Financial Section

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2021 and 2020
Thousands of
U.S. dollars (Note 1)

Millions of yen

2021

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

2020

2021

2021

2020

2021

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 13)
Other current liabilities
Total current liabilities¥ 146,620
211,446
16,344
24,69740,742
4,023
65,964
152,124
661,960¥ 146,726
131,471
70,37336,39332,344
5,440
51,196
148,102622,045$ 1,324,361
1,909,909
147,629
223,078
368,007
36,338595,827
1,374,076
5,979,225

2,890,210
296,673
286,151
5,258
30,393
3,508,685

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

26,106,133
2,679,731
2,584,690
47,493
274,528
31,692,575

122,805
104,154
1,126,670(4,475)
1,349,154

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

1,109,249
940,782
10,176,768(40,420)
12,186,379

160,441(2,989)(4,266)681
153,867
1,503,021¥5,673,666

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

1,449,201(26,998)(38,533)
6,150
1,389,820
13,576,199$51,247,999¥ 188,340
18,714(38)
636,803
68,377912,196¥ 195,361
17,406(61)
648,881
54,447916,034$ 1,701,201
169,036(343)
5,751,992
617,6228,239,508

68,689510,503(2,084)577,108

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

620,441
4,611,173(18,824)
5,212,790

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 13)
Net defined benefit liability (Note 9)
Other long-term liabilities (Note 12)
Total long-term liabilities

2,778,475
1,705,467
44,9391,915
107,850
4,638,646

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

25,096,875
15,404,814
405,916
17,297974,168
41,899,070

Contingent liabilities (Note 20)

Accumulated depreciation and accumulated impairment losses
Net property and equipment(626,477)
4,012,169(578,302)
3,740,255(5,658,721)
36,240,349

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

68,74362,411
11,071
29,968172,193¥5,673,666

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

620,929563,734
100,000
270,689
1,555,352$51,247,999

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 19)
Buildings and structures (Notes 4, 5 and 19)
Machinery and equipment (Notes 5 and 19)
Leased assets
Construction in progress (Notes 4 and 19)

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net assets (Note 14)
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, 2021, 2020 and 2019

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2021, 2020 and 2019
Millions of yen

Thousands of
U.S. dollars (Note 1)

Thousands

Number ofshares ofcommon
stock

2021

2020

2019

2021

Revenue from operations
Costs and expenses:
Cost of revenue from operations
Selling, general and administrative expenses¥917,473¥1,013,513¥1,012,198$8,287,174

629,565
68,664
698,229

691,832
87,349779,181

711,050
81,759792,8095,686,614
620,215
6,306,829

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 (Note 7)
Loss on devaluation of investments in securities (Note 7)
Loss related to COVID-19
Reversal of allowance for doubtful accounts
Other, net

219,244234,332

219,389

1,980,345(18,043)
11,561536—(3,876)(7,890)13,116
(312)
(489)
(629)
—
(2,859)(8,885)(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)(162,975)
104,426
4,841—(35,010)(71,267)
118,472(2,818)(4,417)(5,682)—(25,825)(80,255)

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

210,359

205,810

188,559

1,900,090

64,9304,040
68,97068,180(3,367)64,81362,823(4,367)58,456

586,487
36,492622,979

Profit141,389

140,997

130,103

1,277,111

—

—

—

—

¥141,389¥ 140,997¥ 130,103$1,277,111

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

Yen

2021

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

2021

Millions of yen
Shareholders’ equity

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)—
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)—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at April 1, 2020
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 (¥19 per share)—
Interim for current year (¥19 per share)—
Net deferred gains (losses) on hedges—
Remeasurements of defined benefit plans—
Balance at March 31, 2021
476,086¥297.50—
35.00¥274.51
—
30.00

$2.69
—
0.36

See accompanying notes.

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥122,805—
122,805
—
—
—
—
—
—

¥104,154—
104,154
—
—
—
—
0
—

¥ 765,326(5,299)760,027
130,103
—
—
—
—
(57)

¥(4,443)—(4,443)
—
—
—
(27)
0
—

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

¥131,115—
131,115——(21,905)———¥(2,049)—(2,049)
—
—
—
—
—
—

¥(2,093)—(2,093)
—
(259)
—
—
—
—

¥ 160
—
160
—
—
—
—
—
—

¥127,133—
127,133—(259)(21,905)———¥1,114,975(5,299)1,109,676
130,103(259)(21,905)
(27)
0
(57)

—
—
—
—
¥122,805
—
—
—
—
—
—

—
—
—
—
¥104,154
—
—
—
—
0
—

(6,635)(6,635)——¥ 876,803
140,997
—
—
—
—
—

—
—
—
—
¥(4,470)
—
—
—
(3)
0
—

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

—
—
—
—
¥109,210——(32,875)—————(1,923)—¥(3,972)
—
—
—
—
—
—

—
—
—
—
¥(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
—

—
—
—
—
¥122,805
—
—
—
—
—
—

—
—
—
—
¥104,154
—
—
—
—
—
—

(7,583)(7,583)——¥1,002,634
141,389
—
—
—
—
657

—
(7,583)—(7,583)————¥(4,473) ¥1,225,120—
141,389
—
—
—
—
(2)
(2)
—
—
—
657

—
—
—
—
¥ 76,335——
84,106
—
—
—

—
—
412
—
¥(3,560)
—
—
—
—
—
—

—
—
—
—
¥(2,718)—(1,548)
—
—
—
—

—
—
—
(103)
¥(177)
—
—
—
—
—
—

—
—
412
(103)
¥ 69,880—(1,548)
84,106———(7,583)(7,583)412(103)¥1,295,000
141,389(1,548)
84,106
(2)
—
657

—
—
—
—
¥122,805————¥104,154(9,005)(9,005)——¥1,126,670—(9,005)—(9,005)————¥(4,475) ¥1,349,154————¥160,441——
571—¥(2,989)————¥(4,266)

—
—
—
858
¥ 681

—
—
571
858
¥153,867(9,005)(9,005)571
858¥1,503,021

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofTotal
holding gains
Net deferredcurrency
definedshareholders’(losses) on
gains (losses)
translation
benefitequitysecurities
on hedges
adjustments
plans

