Financial Section

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

AssetsCurrent assets:Cash, time and notice deposits (Notes 3, 5 and 6)
Notes and accounts receivable—trade (Note 6)
Allowance for doubtful accounts
Inventories (Note 4)
Other current assets
Total current assets

2019

2020

2020

2019

2020

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 6 and 8)
Long-term debt due within one year (Notes 5, 6 and 8)
Long-term non-recourse debt due within one year (Notes 5, 6 and 8)
Notes and accounts payable—trade (Note 6)
Accrued income taxes
Accrued bonuses
Deposits received (Note 14)
Other current liabilities
Total current liabilities¥  146,726
131,471
70,37336,39332,344
5,440
51,196
148,102622,045¥   25,643
169,619
102,298
54,93729,2605,573
61,582
137,128
586,040$ 1,348,461
1,208,262
646,751
334,464
297,252
49,995
470,508
1,361,108
5,716,801

2,842,156
250,182
293,505
6,270
8,465
3,400,578

2,744,327
300,900
278,766
6,019
11,964
3,341,976

26,120,357
2,299,256
2,697,408
57,62377,796
31,252,440

122,805
104,154
1,002,634(4,473)1,225,120

122,805
104,154876,803(4,470)1,099,291

1,128,619
957,2109,214,539(41,109)
11,259,259

76,335(3,560)(2,718)(177)
69,8801,295,000¥5,317,623

109,210(3,972)(2,352)(74)
102,8121,202,104¥5,130,120

701,544(32,718)(24,979)(1,627)642,220
11,901,479$48,870,720¥  195,361
17,406(61)
648,881
54,447916,034¥  172,192
21,567(73)
679,90359,422933,011$ 1,795,432
159,967(561)
5,963,432
500,386
8,418,656

100,156
372,414(2,082)
470,488

61,544433,301(9,154)
485,691

920,467
3,422,608(19,134)
4,323,941

Long-term liabilities:
Long-term debt due after one year (Notes 5, 6 and 8)
Long-term non-recourse debt due after one year (Notes 5, 6 and 8)
Guarantee and deposits received (Notes 6 and 14)
Net defined benefit liability (Note 9)
Other long-term liabilities (Note 12)
Total long-term liabilities

2,558,356
1,584,047
40,382
2,054
133,718
4,318,557

2,523,937
1,378,337
35,5182,150
139,451
4,079,393

23,512,140
14,557,917
371,124
18,8771,228,914
39,688,972

Contingent liabilities (Note 21)

Accumulated depreciation and accumulated impairment losses
Net property and equipment(578,302)
3,740,255(548,382)
3,531,011(5,314,788)
34,374,184

Other assets:
Guarantee and lease deposits paid to lessors (Notes 6 and 7)
Leasehold rights and other intangible assets
Deferred income taxes (Note 12)
Other
Total other assets
Total assets

70,172
57,56230,06733,045
190,846¥5,317,623

70,29956,752
17,46435,892
180,407¥5,130,120

644,904
529,014276,326
303,695
1,753,939$48,870,720

Investments:
Investments in unconsolidated subsidiaries and affiliates (Note 6)
Investments in securities and other (Notes 6 and 7)
Allowance for doubtful accounts
Total investments

Property and equipment:
Land (Notes 4, 5 and 20)
Buildings and structures (Notes 4, 5 and 20)
Machinery and equipment (Notes 4, 5 and 20)
Leased assets
Construction in progress (Notes 4, 5 and 20)

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net assets (Note 15):
Shareholders’ equity
Common stock:
Authorized —1,900,000 thousand shares
Issued    —476,086 thousand shares
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities
Net deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018
Millions of yen

Revenue from operations
Costs and expenses:
Cost of revenue from operations
Selling, general and administrative expenses

Thousands of
U.S. dollars (Note 1)

Thousands

Number ofshares ofcommon
stock

2020

2019

2018

2020

¥1,013,513¥1,012,198¥948,402$9,314,521

691,832
87,349779,181

711,050
81,759792,809664,01578,750742,765

6,358,166
802,766
7,160,932

Operating income
Other income (expenses):
Interest expense, net
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Note 10)
Loss on disposal of property and equipment
Gain on sale of investments in securities (Note 7)
Loss on sale of investments in securities
Loss on devaluation of investments in securities (Note 7)
Reversal of allowance for doubtful accounts
Other, net

234,332

219,389

205,637

2,153,589(18,530)
11,024278(2,131)(9,660)(1,567)
1,417—(7,838)4,824(6,339)(28,522)(19,589)
9,472
75(3,724)(8,576)(1,280)12—(1,105)—(6,115)(30,830)(20,096)
8,229
38
(217)
(10,635)
(601)
1,010
(47)
—
—
(6,874)(29,193)(170,297)
101,314
2,555(19,585)(88,779)(14,401)
13,023—(72,034)
44,334(58,257)(262,127)

Income before income taxes
Income taxes (Note 12):Current
DeferredTotal

205,810

188,559

176,444

1,891,462

68,180(3,367)64,81362,823(4,367)58,456

62,098(6,180)55,918626,597(30,944)595,653

Profit140,997

130,103

120,526

1,295,809

—

—

795

—

¥  140,997¥  130,103¥119,731$1,295,809

Profit attributable to non-controlling interests
Profit attributable to owners of parent

Yen

Amounts per share of common stock:
Profit attributable to owners of parent:—Basic—Diluted
Cash dividend applicable to the year

U.S. dollars (Note 1)

2020

2019

2018

2020

¥297.50—
35.00¥274.51—
30.00¥252.62
—
27.00

$2.73
—
0.32

Shareholders’ equity

Balance at April 1, 2017
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥13 per share)—
Interim for current year (¥13 per share)—
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders—
Profit attributable to non-controlling interests—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2018
476,086
Cumulative effects of changes in accounting policies—
Restated balance
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥14 per share)—
Interim for current year (¥14 per share)—
Profit attributable to non-controlling interests—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2019
476,086
Profit attributable to owners of parent—
Foreign currency translation adjustments—
Net unrealized holding gains (losses) on securities—
Acquisition of treasury stock—
Disposal of treasury stock—
Change in scope of consolidation—
Cash dividends paid:
Final for prior year (¥16 per share)—
Interim for current year (¥16 per share)—
Profit attributable to non-controlling interests—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at March 31, 2020
476,086

Treasury
stock

Total
shareholders’equity¥(4,379)
—
—
—
(64)
—
—

¥  913,976
119,731——(64)—(4,885)¥ 97,192——
33,923———¥(2,529)
—
—
—
—
—
—

¥(1,265)
—
(828)
—
—
—
—

¥ (27)——————(6,161)(6,161)——(6,161)(6,161)

—
—

—
—

—
—

—
—

—
—
—
—
¥122,805—
122,805
—
—
—
—
—
—

(28,594)
—
—
—
—
—
—
—
¥104,154 ¥  765,326—(5,299)104,154760,027—
130,103
—
—
—
—
—
—
0
—
—
(57)

—
—
—
—
¥(4,443)—(4,443)
—
—
—
(27)
0
—

(28,594)———¥  987,842(5,299)982,543
130,103
—
—
(27)
0
(57)

—
—
—
—
¥131,115—
131,115——(21,905)
—
—
—

—
—
480
—
¥(2,049)—(2,049)
—
—
—
—
—
—

—
—
—
—
¥(2,093)—(2,093)
—
(259)
—
—
—
—

—
—
—
—
—
¥122,805
—
—
—
—
—
—

—
(6,635)—(6,635)——————¥104,154 ¥  876,803—
140,997
—
—
—
—
—
—
0
—
—
—

—
(6,635)—(6,635)——————¥(4,470) ¥1,099,292—
140,997
—
—
—
—
(3)
(3)
0
0
—
—

—
—
—
—
—
¥109,210——(32,875)
—
—
—

—
—
—
(1,923)—¥(3,972)
—
—
—
—
—
—

—
—
—
—
—
¥122,805—(7,583)—(7,583)——————¥104,154 ¥1,002,634—(7,583)—(7,583)——————¥(4,473) ¥1,225,120

—
—
—
—
—
¥ 76,335

—
—
—
412
—
¥(3,560)

Commonstock

Capitalsurplus¥122,805
—
—
—
—
—
—

¥132,748 ¥  662,802—
119,731
—
—
—
—
—
—
—
—
—
(4,885)——Retainedearnings——

Shareholders’ equity

See accompanying notes.

