MITSUI FUDOSAN

INTEGRATED REPORT 2018

FINANCIAL SECTION
Year ended March 31, 2018

Financial Statements

Consolidated Financial Statements
Consolidated Balance Sheets
Mitsui Fudosan Co., Ltd. and its Subsidiaries
As of March 31, 2018, 2017 and 2016

Thousands of U.S.
dollars (Note 1)

Millions of yen

2018

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 4)
Marketable securities (Note 4, 5)
Notes and accounts receivable - trade (Note 4)
Short-term loans receivable
Allowance for doubtful accounts
Inventories (Note 8, 13)
Advances paid for purchases (Note 9)
Equity investments in properties for sale (Note 4, 5)
Deferred income taxes (Note 11)
Other current assets
Total current assets

PROPERTY and EQUIPMENT, at cost:
Land (Note 7, 13)
Buildings and structures (Note 7, 13, 23)
Machinery and equipment (Note 23)
Construction in progress
Accumulated depreciation
Net property and equipment

INVESTMENTS and OTHER ASSETS
Investments in unconsolidated subsidiaries and affiliatedcompanies
Investment securities (Note 4, 5)
Non-current loans and accounts receivable
Allowance for doubtful accounts
Lease deposits (Note 4, 10)
Net defined benefit asset (Note 12)
Deferred income taxes (Note 11)
Deferred tax assets on land revaluation
Other
Total investments and other assets
Total assets
See accompanying notes.

02

Mitsui Fudosan Co., Ltd.

2017

2016

2018

¥  100,708 ¥  148,547 ¥  109,966
182
69
142
41,18636,07336,094
17,519
5,524
8,899
(412)
(340)
(327)
1,527,320
1,344,126
1,187,020
27,801
18,653
9,352
6,723
6,747
10,16029,61530,09022,894
177,321155,820
136,386
1,927,963
1,745,309
1,520,586$   947,929
1,713
387,669
164,900(3,878)14,376,130
261,681
63,281
278,756
1,669,061
18,147,242

2,086,195
1,551,222
194,812
270,965
4,103,194(810,521)
3,292,673

1,945,032
1,399,068
171,055
162,358
3,677,513(727,076)
2,950,437

19,636,625
14,601,111
1,833,697
2,550,498
38,621,931(7,629,150)
30,992,781

197,844
174,048
165,851
590,114453,753
501,981
98,451
81,101
71,213(1,225)(2,031)(2,542)
138,565
133,439
133,914
17,9755,274
2,186
12,63912,06912,10935
3
326,25522,021
18,5401,080,653
879,677
903,255¥6,301,289 ¥5,570,751 ¥5,374,278

1,862,236
5,554,537
926,685(11,530)
1,304,264
169,192
118,966329
247,130
10,171,809$59,311,832

1,902,002
1,416,866
174,418
211,5293,704,815(759,050)
2,945,765

Thousands of U.S.
dollars (Note 1)

Millions of yen

2018

LIABILITIES AND NET ASSETSCURRENT LIABILITIESBank loans (Note 4, 13)Commercial paper (Note 4, 13)Long-term debt due within one year (Note 4, 13)Notes and accounts payable - trade (Note 4)
Accrued expenses
Accrued income taxes
Advances and deposits received
Deferred income taxes (Note 11)
Other current liabilities (Note 14)
Total current liabilities
LONG-TERM LIABILITIESNet defined benefit liability (Note 12)
Allowance for directors’ and corporate auditors’ retirement
benefits
Long-term debt due after one year (Note 4, 13)
Deposits from tenants (Note 4, 15)Deferred income taxes (Note 11)
Deferred tax liabilities on land revaluation
Other long-term liabilities (Note 14)
Total long-term liabilities

2017

2016

2018

¥   70,523 ¥   64,944 ¥   73,854
125,000
82,000109,000
253,834
257,030
221,968
123,989
113,682
95,87640,42234,80036,25444,952
23,26327,495263,260
257,886
196,156
1,077
1,194
1,171
141,637
76,16778,883
1,064,694
910,966
840,657$   663,808
1,176,581
2,389,251
1,167,065
380,478
423,1172,477,974
10,137
1,333,182
10,021,593

42,73741,083

40,110402,268716
2,155,299
403,413150,009
151,701
45,0202,948,895

707
1,883,515
374,331
112,690
147,663
42,8642,602,853

690
1,821,415
373,084
124,538
139,83144,9112,544,579

6,739
20,287,076
3,797,186
1,411,982
1,427,909
423,758
27,756,918

339,767

339,767

339,767

3,198,108

409,764
834,498

413,231722,364

413,695
640,205

3,856,965
7,854,838(6,079)1,577,950(6,245)
1,469,117(6,242)
1,387,425(57,219)
14,852,692

298,297
205,521226,170
(242)
(357)
(694)
330,923
323,828
305,633(3,956)(7,076)
12,144
1,910(6,397)(8,373)626,932
515,519534,880
1,091
1,104
1,032
81,727
71,19265,7052,287,700
2,056,932
1,989,042¥6,301,289 ¥5,570,751 ¥5,374,278

2,807,765(2,278)3,114,863(37,236)
17,9785,901,092
10,269769,268
21,533,321$59,311,832

CONTINGENT LIABILITIES (Note 26)
NET ASSETS (Notes 16, 17)
Shareholders’ equity
Common stock
Authorized – 3,290,000,000 shares
Issued – 991,424,727 shares in 2018, 2017 and 2016
Capital surplus
Retained earnings
Treasury stock – 3,199,947 shares in 2018, 3,290,104 shares in2017 and 3,303,441 shares in 2016
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities
Deferred losses on hedging instruments
Reserve on land revaluation
Foreign currency translation adjustments
Accumulated adjustments for retirement benefit
Total accumulated other comprehensive income
Subscription rights to shares (Note 18)
Non-controlling interests
Total net assets
Total liabilities and net assets
See accompanying notes.

Mitsui Fudosan Co., Ltd.

03

Financial Statements

Consolidated Statements of Income
Mitsui Fudosan Co., Ltd. and its Subsidiaries
For the years ended March 31, 2018, 2017 and 2016

Thousands of U.S.
dollars (Note 1)

Millions of yen

2018

Revenue from operations (Note 24)
Cost of revenue from operations
Selling, general and administrative expenses
Operating income (Note 24)
Interest, dividends and miscellaneous income (Note 20)
Interest expense
Other expenses (Note 19, 21)
Equity in net income of affiliated companies
Income before income taxes
Income taxes (Note 11)
Current
DeferredTotal
Net income
Net income attributable to non-controlling interests
Net income attributable to shareholders of the Company
See accompanying notes.

04

Mitsui Fudosan Co., Ltd.

2017

2016

2018

¥1,751,114 ¥1,704,416 ¥1,567,970(1,339,483) (1,308,438) (1,214,805)(165,729)(163,279)(150,682)
245,902232,699
202,4839,720
13,127
10,665(25,672)(24,635)(25,432)(20,460)(33,499)(11,962)
15,258
4,565
5,564
224,748
192,257
181,318$16,482,624(12,608,085)(1,559,949)
2,314,590
91,491(241,642)(192,583)
143,618
2,115,474

70,99461,06363,892(4,223)(2,388)(1,881)
66,771
58,67562,011
157,977
133,582
119,307(2,103)(1,766)(1,584)¥  155,874 ¥  131,816 ¥  117,723

668,242(39,750)
628,492
1,486,982(19,795)$ 1,467,187

Consolidated Statements of Comprehensive Income
Mitsui Fudosan Co., Ltd. and its Subsidiaries
For the years ended March 31, 2018, 2017 and 2016

Thousands of U.S.
dollars (Note 1)

Millions of yen

Net income
Other comprehensive income (loss):
Net unrealized holding gains (losses) on securities
Deferred gains on hedging instruments
Reserve on land revaluation
Foreign currency translation adjustments
Adjustments for retirement benefit
Equity in other comprehensive income (loss) of affiliatedcompanies
Total other comprehensive income (loss)
Total comprehensive income
Comprehensive income attributable to:Shareholders of the Company
Non-controlling interests
Total

2018

2017

2016

¥157,977¥133,582¥119,307$1,486,982

2018

92,79986(1,047)
1,149
8,421

(20,704)407
139(14,407)
2,050(28,943)130
7,885(1,808)(11,202)873,485
809(9,855)
10,81579,264

2,287
103,695¥261,672(4,854)(37,369)¥96,213(5,927)(39,865)¥79,442

21,527
976,045$2,463,027¥259,132
2,540¥261,672¥94,399
1,814¥96,213¥78,384
1,058¥79,442$2,439,119
23,908$2,463,027

See Note 22.

PER SHARE INFORMATION
Millions of yen

Net assets per share*
Net income per share— Basic— Diluted
Cash dividends

U.S. dollars (Note 1)

2018

2017

2016

¥2,231.2¥2,008.5¥1,945.4

2018$21.002

157.8
157.6
40.0

133.4
133.3
34.0

119.1
119.1
30.0

1.485
1.483
0.377

* Net assets per share information does not include subscription rights to shares and non-controlling interests.
See accompanying notes.

Mitsui Fudosan Co., Ltd.

05

Financial Statements

Consolidated Statements of Changes in Net Assets
Mitsui Fudosan Co., Ltd. and its Subsidiaries
For the years ended March 31, 2018, 2017 and 2016
Millions of yen
Accumulated other comprehensive income (loss)

Shareholders’ equity

BALANCE AT APRIL 1,2015

Shares ofcommonstock(thousands)

Commonstock

CapitalsurplusRetainedearnings

DeferredNet unrealized losses on
holding gains
hedging
on securities instruments

Treasurystock

Foreign Accumulated
Reserve on currency adjustments Subscription
Nonlandtranslation for retirement rights tocontrolling
revaluation adjustments
sharesbenefitinterests¥(879) ¥298,230

Total net assets

991,425¥339,767¥413,798¥549,660¥(6,065)¥255,074¥19,553¥2,784¥914¥59,248

Cash dividends paid

-

-

-

(27,668)

-

-

-

-

-

-

-

-

¥1,932,084(27,668)

Net income attributable to shareholders of the Company

-

-

-

117,723

-

-

-

-

-

-

-

-

117,723

Reversal of reserve on land revaluation, net of tax

-

-

-

493

-

-

-

7,403

-

-

-

-

7,896

Purchase of treasury stock

-

-

-

-

(237)

-

-

-

-

-

-

-

(237)

Sales of treasury stock

-

-

(5)

-

60

-

-

-

-

-

-

-

55

Changes in the Company’s equity due to transactions with noncontrolling interests

-

-

(103)

-

-

-

-

-

-

-

-

-

(103)

Changes in scope of consolidation

-

-

-

2

-

-

-

-

-

-

-

-

2

Transfer of retained earnings to capital surplus

-

-

5

(5)

-

-

-

-

-

-

-

-

-

Net unrealized holding losses on securities

-

-

-

-

-

(28,904)

-

-

-

-

-

-

(28,904)

Deferred gains on hedging instruments

-

-

-

-

-

-

185

-

-

-

-

-

185

Foreign currency translation adjustments

-

-

-

-

-

-

-

-

(7,409)---(7,409)(11,157)

Defined benefit pension plans

-

-

-

-

-

-

-

-

-

(11,157)--

Subscription rights to shares

-

-

-

-

-

-

-

-

-

-

118

-

118

Non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

6,457

6,457

BALANCE AT MARCH 31, 2016

991,425

339,767

413,695

640,205(6,242)

226,170(694)

305,633

12,144(8,373)

1,032

65,705

1,989,042

BALANCE AT APRIL 1, 2016

991,425

339,767

413,695

640,205(6,242)

226,170(694)

305,633

12,144(8,373)

1,032

65,705

1,989,042

-

-

-

44

-

-

-

-

-

-

-

-

44
1,989,086

Cumulative effects of the changes in accounting policies
BALANCE AT APRIL 1, 2016, as adjusted for cumulative effects ofthe changes in accounting policies

991,425

339,767

413,695

640,249(6,242)

226,170(694)

305,633

12,144(8,373)

1,032

65,705

Cash dividends paid

-

-

-

(31,620)

-

-

-

-

-

-

-

-

(31,620)

Net income attributable to shareholders of the Company

-

-

-

131,816

-

-

-

-

-

-

-

-

131,816

Reversal of reserve on land revaluation, net of tax

-

-

-

(18,056)---

18,195

-

-

-

-

139

Purchase of treasury stock

-

-

-

-

(112)

-

-

-

-

-

-

-

(112)

Sales of treasury stock

-

-

(25)

-

109

-

-

-

-

-

-

-

84

Changes in the Company's equity due to transactions with
non-controlling interests

-

-

(464)

-

-

-

-

-

-

-

-

-

(464)

Transfer of retained earnings to capital surplus

-

-

25

(25)

-

-

-

-

-

-

-

-

-

Net unrealized holding losses on securities

-

-

-

-

-

(20,649)

-

-

-

-

-

-

(20,649)

Deferred gains on hedging instruments

-

-

-

-

-

-

337

-

-

-

-

-

337

Foreign currency translation adjustment

-

-

-

-

-

-

-

-

(19,220)---(19,220)
1,976

Defined benefit pension plans

-

-

-

-

-

-

-

-

-

1,976

-

-

Subscription rights to shares

-

-

-

-

-

-

-

-

-

-

72

-

72

Non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

5,487

5,487

BALANCE AT MARCH 31, 2017

991,425

339,767

413,231722,364(6,245)205,521(357)

323,828(7,076)(6,397)

1,104

71,192

2,056,932

BALANCE AT APRIL 1, 2017

991,425

339,767

413,231722,364(6,245)205,521(357)

323,828(7,076)(6,397)

1,104

71,192

2,056,932

Cash dividends paid

-

-

-

(35,573)

-

-

-

-

-

-

-

-

(35,573)

Net income attributable to shareholders of the Company

-

-

-

155,874

-

-

-

-

-

-

-

-

155,874(1,060)

Reversal of reserve on land revaluation, net of tax

-

-

-

(8,155)

-

-

-

7,095

-

-

-

-

Purchase of treasury stock

-

-

-

-

(22)

-

-

-

-

-

-

-

(22)

Sales of treasury stock

-

-

(12)

-

188

-

-

-

-

-

-

-

176
(3,467)

Change in the Company's equity due to transactions with noncontrolling interests--(3,467)

-

-

-

-

-

-

-

-

-

Transfer of retained earnings to capital surplus

-

-

12

(12)

-

-

-

-

-

-

-

-

-

Net unrealized holding gains on securities

-

-

-

-

-

92,776

-

-

-

-

-

-

92,776

Deferred gains on hedging instruments

-

-

-

-

-

-

115

-

-

-

-

-

115

Foreign currency translation adjustment

-

-

-

-

-

-

-

-

3,120

-

-

-

3,120
8,307

Defined benefit pension plans

-

-

-

-

-

-

-

-

-

8,307

-

-

Subscription rights to shares

-

-

-

-

-

-

-

-

-

-

(13)

-

(13)

Non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

10,535

10,535

991,425¥339,767¥409,764¥834,498¥(6,079)¥298,297¥(242) ¥330,923¥(3,956)¥1,910¥1,091¥81,727¥2,287,700$19,361,182

BALANCE AT MARCH 31, 2018

Thousands of U.S. dollars (Note 1)

BALANCE AT APRIL 1, 2017$(66,604)$(60,213)$10,392$670,105

Cash dividends paid--

(334,836)

-

-

-

-

-

-

-

-

(334,836)

Net income attributable to shareholders of the Company--

1,467,187

-

-

-

-

-

-

-

-

1,467,187$(58,782) $1,934,497$(3,360) $3,048,080(9,977)

Reversal of reserve on land revaluation, net of tax--(76,760)---

66,783----Purchase of treasury stock

-

-

-

(207)

-

-

-

-

-

-

-

(207)

Sales of treasury stock

-

(113)

-

1,770

-

-

-

-

-

-

-

1,657
(32,634)

Change in the Company's equity due to transactions with noncontrolling interests-(32,634)

-

-

-

-

-

-

-

-

-

Transfer of retained earnings to capital surplus

-

113

(113)

-

-

-

-

-

-

-

-

-

Net unrealized holding gains on securities

-

-

-

-

873,268

-

-

-

-

-

-

873,268

Deferred gains on hedging instruments

-

-

-

-

-

1,082

-

-

-

-

-

1,082

Foreign currency translation adjustment

-

-

-

-

-

-

-

29,368---29,36878,191

Defined benefit pension plans

-

-

-

-

-

-

-

-

78,191--

Subscription rights to shares

-

-

-

-

-

-

-

-

-

(123)

-

(123)

Non-controlling interests

-

-

-

-

-

-

-

-

-

-

99,163

99,163$(2,278) $3,114,863$(37,236)$17,978$10,269$769,268$21,533,321

BALANCE AT MARCH 31, 2018
See accompanying notes.