Total
accumulated
othercomprehensive
income (loss)

Total net
assetsConsolidated Statements of Comprehensive Income
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2021, 2020 and 2019

Thousands of
U.S. dollars (Note 1)

Millions of yen

2021

2020

2019

2021

ProfitOther comprehensive income (loss) (Note 18)
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¥141,389¥140,997¥130,103$1,277,111

84,106571(1,548)858
83,987¥225,376(32,875)
412
(366)
(103)
(32,932)¥108,065(21,905)(1,923)(259)(234)(24,321)¥105,782

759,697
5,158(13,982)7,749
758,622$2,035,733

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥225,376—¥108,065—¥105,782—$2,035,733—

Commonstock

Balance at April 1, 2020
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 ($0.17 per share)
Interim for current year ($0.17 per share)
Net deferred gains (losses) on hedges
Remeasurements of defined benefit plans
Balance at March 31, 2021

Total
accumulated
othercomprehensive
income (loss)

Total
shareholders’equityShareholders’ equity¥298.33—
40.00

Net unrealized
holding gains(losses) on
securities

Accumulated other comprehensive income (loss)
RemeasureForeign
ments ofNet deferredcurrency
definedgains (losses)
translation
benefiton hedges
adjustments
plans

CapitalsurplusRetainedearnings

Treasurystock

Total net
assets$1,109,249
—
—
—
—
—
—

$940,782 $ 9,056,400—
1,277,111
—
—
—
—
—
—
—
—
—
5,935

$(40,403) $11,066,028—
1,277,111
—
—
—
—
(17)
(17)
—
—
—
5,935

$ 689,504——
759,697———$(32,156)
—
—
—
—
—
—

$(24,551)—(13,982)————$(1,599) $ 631,198 $11,697,226——
1,277,111—(13,982)(13,982)—759,697759,697
—
—
(17)
—
—
—
—
—
5,935

—
—
—
—
$1,109,249—(81,339)—(81,339)—(81,339)—(81,339)
—
—
—
—
—
—
—
—
$940,782 $10,176,768 $(40,420) $12,186,379————$1,449,201

—
—
5,158
—
$(26,998)————$(38,533)——(81,339)——(81,339)
—
5,158
5,158
7,749
7,749
7,749
$ 6,150 $1,389,820 $13,576,199

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, 2021, 2020 and 2019

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2021 and 2020, and for the years ended March 31, 2021, 2020 and 2019
Thousands of
U.S. dollars (Note 1)

Millions of yen

2021

2020

2019

2021

¥ 210,359
57,813
3,876
(21)
226
(536)
7,890
(12,803)489(11,836)
18,318(1,185)
7,304(12,041)(4,922)
26,434289,365¥ 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$ 1,900,090
522,20235,010(190)
2,041(4,841)
71,267(115,644)
4,417(106,910)
165,459(10,704)
65,974(108,762)(44,458)
238,770
2,613,721

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

11,836(18,224)(57,030)
225,947

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

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

106,910(164,610)(515,130)2,040,891

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
Other, net
Net cash used in investing activities(355,432)
1,659(20,500)
49,141(748)
1,954(16,549)
24,264(20,471)(336,682)(270,347)
11,307(46,695)
2,676(1,121)804(10,950)
29,525(5,318)(290,119)(188,573)
6,617(31,281)
334
(738)
4,475
(14,324)
35,664(21,387)(209,213)(3,210,478)
14,985(185,168)
443,871(6,756)
17,650(149,481)
219,167(184,907)(3,041,117)

Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
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
Other, net
Net cash provided by (used in) financing activities

(106)
—
6,000
(8,000)259,500(131,471)
57,140(62,678)(2)(18,005)(292)
102,086

121,083(40,000)
2,000(2,000)
153,300(129,619)
93,720(100,363)(3)(15,163)(310)
82,645(35,773)(60,000)
4,900(4,900)198,300(225,752)
37,110(44,611)(27)(13,269)(2,036)(146,058)(957)—
54,196(72,261)
2,343,962(1,187,526)
516,123(566,146)(18)(162,632)(2,638)922,103(1,088)

(244)

243

(9,827)

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

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of newly consolidated
subsidiaries
Cash and cash equivalents at end of year (Note 3)
See accompanying notes.

(9,737)22,741(94,970)(87,950)

193,448

170,707

262,046

1,747,340

3,570¥ 187,281—¥ 193,448

3,631¥ 170,707

32,246$ 1,691,636

1Basis of presenting consolidated
financial 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, 2021, which was ¥110.71 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.
(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 forusing the equity method are stated at moving-average cost. Available-forsale securities 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 andlosses on the sale of such securities are computed using moving-average
cost.
Preferred equity securities are stated at cost determined by the specificidentification method, and securities with no available fair value arestated at moving-average cost.
Investments in limited partnerships, which are regarded as securities
under the Financial Instruments and Exchange Act, are accounted for in a

Sumitomo Realty & Development Co., Ltd.

Financial Section

manner 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 (“The Group”) provide for
doubtful accounts at an estimated uncollectable amount based on theevaluation of certain identified doubtful and bankrupt receivables plus anamount calculated using the percentage of actual collection losses incertain 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 Group states derivative financial instruments at fair value andrecognize changes in the fair value as gains or losses unless derivative
financial instruments are used for hedging purposes and qualify forhedge accounting.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Group defers recognition of gains or losses resulting
from changes in fair value of the derivative financial instruments until the
related gains or losses on the hedged 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) Significant accounting estimates
Evaluation of real estate for sale, etc.
(1) Carrying amounts in the consolidated financial statements for theyear ended March 31, 2021
Millions of yen