Consolidated Statements of Comprehensive Income

Commonstock

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018

Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2018

2020

ProfitOther comprehensive income (loss) (Note 19)
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (loss)
Comprehensive income¥140,997¥130,103¥120,526$1,295,809(32,875)
412
(366)
(103)
(32,932)¥108,065(21,905)(1,923)(259)(234)(24,321)¥105,782

33,935538(1,098)
188
33,563¥154,089(302,132)
3,786(3,364)(946)(302,656)$  993,153

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥108,065—¥105,782—¥153,493
596$  993,153—

Balance at April 1, 2019
Profit attributable to owners of parent
Foreign currency translation adjustments
Net unrealized holding gains (losses) on securities
Acquisition of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Cash dividends paid:
Final for prior year ($0.15 per share)
Interim for current year ($0.15 per share)
Profit attributable to non-controlling interests
Net deferred gains (losses) on hedges
Remeasurements of defined benefit plans
Balance at March 31, 2020

Millions of yen
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofholding gains
Net deferredcurrency
defined(losses) on
gains (losses)
translation
benefitsecurities
on hedges
adjustments
plans

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityTotal
accumulated
othercomprehensive
income (loss)

Noncontrollinginterests¥ 93,371 ¥ 31,756
—
—
(828)
—
33,923
—
—
—
—
—
—
—
—
—

(6,161)(6,161)

—
—
—
187
¥ 160
—
160
—
—
—
—
—
—

—
—
—
(31,756)
480
—
187
—
¥127,133 ¥    —
——127,133
—
—
—
(259)
—
(21,905)
—
—
—
—
—
—
—

(28,594)(31,756)
480
187¥1,114,975(5,299)1,109,676
130,103(259)(21,905)
(27)
0
(57)

—
—
—
—
—
¥(2,352)
—
(366)
—
—
—
—

—
—
—
—
(234)
¥ (74)
—
—
—
—
—
—

—
—
—
—
—
—
(1,923)—(234)—¥102,812 ¥    —
—
—
(366)
—
(32,875)
—
—
—
—
—
—
—

(6,635)(6,635)—(1,923)(234)¥1,202,104
140,997(366)(32,875)
(3)
0
—

—
—
—
—
—
¥(2,718)

—
—
—
—
(103)
¥(177)

—
—
—
—
—
—
412
—
(103)
—
¥ 69,880 ¥    —(7,583)(7,583)—412(103)¥1,295,000

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofholding gains
Net deferredcurrency
defined(losses) on
gains (losses)
translation
benefitsecurities
on hedges
adjustments
plans

—
—

Total net
assets¥1,039,103
119,731(828)
33,923(64)—(4,885)

Total
accumulated
othercomprehensive
income (loss)

Noncontrollinginterests

Total net
assets$1,128,619
—
—
—
—
—
—

$957,210 $8,058,110 $(41,081) $10,102,858 $1,003,676— 1,295,809—
1,295,809
—
—
—
—
—
—
—
—
—
—
(302,132)
—
—
(28)
(28)
—
0
—
0
0
—
—
—
—
—
—

$(36,504)
—
—
—
—
—
—

$(21,616)—(3,363)————$ (680)
—
—
—
—
—
—

$944,876—(3,363)(302,132)———$— $11,047,734—
1,295,809—(3,363)—(302,132)
—
(28)
—
0
—
—

—
—
—
—
—
$1,128,619—(69,690)—(69,690)——(69,690)—(69,690)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$957,210 $9,214,539 $(41,109) $11,259,259 $  701,544

—
—
—
3,786
—
$(32,718)

—
—
—
—
—
$(24,979)

—
—
—
—
(947)
$(1,627)

—
—
—
3,786
(947)
$642,220—(69,690)—(69,690)
—
—
—
3,786
—
(947)
$— $11,901,479

See accompanying notes.

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2020, 2019 and 2018

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of and for the years ended March 31, 2020, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2020

2019

2018

2020

¥ 205,810
48,9749,660(4,848)
60
1,853
1,567
(1,417)
7,838(11,680)
19,186
4,637
46,767(18,543)(416)(6,117)303,331¥ 188,559
46,313
8,576
(309)
(242)
3,649
1,280
(12)
1,105
(10,067)
20,1842,233
65,981
26,189(12,073)(1,800)339,566¥ 176,444
41,628
10,635
(525)
91
179
601
(963)
—
(8,484)
20,352(5,669)25,915(12,536)
17,076(6,648)258,096$ 1,891,462
450,087
88,779(44,555)551
17,03014,401(13,023)
72,034(107,343)
176,326
42,616429,804(170,416)(3,823)(56,217)
2,787,713

Proceeds from interest and dividend income
Payments for interest
Payments for income tax and other taxes
Net cash provided by operating activities

11,680(19,334)(65,218)
230,459

10,066(20,147)(69,427)
260,058

8,484(20,395)(56,252)
189,933

107,343(177,686)(599,375)
2,117,995

Cash flows from investing activities:
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of investments in securities
Proceeds from sale and redemption of investments in securities
Payments for guarantee and lease deposits paid to lessors
Proceeds from guarantee and lease deposits paid to lessors
Payments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Receipts of deposits from partnership investors
Restitution of deposits from partnership investors
Other, net
Net cash used in investing activities(270,347)
11,307(46,695)
2,676(1,121)804(10,950)
29,52523(22,208)
16,867(290,119)(188,573)
6,617(31,281)
334
(738)
4,475
(14,324)
35,664
1,004(10,442)(11,949)(209,213)(220,017)
357(28,835)
2,197(1,317)28,462(11,276)
25,271
2,420(11,544)(6,252)(220,534)(2,484,579)
103,915(429,143)
24,593(10,302)7,389(100,634)
271,345
211(204,099)
155,013(2,666,291)

121,083—(40,000)
2,000(2,000)
153,300(129,619)
93,720(100,363)(3)(15,163)(35,773)—(60,000)
4,900(4,900)198,300(225,752)
37,110(44,611)(27)(13,269)(2,892)30,000(80,000)
1,700(1,700)376,000(209,622)
12,610(21,258)(64)(12,337)

1,112,793—(367,613)
18,381(18,381)
1,408,878(1,191,242)
861,318(922,369)(28)(139,353)—(310)
82,645—(2,036)(146,058)(60,910)(5,066)
26,461—(2,849)759,535

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on impairment of fixed assets (Note 10)
Provision for (Reversal of) allowance for doubtful accounts
Increase (Decrease) in net defined benefit liability
Loss (Gain) on sale of property and equipment, net
Loss on disposal of property and equipment
Loss (Gain) on sale of investments in securities, net
Loss (Gain) on devaluation of investments in securities
Interest and dividend income
Interest expense
Decrease (Increase) in notes and accounts receivable—trade
Decrease (Increase) in inventories
Increase (Decrease) in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
Total

Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from non-recourse bonds
Redemption of non-recourse bonds
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from long-term non-recourse loans
Repayment of long-term non-recourse loans
Decrease (Increase) in treasury stocks, net
Cash dividends paid
Payments for purchases of investments in subsidiaries not resulting
in change in scope of consolidation
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

(244)

243

(124)

(2,242)

Net increase (decrease) in cash and cash equivalents

22,741(94,970)(4,264)208,997

Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of a newly consolidated
subsidiary
Decrease in cash and cash equivalents resulting from exclusionof subsidiaries from consolidation
Cash and cash equivalents at end of year (Note 3)

170,707

262,046

267,944

1,568,854

—

3,631

—

—

—
¥ 193,448—¥ 170,707(1,634)¥ 262,046—$ 1,777,851

See accompanying notes.

1 asis of presenting consolidatedBfinancial statements

The accompanying consolidated financial statements of Sumitomo Realty& Development Co., Ltd. (“the Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions set
forth in the Financial Instruments and Exchange Act 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 fromInternational Financial Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are based on
their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of
domicile. The accompanying consolidated financial statements have been
restructured and translated into English (with certain expandeddisclosure) from the consolidated financial statements of the Company
prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Act. Certain supplementary
information included in the statutory Japanese-language consolidated
financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2020, which was ¥108.81 to U.S.
$1. The translation should not be construed as representations that theJapanese yen amounts have been, could have been or could in the future
be converted into U.S. dollars at this or any other rate of exchange.
2