06$3,198,108 $3,889,599 $6,799,360

Mitsui Fudosan Co., Ltd.

$3,198,108 $3,856,965 $7,854,838$(57,219) $2,807,765

Consolidated Statements of Cash Flows
Mitsui Fudosan Co., Ltd. and its Subsidiaries
For the years ended March 31, 2018, 2017 and 2016

Thousands of U.S.
dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes to net
cash provided by operating activities
Depreciation and amortization
Loss on impairment of fixed assets
Interest and dividend income
Interest expense
Equity in net income of affiliated companies
Loss on disposal of property and equipment
Gain on sales of securities
Increase in accounts receivable
Increase (decrease) in accounts payable
Increase in real property for sale and advances paid forpurchases
Other, net
SubtotalInterests and dividends received
Interests paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Proceeds from sale of property and equipment
Purchases of investment securities
Proceeds from sale of investment securities
Payments of lease deposits
Proceeds from collections of lease deposits
Repayments of deposits from tenants
Proceeds from deposits from tenants
Increase in non-current loans and accounts receivable
Proceeds from collections of non-current loans and accounts
receivable
Purchases of consolidated subsidiaries, net
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from bank loans and commercial paper
Repayments of bank loans and commercial paper
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of bonds
Payments for redemption of bonds
Cash dividends paid
Proceeds from non-controlling shareholders
Payments of dividends to non-controlling shareholders
Repayments of capital to non-controlling shareholders
Repayments of lease obligations
Net increase in treasury stocks
Additional investments in consolidated subsidiaries
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

2018

2017

2016

2018

¥224,748¥192,257¥181,318$2,115,474

70,167
8,042(6,084)25,672(15,258)
7,550(4,961)
1,704

71,35725,560(5,610)24,635(4,565)
1,791(122)(9,118)67,461(4,822)25,432(5,564)
3,894(2,690)(1,386)
6,535

660,457
75,697(57,267)
241,642(143,618)
71,066(46,696)
16,039(217,385)(10,570)
83,625
10,378(25,652)(38,207)30,144(59,572)
83,894
320,5078,604(24,553)(77,125)
227,433(173,929)
23,640119,889
6,756(25,448)(69,042)
32,155(2,046,169)(99,492)
787,133
97,684(241,453)(359,629)
283,735(360,076)
4,682(11,777)
2,028(10,968)
5,102(38,041)
66,752(22,934)(168,581)
4,131(16,157)598(8,291)
8,844(32,514)33,653(27,931)(205,150)
8,072(9,263)
15,838(13,548)
5,735(35,295)
42,902(23,719)(3,389,270)
44,070(110,853)
19,089(103,238)
48,023(358,067)
628,313(215,870)

12,815
2,741(15,788)(365,464)

13,872(11,025)
1,817(201,584)

20,064(6,202)(39,154)(239,720)

120,623
25,800(148,605)(3,439,985)

3,346,884(3,293,553)
371,957(220,506)
179,665(54,113)(35,573)
4,499(5,580)(105)(3,943)(18)(464)
289,150(1,669)(47,839)
148,547¥100,708

3,170,459(3,201,269)
225,268(178,816)
105,993(66,972)(31,621)
2,001(5,251)(196)(3,906)(94)(525)
15,071(2,339)38,581
109,966¥148,547

3,166,555(3,049,221)
311,532(174,762)
46,911(68,118)(27,674)
4,239(1,667)(1,274)(3,547)(226)(1,637)201,111(2,540)(8,994)
118,960¥109,966

31,503,050(31,001,064)
3,501,101(2,075,546)
1,691,124(509,347)(334,836)
42,348(52,523)(988)(37,114)(169)(4,368)2,721,668(15,710)(450,292)
1,398,221$947,929

See accompanying notes.

Mitsui Fudosan Co., Ltd.

07

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mitsui Fudosan Co., Ltd. and its Subsidiaries

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Mitsui
Fudosan Co., Ltd. (the “Company”) have been prepared in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements ofInternational Financial Reporting Standards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of domicile. In compliance with the accounting standard,“Practical Solution on Unification of Accounting Policies Applied
to Foreign Subsidiaries for Consolidated Financial Statements”
issued by Accounting Standards Board of Japan, hereafter ASBJ,(ASBJ PITF No. 18, hereafter, “PITF No. 18”), certain adjustments, which are not recorded in the statutory books of overseas
subsidiaries, are incorporated in the consolidated financial statements of the Company prepared in accordance with Japanese

GAAP and filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial Instruments andExchange Law (“statutory Japanese language consolidated financial statements”). The accompanying consolidated financial
statements have been restructured and translated into English(with some expanded descriptions) from the statutory Japanese
language consolidated financial statements. Some supplementary information included in the statutory Japanese language
consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated
financial statements.
The translations of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers, using theprevailing exchange rate at March 31, 2018, which was ¥106.24
to U.S. $1.00. The convenience translations should not be construed as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

2. SIGNIFICANT ACCOUNTING POLICIES(A) CONSOLIDATIONThe consolidated financial statements include the accounts of theCompany and its subsidiaries. The difference between the cost
and the underlying net equity at fair value of investments inconsolidated subsidiaries and in equity method investees isamortized over a period of 5 years. If the amount is immaterial, it
is fully recognized currently in earnings.
The difference between the cost and the underlying net equity
at fair value of investments in consolidated subsidiaries isrecorded as goodwill.
All significant inter-company accounts and transactions havebeen eliminated. In the elimination of investments in subsidiaries,
the assets and liabilities of the subsidiaries, including the portion
attributable to non-controlling shareholders, are recorded basedon the fair value at the time the Company acquired control of therespective subsidiaries.
(B) USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with the generally accepted accounting principles
requires management to make certain estimates and assumptions
that affect the reported amounts in the financial statements andthe accompanying notes. Actual results could differ from thoseestimates.
(C) EQUITY METHOD
Investments in all significant affiliated companies are accounted
for by the equity method and, accordingly, stated at costadjusted for equity in undistributed earnings and losses from thedate of acquisition.
(D) TRANSLATION OF FOREIGN CURRENCY ACCOUNTS
Foreign currency receivables and payables are translated at
appropriate year-end rates and the resulting translation gains orlosses are taken into income currently.
Financial statements of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rate, except thatshareholders’ equity accounts are translated at historical rates
and income statement items resulting from transactions with theCompany at the rates used by the Company.
Differences arising from translation are presented as “Foreign
currency translation adjustments” in accumulated other compre-

08

Mitsui Fudosan Co., Ltd.

hensive income under net assets section.
(E) CASH AND CASH EQUIVALENTS
Deposits in banks and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk ofmarket value fluctuation, with a maturity of three months or lessat the time of purchase are treated as cash equivalents.
(F) SECURITIES
Held-to-maturity securities are stated at amortized cost.
Other securities with fair values are stated at fair value. Unrealized gains and unrealized losses on these securities are reported,
net of applicable income taxes, as a separate component ofaccumulated other comprehensive income under net assets
section. Realized gains and losses on sale of such securities arecomputed using moving-average cost.
Other securities without fair values are stated at moving-average cost.
The Company and its consolidated subsidiaries recognize
losses for the difference between the fair value and the carrying
amount when the fair value significantly declines. The Company
and its consolidated subsidiaries consider the decline to besignificant when the fair value of the other securities declines
more than 50% of the carrying amount. When the fair value ofthe other securities declines from 30% to less than 50% of thecarrying amount, the decline is also determined to be significant
if the fair value of the securities is considered not to be recoverable to the carrying amount.
If the net realizable value of the securities without fair value
declines significantly below the carrying amount, it is written
down to net realizable value with a corresponding charge in thestatements of income.
(G) INVENTORIES, REVENUE AND RELATED COSTS
The Company and its consolidated subsidiaries have followed
accounting standard, “Accounting Standard for Measurement of
Inventories” (ASBJ Statement No.9). Under the standard, inventories are initially recorded at acquisition cost, and when net
realizable value is less than the cost (i.e., profitability of inventory
has declined), the cost basis is reduced to net realizable value.
Costs are determined mainly by the specific identification
method and do not include interest and administrative expenses

incurred during or after development of real estate, which arecharged to income when incurred.
Revenue from leasing is recognized on an accrual basis overthe lease term.
Revenue from sale of properties is recognized in full when
delivered and accepted by the customers.
The Company and its consolidated subsidiaries have followed“Accounting Standard for Construction Contracts” (ASBJ Statement No.15; December 27, 2007) and ”Guidance on AccountingStandard for Construction Contracts” (ASBJ Guidance No.18;
December 27, 2007). The percentage-of-completion method
shall be applied if the outcome of the construction activity isdeemed certain during the course of the activity, otherwise thecompleted-contract method shall be applied.
(H) PROPERTY AND EQUIPMENT, RELATED DEPRECIATION
AND REVALUATION – excluding leased assets
Property and equipment are carried mainly at cost.
When disposed of, the cost and related accumulated depreciation or revaluation of property and equipment are removed fromthe respective accounts and the net difference, less any amounts
realized on disposal, is reflected in the statements of income.
Depreciation of property and equipment is mainly computedby the declining-balance method over the estimated useful livesof the assets, except for those listed below which are calculatedusing the straight-line method.
1. Office buildings (excluding building improvements) of theCompany
2. Buildings (excluding building improvements) acquired by
the Company and the domestic consolidated subsidiaries
after April 1, 1998
3. Property and equipment of the overseas consolidated
subsidiaries
4. Building improvements and structures acquired by the Company and the domestic consolidated subsidiaries after April
1, 2016
For buildings on fixed term leasehold, the Company computes
depreciation using the straight-line method, over its lease term
assuming no residual value.
( I ) IMPAIRMENT LOSSES ON FIXED ASSETSThe Company and its consolidated subsidiaries have followed“Accounting Standard for Impairment of Fixed Assets” (“Opinion
on Establishment of Accounting Standards for Impairment of
Fixed Assets” issued by the Business Accounting Deliberation
Council) and “Guidance on Accounting Standard for Impairmentof Fixed Assets” (ASBJ Guidance No. 6). The accounting standards require that fixed assets be tested for recoverability whenever events or changes in circumstances indicate that the assets
may be impaired. When the undiscounted cash flows estimatedto be generated by those assets are less than the carrying
amount of those assets, the net carrying value of assets notrecoverable is reduced to recoverable amounts. Recoverable
amounts are measured by net realizable values or values in current use. Net realizable values are determined mainly based
upon appraisal value calculated by real-estate appraisers. Values
in current use are calculated based on the present values of
future cash flows.
Accumulated impairment losses are deducted from bookvalues of related fixed assets.
(J) LAND REVALUATION
Pursuant to the Law Concerning Land Revaluation and the revisions thereof, the Company and certain consolidated subsidiaries
revalued land used for business activities on March 31, 2002.

The land prices for revaluation were determined based on theappraisal prices by real estate appraisers in accordance with
Article 2, Paragraph 5 of the Enforcement Ordinance Concerning
Land Revaluation. The difference between quoted appraisal value
and the carrying amount is recorded, net of applicable income
taxes, as “Reserve on land revaluation” as a separate componentof accumulated other comprehensive income under the net
assets section.
(K) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets are included in “Other”
under caption of “INVESTMENTS and OTHER ASSETS.”
Goodwill is amortized over a period of 5 years under straightline method. If the amount is immaterial, it is fully recognizedcurrently in earnings.
Other intangible assets are amortized under the straight-line
method. Software (for internal use) is amortized over its estimated useful lives of 5 years.
(L) ALLOWANCE FOR DOUBTFUL ACCOUNTSThe Company and its consolidated subsidiaries provide for
doubtful accounts principally at an amount computed based on
the historical bad debt ratio during a certain reference period
plus an estimated uncollectible amount based on the analysis ofcertain individual accounts, including claims in bankruptcy.
(M) EMPLOYEES’ RETIREMENT BENEFITSThe Company has a retirement plan which provides for lump-sum
payment and annuity. Upon retirement age, a regular employee
is entitled to receive a lump-sum payment and an annuity, or incertain cases at the option of the retiring employee, the fullamount of the retirement benefits may be paid in a lump-sum.
The retirement benefits are based primarily upon the years of
employee’s service and monthly pay at the time of retirement.
The Company and its consolidated subsidiaries record net
defined benefit asset and liability at fiscal year-end based on theestimated amounts of projected benefit obligation and the fairvalue of the plan assets at that date.
The benefit formula method is adopted as an allocation
method for the projected retirement benefits. Prior service costs
are allocated under the straight-line method over a certain
number of years within the average remaining service years (1-10
years). Actuarial differences are allocated, beginning in the year
following their occurrence, under the straight-line method over acertain number of years within the average remaining service
years (5-10 years).
The Company’s certain consolidated subsidiaries have calculated net defined benefit liability and retirement benefit expenses
using the simplified method, under which defined benefit liability
is provided at the amounts to be paid if all eligible employees
would have voluntarily retired at year end.
(N) ALLOWANCE FOR DIRECTORS’ AND CORPORATE AUDITORS’ RETIREMENT BENEFITS
Allowance for retirement benefits for directors and corporate
auditors of the Company and its 32 consolidated subsidiaries arealso provided at the amounts to be paid if all eligible directors
and corporate auditors would have retired at year end under theinternal guidelines.
(O) ACCOUNTING FOR LEASE TRANSACTIONSThe Company and its consolidated subsidiaries have followed“Accounting Standard for Lease Transactions” (Statement No.13
originally issued by the First Committee of the Business Accounting Council on June 17, 1993 and revised by ASBJ on March 30,2007) and the “Implementation Guidance on Accounting Standard for Lease Transactions” (the Financial Accounting Standard

Mitsui Fudosan Co., Ltd.