Real estate for sale
Real estate for sale in process¥260,825
366,597

Thousands of
U.S. dollars$2,355,930
3,311,327(2) Information on the nature of significant accounting estimates for
identified items
Real estate for sale is stated at cost on the consolidated financial
statements. In case the net realizable value is lower than its cost, theprofitability is regarded to have declined, and the net realizable value
is used as the carrying amount. The difference between the cost andthe net realizable value is recognized as a loss for the current fiscal
year.
The net realizable value is estimated based on business plans withthe consideration of expected selling price, construction cost trend,
etc. The estimation is based on the assumption of unit sales price inits sales area and construction cost per unit on the basis of theCompany’s past results.
In case a loss on devaluation of the real estate for sale is to berecognized due to the change of the above-mentioned assumption,
the impact on the consolidated financial statements may besignificant.
Loss on impairment of fixed assets(1) Carrying amounts in the consolidated financial statements for theyear ended March 31, 2021
Property and equipment
Leasehold rights

Millions of yen

Thousands of
U.S. dollars¥4,012,169
60,162$36,240,349
543,420(2) Information on the nature of significant accounting estimates for
identified items
The amounts determined by deducting accumulated depreciation andaccumulated impairment losses from the acquisition costs is used as
the carrying amount. When a property’s profitability has declined andan impairment indicator exists, the Group is required to determine
whether an impairment loss should be recognized. Impairment
indicators include recurring operating losses, a significant adversechange that could affect the recoverable amount, a significant
deterioration of business environment and a significant decrease in
the market prices. Such market prices are calculated by the Company
using income approach, and future cash flow and discount rate isestimated based on the assumption of current rent per unit, rent levelin the market, occupancy rate, discount rate, etc.
For fixed assets of which the impairment indicator exists, theimpairment loss is recognized if the total amount of their future cash
flow before discount is lower than the book value.
The carrying amounts of fixed assets of which the impairment loss
is to be recognized, have been reduced to the recoverable amounts,
and the amount of the reduction is recognized as impairment loss forthe current fiscal year. The recoverable amounts are determined basedon the appraisal value by a real estate appraiser, the amounts
equivalent to the publicly notified land price and the amounts
calculated by discounting the future cash flow.
In case the impairment indicator exists, and an impairment loss is
to be recognized due to the change of the above-mentioned
assumption, the impact on the consolidated financial statements may
be significant.
(17) 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 26, 2021)(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: Allocate the transaction price to the performance obligation in
the contract
Step 5: Recognize 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 referred
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.”

Sumitomo Realty & Development Co., Ltd.

Financial Section

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.
(18) Changes in presentation methods(Consolidated statements of cash flows)“Receipts of deposits from partnership investors” and “Restitution ofdeposits from partnership investors” which were previously separately
presented in “Cash flows from investing activities” were included in“Other, net” from the year ended March 31, 2021, because thesignificance of these amounts decreased. Reflecting this change inpresentation, the consolidated statements of cash flows for the years
ended March 31, 2020 and 2019 were reclassified, respectively.
As a result, the following amounts were reclassified to “Other, net”
for respective years: “Receipts of deposits from partnership investors” of¥23 million and “Restitution of deposits from partnership investors” of¥22,208 million for the year ended March 31, 2020, and “Receipts ofdeposits from partnership investors” of ¥1,004 million and “Restitution
3of deposits from partnership investors” of ¥10,442 million for the year
ended March 31, 2019.
(Adoption of “Accounting Standard for Disclosure of Accounting
Estimates”)
The Group adopted “Accounting Standard for Disclosure of Accounting
Estimates” (ASBJ Statement No. 31, March 31, 2020) to the consolidated
financial statements for the year ended March 31, 2021, and therefore
significant accounting estimates are disclosed in the note to theconsolidated financial statements.
The information for the previous fiscal year is not included in thenote, in accordance with the transitional provision set out in paragraph
11 of the Accounting Standard.
(19) 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 Group calculated the accounting estimates based on theassumption that the impact of COVID-19 shall be temporary.

Thousands of
U.S. dollars

2021

2020

2021

¥188,340(1,059)¥187,281¥195,361(1,913)¥193,448$1,701,201(9,565)$1,691,636

Inventories

Inventories at March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥260,825
366,597
8,638
743¥636,803¥351,369
286,254
10,370888¥648,881$2,355,930
3,311,327
78,024
6,711$5,751,992

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred to property and equipment
Transferred from property and equipment
Net increase (decrease)¥Cash, time and notice deposits

2021

2020

2,087

¥ 2,0912021$

18,851

Buildings and structures

98,200108,863

887,002Land

404,372

418,971

3,652,534

107

127

966

¥504,766¥530,052$4,559,353

Machinery and equipment
Total
Secured liabilities at March 31, 2021 and 2020 are as follows:

Thousands of
U.S. dollars

Millions of yen

2021

¥

190
16,344
104,620
296,673¥417,827

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

2021

2020

¥

190
70,373
94,810250,182¥415,555$

1,716
147,629944,991
2,679,731$3,774,067

Thousands of
U.S. dollars

2021

Cash and cash equivalents

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

Thousands of
U.S. dollars

Millions of yen

Millions of yen

Millions of yen

4

Pledged assets

Specified assets for non-recourse debts at March 31, 2021 and 2020 are as follows:

Cash and cash equivalents at March 31, 2021 and 2020 consisted of the following:

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

5

Assets pledged as collateral at March 31, 2021 and 2020 are as follows:

2021

2020

2021

¥(5,759)
6,164
¥ 405

¥(6,785)
3,523¥(3,262)$(52,019)
55,677$ 3,658

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

¥

2,995
77,088258,72585¥338,893

2021

2020

¥

3,261
86,741
273,324
96¥363,422$

27,053696,306
2,336,961
768$3,061,088(Note) “Specified assets for non-recourse debts” includes a portion of the amount of “Assets pledged as collateral” for the years ended March 31, 2021 and 2020.

6

Financial instruments

1. Policy for financial instruments
The Group has the policy to limit its fund management to short-term
deposits with funds through loans from banks and the issuance ofcorporate bonds and commercial 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. Details 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.

Sumitomo Realty & Development Co., Ltd.

Financial Section

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 16 “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, 2021 and 2020 are as follows. (Financial instruments whose
fair value is extremely difficult to estimate are not included; please see(Note 2).)