Accounting policies(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which theCompany has power of control through majority voting rights orexistence of certain conditions evidencing control by the Company.
In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable to minority
shareholders, are recorded based on the fair value at the time theCompany acquired control of the respective subsidiaries.
All significant intercompany balances, transactions and profits havebeen eliminated in consolidation.
In the year ended March 31, 2020, the Company acquired the entire
shares of PrimeQuest Three Co., Ltd. (the operator of PrimeQuest Threesilent partnership) and PrimeQuest Four Co., Ltd (the operator ofPrimeQuest Four silent partnership), to make them wholly owned
subsidiaries, after which the Company merged the two companies in anabsorption-type merger with the Company as the surviving company. As
a result, the two companies were included in the scope of consolidation
while the silent partnerships were excluded, then the two companies
were dissolved and excluded from the scope of consolidation.
(2) Foreign currency translation
Receivables and payables denominated in foreign currencies aretranslated into Japanese yen at the year-end rate.
Financial statements of consolidated overseas subsidiaries aretranslated into Japanese yen at the year-end rate, except forshareholders’ equity accounts, which are translated at historical rates,

and income statement items resulting from transactions with theCompany, which are translated at the rates used by the Company.
Differences arising from translation are presented as “Foreign
currency translation adjustments” in net assets.
(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term, highly liquid investments withmaturities not exceeding three months at the time of purchase areconsidered to be cash and cash equivalents.
(4) Recognition of revenue
Revenues from sales operations of condominiums, detached houses andland lots are recognized when the units are delivered and customers
accepted the delivery. Revenues from leasing operations of officebuildings, residences and other properties are recognized as rent accrues
over the lease term.
The Company’s consolidated subsidiary, Sumitomo Real Estate Sales
Co., Ltd. recognizes brokerage fees as revenue at the delivery of theproperty. However, the amount received of the brokerage fees waspreviously recognized as revenue on the date it was received in case ofwhich the brokerage fees are received after the conclusion of the sales
contracts and before the delivery of property. From the year ended March
31, 2020, its revenue recognition has been changed and the total
amount received of the brokerage fees are recognized as revenue at thetiming of the delivery of the property.
This change was made as a result of reviewing the revenue
recognition policy of Sumitomo Real Estate Sales Co., Ltd. to be alignedwith the policy of the Company, after it was delisted and became awholly owned subsidiary to the Company, and implemented as theCompany completed the preparation of the operation system toaccommodate the change at the timing of formulating the EighthManagement Plan starting from the year ended March 31, 2020.
The consolidated financial statements for the year ended March 31,
2019 have been adjusted reflecting the retroactive application of the new
accounting policy.
As a result, revenue from operations decreased by ¥1,032 million,
operating income and income before income taxes decreased by ¥1,030
million respectively. In addition, the balance of retained earnings at April
1, 2018 decreased by ¥5,299 million reflecting cumulative effects to net
assets at the beginning of the year ended March 31, 2019.
As the effect of the change on amounts per share of common stock,earnings per share decreased by ¥1.51 for the year ended March 31, 2019.
(5) Inventories
Inventories are stated at cost, determined by the specific identification
method principally. The carrying amount of inventories is written downwhen the profitability declines.
(6) Securities
Held-to-maturity securities are stated at amortized cost. Investments in
subsidiaries and affiliates that are not consolidated or accounted for using
the equity method are stated at moving-average cost. Available-for-salesecurities with available fair values are stated at fair value. Unrealized
gains and losses on these securities are reported, net of applicable income
taxes, as a separate component of net assets. Realized gains and losseson the sale of such securities are computed using moving-average cost.
Sumitomo Realty & Development Co., Ltd.

Financial Section

Preferred equity securities are stated at cost determined by the
specific identification method, and securities with no available fair value
are stated at moving-average cost.
Investments in limited partnerships, which are regarded as securities
under the Financial Instruments and Exchange Act, are accounted for in amanner similar to the equity method based on the recent financial
statements.
If the market value of held-to-maturity securities, investments in
subsidiaries and affiliates and available-for-sale securities declines
significantly, such securities are stated at fair value and the difference
between fair value and the carrying amount is recognized as a loss in the
period of the decline. If the fair value of investments in unconsolidated
subsidiaries and affiliated companies not accounted for using the equity
method is not readily available, such securities should be written down to
the net asset value with a corresponding charge in the income statementin the event net asset value declines significantly. In these cases, such fairvalue or the net asset value will be the carrying amount of the securities
at the beginning of the next fiscal year.
(7) Property and equipment
The Company and its consolidated domestic subsidiaries depreciatebuildings using the straight-line method, and other property andequipment (excluding facilities attached to buildings and structuresacquired on or after April 1, 2016) using the declining-balance method
over their estimated useful lives. The consolidated overseas subsidiaries
depreciate property and equipment using primarily the straight-line
method in accordance with the accounting principles in the respective
countries.
In addition, the Company and its consolidated domestic subsidiaries
depreciate facilities attached to buildings and structures acquired on orafter April 1, 2016 using the straight-line method.
Leased assets related to finance lease transactions without title
transfer are depreciated using the straight-line method over the lease
periods as their useful lives with no residual value.
Estimated useful lives used in the computation of depreciation are
generally as follows:
Buildings and structures...................... 6 to 60 years
Machinery and equipment.................. 2 to 20 years
Leased assets...................................... Lease periods(8) Software costs
Software costs are amortized using the straight-line method over theestimated useful lives (five years).
(9) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide for doubtful
accounts at an estimated uncollectable amount based on the evaluationof certain identified doubtful and bankrupt receivables plus an amountcalculated using the percentage of actual collection losses in certain
reference periods with respect to remaining receivables.
(10) Lease transactions
Leased assets related to finance lease transactions without title transfer
are depreciated using the straight-line method over the lease periods as
their useful lives with no residual value.

(11) Income taxes
Income taxes are provided for on the basis of income for financial
statement purposes. The tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial statements andincome tax purposes are recognized as deferred income taxes.
(12) Employees’ severance and retirement benefits
The Company and its certain consolidated subsidiaries provide two typesof post-employment benefit plans, lump-sum payment plans and defined
benefit corporate pension plans, under which all eligible employees areentitled to benefits based on their current rate of pay, length of service
and the conditions under which termination occurs.
For the calculation of retirement benefit obligations, the estimatedamount of retirement benefits is allocated to the respective fiscal years by
the straight-line method.
Some of the Company’s consolidated subsidiaries calculate net
defined benefit liability and retirement benefit expenses by using asimplified method in which retirement benefit obligations are equal tothe amount that would be paid if all employees resigned voluntarily atthe end of the fiscal year.
Prior service costs are recognized as expenses in the period in which
they are incurred, and actuarial gains and losses are recognized as
expenses in the following period.
(13) Construction contracts
The construction projects for which the outcome of the portion
completed by the end of the fiscal year under review can be reliably
estimated are accounted for by the percentage-of-completion method(the degree of completion of each construction project is estimated using
the cost-comparison method), while other construction projects areaccounted for by the completed-contract method.
(14) Derivative transactions and hedge accounting
The Company and its consolidated subsidiaries state derivative financial
instruments at fair value and recognize changes in the fair value as gains
or losses unless derivative financial instruments are used for hedging
purposes and qualify for hedge accounting.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company and its consolidated subsidiaries defer
recognition of gains or losses resulting from changes in fair value of thederivative financial instruments until the related gains or losses on thehedged items are recognized.
Also, if interest rate swap contracts are used as a hedge and meetcertain hedging criteria (regarding interest rate swap contracts), the net
amount to be paid or received under the interest rate swap contracts isadded to or deducted from the interest on the assets or liabilities relative
to which the swap contract was executed as a hedge.
(15) Amounts per share of common stock
The computation of earnings per share is based on the weighted-average
number of shares of common stock outstanding during each year.
Diluted earnings per share is computed based on the amount of profit
attributable to owners of parent on common stock and the weightedaverage number of shares of common stock outstanding during eachyear after giving effect to the dilutive potential of shares of common
stock to be issued upon the exercise of stock options.

Diluted earnings per share is not presented as there are no potential
shares.
Cash dividends per share represent actual amounts applicable to therespective year.
(16) New accounting pronouncements (Accounting standards andguidance issued but not yet effective)“Accounting Standard for Revenue Recognition” (ASBJ Statement No.
29, March 31, 2020)“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 31, 2020)(1) Overview
The standard and guidance provide comprehensive principles forrevenue recognition. Under the standard and guidance, revenue isrecognized by applying the following 5 steps:
Step 1: Identify contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: A llocate the transaction price to the performance obligation in
the contract
Step 5: R ecognize revenue when (or as) the entity satisfies a
performance obligation(2) Effective date
Effective from the beginning of the year ending March 31, 2022
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards onthe consolidated financial statements.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No.
30, July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019)“Accounting Standard for Measurement of Inventories” (ASBJ Statement
No. 9, July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, March 31,2020)(1) Overview
In order to enhance comparability with internationally recognizedaccounting standards, “Accounting Standard for Fair Value
Measurement” and “Implementation Guidance on AccountingStandard for Fair Value Measurement” (together, hereinafter referred3