09

Financial Statements

Implementation Guidance No.16 issued originally by the
Accounting System Committee of the Japanese Institute of Certified Public Accountants on January 18,1994 and revised by ASBJ
on March 30, 2007).
Those standards require finance leases to be accounted for ina manner similar to the accounting treatment for ordinary sales
transactions. Lessees are required to record assets and liabilities
regarding finance leases with recognition of depreciation andinterest expenses. Capitalized leased assets are depreciatedunder the straight-line method, over the lease term assuming noresidual value. Lessors are required to recognize lease receivables
or investments in leased assets along with related lease (interest)
income.
It should be noted that finance leases which do not transfer
ownership of the leased assets to lessees whose commencement
day falls on or prior to March 31, 2008 are accounted for as operating leases.
(P) INCOME TAXES
Income taxes are provided for on the basis of income for financial
statement purposes. The tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial
statements and income tax purposes is recognized as deferredincome taxes.
Tax rates:
The Company and its consolidated domestic subsidiaries are
subject to a corporate tax of approximately 23%, an inhabitants
tax of approximately 5% and a deductible enterprise tax ofapproximately 4%, which in the aggregate resulted in a statutory
income tax rate of approximately 31% for the years ended March
31, 2018 and 2017.
The Company and its consolidated domestic subsidiaries are
subject to a corporate tax of approximately 24%, an inhabitants
tax of approximately 5% and a deductible enterprise tax ofapproximately 6%, which in the aggregate resulted in a statutory
income tax rate of approximately 33% for the year ended March
31, 2016.
Tax reforms:
As a result of promulgation of the amended tax laws on March
31, 2016, the Company and its domestic consolidated subsidiaries are subject to the reduced effective income tax rate of 31%
for the years beginning on or after April 1, 2016.
As a result of promulgation of the amended tax laws on March
31, 2015, the Company and its domestic consolidated subsidiaries are subject to the reduced effective income tax rate of 33%
for the years beginning on or after April 1, 2015.
(Q) DERIVATIVES AND HEDGE ACCOUNTING
1. Hedge accounting
The Company and its consolidated subsidiaries defer recognitionof gains or losses resulting from changes in fair value of derivative
financial instruments until the related losses or gains on thehedged items are recognized, if derivative financial instruments
are used as hedges and meet certain hedging criteria.
However, in cases where forward foreign exchange contracts
are used as hedges and meet certain hedging criteria, forward
foreign exchange contracts and hedged items are accounted forin the following manner:(1) If a forward foreign exchange contract is executed to hedge
an existing foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payabletranslated using the spot rate at the inception date of thecontract and the book value of the receivable or payable

10

Mitsui Fudosan Co., Ltd.

is recognized in the income statements in the period
which includes the inception date, and(b) the discount or premium on the contract (that is, thedifference between the Japanese yen amount of thecontract translated using the contracted forward rate andthat translated using the spot rate at the inception dateof the contract) is recognized over the term of thecontract.
(2) If a forward foreign exchange contract is executed to hedge
a future transaction denominated in a foreign currency, thefuture transaction will be recorded using the contracted
forward rate, and no gains or losses on the forward foreignexchange contract are recognized.
Also, if interest rate swap contracts are used as hedge andmeet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or
deducted from the interest on the assets or liabilities for which
the swap contract was executed.
2. The following summarizes hedging derivative financial instruments used by the Company and its consolidated subsidiaries
and items hedged:
Hedging instruments:
Forward foreign exchange contracts
Foreign currency swap contracts
Interest rate swap contracts
Hedged items:
Expected foreign currency transactions
Foreign currency debt
Borrowings and debentures
3. Hedge policy
The Company and its consolidated subsidiaries use interest rate
swap contracts to mitigate risk of fair value changes of borrowings due to fluctuating interest rates and risk of changes in cash
flows. Exchange rate risk on borrowings made and debentures
issued in non-functional currencies is hedged by utilizing currency
swaps. Exchange rate risk on forecasted transactions to be settled in non-functional currencies is hedged by using forward
foreign exchange contracts.
4. Assessment of hedge effectivenessThe assessment of hedge effectiveness is omitted because significant terms of hedging instruments and those of the items
hedged are the same and the risk of changes in foreign exchange
rates and interest rates would be entirely eliminated.
(R) EQUITY INVESTMENTS REGARDING REAL ESTATE SECURITIZATION-RELATED BUSINESS
Equity investments in tokumei-kumiai, or silent partnerships(“TK”), preferred securities issued by tokutei-mokuteki-kaisha, or
specific purpose companies (“TMK”) and others regarding realestate securitization-related business (collectively, “equity investments”) are presented in the balance sheets as follows.
Equity investments held for sale are presented as “Equity
investments in properties for sale” under “CURRENT ASSETS”
and those held other than for sale are presented as “Investment
securities” under “INVESTMENTS and OTHER ASSETS.”(S) REVENUE FROM JAPANESE REAL ESTATE INVESTMENT
TRUST (J-REIT)
Revenue from J-REIT is included in “Revenue from operations.”(T) DIRECTORS’ BONUS
The Company and its consolidated subsidiaries have followed
the accounting standard, “Accounting Standard for Directors’
Bonus” (ASBJ Statement No.4). Directors’ bonuses are charged
to income as selling, general and administrative expenses.

(U) SHARE-BASED PAYMENTS
The Company and its consolidated subsidiaries have followed
the accounting standards, “Accounting Standard for Share-Based
Payment” (ASBJ Statement No.8) and the “Implementation
Guidance for the Accounting Standard for Share-Based Payment”
ASBJ Guidance No.11).
Those standards require that the cost of stock options bemeasured based on the grant-date fair value. Outstanding
options are presented as subscription rights to shares as a component of net assets in the balance sheet.
(V) ASSET RETIREMENT OBLIGATIONSThe Company and its consolidated subsidiaries have followed“Accounting Standard for Asset Retirement Obligations” (ASBJ
Statement No.18; March 31, 2008) and “Guidance on AccountingStandard for Asset Retirement Obligations” (ASBJ Guidance
No.21; March 31, 2008). According to the standards, obligations
associated with the retirement of tangible fixed assets arerecorded as liabilities when those obligations are incurred, withthe amount of the liability initially measured by discounting thefuture cash flows. The associated asset retirement costs are capitalized as part of the carrying amount of the fixed asset andallocated as period expenses.
(W) ACCOUNTING CHANGES AND ERROR CORRECTIONSThe Company and its consolidated subsidiaries have followed“Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No.24, December 4, 2009) and “Guidance on Accounting Standard for Accounting Changes and Error
Corrections” (ASBJ Guidance No.24, December 4, 2009). Thosestandards require that changes in accounting policies, changes inpresentations and corrections of prior period errors be accounted
for retrospectively, and changes in accounting estimates be
accounted for prospectively.
(X) EARNINGS PER SHARE
Basic income per share is computed by dividing the net income
available for distribution to shareholders of common stock by theweighted average number of shares of common stock outstanding during each year. Diluted net income per share reflects thepotential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into
common stock.
(Y) RECLASSIFICATIONS
Certain prior years’ amounts have been reclassified to conform tothe current presentation.
(Z) CHANGES IN ACCOUNTING POLICIESCommencing from the year ended March 31, 2016, the Company
and its consolidated subsidiaries adopted “Accounting Standard
for Business Combinations” (ASBJ Statement No.21, revised on
September 13, 2013), “Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No.22, revised on September 13, 2013) and “Accounting Standard for Business Divestitures” (ASBJ Statement No.7, revised on September 13, 2013). In
compliance with those standards, the changes in the Company’sownership interest in its subsidiary while it retains its controllinginterest in the subsidiary is recognized in capital surplus, andacquisition-related costs are expensed in the period incurred.
Also, finalization of provisional purchase price allocation, whicharose from business combinations occurred on and after April 1,
2015, is reflected in the consolidated financial statements for theyear in which the business combination occurred. In addition, thepresentation of net income has changed and former “minority
interests” is presented as “non-controlling interests.” Prior years’
consolidated financial statements have been reclassified to con-form to the change.
Cash flows from purchases and sales of shares of subsidiaries
which do not give rise to changes in the scope of consolidation ispresented in “cash flows from financing activities”, while cash
flows from acquisition related costs of subsidiaries which give rise
to changes in the scope of consolidation and cash flows fromcosts related to purchases and sales of shares of subsidiaries
which do not give rise to changes in the scope of consolidation ispresented in “cash flows from operating activities.”
In accordance with the transitional treatment set forth in thosestandards, the Company and its consolidated subsidiaries
adopted those standards prospectively commencing on April 1,
2015.
Effect of those changes on capital surplus at March 31, 2016,
the consolidated income statement for the year then ended andper share information is immaterial.
Commencing from the year ended March 31, 2017, the Company and its consolidated subsidiaries adopted “Implementation
Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, revised on March 28, 2016), which resulted in certain changes in the accounting treatment regarding recoverabilityof deferred tax assets.
In accordance with transitional treatment described in Article
49, Section 4 of the Guidance, the difference between thedeferred tax assets and liabilities as of April 1, 2016 calculated
under the Guidance and the deferred tax assets and liabilities asof March 31, 2016 is recognized in retained earnings as of April
1, 2016.
Effect of those changes on deferred tax assets and retained
earnings as of April 1, 2016 is immaterial.
(AA) NEW ACCOUNTING STANDARDS NOT YET ADOPTEDThe Company and its consolidated subsidiaries have not yet
adopted “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 30, 2018) and Implementation Guidance on “Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30, March 30, 2018).
The International Accounting Standards Board (IASB) and the
Financial Accounting Standards Board (FASB) have jointly developed a converged accounting standard on revenue recognition
and issued “Revenue from Contracts with Customers” (IFRS 15
by IASB and Topic 606 by FASB) in May 2014. IFRS 15 is effective
for annual reporting periods beginning on or after January 1,
2018 and Topic 606 is effective for annual reporting periods
beginning on or after December 15, 2017. In this connection, the
ASBJ developed a converged accounting standard on revenue
recognition and issued the standard together with its implementation guidance.
The ASBJ followed two policies in developing accounting
standard for revenue recognition. That is, to incorporate all basic
IFRS 15 requirements to ensure comparability of financial statements, but also to consider additional alternative treatments
based on practices applied by Japanese companies so that thestandards would not significantly impair comparability.
The Company and its consolidated subsidiaries will adopt thestandards at the beginning of the year commencing on April 1,
2021. The effect that the adoption of the standard will have on
the consolidated financial statements is currently underevaluation.

Mitsui Fudosan Co., Ltd.

11

Financial Statements

3. BUSINESS REORGANIZATIONSThere were no significant business reorganizations for the years
ended March 31, 2018 and 2017.
Significant business reorganizations for the year ended March
31, 2016 is described as follows:
On October 1, 2015, the Company transferred its residential
leasing business to Mitsui Fudosan Residential Co. Ltd. throughcorporate divestiture.
(1) Outline of the transaction(a) Business subject to the transfer
The business subject to the transfer is residential leasing
business, which includes construction, leasing and sale ofresidences for leasing.
(b) Date of the business combination
October 1, 2015(c) Legal form of the business combination
Absorption-type split where the Company is a split company
and Mitsui Fudosan Residential Co. Ltd. is a successor
company.
(d) Name of the company after the business combination
Mitsui Fudosan Residential Co. Ltd. (“MFR”)(e) Allotment of shares
The transfer was made in exchange for 500,000 shares ofcommon stock issued by MFR. The Company owns 100% ofcommon stock issued by MFR and all new shares ofcommon stock issued by MFR in connection with the transfer is owned by the Company. Thus, there were no changes
in the Company’s shareholders’ equity regardless of thenumbers of new shares issued.
(f) Other matters
Integration of the Company’s residential leasing businessand MFR’s residential sales business will enable one-stopand quick offering of solutions for various demands on
housing based on diversifying life styles of customers confronting the mature society.
The business transfer aims to strengthen the ability todevelop and provide variety of products such as urban
development by a combination of residential sales andleasing. It is also believed to contribute to centralize landacquisition function and strengthen construction orderability, thus enhancing the business efficiency.
(2) Accounting treatment
The transfer is to be accounted for as transactions among
entities under common control in accordance with the
Accounting Standard for Business Combinations (ASBJ
Statement No.21, revised on September 13, 2013) and
Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures(ASBJ Guidance No.10, revised on September 13, 2013).

4. FINANCIAL INSTRUMENTS(1) Risk management policy regarding financial instrumentsa. Policy on financial instruments
The Company and its consolidated subsidiaries make fund procurements mainly through bank loans and issuance of bonds. The
temporary surplus funds are invested in low-risk financial assets.
Derivative instruments are used to mitigate risks referred to
below, and the Company and its consolidated subsidiaries do notenter into speculative derivative transactions or transactions withhigh volatility on fair value.
b.Risk management
Notes and accounts receivable and lease deposits are subject tocustomers’ credit risk (risk related to customers’ failure to perform
a contract). Each business division monitors due dates and balances for each counterparty to mitigate the risk of those receivables being uncollectible due to financial difficulties and otherfactors.
Investment in equity securities is exposed to market-price risk.
The securities are mainly those of companies with business relationships. The Company and its consolidated subsidiaries periodically monitor market prices and continuously review whether the
securities should be held.
Notes and accounts payable are mostly due within one year.
Short-term debt is mainly used for funding working capital.
Procurement from long-term debt and bonds payable, of which

12

Mitsui Fudosan Co., Ltd.

the maturities are due within 39 years from the balance sheet
date, are mainly used for capital expenditures. Debt with floatinginterest rates is subject to interest-rate risk. The Company and its
consolidated subsidiaries utilize derivatives (interest rate swaps)
as hedging instruments for some long-term debt with floatinginterest rates to fix the cash flows of interest payments. Exchange
rate risk on borrowings made in non-functional currencies arehedged by utilizing currency swaps. Refer to Note 2 (Q) for
details on hedge accounting, hedge policy, assessment of hedge
effectiveness and other matters.
By using derivative instruments, the Company and its consolidated subsidiaries are exposed to counterparty’s credit risk andmarket risks such as interest rate risk and exchange rate risk. The
Company and its consolidated subsidiaries manage the credit risk
by carefully evaluating the financial positions of major financial
institutions before entering into contracts. The derivative transactions are executed in compliance with procedures set forth in thepolicies established in each group company, and transaction
volumes and fair values are reported as appropriate to directors
in charge.
Payables, debt and deposits from customers are subject toliquidity risk (risk of being unable to pay on a due date). The risk
is managed by preparing and updating monthly cash schedules
and by preserving liquidity on hand.