For 2021
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

Thousands of U.S. dollars

Carrying amount

Fair value

Difference

Carrying amount

Fair value¥ 188,340
18,714¥ 188,340
18,714¥503,108

Difference——$ 1,701,201
169,036$ 1,701,201
169,036

503,108—

4,544,377

4,544,377——
535¥ 710,697—
535¥ 710,697

¥

—
—
—

—
4,833
$ 6,419,447—
4,833$ 6,419,447

$

—
—
—

¥

¥

$

$

$

24,697
146,620
3,101,656
313,017¥3,585,990

24,697
146,620
3,137,030
317,321¥3,625,668¥——
35,374
4,304¥39,678

223,078
1,324,361
28,016,042
2,827,360$32,390,841

223,078
1,324,361
28,335,561
2,866,237$32,749,237

$

¥
¥

¥
¥

¥
¥

$
$

$
$

$
$

(4,310)(4,310)(4,310)(4,310)——(38,931)(38,931)(38,931)(38,931)————319,519
38,877$358,396——(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 individualcollections. Therefore, the fair value of doubtful receivables approximatesthe 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.”

For 2020
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¥ 195,361
17,406¥ 195,361
17,406¥

366,734

366,734——

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 shorttime period and because the credit standing of the Company is the sameafter borrowing. The fixed-coupon debt is calculated by discounting the
combined total of principal and interest at an interest rate assumed forsimilar new borrowings.
The specific matching criteria of interest rate swaps are applicable tosome long-term debts with floating interest rates (please see Note 16“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 shorttime period and the value of its non-exempt properties has not beenchanged.
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 16 “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.

Derivative transactions:
Please see Note 16 “Derivative transactions.”(Note 2) Financial instruments whose fair value is extremely difficult to estimate
Carrying amount—Thousands of
U.S. dollars

Millions of yen

200
747¥ 580,448
¥

200
747
¥ 580,448

¥

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

¥
¥

¥
¥

¥
¥

(5,134)(5,134)(5,134)(5,134)

¥

—
—

2021

2020

2021

$ 378,277¥ 41,879¥ 74,468

Unlisted equity securities*1

2,338

2,338

21,118Preferred equity securities, etc.*1

26,81025,688242,164

Investments in subsidiaries and affiliates*

1

2

2

18

Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities)*2

68,20869,224

616,096

Guarantee and deposits received*3

258,219

247,610

2,332,391

Investments in limited partnerships, etc.*1*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.

* Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

Sumitomo Realty & Development Co., Ltd.

Financial Section

7(Note 3) Redemption schedule of pecuniary claims and securities with maturities
For 2021
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¥188,340
18,714

¥ —
—

¥—
—

¥—
—

—
117
¥207,171

—
409
¥409

—
—
¥—

—
—
¥—

(b) Available-for-sale securities:

For 2020
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¥195,361
17,406

¥ —
—

¥—
—

¥—
—

200
206
¥213,173

—
483
¥483

—
43
¥43

—
—
¥—

For 2021
Thousands of U.S. dollars

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 year or less

1 to 5 years

5 to 10 years

Over 10 years$1,701,201
169,036

$

—
—

$—
—

$—
—

—
1,057
$1,871,294—
3,694$3,694

—
—
$—

—
—
$—

Millions of yen

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

2022

2023

2024

2025

¥146,620
211,446
16,344¥374,410¥—
237,386
4,786¥242,172¥—
289,472
4,640¥294,112¥—
379,4154,374¥383,789

2026 2027 and thereafter¥—
293,855
52,007¥345,862¥—
1,690,082
230,866¥1,920,948

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

2022

2023

2024

2025

$1,324,361
1,909,909
147,629$3,381,899$—
2,144,215
43,230$2,187,445$—
2,614,687
41,911$2,656,598$—
3,427,107
39,509$3,466,616

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

For 2021
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

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

Millions of yen
Carrying amount

Acquisition cost

¥460,551
535
423
461,50941,474—660
42,134¥503,643

Thousands of U.S. dollars
Difference

Carrying amount

Acquisition cost

Difference¥217,650
526
409
218,585¥242,9019
14242,924$4,159,977
4,832
3,821
4,168,630$1,965,948
4,751
3,694
1,974,393$2,194,029
81
127
2,194,237

53,019—677
53,696¥272,281(11,545)—(17)(11,562)¥231,362

374,618—
5,962
380,580$4,549,210

478,900—
6,115
485,015$2,459,408(104,282)—(153)(104,435)$2,089,802* 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 ¥489 million ($4,417 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, 2021 amounted to ¥3,743 million ($33,809 thousand) and the related gains
and losses amounted to ¥1,243 million ($11,228 thousand) and ¥312 million ($2,818 thousand), respectively.
C. Gain on sale of investments in securities of ¥13,116 million ($118,472 thousand) is consisted mainly of gain on sale of the equity interests of Dalian
Qingyun Sky Realty and Development Co., Ltd, amounted to ¥11,873 million ($107,244 thousand).
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(Note 4) Repayment schedule of corporate bonds, long-term debt, long-term non-recourse debt and other interest-bearing debt
For 2021
Year ending March 31

Securities

For 2021
A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2021:(a) Held-to-maturity securities:
Not applicable

2026 2027 and thereafter$—
2,654,277
469,759$3,124,036$—
15,265,847
2,085,322$17,351,169

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

¥200

¥200

¥ 0

—
¥200

—
¥200

—
¥ 0

Carrying amount

Acquisition cost

¥257,807
747—
258,554¥124,727
732—
125,459¥133,080
15—
133,095

108,045—882
108,927¥367,481

130,965—891
131,856¥257,315(22,920)—(9)(22,929)¥110,166(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 ¥7,838 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, 2020 amounted to ¥2,302 million and the related gains amounted to¥1,417 million.

Sumitomo Realty & Development Co., Ltd.