to as “Fair Value Accounting Standards”) were developed andguidance on methods measuring fair value was issued. Fair Value
Accounting Standards are applicable to the fair value measurement of
the following items:* Financial instruments in “Accounting Standard for Financial
Instruments”; and* Inventories held for trading purposes in “Accounting Standard for
Measurement of Inventories.”
In addition, “Implementation Guidance on Disclosures about Fair
Value of Financial Instruments” has been revised, and items of notes
such as the breakdown by the fair value level of financial instruments
are required.
(2) Effective date
Effective from the beginning of the year ending March 31, 2022
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards onthe consolidated financial statements.
“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ
Statement No. 31, March 31, 2020)(1) Overview
For the purpose of disclosing information that contributes to the usersof financial statements to understand, the standard addresses figures
recorded in the financial statements for the current fiscal year basedon accounting estimates for items that have a risk of a significantly
impacting financial statements in the next fiscal year.
(2) Effective date
Effective from the end of the year ending March 31, 2021
(17) Additional information(Accounting estimates regarding the impact of COVID-19 pandemic)
The accounting estimates such as the valuation of real estate for sale andthe loss on impairment of fixed assets are calculated reasonably based ondata available at the time of preparing the consolidated financial
statements.
The Company and its consolidated subsidiaries calculated theaccounting estimates based on the assumption that the impact of
COVID-19 shall be temporary. However, its effect to the businessactivities and business results is unclear for the time being. Despite theanticipation that business activities will be gradually resumed and returntoward normal from the second quarter of the next fiscal year, theCompany assumes that they will not return to the level of the previous
fiscal year during the next fiscal year and will take 1 – 2 years to recover.

Cash and cash equivalents

Cash and cash equivalents at March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Time deposits
Cash and cash equivalents

2020

2019

2020

¥195,361(1,913)¥193,448¥172,192(1,485)¥170,707$1,795,432(17,581)$1,777,851

Sumitomo Realty & Development Co., Ltd.

Financial Section

4

6

Inventories

Inventories at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Real estate for sale
Real estate for sale in process
Costs on uncompleted construction contracts
Other
Total

2020

2019

2020

¥351,369
286,254
10,370888¥648,881¥390,026
282,595
5,827
1,455¥679,903$3,229,198
2,630,769
95,304
8,161$5,963,432

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred to property and equipment
Transferred from property and equipment
Net decrease
5

2020

2019

2020

¥(6,785)
3,523¥(3,262)¥(23,162)
4,822¥(18,340)$(62,356)
32,378$(29,978)

Pledged assets

Assets pledged as collateral at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Cash, time and notice deposits¥  2,091¥  2,068$   19,217

Buildings and structures

108,863

103,708

1,000,487

Land

418,971

393,316

3,850,482

Construction in progress

—

85

—

Machinery and equipment

127

210

1,168

¥530,052¥499,387$4,871,354

Total

Financial instruments

1. Policy for financial instruments
The Company and its consolidated subsidiaries (“the Group”) have thepolicy to limit its fund management to short-term deposits with funds
through loans from banks and the issuance of corporate bonds andcommercial paper.
The Group utilizes derivative financial instruments only for the
purpose of hedging the interest rate risk associated with the Group’sloans payable, and does not utilize derivative financial instruments forany speculative purposes.
2. D etails of financial instruments, risks, and policies andsystems of risk management
Operating receivables such as notes and accounts receivable—trade areexposed to customers’ credit risk, but this risk is generally avoided
through the receipt of deposits.
Investments in securities are business-related equities and are exposed
to market price fluctuation risk. The Group regularly checks the market
value of the securities and the financial condition of the issuers, andcontinuously reviews whether it continues to hold securities withconsideration for its relationships with the issuers.
Guarantee and lease deposits are mostly deposits related to leasing
properties, and are exposed to the counterparty credit risk.
In addition, the Group accommodates counterparties with loans andconsequently is exposed to the borrowers’ credit risk. However, theGroup constantly checks the financial condition of principal borrowers
and their performance using the funds lent to those borrowers even after
accommodation.
The majority of due dates of operating debt, such as notes andaccounts payable, are within one year.
Interest rate swap contracts are used to hedge risks arising fromfluctuations in interest rates on certain loans and corporate bonds.
In regard to derivative transactions, the Group utilizes interest rate
swaps for bank loans and deposits, and utilizes foreign exchange forward
contracts and cross currency swap contracts for foreign currencydenominated transactions. Interest rate swap contracts are exposed to
the risks of interest rate changes, and foreign exchange forward
contracts and cross currency swap contracts are exposed to the risks offoreign exchange rate changes. The derivative financial instruments are
executed with creditworthy financial institutions, and the Group’s
management believes there is insignificant risk of default by
counterparties. Derivative transactions are executed by the Group’s
Finance Department in accordance with the decisions of a committee
whose chairman is the director of the Finance Department. The Finance
Department prepares reports on derivative transactions that are provided
to the director of the Finance Department periodically.
3. Supplemental information on fair values of financial instruments
The fair values of financial instruments are based on their market prices,
and if the market price is not available, other rational valuation
techniques are used instead. The rational valuation techniques
incorporate variable factors, and as a result the values may change due
to using different assumptions.
The amounts of derivative transactions shown in Note 17 “Derivativetransactions” are not representing the market risks related to derivativetransactions.
The carrying amounts of financial instruments on the consolidatedbalance sheets, their fair values and the differences between them as ofMarch 31, 2020 and 2019 are as follows. (Financial instruments whose
fair value is extremely difficult to estimate are not included; please see(Note 2).)

For 2020
Millions of yen

Secured liabilities at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Long-term debt due within one year
Long-term non-recourse debt due within one year
Long-term debt due after one year
Long-term non-recourse debt due after one year
Total

2020

2019

2020

¥    190
70,373
94,810250,182¥415,555¥      —102,298—
300,900¥403,198$    1,746
646,751
871,335
2,299,256$3,819,088

Specified assets for non-recourse debts at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Buildings and structures
Land
Construction in progress
Machinery and equipment
Total

2020

2019

2020

¥  3,261
86,741
273,324—
96¥363,422¥ 11,345
103,708
393,31685
210¥508,664$   29,970
797,179
2,511,938—
882$3,339,969

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits
Held-to-maturity securities
Available-for-sale securities
Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within one year)
Total liabilities
Derivative transactions*:
Hedge accounting
Total derivative transactions

Carrying amount

Fair value¥  195,361
17,406¥  195,361
17,406

366,734

Thousands of U.S. dollars
Difference

Carrying amount

Fair value

Difference¥     ——

$ 1,795,432
159,967$ 1,795,432
159,967$      ——

366,734—

3,370,407

3,370,407

—

200
747
¥  580,448

200
747¥  580,4480—¥     0

1,838
6,865
$ 5,334,509

1,838
6,865
$ 5,334,509

0—$      0¥   36,393
146,726
2,973,627
320,555¥3,477,301¥   36,393
146,726
3,026,438
325,637¥3,535,194¥     ——
52,811
5,082¥57,893$   334,464
1,348,461
27,328,619
2,946,007$31,957,551$   334,464
1,348,461
27,813,969
2,992,712$32,489,606$      —
—485,350
46,705$532,055¥   (5,134)¥   (5,134)¥   (5,134)¥   (5,134)¥     —
¥     —$   (47,183)$   (47,183)$   (47,183)$   (47,183)$      —
$      —

(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2020 and 2019.

Sumitomo Realty & Development Co., Ltd.

Financial Section

For 2019

Derivative transactions:
Please see Note 17 “Derivative transactions.”

Millions of yen

Assets:(1) Cash, time and notice deposits(2) Notes and accounts receivable—trade(3) Investments in securities
Available-for-sale securities(4) Guarantee and lease deposits
Held-to-maturity securities
Available-for-sale securities
Total assets
Liabilities:(1) Notes and accounts payable—trade(2) Short-term debt
(3) Long-term debt (including due within one year)(4) Long-term non-recourse debt (including due within one year)
Total liabilities
Derivative transactions*:
Hedge accounting
Total derivative transactions

Carrying amount

Fair value

Difference¥  172,192
21,567¥  172,192
21,567¥    ——

414,743414,743

—

3,169
1,170
¥  612,841

3,167
1,170
¥  612,839(2)—¥    (2)(Note 2) Financial instruments whose fair value is extremely difficult to estimate¥   54,937
25,643
2,913,946
403,198¥3,397,724¥   54,937
25,643
2,964,782
410,218¥3,455,580¥    ——
50,836
7,020¥57,856¥   (5,733)¥   (5,733)¥   (5,733)¥   (5,733)¥    —¥    —

Carrying amount

Investments in subsidiaries and affiliates*1

Liabilities:(1) Notes and accounts payable—trade and (2) Short-term debt
The fair value of these items approximates their carrying amounts
because of their short-term maturities.
(3) Long-term debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value because
the market interest rate is reflected in such notes within a short time period
and because the credit standing of the Company is the same after borrowing.
The fixed-coupon debt is calculated by discounting the combined total ofprincipal and interest at an interest rate assumed for similar new borrowings.
The specific matching criteria of interest rate swaps are applicable tosome long-term debts with floating interest rates (please see Note 17“Derivative transactions”). The fair value of these items is calculated bydiscounting the combined total of interest and principal, with which theinterest rate swap has been accounted for, at an interest rate rationallyestimated for similar borrowings.
The fair value of corporate bonds issued by the Company (included in(3) Long-term debt (including due within one year)) is based on themarket price.
(4) Long-term non-recourse debt (including due within one year)
For floating rate notes, the carrying amount is used as the fair value because
the market interest rate is reflected in such notes within a short time period
and the value of its non-exempt properties has not been changed.
The fixed-coupon debt is calculated by discounting the combined
total of principal and interest at an interest rate assumed for similar new
borrowings or bonds.
The specific matching criteria of interest rate swaps are applicable tosome long-term non-recourse debts with floating interest rates (please
see Note 17 “Derivative transactions”). The fair value of these items is
calculated by discounting the combined total of interest and principal,
with which the interest rate swap has been accounted for, at an interest
rate rationally estimated for similar borrowings or bonds.