(2) Estimated fair value of financial instruments
The carrying amount, estimated fair value and the difference of financial instruments as of March 31, 2018, 2017 and 2016 are summarized in the following table. Information on financial instruments for which the fair value is not reliably measurable is not included in the
below table (refer to b).
Millions of yen

Thousands of U.S. dollars (See Note 1)

2018
Carrying
amountEstimated
fair value Difference

AssetsCash and bank deposits *1¥  100,889 ¥  100,889
Notes and accounts receivable-trade41,186
41,186
Marketable and investment securities
563,330
563,368
Liabilities
Notes and accounts payable-trade123,989
123,989
Bank loans and long-term debt due within one year
Non-recourse
79,89480,196
Recourse
244,463
245,953
Commercial paper
125,000
125,000
Long-term debt due after one year
Non-recourse
361,060
361,107
Recourse
1,794,239 1,851,112
Derivative instruments *2
3,749
3,749

Carrying
amountEstimated
fair value

Difference¥     - $   949,633 $   949,633 $      387,669
387,66938
5,302,428
5,302,786
358-

1,167,065

1,167,065

-

302
1,490
-

752,0142,301,045
1,176,581

754,857
2,315,070
1,176,581

2,843
14,025-47
3,398,532
3,398,974
56,873 16,888,544 17,423,870
35,28835,288442
535,326-

Millions of yen

2017
Carrying
amountEstimated
fair value Difference

2016
Carrying
amountEstimated
fair value

Difference

AssetsCash and bank deposits *1¥  148,742 ¥  148,742 ¥      - ¥  111,157 ¥  111,157 ¥      Notes and accounts receivable-trade
36,07336,07336,09436,094Marketable and investment securities
428,604
428,65652
447,987
448,067
80
Liabilities
Notes and accounts payable-trade113,682
113,682
95,876
95,876
Bank loans and long-term debt due within one year
Non-recourse
105,455
105,469
14
32,73832,742
4
Recourse
216,519
217,588
1,069
263,084
264,637
1,553
Commercial paper
82,00082,000109,000
109,000
Long-term debt due after one year
Non-recourse
260,631
261,234603
289,343
289,722
379
Recourse
1,622,884 1,688,526
65,642
1,532,072
1,630,390
98,318Derivative instruments *2
2,352
2,352
4,663
4,663
*1 Carrying amount of cash and bank deposits consists of ¥100,708 million ($947,929 thousand) of cash and cash equivalents and ¥181 million ($1,704
thousand) of bank deposits with maturities exceeding 3 months, which is included in other current assets in the accompanying consolidated balance
sheets, as of March 31, 2018.
Carrying amount of cash and bank deposits consists of ¥148,547 million of cash and cash equivalents and ¥195 million of bank deposits with maturities
exceeding 3 months, which is included in other current assets in the accompanying consolidated balance sheets, as of March 31, 2017.
Carrying amount of cash and bank deposits consists of ¥109,966 million of cash and cash equivalents and ¥1,191 million of bank deposits with maturities exceeding 3 months, which is included in other current assets in the accompanying consolidated balance sheets, as of March 31, 2016.
*2 Carrying amount and estimated fair value of derivative instruments represent derivative liabilities netted against derivative assets.

a.Estimation of fair value
The following methods and significant assumptions were used toestimate the fair value of financial instruments for which the fairvalue is reasonably measurable.
Cash and bank deposits and notes and accounts receivable-trade - The carrying amount of cash and bank deposits andnotes and accounts receivable-trade approximates fair value dueto their relatively short maturity.
Certificates of deposits - Fair value of certificates of deposits isbased on quoted market prices.
Marketable and investment securities - Fair value of thosesecurities is based on quoted market prices. Refer to Note 5 fordetailed information.
Notes and accounts payable-trade and commercial paper- The carrying amount of notes and accounts payable-trade andcommercial paper approximates fair value due to their relatively
short maturity.
Bank loans and long-term debt due within one year - The
carrying amount of bank loans approximates fair value due totheir relatively short maturity. Fair value of long-term debt andbonds payable due within one year is calculated by discounting
the future cash flows, using the borrowing interest rates expected
to be currently available for the Company and its consolidated
subsidiaries for debt with similar terms and remaining maturities

Mitsui Fudosan Co., Ltd.

13

Financial Statements

as the discount rates.
Long-term debt due after one year- Fair value of long-term
debt due after one year is calculated by discounting the future
cash flows, using the borrowing interest rates expected to be
currently available for the Company and its consolidated subsidiaries for debt with similar terms and remaining maturities as thediscount rates.

Derivative instruments – Refer to Note 6.
Fair value of financial instruments includes amounts based onquoted market prices and amounts reasonably calculated. Fairvalue reasonably calculated, incorporating fluctuating factors, issubject to change under different assumptions. Nominal amountshown in Note 6 does not represent the market risk regarding thederivative transactions.

b.Financial instruments for which the fair value is not reliably measurable
For the following financial instruments, for which there were no quoted market prices, reasonable estimates of fair values could not bemade without incurring excessive costs because of the difficulty in estimating future cash flows. Thus, information on those instruments
is not presented in the above table.

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Assets:Equity investments in properties for sale
Other securities
Unlisted stocks (excluding OTC securities)
Other (TK investments, preferred securities and others)
Lease deposits *Liabilities:
Deposits from tenants *

2018

2017

2016

2018

¥  6,723¥  6,747¥ 10,160$   63,281

7,075
19,729138,565

6,275
18,821
133,439

33,68920,331
133,914

66,595
185,7021,304,264

403,413374,331373,084

3,797,186* While fair value accounting is applied to some lease deposits and deposits from tenants, they are not separately disclosed since they are not material.

c.Redemption schedule
The redemption schedule on cash and cash equivalents, receivables and securities with maturities as of March 31, 2018, 2017 and2016 is as follows.
Refer to Note 13 for redemption schedule for long-term debt.
Millions of yen

2018
Due after 1
Due after 5
Due within 1 year and within
years andDue after 10year
5 years
within 10 years
years

Cash and bank deposits *1
Notes and accounts receivable-trade
Other securities
National and local government bonds and other
Total¥100,889
41,186¥     -

¥   -

¥-

182
¥142,257

1,358¥1,358

279
¥279

¥-

Millions of yen

2017
Due after 1
Due after 5
Due within 1 year and within
years andDue after 10year
5 years
within 10 years
years

Cash and bank deposits *1
Notes and accounts receivable-trade
Other securities
National and local government bonds and otherTotal¥148,742
36,073¥      -

¥    -¥-

69¥184,884

1,338¥1,338

377
¥377

¥-

Millions of yen

2016
Due after 1
Due after 5
Due within 1 year and within
years andDue after 10year
5 years
within 10 years
years

Cash and bank deposits *1
Notes and accounts receivable-trade
Other securities
National and local government bonds and other
Total

14

Mitsui Fudosan Co., Ltd.

¥111,157
36,094¥      -

¥    -¥-

142¥147,393

1,500¥1,500

379
¥379

¥-

Thousands of U.S. dollars (See Note 1)

2018
Due after 1
Due after 5
Due within 1 year and within
years andDue after 10year
5 years
within 10 years
years

Cash and bank deposits *1
Notes and accounts receivable-trade
Other securities
National and local government bonds and otherTotal$  949,633
387,669$      -

$    -$-

1,713$1,339,015

12,782$12,7822,626$2,626$-*1 Carrying amount of cash and bank deposits consists of ¥100,708 million ($947,929 thousand) of cash and cash equivalents and ¥181 million ($1,704
thousand) of bank deposits with maturities exceeding 3 months, which is included in other current assets in the accompanying consolidated balance
sheets, as of March 31, 2018.
Carrying amount of cash and bank deposits consists of ¥148,547 million of cash and cash equivalents and ¥195 million of bank deposits with maturities
exceeding 3 months, which is included in other current assets in the accompanying consolidated balance sheets, as of March 31, 2017.
Carrying amount of cash and bank deposits consists of ¥109,966 million of cash and cash equivalents and ¥1,191 million of bank deposits with maturities exceeding 3 months, which is included in other current assets in the accompanying consolidated balance sheets, as of March 31, 2016.

5. FAIR VALUE INFORMATION OF MARKETABLE SECURITIES, INVESTMENT SECURITIES AND
OTHERS(1) The following tables summarize historical cost, book value and fair value of securities as of March 31, 2018, 2017 and 2016:(a) Held-to-maturity securities:
Millions of yen

2018

Securities whose fair value exceeds book value
National and local government bonds andother
Securities whose fair value does not exceed
book value
National and local government bonds and
other
Total

2017

2016

Book Value

Fair Value

Difference Book Value Fair Value Difference Book Value Fair Value Difference¥1,819¥1,857¥38 ¥1,784 ¥1,836¥52 ¥2,021 ¥2,101¥80¥1,819¥1,857¥38 ¥1,784 ¥1,836¥52 ¥2,021 ¥2,101¥80

Thousands of U.S. dollars(See Note 1)

2018Book Value

Securities whose fair value exceeds book value
National and local government bonds andother
Securities whose fair value does not exceed
book value
National and local government bonds and
other
Total

Fair Value

Difference$17,121 $17,479$358$17,121 $17,479$358

Mitsui Fudosan Co., Ltd.

15

Financial Statements(b) Other securities:

Millions of yen
2018

2017

Book Value Historical(Fair Value)
Cost

Securities whose book value (fair value)
exceeds historical cost
StocksOther
Subtotal
Securities whose book value (fair value)
does not exceed historical cost
StocksOther
Subtotal
Total

2016

Book Value Historical
Difference (Fair Value)
Cost

Book Value Historical
Difference (Fair Value)
Cost

Difference¥496,948 ¥ 87,731 ¥409,217 ¥359,967 ¥ 87,716 ¥272,251 ¥379,671 ¥ 76,207 ¥303,464
57,73036,36921,361
61,60936,38025,22953,85031,25922,591
554,678 124,100 430,578 421,576 124,096 297,480 433,521 107,466 326,055

6,825
7,690
(865)
5,239
6,798
(1,559)12,443
15,455(3,012)
8
8
5
6
(1)
2
2
6,833
7,698
(865)
5,244
6,804
(1,560)12,445
15,457(3,012)¥561,511 ¥131,798 ¥429,713 ¥426,820 ¥130,900 ¥295,920 ¥445,966 ¥122,923 ¥323,043
Thousands of U.S. dollars (See Note 1)
2018Book Value(Fair Value) Historical Cost Difference

Securities whose book value (fair value)
exceeds historical cost
StocksOther
Subtotal
Securities whose book value (fair value)
does not exceed historical cost
StocksOther
Subtotal
Total$4,677,598 $  825,781 $3,851,817
543,392
342,329
201,063
5,220,990 1,168,110 4,052,880

64,242
72,383(8,141)75
75
64,31772,458(8,141)$5,285,307 $1,240,568 $4,044,739(2) The following table summarizes other securities sold in the years ended March 31, 2018, 2017 and 2016:
Millions of yen
2018
Sales amount

Stocks
Total

¥233
¥233

Gains

2017
Losses¥101¥101

Sales amount

¥¥-

¥620
¥620

Gains

¥278
¥278

2016
Losses¥(113)¥(113)

Sales amount¥15,977¥15,977

Gains

Losses¥2,690¥2,690Thousands of U.S. dollars (See Note 1)
2018
Sales amount

StocksTotal$2,193$2,193

Gains

$951
$951

Losses$$-(3) The Company and its consolidated subsidiaries did not recognize impairment loss on investment securities for the years
ended March 31, 2018, 2017 and 2016.

16

Mitsui Fudosan Co., Ltd.

¥¥-6. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS
The following summarizes derivative financial instruments for which hedge accounting is not applied as of March 31, 2018, 2017 and2016:
Millions of yen

2018
Nominal Amount
Total

Non-market transactions

Interest rate and currency swap
Foreign exchange forward
Buy
U.S. dollars

Total

Due after 1 year

Fair value(*)

Gain (loss)¥27,774¥13,234¥(1,102)¥(1,102)133¥27,907¥13,234(8)¥(1,110)(8)¥(1,110)

Millions of yen

2017
Nominal Amount
Total

Non-market transactions

Interest rate and currency swap
Foreign exchange forward
Buy
U.S. dollars

Total

Due after 1 year

Fair value(*)

Gain (loss)¥12,350¥8,147¥1,412¥1,412642¥12,992¥8,14737¥1,44937¥1,449Millions of yen

2016
Nominal Amount
Total

Non-market transactions

Interest rate and currency swap
Foreign exchange forward
Buy
U.S. dollars

Total

Due after 1 year

Fair value(*)

Gain (loss)¥5,465¥5,465¥1,040¥1,040987¥6,452¥5,46511¥1,05111¥1,051Thousands of U.S. dollars

2018
Nominal Amount
Total

Non-market transactions

Interest rate and currency swap
Foreign exchange forward
Buy
U.S. dollars

Total

Due after 1 year

Fair value(*)

Gain (loss)$261,427$124,567$(10,373)$(10,373)

1,252$262,679$124,567(75)$(10,448)(75)$(10,448)(*) Fair values are calculated mainly by discounting the future cash flows.

Mitsui Fudosan Co., Ltd.