Financial Section

8

Short-term debt and long-term debt

Non-recourse debt at March 31, 2021 and 2020 consisted of the following:

Short-term debt at March 31, 2021 and 2020 consisted of the following:
Millions of yen

2021

Loans, principally from banks
Commercial paper
Total¥ 26,620
120,000¥146,620

Average interest
rate (%)

2020

0.28
(0.04)

Average interest
rate (%)¥ 26,726
120,000¥146,726

0.27
0.00

2021

$ 240,448
1,083,913$1,324,361

The interest rates represent weighted-average rates in effect at March 31, 2021 and 2020, regardless of borrowing currencies, though the range ofthe interest rate varies by borrowing currency.
Long-term debt at March 31, 2021and 2020 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

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 0.30%
in 2021 and 0.31% in 2020:
SecuredUnsecured
Subtotal
Amount due within one year
Total

¥

10,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000104,8102,726,846
3,101,656(211,446)¥2,890,210

2021

2020

¥

10,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,00095,0002,608,627
2,973,627(131,471)¥2,842,156$

90,32690,32690,326
180,652
180,652
180,652
180,652
180,652
180,652
90,32690,32690,326
180,652
180,652
90,32690,326
270,979

946,708
24,630,531
28,016,042(1,909,909)$26,106,133

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 2021 and 2020, respectively:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted-average rates of 0.12% in 2021 and 0.11% in 2020:
Due within one year
Due after one year
Subtotal
Total
SecuredUnsecured
Total

2021

2020

1,500
35,60037,100¥ 8,000
31,10039,100$14,844
261,073
275,917¥313,017

62,373
219,082
281,455¥320,555

134,080
2,358,170
2,492,250$2,827,360¥313,017—¥313,017¥320,555—¥320,555$2,827,360—$2,827,360

¥

2021

13,549321,561
335,110

The aggregate annual maturities of long-term debt at March 31, 2021 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2022
2023
2024
2025
2026
2027 and thereafter
Total¥ 211,446
237,386
289,472
379,415
293,855
1,690,082¥3,101,656$ 1,909,909
2,144,215
2,614,687
3,427,107
2,654,277
15,265,847$28,016,042

The aggregate annual maturities of non-recourse debt at March 31, 2021 are as follows:Year ending March 31

2022
2023
2024
2025
2026
2027 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 16,344
4,786
4,640
4,374
52,007
230,866¥313,017$ 147,629
43,23041,911
39,509469,759
2,085,322$2,827,360

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 Group has 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 2021 and 2020
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

2021

2020

2021

¥12,069
754
49
(194)
(525)
¥12,153¥11,876
732
48
(64)
(523)
¥12,069$109,014
6,811
443(1,752)(4,743)$109,773(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

2021

2020

2021

¥5,799
116
786
366
(172)
¥6,895¥5,857
117
(321)
380
(234)
¥5,799$52,380
1,048
7,100
3,306
(1,554)$62,280(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

Obligations under retirement benefit plans (funded)
Fair value of plan assets
Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheets
Net defined benefit liability
Net amount of liabilities on the consolidated balance sheets

2021

2020

2021

¥ 6,328(6,895)(567)
5,825¥ 5,258¥ 6,307(5,799)508
5,762¥ 6,270$ 57,158(62,280)(5,122)
52,615$ 47,493¥ 5,258¥ 5,258¥ 6,270¥ 6,270(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

2021

2020

2021

¥ 754
49
(116)
257
¥ 944

¥ 732
48
(117)
66
¥ 729

$ 6,811443(1,048)2,321$ 8,527(5) Remeasurements of defined benefit plans (before deducting tax effect)

2021

2020

2021

¥(980)¥(980)¥257¥257$(8,852)$(8,852)(7) Major breakdown of plan assets
Debt securities
Equity securities
General life insurance accounts
Other
Total

2021

2020

27.9%
35.9
34.8
1.4
100.0%

29.7%
29.1
39.5
1.7
100.0%(8) Actuarial assumptions
Discount rate
Rate of expected return on plan assets

2021

2020

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 ¥388 million ($3,505
thousand) and ¥394 million for the years ended March 31, 2021 and 2020, respectively.
10 Loss on impairment of fixed assets
The Group recognized impairment losses on the following assets for the years ended March 31, 2021, 2020 and 2019, respectively.
For 2021
Use

Location

Assets leased to others

Tokyo, etc.

Number of properties

4

For 2020
Use

Location

Number of properties

Assets leased to others

Tokyo

2

Use

Location

Number of properties

Asset leased to others

Tokyo

1

For 2019

The Group recognized losses on the impairment of certain properties,
which are generally assessed individually for impairment. The Company’s
houses are treated as common assets.
The carrying value of assets have been reduced to their recoverable
amounts by ¥3,578 million ($32,319 thousand) since the total amount of
the future cash flow is estimated to be lower than the carrying value forthe year ended March 31, 2021. The recoverable amounts are calculatedby discounting the future cash flow at 3.6%.
Loss on sales of property and equipment of ¥299 million ($2,701
thousand) and ¥9,660 million were recognized by a consolidated

subsidiary due to restructuring of assets within the Group for the years
ended March 31, 2021 and 2020, respectively. The selling price of theassets for the year ended March 31, 2021 is based on the amountequivalent to the publicly notified land price, and that of the assets forthe year ended March 31, 2020 is based on evaluation by a real estateappraiser. These amounts were determined as their recoverable amounts,
and loss on sales of property and equipment of the assets wasrecognized as impairment losses in other expenses for the years ended
March 31, 2021 and 2020, respectively.

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total$ 47,493$ 47,493

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥(1,237)¥(1,237)

¥191
¥191

$(11,173)$(11,173)
Sumitomo Realty & Development Co., Ltd.

Financial Section

11 Asset retirement obligations
Even though removing asbestos is required for some buildings theGroup operates at the time of demolishing, it is difficult to estimate thefair value of obligations associated with such assets reasonably since thetiming and/or method of settlement for the retirement obligations are
not clear enough. Therefore, for the years ended March 31, 2021 and2020, asset retirement obligations related to such a case are notrecorded (except for the asset retirement obligations recorded on thefinancial statements).
In addition, under the partial lease contracts, the Group has

The difference between the statutory tax rate and the effective tax rate for the year ended March 31, 2021 is as follows:
obligations for restoring office spaces when they move out. For theasset retirement obligations associated with such a case, the duration ofuse 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, 2021 and 2020, asset retirement obligations related to such a caseare not recorded (except for the asset retirement obligations recordedon 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, 2021, 2020 and 2019 respectively.