2020

2019

2020

¥ 74,468¥ 35,856$  684,386

Unlisted equity securities*1

2,338

2,327

21,487

Preferred equity securities, etc.*1

25,68825,688236,081

2

352

18

Investments in limited partnerships, etc.*1
Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities)*

69,22465,960636,192

Guarantee and deposits received*3

247,610

228,959

2,275,618

2*1. The fair value of these items are not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.
*2. Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities) are not included in “Assets (4) Guarantee and lease deposits” because their remaining terms cannot
be determined and the assessment of their fair value is deemed extremely difficult.
*3. The fair value of guarantee and deposits received (mainly consisting of lease deposits) are not disclosed because their remaining terms cannot be determined and the assessment of their fair value isdeemed extremely difficult.

(Note 3) Redemption schedule of pecuniary claims and securities with maturities
For 2020
Millions of yen
1 year or less* Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

(Note 1) The calculation methods of fair value for financial instruments
Assets:(1) Cash, time and notice deposits
The fair value of cash, time and notice deposits approximates theircarrying amounts because of their short-term maturities.
(2) Notes and accounts receivable—trade
The fair value of notes and accounts receivable—trade approximates theircarrying amounts unless the credit standing of debtors has changed
significantly since the loan origination.
The allowance for doubtful receivables is estimated based on expected
recoverable amounts, considering the possibility of individual collections.
Therefore, the fair value of doubtful receivables approximates the carrying
amount deducted by the estimated allowance for doubtful accounts on
the consolidated balance sheets as of the end of the fiscal year.
(3) Investments in securities
The fair value of listed shares is based on the exchange prices at market.
For floating rate notes, the carrying amount is presented as the fair value,as the fair value approximates the carrying amount because the market
interest rate is reflected in such notes within a short time period. The fairvalue of the fixed-coupon debt is determined based on the present value
discounted at the interest rate which reflects the period remaining tomaturity and the credit risk.
For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”(4) Guarantee and lease deposits
The fair value of guarantee and lease deposits are based on the value
offered by correspondent financial institutions.
For notes on securities classified by purpose of holding, please see
Note 7 “Securities.”

Thousands of
U.S. dollars

Millions of yen

Cash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥195,361
17,406

¥ —
—

¥—
—

¥—
—

200
206
¥213,173

—
483
¥483

—
43
¥43

—
—
¥—

For 2019
Millions of yen
1 year or lessCash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥172,192
21,567

¥ —
—

¥ —
—

¥—
—

2,969
407
¥197,135

200
561
¥761

—
171
¥171

—
—
¥—

For 2020
Thousands of U.S. dollars
1 year or lessCash, time and notice deposits
Notes and accounts receivable—trade
Guarantee and lease deposits:
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years$1,795,432
159,967

$   —
—

$ —
—

$—
—

1,838
1,893
$1,959,130—
4,439$4,439

—
395
$395

—
—
$—

Sumitomo Realty & Development Co., Ltd.

Financial Section(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt
For 2020
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total

2021

2022

2023

2024

¥146,726
131,471
70,373¥348,570¥     —
211,446
15,404¥226,850¥     —
237,386
3,846¥241,232¥     —
289,472
3,700¥293,172

2020

2021

2022

2023

¥ 25,643
169,619
102,298¥297,560¥     —
131,281
69,913¥201,194¥     —
211,256
14,944¥226,200¥     —
237,1963,386¥240,582

2021

2022

2023

2024

$1,348,461
1,208,262
646,751$3,203,474$      —1,943,259
141,568$2,084,827$      —2,181,656
35,346$2,217,002$      —2,660,344
34,004$2,694,348

2025 2026 and thereafter¥     —
379,4143,434¥382,848¥      —1,724,438
223,798¥1,948,236

For 2019
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total

2024 2025 and thereafter¥     —
289,2823,240¥292,522¥       —1,875,312
209,417¥2,084,729

For 2020
Thousands of U.S. dollars
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total
72025 2026 and thereafter$      —3,486,941
31,560$3,518,501$       —15,848,157
2,056,778$17,904,935

Securities

For 2020
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2020:(a) Held-to-maturity securities:
Millions of yen

Carrying amount

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.
Securities whose fair value does not exceed carrying amount:
National and local government bonds, etc.
Total

Millions of yen

Carrying amount

Securities whose fair value exceeds carrying amount:
National and local government bonds, etc.
Securities whose fair value does not exceed carrying amount:
National and local government bonds, etc.
Total

Difference¥  461¥  462¥1

2,708¥3,1692,705¥3,167(3)¥(2)

Carrying amount

Acquisition cost

¥348,562
1,171—
349,733¥180,791
1,140—
181,931¥167,771
31—
167,80265,517—664
66,181¥415,914

75,824—664
76,488¥258,419(10,307)——(10,307)¥157,495(b) Available-for-sale securities:
Securities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Fair value

Millions of yen
Difference* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized impairment loss on investments in securities of ¥1,105 million related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2019 amounted to ¥264 million and the related gains amounted to ¥12 million.

Thousands of U.S. dollars

Difference

Carrying amount

Fair value

Difference

¥200

¥200

¥ 0

$1,838$1,838

$ 0

—
¥200

—
¥200

—
¥ 0

—
$1,838—$1,838—$ 0

Carrying amount

Acquisition cost

¥257,807
747—
258,554
108,045—882
108,927¥367,481(b) Available-for-sale securities:
Securities whose carrying amount exceeds acquisition cost:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed acquisition cost:
Equity securities
Debt securities
Other
Subtotal
Total

Fair value

For 2019
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2019:(a) Held-to-maturity securities:

Millions of yen

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥124,727
732—
125,459¥133,080
15—
133,095$2,369,332
6,865—
2,376,197$1,146,283
6,727—
1,153,010$1,223,049
138—
1,223,187

130,965—891
131,856¥257,315(22,920)—(9)(22,929)¥110,166

992,969—8,106
1,001,075$3,377,272

1,203,612—
8,189
1,211,801$2,364,811(210,643)—(83)(210,726)$1,012,461* Debt securities in securities whose carrying amount exceeds acquisition cost are included in “Guarantee and lease deposits paid to lessors” on the consolidated balance sheets.
(Note) The Company recognized impairment loss on investments in securities of ¥7,838 million ($72,034 thousand) related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2020 amounted to ¥2,302 million ($21,156 thousand) and the related gains
amounted to ¥1,417 million ($13,023 thousand).

Sumitomo Realty & Development Co., Ltd.