17

Financial Statements

The following summarizes hedging derivative financial instruments accounted for under hedge accounting as of March 31, 2018, 2017and 2016:
Millions of yen

2018
Nominal Amount
Hedged items

Interest rate swap
Pay : fixed rate
Receive : floating rate
Interest rate swap (*2)
Pay : fixed rate
Receive : floating rate
Interest rate and currency swap (*2)
Foreign exchange forward (*3)
Buy
U.S. dollars
Total

Total

Due after 1 year

Fair value(*4)

Long-term debt

¥542,729¥454,039*1

Long-term debt

5,650

5,650

¥73

Long-term debt

14,00012,000(2,674)

1,124¥563,503¥471,689(38)¥(2,639)

Forecasted transactions denominatedin foreign currencies

Millions of yen

2017
Nominal Amount
Hedged items

Interest rate swap
Pay : fixed rate
Receive : floating rate
Interest rate swap (*2)
Pay : fixed rate
Receive : floating rate
Interest rate and currency swap (*2)
Foreign exchange forward (*3)
Buy
U.S. dollars
Total

Total

Due after 1 year

Fair value(*4)

Long-term debt

¥599,759¥544,359*1

Long-term debt

5,824

5,824

¥24

Long-term debt

16,00014,000(3,887)1,468¥623,051¥564,18362¥(3,801)

Forecasted transactions denominatedin foreign currencies

Millions of yen

2016
Nominal Amount
Hedged items

Interest rate swap
Pay : fixed rate
Receive : floating rate
Interest rate swap (*2)
Pay : fixed rate
Receive : floating rate
Interest rate and currency swap (*2)
Foreign exchange forward (*3)
Buy
U.S. dollars
Total

18

Mitsui Fudosan Co., Ltd.

Total

Due after 1 year

Fair value(*4)

Long-term debt

¥681,710¥594,310*1

Long-term debt

6,031

6,031

¥(5)

Long-term debt

18,00016,000(5,533)

2,676¥708,417¥616,341(176)¥(5,714)

Forecasted transactions denominatedin foreign currencies

Thousands of U.S. dollars (See Note 1)

2018
Nominal Amount
Hedged items

Interest rate swap
Pay : fixed rate
Receive : floating rate
Interest rate swap (*2)
Pay : fixed rate
Receive : floating rate
Interest rate and currency swap (*2)
Foreign exchange forward (*3)
Buy
U.S. dollars
Total

Total

Due after 1 year

Fair value(*4)

Long-term debt

$5,108,518$4,273,710*1Long-term debt

53,182

53,182$687

Long-term debt

131,777

112,952(25,169)

10,580$5,304,057$4,439,844(358)$(24,840)

Forecasted transactions denominatedin foreign currencies(*1): The net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities forwhich the swap contract was executed. Thus, the fair value of the interest rate swap is included in the fair value of long-term debt including those due
within one year.
(*2): Recognition of gains or losses resulting from changes in fair value of interest rate swap contracts and foreign currency swap contracts are deferred
until the related losses or gains on the hedged items are recognized.
(*3): Future transactions denominated in foreign currencies will be recorded using the contracted forward rate, and no gains and losses on the foreignexchange forward contract are recognized.
(*4): Fair values are calculated mainly by discounting the future cash flows.

7. INVESTMENT AND LEASING PROPERTIESThe Company and its consolidated subsidiaries have followed“Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Statement No.20; November
28, 2008) and its implementation guidance “Guidance on
Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Guidance No.23, November
28, 2008) which require explanations on investment and leasing
properties and disclosure of fair value of those properties. Investment and leasing properties are properties held to earn rentals orfor capital appreciation, and include (1) properties classified as
investment properties in the balance sheet, (2) idle propertiesand (3) leasing properties other than (1) and (2).
The Company and its certain subsidiaries own office buildings
for rent, commercial facilities and other properties in Tokyo andother areas. Net rent income, impairment loss and loss on disposal of property and equipment regarding those investments

and leasing properties were ¥131,014 million ($1,233,189 thousand), ¥7,584 million ($71,386 thousand), and ¥6,350 million($59,770 thousand) for the year ended March 31, 2018. Net rent
income, impairment loss and loss on disposal of property andequipment regarding those investments and leasing properties
were ¥130,099 million, ¥14,206 million, and ¥829 million for theyear ended March 31, 2017.Net rent income and loss on disposalof property and equipment was ¥117,891 million and ¥203 million for the year ended March 31, 2016, respectively. Gross rent
revenue is included in revenue from operations and gross cost forrent is included in cost of revenue from operations. Gain on
disposal of property and equipment is included in interest, dividends and miscellaneous income (see Note 20). Impairment loss
and loss on disposal of property and equipment are included inother costs and expenses (see Note 21).

The carrying amounts, net changes in the carrying amounts and the fair value of the investment and leasing properties as of and forthe years ended March 31, 2018, 2017 and 2016 are stated below:
Millions of yen

2018

2017

Carrying amount
Beginning ofyear¥2,645,057

Net increaseduring theyear

End of year

Fair value

Carrying amountEnd of year

Net increaseduring theyear

Beginning ofyear¥315,652 ¥2,960,709 ¥5,436,150 ¥2,648,353

End of year

2016
Fair value

Carrying amountEnd of year

Net increaseduring theyear

Beginning ofyear¥(3,296) ¥2,645,057 ¥4,828,440 ¥2,489,933

Fair value

End of year

End of year

¥158,420 ¥2,648,353 ¥4,560,531

Thousands of U.S. dollars (See Note 1)

2018
Carrying amount
Beginning of year

Net increase during
the year$24,896,997$2,971,122

Fair value
End of year

End of year

$27,868,119$51,168,581

Carrying amount represents acquisition cost less accumulated depreciation and accumulated loss on impairment.
The net increase in the carrying amounts mainly consists of acquisitions of real estate which amounts to ¥381,824 million ($3,593,976
thousand) and sales of real estate which amounts to ¥ 3,078 million ($28,972 thousand) for the year ended March 31, 2018.

Mitsui Fudosan Co., Ltd.

19

Financial Statements

The net decrease in the carrying amounts mainly consists of acquisitions of real estate which amounts to ¥140,501 million, transfer toinventories which amounts to ¥ 67,987 million and sales of real estate which amounts to ¥ 4,485 million for the year ended March 31,
2017.
The net increase in the carrying amounts mainly consists of acquisitions of real estate which amounts to ¥169,243 million and sales ofreal estate which amounts to ¥ 6,528 million for the year ended March 31, 2016.
Estimated fair value was calculated internally based on Japanese Real Estate Appraisal Standards.

8. INVENTORIESInventories at March 31, 2018, 2017 and 2016 comprise the following:Thousands of U.S.
dollars (See Note 1)

Millions of yen

2018Real property for saleCompleted
In progress
Land held for development
Expenditure on contracts in progress
Other
Total

2017

2016

¥  707,579 ¥  647,536 ¥  571,371
468,310454,764
399,361
321,173
213,215
187,661
25,401
24,24723,804
4,857
4,364
4,823
¥1,527,320 ¥1,344,126 ¥1,187,020

2018$ 6,660,194
4,408,038
3,023,089
239,091
45,718$14,376,130

9. ADVANCES PAID FOR PURCHASES
Advances paid for purchases comprise primarily advance payments for purchasing real estate for sale.

10. LEASE DEPOSITSThe Company and its consolidated subsidiaries lease certain office buildings and commercial facilities from the owners thereof andsublease them to subtenants. In these transactions, the Company and its consolidated subsidiaries pay lease deposits to the owners
and receive deposits from subtenants (See Note 15).

11. INCOME TAXES
Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2018, 2017 and 2016 are as follows:
Thousands of U.S.
dollars (See Note 1)

Millions of yen

Deferred tax assets:
Loss on impairment of fixed assets
Net defined benefit liability
Unrealized inter-company transactions
Accrued employees’ bonuses
Excess depreciation expense
Allowance for loss on devaluation of real property held for saleAccrued enterprise tax
Unrealized loss on valuation of lease deposits
Allowance for loss on valuation of securities
Other
Total
Deferred tax liabilities:
Unrealized gain on valuation of securities
Deferred gain on sale of land and buildings for tax purposes
Consolidation difference in real property
Unrealized gain on valuation of lease deposits
Other
Total
Net deferred tax assets (liabilities)

20

Mitsui Fudosan Co., Ltd.

2018

2017

2016

2018

¥  17,333
12,176
7,567
5,844
5,751
5,215
3,713
3,575
1,765
26,104¥  89,043¥  17,563
11,848
7,466
5,610
5,644
5,207
2,773
3,558
4,119
26,198¥  89,986¥   7,008
12,100
7,592
5,564
5,410
6,061
3,564
3,545
5,250
25,352¥  81,446$  163,149
114,608
71,22655,00854,132
49,08734,94933,65016,613245,709$  838,131(130,873)(12,188)(5,539)(3,519)(45,756)¥(197,875)¥(108,832)(91,091)(12,350)(5,684)(3,498)(49,088)¥(161,711)¥ (71,725)(100,622)(12,444)(5,779)(3,480)(49,827)¥(172,152)¥ (90,706)(1,231,862)(114,721)(52,137)(33,123)(430,685)$(1,862,528)$(1,024,397)

Amounts of total deferred tax assets as of March 31, 2018,2017 and 2016 are presented net of valuation allowances of¥9,596 million ($90,324 thousand), ¥4,101 million and ¥4,257
million, respectively.
Differences between the statutory tax rate and the Company’s
effective tax rate for the years ended March 31, 2018, 2017 and2016 were immaterial, and therefore are not disclosed.
As a result of promulgation of the amended tax laws on March
31, 2016 based on passage of the tax reform bill by the National
Diet on March 29, 2016, the Company and its domestic consolidated subsidiaries are subject to the new income tax rates for theyears beginning on or after April 1, 2016 (Refer to Note 2(P)).
As a result of the amendment, deferred income taxes for the year
ended March 31, 2016 increased by ¥698 million. Current
deferred income tax assets, non-current deferred income tax
assets, current deferred income tax liabilities, non-current
deferred income tax liabilities, deferred income tax assets onland revaluation, deferred income tax liabilities on land

revaluation and accumulated adjustments for retirement benefit
as of March 31, 2016 decreased by ¥1,230 million, ¥2,366 million, ¥297 million, ¥7,723 million, ¥1,406 million, ¥8,619 millionand ¥207 million, respectively. Net unrealized holding gains(losses) on securities and reserve on land revaluation as of March
31, 2016 increased by ¥5,329 million and ¥7,214 million,
respectively.
On December 22, 2017, the tax reform bill in the United States
was enacted, which, among other effects, reduced U.S. corporate
tax effective for annual reporting periods beginning on or afterJanuary 1, 2018. The Company’s consolidated U.S. subsidiaries
are subject to reduced tax rate of 21% from existing tax rate of35%.
As a result of the tax reform, deferred income tax liabilities, netof deferred tax assets, at March 31, 2018 and deferred income
taxes for the year then ended decreased by ¥4,799 million($45,171 thousand) and ¥4,848 million ($45,633 thousand),
respectively.

12. EMPLOYEES’ RETIREMENT BENEFITS(1) Outline of retirement benefit plan
The Company and its consolidated subsidiaries have adopted
funded and unfunded defined benefit plans and defined contribution plans for employees’ retirement benefits.
The Company and its consolidated subsidiaries have adopted
a corporate pension plan and lump-sum pension plans as defined
benefit plans, under which employees are entitled to lump-sum
or annuity payments based on their respective salaries and service periods. The Company has established a retirement benefit

trust for its corporate pension plan. The Company’s certain consolidated subsidiaries have calculated net defined benefit liability
and retirement benefit expenses using the simplified method,under which actuarial calculation is not adopted. The Company
and its consolidated subsidiaries, upon employees’ retirement
and other cases, may pay supplemental benefits that are notsubject to retirement benefit obligation actuarially calculated incompliance with accounting standard for retirement benefits.

(2) Defined benefit plans(a) Change in benefit obligation, excluding plans accounted for under the simplified method, for the years ended March 31, 2018,2017 and 2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial differences
Prior service costs
Benefits paid
Other
Benefit obligation at end of year

2018

2017

2016

¥158,774
7,354
1,455
1,308
156
(4,784)19¥164,282¥155,983
7,395
1,455
(1,606)105(4,539)(19)¥158,774¥141,550
6,716
1,653
10,66556(4,820)163¥155,983

2018$1,494,484
69,221
13,695
12,312
1,468(45,030)
179$1,546,329(b) Change in plan assets, excluding plans accounted for under the simplified method, for the years ended March 31, 2018, 2017 and2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Fair value of plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Employer contribution
Benefits paid
Other
Fair value of plan assets at end of year

2018

2017

2016

¥126,384
2,716
10,811
6,317(3,158)104¥143,174¥121,301
2,545(1,144)
6,601(3,030)111¥126,384¥121,462
2,511(6,083)
6,678(3,267)¥121,3012018$1,189,608
25,565
101,760
59,460(29,725)979$1,347,647

Mitsui Fudosan Co., Ltd.

21

Financial Statements(c) Change in net defined benefit liability under simplified method for the years ended March 31, 2018, 2017 and 2016:
Thousands of U.S.
dollars (See Note 1)

Millions of yen

Net defined benefit liability at beginning of year
Retirement benefit expenses
Benefits paid
Contribution to the plan
Other
Net defined benefit liability at end of year

2018

2017

2016

¥3,420
517
(439)
(52)
207
¥3,653¥3,241
521
(248)
(44)
(50)
¥3,420¥3,222
435
(218)
(42)
(156)
¥3,241

2018$32,191
4,866(4,132)(489)
1,948$34,384(d) Amount recognized in the consolidated balance sheets, including plans accounted for under the simplified method, at March 31,
2018, 2017 and 2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

2018

2017

2016

Benefit obligation for unfunded plan
Net amount recognized on the consolidated balance sheets¥138,817(143,571)¥  (4,754)
29,516¥ 24,762¥135,011(126,749)¥  8,262
27,547¥ 35,809¥131,897(121,638)¥ 10,259
27,665¥ 37,924$1,306,636(1,351,384)$   (44,748)
277,824$  233,076

Net defined benefit liability
Net defined benefit asset
Net amount recognized on the consolidated balance sheets

42,737(17,975)¥ 24,762

41,083(5,274)¥ 35,809

40,110(2,186)¥ 37,924

402,268(169,192)$  233,076

Benefit obligation for funded plan
Plan assets(e) Details of retirement benefit expenses for the years ended March 31, 2018, 2017 and 2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Actuarial differences recognized in earnings
Prior service costs recognized in earnings
Retirement benefit expenses under simplified method
Defined benefit expenses

2018

2018

2017

2016

¥7,354
1,455(2,716)
2,619
166
517
¥9,395¥7,395
1,455(2,545)
2,570
77
521
¥9,473¥6,716
1,653(2,511)
555
(19)
426
¥6,8202018$69,221
13,695(25,565)
24,652
1,563
4,866$88,432

Premium benefits payments other than the above defined benefit expenses of ¥197 million ($1,854 thousand), ¥144 million and ¥133
million are recognized for the years ended on March 31, 2018, 2017 and 2016, respectively.
(f) Amount recognized in other comprehensive income (pretax) at March 31, 2018, 2017 and 2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Prior service costs
Actuarial differences
Total

2018

2017

2016

2018

¥     (9)(12,118)¥(12,127)¥    27(3,032)¥(3,005)¥    75
16,171¥16,246$     (85)(114,062)$(114,147)(g) Amount recognized in accumulated other comprehensive income (pretax) at March 31, 2018, 2017 and 2016:
Millions of yen

Unrecognized prior service costs
Unrecognized actuarial differences
Total

22

Mitsui Fudosan Co., Ltd.