2021

30.62%

Statutory tax rate
Adjustment:
Valuation Allowance
Inhabitant tax on per capita basis
Dividends and other income not taxable permanently
Other
Effective tax rate

2.45
0.14
(0.35)(0.08)
32.78%The difference between the statutory tax rate and the effective tax rate for the years ended March 31, 2020 and 2019 was insignificant and notpresented.
13 Deposits received with interest rate
Guarantee and deposits received at March 31, 2021 and 2020 are as follows:

Details of deferred tax assets and liabilities at March 31, 2021 and 2020 are as follows:

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

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
Net operating loss carryforwards
Depreciation and amortization of consolidated adjustment
Accrued enterprise tax and business office tax
Loss on devaluation of investments in securities
Net defined benefit liability
Loss on devaluation of investments in SPEs’ holding properties for saleNet deferred losses on hedges
Accrued bonuses
Allowance for doubtful accounts
Elimination of unrealized profit
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets¥ 18,807
15,001
11,632
7,977
6,306
2,728
2,101
1,917
1,413
1,319
1,304
1,167
897
12,646
85,215(19,785)¥ 65,430¥ 18,582
13,899
11,633
3,136
6,312
2,284
1,951
1,847
1,413
1,571
1,742
1,290
909
17,49584,064(14,613)¥ 69,451$ 169,876
135,498
105,067
72,05356,96024,641
18,97817,316
12,763
11,914
11,77910,541
8,102
114,226
769,714(178,710)$ 591,004

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¥(70,728)(3,731)(2,648)¥(77,107)¥(11,677)¥(33,756)(3,731)(1,908)¥(39,395)¥ 30,056$(638,858)(33,701)(23,919)$(696,478)$(105,474)

Thousands of
U.S. dollars

Millions of yen

2021

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¥ 65,964—
65,964258,219—
27,932—
286,151¥352,115

Average interest
rate (%)

—

—

—

2020

¥ 51,196—
51,196247,610—45,895—
293,505¥344,701

Average interest
rate (%)

—

—

—

2021

$ 595,827—
595,827
2,332,391—
252,299—2,584,690$3,180,517

14 Net assets
Under the Japanese Corporate Law (“the Law”) and its regulations, theentire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one-half of the price ofthe new shares as additional paid-in capital, which is included in capitalsurplus.
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 inretained 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 capital andall legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available 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.

(Note 1) Valuation allowance increased by ¥5,173 million ($46,726 thousand) for the year ended March 31, 2021, as a result of the additional recognition of valuation allowance related to loss carryforwardsof ¥4,840 million ($43,718 thousand).
(Note 2) Net deferred tax assets are included in the following items on the consolidated balance sheets for the years ended March 31, 2021 and 2020.
Thousands of
U.S. dollars

Millions of yen

Other assets—Deferred income taxes
Long-term liabilities—Other long-term liabilities

2021

2020

2021

¥11,071
22,748¥30,067
11$100,000
205,474

Sumitomo Realty & Development Co., Ltd.

Financial Section

15 Information for certain lease transactions

17 Segment information

Future lease payments and receipts under such non-cancelable operating leases at March 31, 2021, 2020 and 2019 are as follows:

The Group mainly operates their business in five segments: (1) Leasing
business consists of leasing and management of office buildings, rental
apartments, etc., and operation and management of hotels, event halls,
retail facilities, etc.; (2) Sales business consists of sales of condominium
units, detached houses, etc.; (3) Construction business consists ofconstruction and remodeling of detached houses, condominiums, etc.;(4) Brokerage business consists of brokerage of real estate sales and sales
agent of residential properties; and (5) Other businesses including fitnessbusiness and restaurant business.
In accordance with partial reviews of segments for performance
management among the Group, the financial results of Sumitomo Real
Estate Sales, which were previously allocated to Sales business,

Thousands of
U.S. dollars

Millions of yen

2021

2020

2019

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

2021

¥

1,574
41,880¥ 43,454¥ 1,526
39,395¥ 40,921¥ 1,526
42,211¥ 43,737$

Future lease receipts:
Due within one year
Due after one year
Total

¥ 91,310
140,152¥231,462¥ 89,154
122,544¥211,698¥ 95,607
142,321¥237,928$ 824,767
1,265,938$2,090,705

14,217378,286$ 392,503

Brokerage business and Adjustments, have been changed to beconsolidated into Brokerage business from the year ended March 31,
2021. The segment information for the year ended March 31, 2020 has
been adjusted retroactively.
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 by ¥1,032 million and segment profit
decreased by ¥1,030 million, respectively, compared to the amount
before its application.

Information by business segment for the years ended March 31, 2021, 2020 and 2019 is summarized as follows:
Millions of yen

16 Derivative transactions

For 2021

Hedge accounting was applied to all derivative transactions for the years ended March 31, 2021 and 2020.
The summary of these transactions is as follows:(1) Foreign currency-related derivatives
Not applicable(2) Interest-related derivatives
For 2021
Hedging accounting

Types of derivative transactions

Deferred hedge
Interest rate swap contracts
accounting
Fixed rate payments / Floating rate receipts
Exceptional accounting for Interest rate swap contracts
interest rate swaps
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

¥ 348,900¥ 347,400

1,440,247

1,271,549

Fair value¥(4,310)— (*)

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¥ 395,288
2,950
398,238¥ 155,246¥4,226,734¥263,30392
263,395¥ 53,932¥658,010¥187,564
1,144
188,708¥ 15,566¥ 23,460¥ 64,026
1,767
65,793¥ 11,480¥179,632¥ 7,292
979
8,271
¥
(49)
¥71,731¥ 917,473
6,932
924,405¥ 236,175¥5,159,567—(6,932)(6,932)¥ (16,931)¥514,099¥ 917,473—
917,473¥ 219,244¥5,673,666

¥

¥

¥

¥

¥

¥

¥

¥

363,798

Types of derivative transactions

Deferred hedge
Interest rate swap contracts
accounting
Fixed rate payments / Floating rate receipts
Exceptional accounting for Interest rate swap contracts
interest rate swaps
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year