Financial Section

8

Short-term debt and long-term debt

Non-recourse debt at March 31, 2020 and 2019 consisted of the following:

Short-term debt at March 31, 2020 and 2019 consisted of the following:
Millions of yen

2020

Loans, principally from banks
Commercial paper
Total¥ 26,726
120,000¥146,726

Average interest
rate (%)

0.27
0.00

2019

Average interest
rate (%)¥25,643—¥25,643

0.27
—

2020

$  245,621
1,102,840$1,348,461

The interest rates represent weighted-average rates in effect at March 31, 2020 and 2019, regardless of borrowing currencies, though the range ofthe interest rate varies by borrowing currency.
Long-term debt at March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2.50% domestic straight bonds, due 2019
0.563% domestic straight bonds, due 2020
0.877% domestic straight bonds, due 2020
1.098% domestic straight bonds, due 2023
0.950% domestic straight bonds, due 2023
0.968% domestic straight bonds, due 2023
0.987% domestic straight bonds, due 2024
0.914% domestic straight bonds, due 2024
0.904% domestic straight bonds, due 2024
0.884% domestic straight bonds, due 2024
0.836% domestic straight bonds, due 2024
0.809% domestic straight bonds, due 2024
0.429% domestic straight bonds, due 2021
0.392% domestic straight bonds, due 2022
0.670% domestic straight bonds, due 2025
0.826% domestic straight bonds, due 2025
0.992% domestic straight bonds, due 2025
0.400% domestic straight bonds, due 2026
0.230% domestic straight bonds, due 2026
0.400% domestic straight bonds, due 2027
Loans, principally from banks and insurance companies, with interest at weighted-average rates of 0.31%
in 2020 and 2019, respectively:
SecuredUnsecured
Subtotal
Amount due within one year
Total

2020

2019

2020

¥      ——
—10,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000¥   10,000
10,00020,00010,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000$       ——
—91,90391,90391,903
183,807
183,807
183,807
183,807
183,807
183,807
91,90391,90391,903
183,807
183,807
91,90391,903
275,71095,0002,608,627
2,973,627(131,471)¥2,842,156—
2,603,946
2,913,946(169,619)¥2,744,327

873,082
23,974,147
27,328,619(1,208,262)$26,120,357

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Non-recourse bonds, with interest at weighted-average rates of 0.09% in 2020 and 0.07% in 2019:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted-average rates of 0.11% in 2020 and 2019, respectively:
Due within one year
Due after one year
Subtotal
Total
SecuredUnsecured
Total

2020

2019

2020

¥  8,000
31,10039,100¥  2,000
37,10039,100$   73,523
285,819359,342

62,373
219,082
281,455¥320,555

100,298
263,800
364,098¥403,198

573,229
2,013,436
2,586,665$2,946,007¥320,555—¥320,555¥403,198—¥403,198$2,946,007—$2,946,007

The aggregate annual maturities of long-term debt at March 31, 2020 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2021
2022
2023
2024
2025
2026 and thereafter
Total¥  131,471
211,446
237,386
289,472
379,414
1,724,438¥2,973,627$ 1,208,262
1,943,259
2,181,656
2,660,344
3,486,941
15,848,157$27,328,619

The aggregate annual maturities of non-recourse debt at March 31, 2020 are as follows:Year ending March 31

2021
2022
2023
2024
2025
2026 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 70,373
15,404
3,846
3,700
3,434
223,798¥320,555$  646,751
141,568
35,34634,00431,5602,056,778$2,946,007

It is customary in Japan that security must be given if requested by lending banks under certain circumstances, and generally banks have the right tooffset cash deposited with them against any debt or obligations payable to the bank that becomes due in the case of default and certain other specified
events. The Company and its consolidated subsidiaries have never received such a request.

Sumitomo Realty & Development Co., Ltd.

Financial Section

9

Employees’ severance and retirement benefits(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

As explained in Note 2 (12), the liabilities and expenses for severance and retirement benefits are determined based on the amounts obtained by actuarial
calculations except for the cases using the simplified method.
Unrecognized actuarial differences
Total

For 2020 and 2019
1. Defined benefit plan
(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year

2020

2019

2020

¥11,876
732
48
(64)
(523)
¥12,069¥11,615
714
48
(1)
(500)
¥11,876$109,144
6,727
441
(588)
(4,806)$110,918(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Retirement benefits paid
Plan assets at end of year

2020

2019

2020

¥5,857
117
(321)
380
(234)
¥5,799¥5,650
113
(67)
388
(227)
¥5,857$53,828
1,075(2,950)3,492(2,150)$53,295(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidatedbalance sheets

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheets¥ 6,307(5,799)508
5,762¥ 6,270¥ 6,295(5,857)438
5,581¥ 6,019$ 57,963(53,295)
4,668
52,955$ 57,623

Net defined benefit liability
Net amount of liabilities on the consolidated balance sheets¥ 6,270¥ 6,270¥ 6,019¥ 6,019$ 57,623$ 57,623

Obligations under retirement benefit plans (funded)
Fair value of plan assets(4) Components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

Service costs
Interest costs
Expected return on plan assets
Actuarial differences
Retirement benefit expenses

2020

2019

2020

¥ 732
48
(117)
66
¥ 729

¥ 714
48
(113)
(229)
¥ 420

$ 6,727441(1,075)607$ 6,700(5) Remeasurements of defined benefit plans (before deducting tax effect)(7) Major breakdown of plan assets
Debt securities
Equity securities
General life insurance accounts
Other
Total
(8) Actuarial assumptions
Discount rate
Rate of expected return on plan assets

2020

2019

2020

¥257
¥257

¥66
¥66

$2,362$2,362

2020

2019

29.7%
29.1
39.5
1.7
100.0%

25.6%
34.9
37.8
1.7
100.0%

2020

2019

0.4%
2.0

0.4%
2.0

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥394 million ($3,621
thousand) and ¥389 million for the years ended March 31, 2020 and 2019, respectively.
10 Loss on impairment of fixed assets
The Company and its consolidated domestic subsidiaries recognized impairment losses on the following assets for the years ended March 31, 2020, 2019and 2018, respectively.
For 2020
Use

Location

Number of properties

Assets leased to others

Tokyo

2

Use

Location

Number of properties

Asset leased to others

Tokyo

1

Use

Location

Number of properties

Asset leased to others

Tokyo

1

For 2019

For 2018

The Company and its consolidated domestic subsidiaries recognized
losses on the impairment of certain properties, which are generally
assessed individually for impairment. The Company’s houses are treatedas common assets.
Loss on sales of property and equipment of ¥9,660 million ($88,779
thousand) and ¥8,576 million were recognized by a consolidated
subsidiary by restructuring of assets within the Group for the years ended
March 31, 2020 and 2019, respectively. The selling price of the asset,
based on evaluation by a real estate appraiser, was determined as its

recoverable amount, and loss on sales of property and equipment of theasset was recognized as impairment losses in other expenses for the years
ended March 31, 2020 and 2019, respectively.
The carrying value of the asset has been reduced to its recoverable
amount by ¥10,635 million since the total amount of its future cash flow
is estimated to be less than the carrying value for the year ended March
31, 2018. The recoverable amount is calculated by discounting the future
cash flow at 4.0%. The write-down was recognized as impairment losses
in other expenses for the years ended March 31, 2018.

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥191
¥191

¥295
¥295

$1,755$1,755
Sumitomo Realty & Development Co., Ltd.

Financial Section

11 Asset retirement obligations
Even though removing asbestos is required for some buildings theCompany and its consolidated subsidiaries (“the Group”) operate at thetime of demolishing, it is difficult to estimate the fair value ofobligations associated with such assets reasonably since the timing
and/or method of settlement for the retirement obligations are not clear
enough. Therefore, for the years ended March 31, 2020 and 2019, asset
retirement obligations related to such a case are not recorded (except
for the asset retirement obligations recorded on the financial
statements).

13 Business Combination
In addition, under the partial lease contracts, the Group has obligations
for restoring office spaces when they move out. For the asset retirement
obligations associated with such a case, the duration of use of the assets
is not clear enough and these assets do not have any relocation plans.
Therefore, the Group is unable to estimate the asset retirement obligations
since it is difficult to estimate the timing of fulfillment of the obligations.
Consequently, for the years ended March 31, 2020 and 2019, asset
retirement obligations related to such a case are not recorded (except for
the asset retirement obligations recorded on the financial statements).

12 Income taxes
The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes was approximately
30.62% for the years ended March 31, 2020 and 2019 respectively, and 30.86% for the year ended March 31, 2018.
Details of deferred tax assets and liabilities at March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Deferred tax assets:
Loss on devaluation of real estate for sale
Loss on impairment of fixed assets
Loss on adjustment of profit and loss on transfer
Depreciation and amortization of consolidated adjustment
Net operating loss carryforwards
Accrued enterprise tax and business office tax
Loss on devaluation of investments in securities
Net defined benefit liability
Accrued bonuses
Net deferred losses on hedges
Loss on devaluation of investments in SPEs’ holding properties for sale
Allowance for doubtful accounts
Elimination of unrealized profit
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets¥ 18,582
13,899
11,633
6,312
3,136
2,284
1,951
1,847
1,742
1,571
1,413
1,290
909
17,49584,064(14,613)¥ 69,451¥ 14,415
17,077
4,254
7,258
1,593
1,834
797
1,759
1,875
1,752
1,413
3,439
926
15,767
74,159(9,247)¥ 64,912$ 170,775
127,736
106,91158,00928,821
20,991
17,93016,97516,01014,43812,986
11,856
8,354
160,784
772,576(134,298)$ 638,278

Deferred tax liabilities:
Net unrealized holding gains on securities
Retained earnings appropriated for tax allowable reserves
Other
Total deferred tax liabilities
Net deferred tax assets¥(33,756)(3,731)(1,908)¥(39,395)¥ 30,056¥(48,241)(3,731)(637)¥(52,609)¥ 12,303$(310,229)(34,289)(17,535)$(362,053)$ 276,225(Notes)
1. Valuation allowance increased by ¥5,366 million ($49,315 thousand) as a result of mainly the recognition of loss on adjustment of profit and loss on transfer.
2. The amounts of deferred tax assets for the year ended March 31, 2019 are restated after reflecting retroactive application of the new accounting policy as stated in (4) “Recognition of revenue” inNote 2 “Accounting policies.”