Thousands of U.S.
dollars (See Note 1)

2018

2017

2016

2018

¥   (18)(3,036)¥(3,054)¥    (9)9,082¥9,073¥    (37)12,115¥12,078$   (169)(28,577)$(28,746)

(h) The asset allocation for the plans, excluding plans accounted for under the simplified method, at March 31, 2018, 2017 and 2016:

Domestic bonds
Domestic stocks
Foreign stocks
Life insurance company general accounts
Foreign bonds
Cash and bank deposits
Other
Total

2018

2017

2016

26.6%
26.6
12.1
10.1
5.4
4.2
15.0
100.0%

27.5%
22.9
14.3
11.4
6.0
3.8
14.1
100.0%

29.1%
23.7
12.2
11.6
5.5
5.3
12.6
100.0%* The plan assets include retirement benefit trust established for corporate pension plan which accounts for 13.6%, 9.1% and 11.8% of the total plan
assets as of March 31, 2018, 2017 and 2016, respectively.

The expected long-term rate of return on plan assets is determined based on the actual return on the plan asset portfolios and the
expected rate of return on those portfolios.
(i) Basis for actuarial calculation:

Discount rates
Expected long-term rates of return on plan assets

2018

2017

2016

0.5 – 1.2%
1.0 – 2.5%

0.5 – 1.2%
1.0 – 2.5%

0.6 – 1.3%
1.5 – 2.5%

(3) Defined contribution plans
Contribution made to the defined contribution plans by the Company’s certain consolidated subsidiaries amounted to ¥501 million($4,716 thousand), ¥241 million and ¥227 million for the years ended March 31,2018, 2017 and 2016, respectively.

13. BANK LOANS, COMMERCIAL PAPER AND LONG-TERM DEBT
(1) Bank loans and commercial paper
Bank loans consist mainly of short-term notes and short-term borrowings under the loan agreements. The Company and its consolidated subsidiaries have had no difficulty in renewing such notes and borrowings, when they considered it appropriate to do so.
The amounts and the weighted average interest rates of bank loans and commercial paper at March 31, 2018, 2017 and 2016 are as
follows:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Bank loans
Non-recourse, with the weighted average interest rates of 0.12%
in 2017 and 0.16% in 2016
Recourse, with the weighted average interest rates of 1.72% in2018, 0.98% in 2017 and 0.63% in 2016
Commercial paper, with the weighted average interest rates of-0.00% in 2018, -0.01% in 2017 and 0.00% in 2016

2018

2017

2016

2018

¥      -

¥    40¥    200$        -70,52364,90473,654

663,808

125,000

82,000109,000

1,176,581

Mitsui Fudosan Co., Ltd.

23

Financial Statements(2) Long-term debt
Long-term debt at March 31, 2018, 2017 and 2016 comprise the following:Thousands of U.S.
dollars (See Note 1)

Millions of yen

2018Long-term loans, principally from banks and insurance companies:
Loans secured by collateral or bank guarantees
Unsecured loans
Total long-term loans, principally from banks and insurancecompanies
Bonds and debentures
1.99%yen notes due 2016
1.91%yen notes due 2016
1.84%yen notes due 20172.06%yen notes due 20171.97%yen notes due 20171.92%yen notes due 2018
2.09%yen notes due 2019
1.72%yen notes due 20191.63%yen notes due 2019
1.49%yen notes due 20191.50%yen notes due 2020
1.19%yen notes due 2020
1.06%yen notes due 2020
1.32%yen notes due 2020
2.30%yen notes due 2030
1.27%yen notes due 2021
1.17%yen notes due 2021
1.00%yen notes due 2022
0.96%yen notes due 2022
1.95%yen notes due 2032
2.05%yen notes due 2033
1.33%yen notes due 2046
1.00%yen notes due 2046
0.00%yen notes due 2019
0.71%yen notes due 2036
1.18%yen notes due 2056
0.00%yen notes due 2020
0.93%yen notes due 2037
0.20%yen notes due 2024
0.24%yen notes due 2027
0.10%yen notes due 2023
0.22%yen notes due 2025
3.65%U.S. dollar notes due 2027
2.95%U.S. dollar notes due 2023
0.01% - 0.99% notes due 2018 - 2022 (*1)
Total bonds and debentures
Less amount due within one year
Long-term debt due after one year

2017

2016

2018

¥  284,640 ¥  246,129 ¥  212,982
1,605,270
1,496,497
1,471,502$ 2,679,217
15,109,846

1,889,910

1,684,484

17,789,063

10,00020,00010,00020,00020,00020,00020,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,000
7,000
7,000
6,000
6,000
25,00025,00010,00010,00010,00010,00010,00010,00053,08331,826
156,314
119,919
108,899
519,223
397,919
358,899(253,834)(257,030)(221,968)¥2,155,299 ¥1,883,515 ¥1,821,415

94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,127
94,12765,88756,474
235,314
94,127
94,127
94,127
94,127
94,127499,650
299,565
1,471,326
4,887,264(2,389,251)$20,287,076

1,742,626(*1) Represents the total balance of asset backed securities issued by the Company’s consolidated special purpose entities. The interest rates include both
fixed rates and floating rates.

24

Mitsui Fudosan Co., Ltd.

Long-term loans, principally from banks and insurance companies consist of the following:Thousands of U.S.
dollars (See Note 1)

Millions of yen

2018

Due within one year
Non-recourse, with the weighted average interest rate of 1.59%
in 2018, 1.52% in 2017 and 0.58% in 2016
Recourse, with the weighted average interest rate of 1.46% in
2018, 1.84% in 2017 and 1.17% in 2016
Subtotal
Due after one year
Non-recourse, with the weighted average interest rate of 1.83%
in 2018, 0.76% in 2017 and 0.92% in 2016
Recourse, with the weighted average interest rate of 1.34% in2018, 1.34% in 2017and 1.42% in 2016
Subtotal
Total

2017

2016

2018

¥   48,744 ¥   97,760 ¥   17,695
153,940
202,684

111,615
209,375

149,430
167,125

1,448,984
1,907,794

235,896

148,368

195,287

2,220,407

1,451,330
1,384,883
1,322,072
1,687,226
1,533,251
1,517,359¥1,889,910 ¥1,742,626 ¥1,684,484

13,660,862
15,881,269$17,789,063

Millions of yen

Thousands of U.S.
dollars (See Note 1)

Bonds and debentures consist of the following:

Due within one year
Non-recourse
Recourse
Subtotal
Due after one year
Non-recourse
Recourse
Subtotal
Total

2018

2017

2016

2018

¥ 31,150
20,00051,150¥  7,655
40,00047,655¥ 14,843
40,00054,843$  293,204
188,253
481,457

125,164
342,909
468,073¥519,223

112,263
238,001
350,264¥397,919

94,056210,000
304,056¥358,899

1,178,125
3,227,682
4,405,807$4,887,264

Long-term debt secured by collateral or bank guarantees consist of the following:Thousands of U.S.
dollars (See Note 1)

Millions of yen

Secured loans
Long-term loans, principally from banks and insurancecompanies
Non-recourse
Subtotal
Bonds and debentures
Non-recourse
Subtotal
Total

2018

2017

2016

¥284,640
284,640¥246,129
246,129¥212,982
212,982$2,679,217
2,679,217

151,514
151,514¥436,154

119,919
119,919¥366,048

108,899
108,899¥321,881

1,426,148
1,426,148$4,105,365

The following assets are pledged as collateral for secured loans:

Real property for sale
Buildings and structures
Land
Other
Total

2018

Thousands of U.S. dollars(See Note 1)

Millions of yen

2018$   458,810

2017

2016

Total

Non-recourse *Total

Non-recourse *Total

Non-recourse *¥295,391
61,787
187,531
182,473¥727,182¥295,391
58,213
179,753
182,461¥715,818¥288,684
63,56281,891
140,492¥574,629¥288,684
59,78774,087140,477¥563,035¥278,104
50,84572,988
133,531¥535,468¥278,104
46,92065,184
133,516¥523,724

2018
Total

Non-recourse *$2,780,412 $2,780,412
581,579
547,939
1,765,164
1,691,952
1,717,555
1,717,442$6,844,710 $6,737,745* Represents assets pledged as collateral for non-recourse loans.

Mitsui Fudosan Co., Ltd.

25

Financial Statements

As is customary in Japan, collateral must be given if requested,under certain circumstances, by a lending bank and such bankhas the right to offset cash deposited with it against any debt or
obligation that becomes due and, in case of default and certain

other specified events, against all debt payable to the bank. The
Company and its consolidated subsidiaries have never received
any such requests nor do they expect that any such request will
be made.

The annual maturities of long-term debt at March 31, 2018, 2017 and 2016 are as follows:
Millions of yen
2018
Non-recourse

Due within 1 year
Due after 1 to 2 years
Due after 2 to 3 years
Due after 3 to 4 years
Due after 4 to 5 years
Thereafter
Total

2017

Recourse

Total¥ 79,894 ¥  173,940 ¥  253,834
146,063
187,431
333,494
60,951147,091
208,042
37,752
165,377
203,129
108,294
177,253285,547
8,000 1,117,087 1,125,087¥440,954 ¥1,968,179 ¥2,409,133

Non-recourse

Recourse

2016
Total

¥105,416 ¥  151,614 ¥  257,030
51,030172,672
223,702125,430
176,628
302,058
84,170127,020
211,190
135,380
135,380- 1,011,185 1,011,185¥366,046 ¥1,774,499 ¥2,140,545

Non-recourse

Recourse

Total¥ 32,538 ¥  189,430 ¥  221,968
85,741
151,638
237,379
65,130168,522233,652
93,358
165,858
259,216
45,113
103,405
148,518
1
942,649
942,650¥321,881 ¥1,721,502 ¥2,043,383

Thousands of U.S. dollars (See Note 1)
2018
Non-recourse

Due within 1 year
Due after 1 to 2 years
Due after 2 to 3 years
Due after 3 to 4 years
Due after 4 to 5 years
Thereafter
Total$  752,014
1,374,840
573,711355,346
1,019,334
75,301$4,150,546

Recourse$ 1,637,237
1,764,222
1,384,516
1,556,636
1,668,420
10,514,750$18,525,781

Total$ 2,389,251
3,139,062
1,958,227
1,911,982
2,687,754
10,590,051$22,676,327

14. ASSET RETIREMENT OBLIGATIONS(1) Asset retirement obligations recognized in the consolidated balance sheets as of March 31, 2018, 2017 and 2016
The Company and its consolidated subsidiaries, in connection
with operating commercial facilities and parking business (Mitsui
Repark), have entered into real estate lease contracts with terms
ranging from several months to 20 years. Asset retirement obligations have been recognized in respect of the obligation of theCompany and its consolidated subsidiaries to the landlords toremove the facilities from leased real estate at the end of thosecontracts. The liability has been calculated with expected useful
lives ranging from several months to 20 years and discount rates
ranging from 0 to 2.5%.
Asset retirement obligations are included in other current
liabilities and other long-term liabilities on the consolidatedbalance sheets.

The following table summarizes the changes in the aggregate carrying amount of asset retirement obligations for the years ended
March 31, 2018, 2017 and 2016:
Thousands of U.S.
Millions of yen

Beginning of year
Increase due to acquisition of fixed assets
Net increase due to revisions to original estimate*
Decrease due to settlement
Other
End of year

dollars (See Note 1)

2018

2017

2016

¥3,924
573
120
(391)
55
¥4,281¥3,718
451
25
(287)
17
¥3,924¥3,520
324
109
(258)
23
¥3,7182018$36,935
5,393
1,130(3,680)518$40,296* Increase for the years ended March 31, 2018, 2017 and 2016 was mainly due to additions of decommissioning costs that have become measurable in amore accurate manner.

(2) Asset retirement obligations not recognized in the consolidated balance sheets as of March 31, 2018, 2017 and 2016
The Company and its consolidated subsidiaries own properties
containing asbestos material and are obligated to remove thosematerials upon disposition of the properties. However, since
sufficient information is not available to reasonably estimate theobligation amount due to uncertainty about the method andtiming of settlement, asset retirement obligation is not recognized for the obligations to remove asbestos materials.

26

Mitsui Fudosan Co., Ltd.

The Company and its consolidated subsidiaries, in connection
with some commercial facilities, hotels and retail premises, haveentered into real estate lease contracts and are obligated to thelandlords to dismantle the facilities upon exit. However, sufficient
information is not available to reasonably estimate the obligation
amount due to uncertainty about the timing of settlement or lackof plan to settle. Thus asset retirement obligation regarding
reestablishing the previous state is not recognized except for
those mentioned in (1) above.

15. DEPOSITS FROM TENANTS
Deposits from tenants at March 31, 2018, 2017 and 2016 comprise the following:Thousands of U.S.
dollars (See Note 1)

Millions of yen

Non-interest-bearing
Interest-bearing
Total
Average interest rate
The Company and its consolidated subsidiaries generally makelease agreements with tenants under which they receive bothinterest-bearing deposits and non-interest-bearing deposits fromtenants. The non-interest-bearing deposits and some of theinterest-bearing deposits are not refundable during the life of the

2018

2017

2016

¥402,232
1,181¥403,413
1.00%¥372,802
1,529¥374,331
1.03%¥371,261
1,823¥373,084
1.03%

2018

$3,786,069
11,117$3,797,186

lease. The rest of the interest-bearing deposits are generally
refundable to the tenant in equal annual or monthly paymentswith interest over certain periods of time commencing after thegrace periods, depending on the terms of the contracts.

16. NET ASSETS
Net assets comprises four subsections, which are shareholders’equity, accumulated other comprehensive income, subscription
rights to shares and non-controlling interests, as applicable.
Under the Japanese Company Law (the “Law”), the entire
amount paid for new shares is required to be designated ascommon stock. However, a company may, by resolution of theBoard of Directors, designate an amount not exceeding one-halfof the prices of the new shares as additional paid-in capital,
which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the totalof additional paid-in-capital and legal earnings reserve must be
set aside as additional paid-in-capital or legal earnings reserve.

Legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in
capital may be used to eliminate or reduce a deficit, or may becapitalized by resolution of the shareholders’ meeting. Additional
paid-in capital and legal earnings reserve may not be distributed
as dividends. However, all additional paid-in capital and all legal
earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with Japanese laws
and regulations.