Fair value$ 3,151,477$ 3,137,928$(38,931)

13,009,186

11,485,403— (*)

Contract amounts

Contract amounts
due after one year

¥ 342,900¥ 302,900¥(5,134)

1,474,995

1,333,990— (*)

For 2020

Millions of yen

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

Hedged items

Bank loans
Bank loans and bonds

Fair value

97
—
2,262

1,209
—
341

673
—
550

330
—

Total

56,641
3,876

663

Adjustments¥

367,614

1,172—

Consolidated financial
statements amounts

107

57,813
3,876
367,721

Millions of yen

For 2020

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥ 392,110
3,482
395,592¥ 169,416¥3,922,764¥324,661
267
324,928¥ 46,490¥673,420¥216,622
2,309
218,931¥ 20,583¥ 25,053¥ 69,158
2,041
71,199¥ 14,593¥170,884¥10,962
1,135
12,097¥ 775¥72,476¥1,013,513
9,234
1,022,747¥ 251,857¥4,864,597¥—(9,234)(9,234)¥ (17,525)¥453,026¥1,013,513—
1,013,513¥ 234,332¥5,317,623

¥

¥

113
—

¥ 1,283—¥¥¥

47,7899,660¥ 1,185
—

¥

2,904

1,553

279,126

248

Thousands of U.S. dollars
Hedging accounting

54,332
3,876

Other businesses

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

45,421
9,660
273,245

658—
816

Other businesses

314
—
608

Total

Adjustments

Consolidated financial
statements amounts

48,974
9,660
279,374(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.

Sumitomo Realty & Development Co., Ltd.

Financial Section

18 Comprehensive income

Millions of yen

For 2019

Reportable segments

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

Leasingbusiness

Salesbusiness

Construction
business¥ 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

¥

¥

145
—

¥ 1,182—¥¥¥

45,213
8,576¥ 1,100
—

¥

590

2,015

184,398397

43,201
8,576
179,872

Brokeragebusiness

Other businesses

458
—
920

227
—
1,001

Total

Adjustments

Consolidated financial
statements amounts¥

46,313
8,576
184,795

Thousands of U.S. dollars

For 2021
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$ 3,570,481
26,647
3,597,128$ 1,402,276$38,178,430$2,378,313
831
2,379,144$ 487,147$5,943,546$1,694,192
10,333
1,704,525$ 140,602$ 211,905$ 578,322
15,960594,282$ 103,694$1,622,545

$

$

$

$

490,760
35,0103,286,045

876—
20,432

10,920—3,080Intercompany 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, 2021, 2020 and 2019.

6,079
—
4,968

Adjustments

Consolidated financial
statements amounts$ 65,866 $ 8,287,174
8,843
62,61474,7098,349,788$(443) $ 2,133,276$647,918 $46,604,344—(62,614)(62,614)$ (152,931)$4,643,655$ 8,287,174—
8,287,174$ 1,980,345$51,247,999

$

$

$

Other businesses

Total

2,981 $—

511,61635,0105,989

3,320,514$

10,586—966

522,20235,0103,321,480

Intercompany eliminations between the Company and its
consolidated subsidiaries and undistributed corporate assets to eachsegment are included in adjustments of segment assets, and theCompany classified cash, time and notice deposits, investments insecurities and assets of the general administrative division in the
Company and its certain consolidated subsidiaries to corporate assets forthe years ended March 31, 2021, 2020 and 2019.

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, 2021, 2020 and 2019 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)

2021

2020

2019

2021

¥133,468(12,272)
121,196(37,090)¥ 84,106¥(53,788)
6,434(47,354)
14,479¥(32,875)¥(32,668)
1,088(31,580)
9,675¥(21,905)$1,205,564(110,848)
1,094,716(335,019)$ 759,697

¥

(112)
935
823
(252)
571

¥

¥ (3,628)
876(2,752)829¥ (1,923)

$

¥

(349)
942
593
(181)
412

$

(1,012)8,446
7,434(2,276)5,158¥ (1,548)

¥

(366)

¥

(259)

$

(13,982)

¥

¥

(257)
66
(191)
88
¥ (103)¥(32,932)

¥

(66)
(229)
(295)
61
¥ (234)¥(24,321)

$

¥

980
257
1,237
(379)
¥
858
¥ 83,987

8,852
2,321
11,173(3,424)$
7,749$ 758,622

19 Investment and rental properties
The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and residences in Tokyo and other areas. The
carrying amount on the consolidated balance sheets for the year ended March 31, 2021 is ¥3,838,536 million ($34,671,990 thousand). 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,
2021 and 2020 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

2021

2020

2021

¥3,415,982
289,550
3,705,532
6,873,990¥ 139,090(6,086)
133,004
397,179¥3,373,449
42,533
3,415,982
6,330,951¥ 141,889(2,798)139,091
400,272$30,855,225
2,615,392
33,470,617
62,090,055$ 1,256,345(54,972)
1,201,373
3,587,562(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, 2021 and 2020 are calculated by the Company primarily based on their fair values according to Real Estate Appraisal Standards.

Sumitomo Realty & Development Co., Ltd.

Independent Auditor’s Report

Financial Section

Significant changes during the years ended March 31, 2021 and 2020 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.

2021

2020

2021

¥337,931
5,759¥181,035
6,785$3,052,398
52,019¥ (46,944)(6,164)(3,741)—¥ (42,436)(1,940)(9,660)(67,244)$ (424,027)(55,677)(33,791)—

Income and expenses for investment and rental properties for the years ended March 31, 2021 and 2020 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)

2021

2020

2021

¥298,596
146,879
151,717(10,084)¥ 18,960
11,3217,639(0)¥291,163
135,568
155,595(12,197)¥ 18,536
8,869
9,667
(45)

$2,697,101
1,326,700
1,370,401(91,085)$ 171,258
102,258
69,000(0)(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 and Other income (expenses) for a portion used as investment and rental properties is mostly the loss on disposal of property and equipment.