The difference between the statutory tax rate and the effective tax rate for the years ended March 31, 2020, 2019 and 2018 was insignificant and notpresented.

(Transactions conducted by commonly controlled entities)(An absorption-type merger of consolidated subsidiaries)
The Company resolved at its board of directors meeting held on
August 13, 2019 to merger by absorption with its consolidated
subsidiaries, PrimeQuest Three Co., Ltd. and PrimeQuest Four Co.,
Ltd. The merger agreement had been executed on the same date, andthese subsidiaries were absorbed and merged as of October 1, 2019.
1. Overview of business combination(1) Name and business of the target companies
Name: PrimeQuest Three Co., Ltd. and PrimeQuest Four Co., Ltd.
Business: Property leasing(2) Date of business combination
October 1, 2019(3) Legal form of business combination
An absorption-type merger in which the Company is thesurviving company and PrimeQuest Three Co., Ltd. andPrimeQuest Four Co., Ltd. are absorbed.

(4) Name of company after combination
No change(5) Purpose of business combination
The purpose is to simplify the organization of the Company’s
consolidated Group as PrimeQuest Three Co., Ltd. andPrimeQuest Four Co., Ltd. jointly own 100% of the trust
beneficiary rights of Shinjuku Sumitomo Building.
2. Overview of accounting treatments
The transaction is treated as a common control transaction
pursuant to “Accounting Standard for Business Combinations”(ASBJ Statement No. 21, January 16, 2019), as well as “Guidanceon Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures” (ASBJ Guidance No.
10, January 16, 2019).

14 Deposits received with interest rate
Guarantee and deposits received at March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

2020

Short-term deposits and long-term deposits due within one year:
Non-interest-bearing
Interest-bearing
Guarantee and lease deposits from tenants:
Non-interest-bearing
Interest-bearing
Long-term deposits:
Non-interest-bearing
Interest-bearing
Total¥ 51,196—
51,196247,610—45,895—
293,505¥344,701

Average interest
rate (%)

—

—

—

2019

¥ 61,582—
61,582228,959—
49,807—
278,766¥340,348

Average interest
rate (%)

—

—

—

2020

$  470,508—
470,5082,275,618—
421,790—2,697,408$3,167,916

15 Net assets
Under the Japanese Corporate Law (“the Law”) and its regulations, theentire amount paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one-half of the price of the newshares as additional paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of 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 on the accompanying consolidated balance sheets.

Under the Law, legal earnings reserve and additional paid-in capital
could be used to eliminate or reduce a deficit and capitalized by aresolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be
distributed as dividends. Under the Law, all additional paid-in capitaland all legal earnings reserve may be transferred to other capitalsurplus and retained earnings, respectively, which are potentiallyavailable for dividends.
The maximum amount that the Company can distribute as dividends
is calculated based on the non-consolidated financial statements of theCompany in accordance with the Law and its regulations.

Sumitomo Realty & Development Co., Ltd.

Financial Section

16 Information for certain lease transactions

18 Segment information

Future lease payments and receipts under such non-cancelable operating leases at March 31, 2020, 2019 and 2018 are as follows:

The Company and its consolidated subsidiaries mainly operate theirbusiness in five segments: (1) Leasing business consists of leasing of
office buildings, residences and other properties, and management ofthese properties; (2) Sales business consists of sale of condominiums,
detached houses and land lots; (3) Construction business consists ofconstruction of housing, condominiums and buildings; (4) Brokeragebusiness; and (5) Other businesses including fitness business andrestaurant business.

Thousands of
U.S. dollars

Millions of yen

Operating leases:
Future lease payments:
Due within one year
Due after one year
Total

2020

2019

2018

2020

¥  1,526
39,395¥ 40,921¥  1,526
42,211¥ 43,737¥  1,401
38,241¥ 39,642$   14,024
362,053$  376,077

The calculation method for segment profit/loss has been changed
reflecting the change of the revenue recognition method of brokerage
fees as stated in (4) “Recognition of revenue” in Note 2 “Accounting
policies”. The segment information for the year ended March 31, 2019has been adjusted retroactively, and as a result, revenue from operations
from customers decreased ¥1,032 million and segment profit decreased¥1,030 million, respectively, compared to the amount before its
application.

Information by business segment for the years ended March 31, 2020, 2019 and 2018 is summarized as follows:
Future lease receipts:
Due within one year
Due after one year
Total

¥ 89,154
122,544¥211,698¥ 95,607
142,321¥237,928¥ 83,254
153,777¥237,031$  819,355
1,126,220$1,945,575

17 Derivative transactions
Hedge accounting was applied to all derivative transactions for the years ended March 31, 2020 and 2019.
The summary of these transactions is as follows:(1) Foreign currency-related derivatives
Not applicable(2) Interest-related derivatives
For 2020
Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Millions of yen
Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Fair value¥  342,900¥  302,900¥(5,134)

1,474,995

1,333,990— (*)

Contract amounts

Contract amounts
due after one year

Fair value$ 3,151,365$ 2,783,751$(47,183)

13,555,693

12,259,811— (*)

For 2019

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Total

Adjustments

Consolidated financial
statements amounts¥  392,110
3,482
395,592¥  169,416¥3,922,318¥324,700
267
324,967¥ 47,374¥670,079¥216,622
2,309
218,931¥ 20,583¥ 25,053¥69,119
212
69,331¥19,337¥ 8,181¥10,962
1,135
12,097¥   775¥72,476¥1,013,513
7,405
1,020,918¥  257,485¥4,698,107¥     —
(7,405)(7,405)¥ (23,153)¥619,516¥1,013,513—
1,013,513¥  234,332¥5,317,623¥   45,421
9,660¥    119—¥  1,283—¥   462—¥   314—¥   47,599
9,660

¥

1,375
—

¥   48,974
9,660

273,245

2,919

1,553

429

608

278,754620

279,374

For 2019
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥  378,091
3,673
381,764¥  149,933¥3,737,136¥331,516
236
331,752¥ 47,115¥713,300¥219,776
1,917
221,693¥ 20,407¥ 30,057¥71,490377
71,867¥20,978¥14,074¥11,325
1,419
12,744¥ 1,528¥32,545¥1,012,198
7,622
1,019,820¥  239,961¥4,527,112¥     —
(7,622)(7,622)¥  (20,572)¥603,008¥1,012,198—
1,012,198¥  219,389¥5,130,120¥   43,201
8,576¥    145—¥  1,182—¥   458—¥   227—¥   45,213
8,576¥  1,100—¥   46,313
8,576

179,872

590

2,015

920

1,001

184,398397

184,795

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year

Other businesses

Total

Adjustments

Consolidated financial
statements amounts

Millions of yen

Millions of yen

Hedging accounting

Other businesses

Millions of yen

Thousands of U.S. dollars
Hedging accounting

Millions of yen

For 2020

Fair value¥  248,600¥  208,600¥(5,733)

1,507,198

1,415,693— (*)(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.
(*) Interest rate swap contracts which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received under the swap agreements
is recognized and included in interest expenses or income of the long-term debt or the long-term non-recourse debt as hedged items. Thus, the fair value of such interest rate swap contracts is includedin the fair value of the long-term debt.

For 2018
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥  350,211
3,670
353,881¥  139,368¥3,565,088¥310,914
279
311,193¥ 46,839¥826,574¥206,839
2,517
209,356¥ 16,109¥ 27,946¥68,858311
69,169¥21,457¥12,200¥11,580
1,297
12,877¥ 1,628¥25,203¥  948,402
8,074
956,476¥  225,401¥4,457,011¥     —
(8,074)(8,074)¥  (19,764)¥710,187¥  948,402—
948,402¥  205,637¥5,167,199¥   38,981
10,635¥    174—¥  1,022—¥   471—¥   217—¥   40,865
10,635¥    763—¥   41,628
10,635

220,785

672

1,027

859

428

223,771

4,523

228,294

Other businesses

Total

Adjustments

Consolidated financial
statements amounts

Sumitomo Realty & Development Co., Ltd.