17. SUPPLEMENTAL INFORMATION ON THE CONSOLIDATED STATEMENTS OF CHANGES IN NETASSETS(1) Changes in number of shares issued and outstanding during the years ended March 31, 2018, 2017 and 2016 are as follows:
Thousands of shares

Numbers of shares as of March 31, 2015
Numbers of shares increased (*1)
Numbers of shares decreased (*2)
Numbers of shares as of March 31, 2016
Numbers of shares increased (*1)
Numbers of shares decreased (*3)
Numbers of shares as of March 31, 2017
Numbers of shares increased (*1)
Numbers of shares decreased (*4)
Numbers of shares as of March 31, 2018

IssuedTreasury stock

Common stock

Common stock

991,425
991,425
991,425
991,425

3,264
72
(33)
3,303
44
(57)
3,290
9
(99)
3,200

(*1) Treasury stock increased due to purchase of odd shares.
(*2) Treasury stock decreased due to sale of 4 thousand odd shares and exercise of 29 thousand shares of subscription rights.
(*3) Treasury stock decreased due to sale of 7 thousand odd shares and exercise of 50 thousand shares of subscription rights.
(*4) Treasury stock decreased due to sale of 1 thousand odd shares and exercise of 98 thousand shares of subscription rights.

Mitsui Fudosan Co., Ltd.

27

Financial Statements(2) Information of subscription rights to shares is summarized as follows:
Millions of yen
Company

Type of subscription rights to shares
Balance as of March 31, 2016
Balance as of March 31, 2017
Balance as of March 31, 2018

Consolidated
subsidiaries

Stock option¥1,032¥1,104¥1,091-Thousands of U.S. dollars (See Note 1)
Total

Company¥1,032¥1,104¥1,091

Consolidated
subsidiaries$10,269

Total-$10,269

Number of shares regarding stock options as of March 31, 2018, 2017 and 2016 and number of such shares increased anddecreased during the years then ended are not presented as they are insignificant.
(3) Information of dividends is summarized as follows:(a) Dividends paid
The following resolution was approved by the ordinary general shareholders’ meeting held on June 29, 2017, June 29, 2016 and June
26, 2015:

Date of shareholders' meeting
Type of stock
Total amount
Per share amount
Record date
Effective dateJune 29, 2017
Common stock¥17,786 million($167,413 thousand)¥18 ($0.169)
March 31, 2017
June 30, 2017

June 29, 20176
Common stock¥15,810 million

June 26, 2015
Common stock¥13,834 million¥16
March 31, 2016
June 30, 2016¥14
March 31, 2015
June 29, 2015

The following resolution was approved by the Board of Directors’ meeting held on November 10, 2017, November 11, 2016 andNovember 6, 2015:

Date of board of directors’ meeting
Type of stock
Total amount
Per share amount
Record date
Effective dateNovember 10, 2017
Common stock¥17,787 million($167,423 thousand)¥18 ($0.169)
September 30, 2017
December 4, 2017

November 11, 2016
Common stock¥15,810 million

November 6, 2015
Common stock¥13,834 million¥16
September 30, 2016
December 2, 2016¥14
September 30, 2015
December 2, 2015(b) Dividend whose record date falls within the current fiscal year but to be effective in the following fiscal year
The following resolution was approved by the ordinary general shareholders’ meeting held on June 28, 2018, June 29, 2017 and June29, 2016:

Date of shareholders’ meeting
Type of stock
Total amount
SourcePer share amount
Record date
Effective dateJune 28, 2018
Common stock¥21,741 million($204,640 thousand)
Retained earnings¥22 ($ 0.207)
March 31, 2018
June 29, 2018

June 29, 2017
Common stock¥17,786 million

June 29, 2016
Common stock¥15,810 million

Retained earnings¥18
March 31, 2017
June 30, 2017

Retained earnings¥16
March 31, 2016
June 30, 201618. STOCK OPTION PLANS
The following table summarizes the stock option plans introduced by the Company.
Stock option expenses charged to income for the years ended March 31, 2018, 2017 and 2016 are as follows:
Millions of yen

2018

Cost of revenue from operations
Selling, general and administrative expenses
Total

28

Mitsui Fudosan Co., Ltd.

¥71
88
¥159

2017

¥38
100
¥138

2016

¥41
121
¥162

Thousands of U.S.
dollars (See Note 1)

2018

$668
829
$1,497

The following table summarizes the contents and activity of stock options as of March 31, 2018 and for the year then ended:
GranteesType of stockand numberof shares
grantedGrant date2017 plan

2016 plan

2015 plan2014 plan2013 plan2012 plan2011 plan2010 plan2009 plan2008 plan2007 plan

Directors,
corporate
officers andgroup
managing
officers; 28
in total (*1)
80,440shares ofcommonstock
July 14,2017

Directors,
corporate
officers andgroup
managing
officers; 27
in total (*1)
77,720shares ofcommonstock
August 19,
2016

Directors,
corporate
officers andgroup
managing
officers; 27
in total (*1)
50,460shares ofcommonstock
August 21,
2015

Directors,
corporate
officers andgroup
managing
officers; 27
in total (*1)
52,450shares ofcommonstock
August 22,
2014

Directors,
corporate
officers andgroup
managing
officers; 27
in total (*1)
66,650shares ofcommonstock
August 23,
2013

Directors,
corporate
officers andgroup
managing
officers; 25
in total (*1)
134,640
shares ofcommonstock
August 17,
2012

Directors,
corporate
officers andgroup
managing
officers; 25
in total (*1)
143,040
shares ofcommonstock
August 12,
2011

Directors,
corporate
officers andgroup
managing
officers; 25
in total (*1)
140,420
shares ofcommonstock
August 13,
2010

Directors,
corporate
officers andgroup
managing
officers; 25
in total (*1)
109,650
shares ofcommonstock
August 14,
2009

Directors,
corporate
officers andgroup
managing
officers; 26
in total (*1)
71,250shares ofcommonstock
August 15,
2008

Directors,
corporate
officers andgroup
managing
officers; 27
in total (*1)
48,880shares ofcommonstock
September
18, 2007

Vesting
conditions
(*2)
(*2)
(*2)
(*2)
(*2)
(*2)
(*2)
(*2)
(*2)
(*2)
(*2)
Requisite
Not
Not
Not
Not
Not
Not
Not
Not
Not
Not
Not
service period specified
specified
specified
specified
specified
specified
specified
specified
specified
specified
specifiedExercise
July 15,
August 20, August 22, August 23, August 24, August 18, August 13, August 14, August 15, August 16, September
period(*2)
2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 19, 2007 July 14,
August 19, August 21, August 22, August 23, August 17, August 12, August 13, August 14, August 15, September
2047
2046
2045
2044
2043
2042
2041
2040
2039
2038
18, 2037
Non-vested
options(number ofshares):Outstanding at
beginning ofyear
73,03047,44044,22056,190104,040
111,300
66,27051,07022,84014,240Granted80,440Forfeited
Vested(6,230)(4,020)(4,120)(5,230)(9,980)(10,680)(9,700)(7,660)(4,390)(2,660)
Outstanding at
end of year
80,44066,80043,42040,10050,96094,060100,620
56,57043,41018,450
11,580
Vested options(number ofshares):Outstanding at
beginning of
year
4,690
3,020
6,890
8,760
12,3508,110
10,470
4,360
2,430
1,660
Vested
6,230
4,020
4,120
5,230
9,980
10,680
9,700
7,660
4,390
2,660
Exercised(7,210)(4,650)(8,560)(10,880)(17,020)(13,110)(12,770)(12,020)(6,820)(4,320)
ExpiredOutstanding at
end of year

Yen/U.S. dollars(See Note 1)
Exercise price¥1/$0.01
Average stock
price onexercise date
Grant-date fair
¥2,093/value$19.70

3,710

2,390

2,450

3,110

5,310

5,680

7,400

-

-

-

Yen
¥    1

Yen¥    1

Yen¥    1

Yen¥    1

Yen¥    1

Yen¥    1

Yen¥    1

Yen¥    1

Yen¥    1

Yen¥    1¥2,581¥2,581¥2,543¥2,543¥2,549¥2,569¥2,552¥2,543¥2,542¥2,546¥1,670¥3,218¥3,067¥2,796¥1,265¥919¥1,029¥1,493¥1,967¥2,357(*1) Grantees consist of 8 directors (excluding outside directors), 13 corporate officers (non-directors) and 7 group managing officers for 2017 plan, 8
directors (excluding outside directors), 13 corporate officers (non-directors) and 6 group managing officers for 2016 plan, 8 directors (excluding outside
directors), 14 corporate officers (non-directors) and 5 group managing officers for 2015 plan, 2014 plan and 2013 plan, 9 directors (excluding outside
directors), 9 corporate officers (non-directors) and 7 group managing officers for 2012 plan, 9 directors (excluding outside directors), 8 corporate officers(non-directors) and 8 group managing officers for 2011 plan, 8 directors (excluding outside directors), 9 corporate officers (non-directors) and 8 groupmanaging officers for 2010 plan and 2009 plan, 6 directors (excluding outside directors), 12 corporate officers (non-directors) and 8 group managing
officers for 2008 plan, and 6 directors (excluding outside directors), 13 corporate officers (non-directors) and 8 group managing officers for the 2007 plan.
(*2) Vesting conditions and exercise period:
Stock options granted are exercisable on the day following grantees leaving the positions of director, statutory auditor, corporate officer or group managing officer, and for 5 years commencing on that date.

The fair value of options was estimated using the Black-Scholes option pricing-model under the following assumptions:2017 plan

2016 plan

2015 plan

Expected volatility (*1)

38%

38%

38%

Expected life (*2)
Expected dividend (*3)
Risk-free rate (*4)

15 years¥36 ($0.34) per share
0.36%

15 years¥32 per share
0.08%

15 years¥28 per share
0.76%(*1) Expected volatility is calculated based on the historical stock price for the 15-year period ending on the grant date.
(*2) Options are assumed to be exercised at the midpoint of the exercise period because of the difficulty to reasonably estimate expected life due toinsufficient historical data.
(*3) Expected dividend is the expected dividend amount for the fiscal year in which the options are granted, estimated as of the grant date.
(*4) Risk-free rate represents the interest rate of Japanese government bonds whose life corresponds to the expected life of stock options.

Number of vesting options is estimated based on actual forfeitures due to difficulty in reasonably estimating future forfeitures.

Mitsui Fudosan Co., Ltd.

29

Financial Statements

19. IMPAIRMENT LOSS ON FIXED ASSETS
During the year ended March 31, 2018, the Company and certain consolidated subsidiaries recognized impairment losses for thefollowing groups of assets.
Primary use

Leasing properties and otherType of assets

Location

Buildings, land and otherFor the purpose of identifying fixed assets that are impaired,
the Company and certain consolidated subsidiaries grouped their
fixed assets at the lowest level for which identifiable cash flows
are largely independent of the cash flows of other assets orgroups of assets. The corporate headquarters’ facilities aretreated as common assets.
Considering significant deterioration of profitability due to a
decline in current rental rates, adverse changes in market

Hiroshima City, Hiroshima, Japan and otherconditions and other factors, the Company reduced the bookvalues of operating facilities to their recoverable amounts andrecognized impairment losses.
Impairment losses totaling ¥8,042 million ($75,697 thousand)are comprised of ¥3,476 million ($32,718 thousand) of land,¥4,245 million ($39,957 thousand) of buildings and structures and¥321 million ($3,022 thousand) of others.

During the year ended March 31, 2017, the Company and certain consolidated subsidiaries recognized impairment losses for thefollowing groups of assets.
Primary use

Leasing properties and other
Operating facilities

Type of assets

Location

Buildings, land and other
Buildings, land and otherFor the purpose of identifying fixed assets that are impaired,
the Company and certain consolidated subsidiaries grouped their
fixed assets at the lowest level for which identifiable cash flows
are largely independent of the cash flows of other assets orgroups of assets. The corporate headquarters’ facilities aretreated as common assets.
In the light of a significant decrease in the projected recoverable amount due to the Company’s decision to sell the leasing
properties early, the Company recorded impairment loss on
those properties. In addition, considering significant deterioration of profitability due to a decline in current rental rates,
adverse changes in market conditions and other factors, theOsaka City, Osaka, Japan and other
Minato-ku, Tokyo, Japan and other
Company reduced the book values of operating facilities to theirrecoverable amounts and recognized impairment losses.
Impairment losses totaling ¥25,560 million are comprised of¥17,044 million of land, ¥7,731 million of buildings and structuresand ¥785 million of others.
Recoverable amounts are measured by net realizable values.
Net realizable values are determined mainly based upon income
approach and comparable transactions.
During the year ended March 31, 2016, there were no impairment losses recognized by the Company and its consolidated
subsidiaries.

20. MAJOR COMPONENTS OF INTEREST, DIVIDENDS AND MISCELLANEOUS INCOME
Thousands of U.S.
dollars (See Note 1)

Millions of yen
Years ended March 31,

2018

2017

2016

Interest income
Dividend income
Gain on sale of investment securities
Other
Total

¥  8395,245
3,636¥9,720¥ 1,104
4,506
7,517¥13,127¥   727
4,095
2,690
3,153
¥10,6652018$ 7,897
49,37034,224$91,491

21. MAJOR COMPONENTS OF OTHER EXPENSES
Thousands of U.S.
dollars (See Note 1)

Millions of yen

30Years ended March 31,

2018

2017

2016

2018

Loss on disposal of property and equipment
Impairment loss on fixed assets
Other
Total

¥ 7,550
8,042
4,868¥20,460¥ 1,791
25,5606,148¥33,499¥ 3,894
8,068¥11,962$ 71,066
75,69745,820$192,583

Mitsui Fudosan Co., Ltd.

22. COMPREHENSIVE INCOME
An analysis of each component of other comprehensive income (loss) and related tax effects for the years ended March 31, 2018, 2017and 2016 is presented as follows.

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Net unrealized holding gains (losses) on securities
Unrealized holding gains (losses) arising during the year
Reclassification to income for the year
Pretax amountTax benefit (expense)
Net-of-tax amountDeferred gains (losses) on hedging instruments
Deferred gains (losses) arising during the year
Reclassification to income for the year
Pretax amountTax expense
Net-of-tax amountReserve on land revaluation
Tax benefit (expense)
Foreign currency translation adjustments
Aggregated adjustment during the year resulting from foreign
currency translation
Reclassification to income for the year
Net amount
Adjustments for retirement benefit
Adjustments for retirement benefit arising during the year
Reclassification to income for the year
Pretax amountTax benefit (expense)
Net-of-tax amount
Equity in other comprehensive income (loss) of affiliated companies
Unrealized gains (losses) arising during the year
Reclassification to income for the year
Net amount
Total other comprehensive income (loss)

2018

2017

2016

2018

¥133,893(95)
133,798(40,999)
92,799¥(29,588)(278)(29,866)
9,162(20,704)¥(51,296)(461)(51,757)
22,814(28,943)$1,260,288(894)
1,259,394(385,909)
873,485

(304)
567
263
(177)
86

28
722
750
(343)
407

(550)
861
311
(181)
130

(2,861)
5,337
2,476(1,667)809(1,047)

139

7,885

(9,855)

1,150
(1)
1,149

(13,551)(856)(14,407)(1,808)(1,808)

10,825(10)
10,8159,536
2,591
12,127(3,706)
8,421

463
2,542
3,005
(955)
2,050

(16,782)536(16,246)
5,044(11,202)89,75924,388114,147(34,883)
79,264

2,359
(72)
2,287
¥103,695(4,070)(784)(4,854)¥(37,369)(5,927)(5,927)¥(39,865)

22,204(677)
21,527$976,045

Mitsui Fudosan Co., Ltd.

31

Financial Statements

23. LEASESAs lessee:(A) Finance leases
Assets leased under finance leases that do not transfer ownership to the lessee consist mainly of buildings and structures used in leasing business. Such assets are capitalized as assets and depreciated using the straight-line method over their lease term assuming noresidual value.
As described in Note 2 (O), finance leases that do not transfer ownership to the lessee whose commencement day falls on or before
March 31, 2008 are accounted for as operating lease. Information on such leases is summarized as follows:(1) Assumed amounts of acquisition cost, accumulated depreciation and net book value at March 31, 2018, 2017 and 2016:
Millions of yen

2018
Buildings andstructures

Acquisition cost
Accumulated depreciation
Net book value

2017
Total

¥519
380
¥139

2016

Buildings andstructures

¥519
380
¥139

Total

¥778
590
¥188

Buildings andstructures

Machinery andequipment¥2,111
1,765
¥346

¥48
46
¥2

¥778
590
¥188

Total

¥2,159
1,811¥348

Thousands of U.S. dollars (See Note 1)

2018
Buildings andstructures

Acquisition cost
Accumulated depreciation
Net book value$4,885
3,577$1,308

Total$4,885
3,577$1,308(2) Future lease payment inclusive of interest at March 31, 2018, 2017 and 2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

2018

Amount due within one year
Amount due after one year
Total

¥35
104
¥139

2017

¥50
138
¥188

2016

2018

¥159
189
¥348

$329
979
$1,308(3) Lease expense and the assumed amount of depreciation expense for the years ended March 31, 2018, 2017 and 2016:
Thousands of U.S.
dollars (See Note 1)

Millions of yen

2018

Lease expense
Depreciation expense

¥50
50

2017

¥159
159

2016

2018

¥188
188

$471
471

(4) Calculation of the assumed amount of depreciation expense:
Assumed depreciation amounts are computed using the straight-line method over the lease terms assuming no residual value.
(B) Operating leases
Future lease payments under non-cancellable operating leases at March 31, 2018, 2017 and 2016:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Amount due within one year
Amount due after one year
Total

2018

2017

2016

¥77,772
271,106¥348,878¥69,028
261,667¥330,695¥66,588271,944¥338,532

As lessor:
Operating leases
Future lease revenue under non-cancellable operating leases at March 31, 2018, 2017 and 2016:32

Mitsui Fudosan Co., Ltd.

$732,041
2,551,826$3,283,867

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Amount due within one year
Amount due after one year
Total

2018

2018

2017

2016

¥88,819
628,429¥717,248¥76,029
278,571¥354,600¥74,720
239,263¥313,983

2018$836,022
5,915,183$6,751,205

24. SEGMENT INFORMATION
Reportable Segment Information:
The reportable segments of the Company represent its components for which operating results are regularly reviewed, utilizing
separately available financial information, by the management indeciding how to allocate resources and assessing segment
performance.
The Company’s Head Office organizes its business units basedon products and services, with each unit controlling subsidiaries
with related business, mainly consisting of leasing, property sales
and management.
The Company employs a matrix form of segment categorized
by business unit organized by Head Office and by services provided. The Company’s segments have been aggregated basedon the nature of products and services into the 5 reportablesegments of “Leasing”, “Property Sales”, “Management”,“Mitsui Home”, a listed subsidiary, and “Other.”

Descriptions of reportable segments are stated below.
(1) Leasing
Leasing of office buildings and commercial facilities and other(2) Property Sales
Sales of condominiums and detached housing to individuals,
and sales of rental housing and office buildings and other toinvestors.
(3) Management
Property management and brokerage and asset management
and other(4) Mitsui Home
New housing construction and renovation and other(5) Other
Facility operations and other

Financial information about reportable segments for the years ended March 31, 2018, 2017 and 2016 is summarized in the following
tables. The accounting policies of segments are almost the same as those described in Note 2. Segment operating income is based onrevenue from operations, cost of revenue from operations and selling, general and administrative expenses. Transactions and transfers
between segments are made at amounts based on prevailing market prices.
Millions of yen
Year ended March 31,2018

Revenue from operations:
Outside customers
Inter-segment
Total revenue from operations
Segment operating income
Segment assets
Depreciation
Loss on impairment of fixed assets
Additions to property andequipment and intangible assets

(1)

(2)

(3)

(4)

(5)

Adjustments (*1)

Consolidated¥ 558,166
17,782¥ 575,948¥ 138,338
3,535,907
51,0457,584¥ 499,608
234¥ 499,842¥  83,011
1,730,914
1,611
18¥353,813
71,602¥425,415¥ 48,728
344,2698,727
440¥252,181
7,929¥260,110¥  5,464
137,405
2,865-¥ 87,346
3,920¥ 91,266¥  6,848
125,2344,347-¥       (101,467)¥(101,467)¥ (36,487)
427,560
1,572-¥1,751,114¥1,751,114¥  245,902
6,301,289
70,167
8,042

397,7442,389

13,144

3,252

20,8583,366

440,753

(1)

(2)

(3)

(4)

(5)

Adjustments (*2)

Consolidated¥ 536,519
17,484¥ 554,003¥ 135,775
3,178,949
52,104
19,174¥ 488,710¥ 488,710¥  65,286
1,523,060
1,354-¥347,672
68,349¥416,021¥ 53,839
342,5218,770
542¥247,195
7,649¥254,844¥  4,907
130,183
2,946-¥ 84,320
4,321¥ 88,641¥  5,995
101,215
4,794
5,844

¥       (97,803)¥ (97,803)¥ (33,103)
294,823
1,389-¥1,704,416¥1,704,416¥  232,699
5,570,751
71,35725,560139,527

8,030

12,426

2,455

11,020288

173,746

(1)

(2)

(3)

(4)

(5)

Adjustments (*3)

Consolidated¥ 509,179
17,948¥ 527,127¥ 124,113
3,166,125
49,523¥ 391,578
3,287¥ 394,865¥  44,525
1,354,808
1,251¥334,652
64,951¥399,603¥ 52,447
309,575
8,087¥247,455
8,792¥256,247¥  4,725
129,779
3,245¥ 85,106
3,092¥ 88,198¥  7,164
107,1394,123¥       (98,070)¥ (98,070)¥ (30,491)
306,852
1,232¥1,567,970¥1,567,970¥  202,483
5,374,278
67,461

174,891

4,294

10,561

2,998

15,779(1,350)207,173

Millions of yen
Year ended March 31,2017

Revenue from operations:
Outside customers
Inter-segment
Total revenue from operations
Segment operating income
Segment assets
Depreciation
Loss on impairment of fixed assets
Additions to property andequipment and intangible assets

Millions of yen
Year ended March 31,2016

Revenue from operations:
Outside customers
Inter-segment
Total revenue from operations
Segment operating income
Segment assets
Depreciation
Additions to property andequipment and intangible assets

Mitsui Fudosan Co., Ltd.

33

Financial Statements

Thousands of U.S. dollars (See Note 1)
Year ended March 31,2018

Revenue from operations:
Outside customers
Inter-segment
Total revenue from operations
Segment operating income
Segment assets
Depreciation
Loss on impairment of fixed assets
Additions to property andequipment and intangible assets

(1)

(2)

$ 5,253,821 $ 4,702,636
167,376
2,202$ 5,421,197 $ 4,704,838$ 1,302,127 $   781,354
33,282,257 16,292,489
480,469
15,164
71,386169
3,743,825

22,487

(3)

(4)

(5)

$3,330,318
673,965$4,004,283$  458,660
3,240,484
82,1444,142$2,373,692
74,633$2,448,325$    51,431
1,293,345
26,967-$ 822,157
36,898$ 859,055$  64,457
1,178,784
40,916-

123,720

30,610196,329

Adjustments (*1)

Consolidated$        - $16,482,624(955,074)$ (955,074) $16,482,624$ (343,439) $ 2,314,590
4,024,473
59,311,832
14,797660,457
75,697
31,683

4,148,654(*1) Adjustments to segment operating income of ¥(36,487) million ($(343,439) thousand) consists of ¥(617) million ($(5,807) thousand) of inter-segment
elimination and ¥(35,870) million ($(337,632) thousand) of corporate expenses, which mainly represent the Company’s general and administrative
expenses that are not allocable to any of the reportable segments. Adjustments to segment assets of ¥427,560 million ($4,024,473thousand) consistsof ¥(919,494) million ($(8,654,876) thousand) of inter-segment elimination, ¥1,149,210 million ($10,817,113 thousand) of corporate assets and investments in affiliated companies of ¥197,844 million ($1,862,236 thousand).
(*2) Adjustments to segment operating income of ¥(33,103) million consists of ¥(842) million of inter-segment elimination and ¥(32,261) million of corporate expenses, which mainly represent the Company’s general and administrative expenses that are not allocable to any of the reportable segments.
Adjustments to segment assets of ¥294,823 million consists of ¥(761,831) million of inter-segment elimination, ¥882,606 million of corporate assets
and investments in affiliated companies of ¥174,048 million.
(*3) Adjustments to segment operating income of ¥(30,491) million consists of ¥(1,355) million of inter-segment elimination and ¥(29,136) million of
corporate expenses, which mainly represent the Company’s general and administrative expenses that are not allocable to any of the reportable segments. Adjustments to segment assets of ¥306,852 million consists of ¥(788,155) million of inter-segment elimination, ¥929,156 million of corporate
assets and investments in affiliated companies of ¥165,851 million.

Reportable segment information regarding carrying amount and amortization of goodwill and income recognized from negative goodwill has been omitted due to their immateriality.
Products and Services Information:
Refer to reportable segment information.
Geographic Area Information:(1) Revenue from operations
Geographic area information has been omitted since revenue from outside customers in the Japan area accounted for more than 90%
of revenue from operations on the consolidated income statements.
(2) Property and equipment
Property and equipment classified by the location at March 31, 2018, 2017 and 2016 are as follows:
Thousands of U.S.
dollars (See Note 1)

Millions of yen

Japan
U.S.A.
U.K.
Other
Total

2018

2017

2016

¥2,840,247
355,966
63,12533,335¥3,292,673¥2,645,116
217,71358,281
24,655¥2,945,765¥2,634,198
214,697
77,171
24,371¥2,950,437

2018$26,734,253
3,350,584
594,174
313,770$30,992,781

Customer Information:
Customer information has been omitted since revenue from no single customer exceeded 10% of revenue from operations on the
consolidated income statements.

34

Mitsui Fudosan Co., Ltd.

25. RELATED PARTIES
Significant related party transaction for the year ended March 31, 2018 is summarized as follows:
Transaction with the Company’s directors and major individual shareholders
Millions of yen

Thousands of U.S. dollars (Note 1)

2018
Type

Name

Corporate
AuditorYasushiManagoOwnership ratioof voting shares

Nature oftransaction

Transaction amount

Directly owns Renovation of
0.00%
residence

Balance outstandBalance outstanding at year end Transaction amount ing at year end

¥23

-

$216

-

Policies for terms and conditions of the transaction:
The transaction price is determined in reference to market prices.
There were no significant related party transactions for the years ended March 31, 2017 and 2016.

26. CONTINGENT LIABILITIESContingent liabilities at March 31, 2018, 2017 and 2016 are as follows:

Thousands of U.S.
dollars (See Note 1)

Millions of yen

Loans guaranteed

2018

2017

2016

2018

¥32,130¥27,051¥31,826$302,428

It had been presumed that some of the foundation piles, part ofa building’s substructure, were faulty on a condominium complex(the “Condominiums”) located in the City of Yokohama that weresold by Mitsui Fudosan Residential Co., Ltd. (“MFR”), one of theCompany’s consolidated subsidiaries. On April 11, 2016, MFR
received a report of an investigation of current conditions confirming that a portion of the piles used in the construction failed
to reach the required bearing layer from the building contractor,
Sumitomo Mitsui Construction Co., Ltd. (“SMC”). In addition, on
August 26, 2016, MFR received a notice from the City of Yokohama stating that the Condominiums were in violation of the
Building Standards Law and requesting that MFR consult with theunit owners of the Condominiums and take all responsible steps
to resolve the situation.
On May 8, 2016, MFR executed an agreement (the “Agreement”) with the condominium association (the “Condominium
Association”), establishing a basic framework to remedy thedefects in the installation of the foundation piles, including thepossibility of reconstructing the Condominiums, as well as compensation and providing that MFR would bear the expenses
arising out of such defects. On September 19, 2016, the Condominium Association resolved in accordance with the Act on Building Unit Ownership, etc. and determined that it would seek thecomplete reconstruction of the entire Condominiums as thecorrective measure.
With regard to the Condominiums, MFR received the reportfrom the building contractor, SMC, which noted that construction
records had been diverted and modified at the time of the installation of the foundation piles, and it was revealed that certain
foundation piles failed to reach the required bearing layer andthe Condominiums violated the Building Standards Law. Accordingly, MFR determined to seek all damages incurred includingreconstruction costs and expenses relating to the temporary
housing of unit owners of the Condominiums during the periodof reconstruction against the building contractor, SMC, as well as
Hitachi High-Technologies Corporation and Asahi Kasei Construction Materials Corporation, which installed the foundation
piles, based on their tort liabilities and defect liabilities. On
November 28, 2017, MFR filed a lawsuit of approximately ¥45.9
billion ($432.0 million) in total to seek damages incurred against
the above 3 companies. All related temporary payments undertaken by MFR up to March 31, 2018 are recorded as current
assets on the consolidated balance sheet.
Depending on the outcome of future events, the mattersreferred to above may impact the consolidated results of operations of the Company and its consolidated subsidiaries. At thisstage, however, it is difficult to estimate reasonably the amountof any such impact.

27. SUBSEQUENT EVENTS
There were no applicable items under this category.

Mitsui Fudosan Co., Ltd.

35

Independent Auditor’s Report

36

Mitsui Fudosan Co., Ltd.