Financial Section

20 Investment and rental properties

Thousands of U.S. dollars

For 2020
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property and equipment,
and intangible assets

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness$ 3,603,621
32,001
3,635,622$ 1,556,989$36,047,404$2,984,101
2,454
2,986,555$  435,383$6,158,248$1,990,828
21,2202,012,048$  189,165$  230,245$635,227
1,948
637,175$177,713$ 75,186$   417,434
88,779$    1,094—$   11,791—$  4,246—

2,511,212

26,827

14,273

3,943

Adjustments

Consolidated financial
statements amounts$100,744 $ 9,314,521
10,431
68,054111,175
9,382,575$  7,123 $ 2,366,373$666,079 $43,177,162$       —(68,054)(68,054)$  (212,784)$5,693,558$ 9,314,521—
9,314,521$ 2,153,589$48,870,720$  2,886 $   437,451—
88,779$   12,636—$   450,087
88,7795,698

2,567,540

Other businesses

5,587

Total

2,561,842(Note) Information for the year ended March 31, 2018 has been adjusted retroactively reflecting the adoption of ”Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No.
28, February 16, 2018) effective from the beginning of the year ended March 31, 2019.

Intercompany eliminations between the Company and its
consolidated subsidiaries and undistributed corporate expenses to eachsegment are included in adjustments of segment profit, and theCompany classified expenses of the general administrative division in the
Company and its certain consolidated subsidiaries to corporate expenses
for the years ended March 31, 2020, 2019 and 2018.

Intercompany eliminations between the Company and its consolidated
subsidiaries and undistributed corporate assets to each segment are includedin adjustments of segment assets, and the Company classified cash, time andnotice deposits, investments in securities and assets of the generaladministrative division in the Company and its certain consolidated subsidiaries
to corporate assets for the years ended March 31, 2020, 2019 and 2018.

19 Comprehensive income
Amounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods and tax effects
for each component of other comprehensive income (loss) for the years ended March 31, 2020, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrealized holding gains (losses) on securities:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Deferred gains (losses) on hedges:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Foreign currency translation adjustments:
Increase (Decrease) during the fiscal year
Remeasurements of defined benefit plans:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Total other comprehensive income (loss)

2020

2019

2018

2020

¥(53,788)
6,434(47,354)
14,479¥(32,875)¥(32,668)
1,088(31,580)
9,675¥(21,905)¥ 50,290(1,373)
48,917(14,982)¥ 33,935$(494,330)
59,131(435,199)
133,067$(302,132)¥   (349)
942
593
(181)
¥   412¥ (3,628)
876(2,752)829¥ (1,923)¥   (453)
1,208
755
(217)
¥   538$  (3,207)
8,657
5,450
(1,664)$   3,786¥   (366)¥   (259)¥ (1,098)$  (3,364)¥   (257)
66
(191)
88
¥   (103)¥(32,932)¥    (66)
(229)
(295)
61
¥   (234)¥(24,321)¥   22941
270(82)¥   188¥ 33,563$  (2,362)
607(1,755)809$    (946)$(302,656)

The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and residences in Tokyo and other areas.
Certain domestic office buildings are not recognized as rental properties but as a portion used as investment and rental properties since the Company or
its certain consolidated subsidiaries use some of the floor space of these properties.
The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March 31,
2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

Balance at beginning of fiscal year
Changes during the fiscal year
Balance at end of fiscal year
Fair value at end of fiscal year
Balance at beginning of fiscal year
Changes during the fiscal year
Balance at end of fiscal year
Fair value at end of fiscal year

2020

2019

2020

¥3,373,449
42,533
3,415,982
6,330,951¥  141,889(2,798)139,091
400,272¥3,208,325
165,124
3,373,449
5,838,717¥  141,950(61)
141,889
379,883$31,003,116
390,892
31,394,008
58,183,540$ 1,304,007(25,715)
1,278,292
3,678,632(Notes)* Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs.
* Fair values as of March 31, 2020 and 2019 are calculated by the Company primarily based on their fair values according to Real Estate Appraisal Standards.

Significant changes during the years ended March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

Increase:
Acquired real estateTransferred from real estate for sale in process, etc.
Decrease:
Depreciation and amortization
Transferred to real estate for sale, etc.
Loss on impairment of fixed assets
Transferred to owner-occupied properties, etc.

2020

2019

2020

¥181,035
6,785¥173,144
23,162$1,663,772
62,356¥ (42,436)(1,940)(9,660)(67,244)¥ (42,374)(4,822)(8,576)—$ (390,001)(17,829)(88,779)(617,995)

Income and expenses for investment and rental properties for the years ended March 31, 2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

IncomeExpenses
Balance
Other income (expenses)
IncomeExpenses
Balance
Other income (expenses)

2020

2019

2020

¥291,163
135,568
155,595(12,197)¥ 18,536
8,869
9,667
(45)

¥269,493
137,784
131,709(9,193)¥ 18,413
9,176
9,237
(4)

$2,675,885
1,245,915
1,429,970(112,094)$  170,352
81,50988,843(414)(Notes)* As a portion used as investment and rental properties includes a portion used by the Company or its certain consolidated subsidiaries for providing services as well as management and administration,
income for these are not recorded above. The expenses primarily consist of rent, depreciation, taxes and dues, and others.
* Other income (expenses) for investment and rental properties is mostly the loss on impairment of fixed assets, and Other income (expenses) for a portion used as investment and rental properties is mostly
the loss on disposal of property and equipment.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Independent Auditor’s Report

21 Contingent liabilities
The Company and its consolidated subsidiaries were contingently liable as guarantors of borrowings by customers and others in an amount aggregating
to ¥9,407 million ($86,453 thousand) and ¥7,316 million at March 31, 2020 and 2019, respectively.
22 Subsequent events(Change in ownership of its subsidiary with transfer of equity interest)
The Company decided to transfer all of its equity interest in its subsidiary, Dalian Qingyun Sky Realty and Development Co., Ltd., to Dalian Jiaguan
Guangcheng Corporate Management Centre (Limited Partnership) as of June 12, 2020.
1. Reason for transfer of equity interest
The Company established the subsidiary in 2013, with business objectives of development and sales of condominiums, as a joint-venture with Yida
Group Co., Ltd., a prominent developer in Dalian, China (due to the reorganization of Yida Group, the current partner is Dalian Yida Management
Consultancy Co., Ltd., herein referred to as “Yida”). Although the subsidiary had been promoting its business thereafter, Yida offered to dissolve
the joint venture and the Company decided to transfer all of its equity interest in the subsidiary to a LLP led by Yida, in which the Company holds
no stake.
2. Overview of the subsidiary transferred
Name: Dalian Qingyun Sky Realty and Development Co., Ltd.
Address: Room 524, 9-1 Kuiying Street, Zhongshan District, Dalian City, Liaoning Province, PRC
Position and name of representative: Executive Director, Yusuke Menjo
Description of business: Development, construction, sale, lease and related operations of real estate
Paid-in capital: RMB 2,963,280,000
Establishment: February, 2013
Shareholding ratio: Sumitomo Realty & Development Co., Ltd. 75%, Dalian Yida Management Consultancy Co., Ltd. 25%
3. Name of the counterparty of the transfer
Dalian Jiaguan Guangcheng Corporate Management Centre (Limited Partnership)
4. Amount of transfer
RMB 3,030,000,000
5. Date of transfer
June 12, 2020
6. Effect on the financial statements
The gain on sale of investments in securities of ¥12,293 million (¥15.06/RMB) will be recognized as Other income for the year ending March 31, 2021.
(Dividends)
On June 26, 2020, the shareholders of the Company approved payments of a year-end cash dividend of ¥19 ($0.17) per share or a total of ¥9,004 million($82,750 thousand) to shareholders of record at March 31, 2020. Such appropriations are recognized in the period in which they are approved by theshareholders.

To the Board of Directors of Sumitomo Realty & Development Co., Ltd.:

OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group"), which comprise the consolidated balance sheets as at March 31, 2020 and 2019, theconsolidated statements of income and comprehensive income, changes in net assets and cash flows for each of the years in the three-year period ended
March 31, 2020, and notes, comprising a summary of significant accounting policies, other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Groupas at March 31, 2020 and 2019, and its consolidated financial performance and cash flows for each of the years in the three-year period ended March
31, 2020, in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, asapplicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties including the design,
implementation and maintenance of the Group’s financial reporting process.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2020 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 1 to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.

/S/ Atsuji Maeno
Designated Engagement Partner
Certified Public Accountant/S/ Hidekazu Takahashi
Designated Engagement Partner
Certified Public Accountant

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.

/S/ Masako Kanno
Designated Engagement Partner
Certified Public Accountant

Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

KPMG AZSA LLC
Tokyo Office, Japan
July 29, 2020

Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting standards generally
accepted in Japan, the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an
opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned scope and timing of the audit,
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.

Sumitomo Realty & Development Co., Ltd.