20 Contingent liabilities

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, 2021 and 2020, 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, 2021, and notes, comprising a summary of significant accounting policies and 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, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for each of the years in the three-year period
ended 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements ofthe current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

The Group was contingently liable as guarantors of borrowings by customers and others in an amount aggregating to ¥11,305 million ($102,114
thousand) and ¥9,407 million at March 31, 2021 and 2020, respectively.
21 Subsequent events(Dividends)
On June 29, 2021, the shareholders of the Company approved payments of a year-end cash dividend of ¥21 ($0.19) per share or a total of ¥9,953 million($89,902 thousand) to shareholders of record at March 31, 2021. Such appropriations are recognized in the period in which they are approved by theshareholders.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Appropriateness of management’s judgment concerning the identification of an impairment indicator for the Properties

The reasonableness of the valuation of Real Estate for Sale

The key audit matter

How the matter was addressed in our audit

The key audit matter

How the matter was addressed in our audit

Office buildings and residences owned by the Group (the “Properties”)
were recognized in the consolidated balance sheet of the Group as ofMarch 31, 2021. As described in Note 19, “Investment and rental
properties” to the consolidated financial statements, the total of such
Properties amounted to ¥3,838,536 million and accounted forapproximately 67% of the consolidated total assets in the consolidated
financial statements. Of such Properties, we determined the Properties
whose profitability had declined were a key audit matter.

The primary procedures we performed to evaluate whether
management’s judgment concerning the identification of an impairment
indicator for the Properties was appropriate included the following:

The Group recognized real estate for sale of ¥260,825 million and realestate for sale in process of ¥366,597 million as described in Note 4,“Inventories” to the consolidated financial statements (collectively, the“Real Estate for Sale”), and their total amount accounted forapproximately 11% of the consolidated total assets in the consolidated
financial statements. Of the Real Estate for Sale, we determined the Real
Estate for Sale whose profitability had declined was related to a key audit
matter.

The primary procedures we performed to evaluate whether the valuationof the Real Estate for Sale was reasonable included the following:

As described in Note 2 (16), “Significant accounting estimates” to theconsolidated financial statements, when a Property’s profitability has
declined and an impairment indicator exists, the Group is required todetermine whether an impairment loss should be recognized. Impairment
indicators include recurring operating losses, a significant adverse changethat could affect the recoverable amount, a significant deterioration ofbusiness environment and a significant decrease in the market prices.

(2) Evaluation of the appropriateness of management’s judgment
concerning the identification of an impairment indicator for theProperties.

Economic trends, corporate performance, trends in land prices, financial
market situations, taxation system and other social aspects have a large
impact on the following:• the judgment of whether there is significant deterioration of businessenvironment or significant adverse change that could affect therecoverable amount due to cancellation or long delay of development
plans, a change in usage or a significant decline in rents and occupancy
rates; and• estimating the future cash flows and discount rates which were used asa basis for calculating the market prices of the Properties.
Accordingly, these estimates involved a high degree of uncertainty, as
well as significant subjectivity in management’s judgments.
In addition, in case the impairment indicator exists, and an impairment
loss is to be recognized, the impact on the consolidated financial
statements may be significant.
We, therefore, determined that the appropriateness of management’s
judgment concerning the identification of an impairment indicator for
the Properties was one of the most significant in our audit of theconsolidated financial statements for the current fiscal year, andaccordingly, a key audit matter.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to management’s judgment concerning
the identification of an impairment indicator for the Properties.

• We inquired management and the personnel in the responsible
divisions, inspected relevant materials and observed certain Properties todetermine if there was significant deterioration of business environment
or significant adverse change that could affect the recoverable amountdue to cancellation or long delay of development plans, a change inusage or a significant decline in rents or occupancy rates.

As described in Note 2 (16), “Significant accounting estimates” to theconsolidated financial statements, Real Estate for Sale is stated at cost. In
case the net realizable value is lower than its cost, the profitability is
regarded to have declined, and the net realizable value is used as the
carrying amount. The difference between the cost and the net realizablevalue is recognized as a loss for the current fiscal year.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to the valuation of the Real Estate forSale.
(2) Evaluation of the reasonableness of the valuation of the Real Estatefor Sale• We inquired management and the personnel in the responsible
divisions, inspected relevant materials and observed certain real estate forsale in progress to evaluate the probability of achieving the development
plans.

Economic trends, trends in personal income, trends in land prices,financial market situations, taxation system and other social aspects havea large impact on the following:• In order to evaluate the reasonableness of the net realizable value, withthe assistance of our own real-estate valuation specialists, as necessary,
we performed the following procedures.

• In order to evaluate the reasonableness of the Properties’ estimatedmarket prices used to determine whether an impairment indicator exists,
we performed the following procedures regarding the estimates of the
future cash flows and discount rates which were used as a basis forcalculating the market prices of the Properties.

• determining the probability of achieving the development plans of realestate for sale in progress; and• We evaluated the appropriateness of the valuation method selected to
calculate the net realizable value in light of the requirements including
those in the accounting standards.

• We evaluated the appropriateness of the valuation method selected to
calculate the market prices in light of the requirements including those in
the accounting standards;

Accordingly, these estimates involved a high degree of uncertainty, as
well as significant subjectivity in management’s judgments. In addition, incase a loss on devaluation of the Real Estate for Sale is to be recognized,
the impact on the consolidated financial statements may be significant.

• We evaluated the reasonableness of the future rents, a significant
assumption for estimating future cash flows, by taking into consideration
future economic conditions including the spread of COVID-19 infection,and by comparing them with actual rents; and• We evaluated the reasonableness of the discount rates by comparing
them with information published by external organizations and also withthe assistance of our own real-estate valuation specialists.

• estimating the selling price of the Real Estate for Sale, which is used to
calculate the net realizable value.

• We obtained an understanding of profitability of the Real Estate for Saleand evaluated the reasonableness of the estimated selling price, asignificant assumption for estimating the net realizable value, by taking
into consideration future economic conditions including the spread of
COVID-19 infection, and by comparing them with the actual selling price.

We, therefore, determined that the reasonableness of the valuation of
the Real Estate for Sale was one of the most significant in our audit of
the consolidated financial statements for the current fiscal year, andaccordingly, a key audit matter.

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 with regard to 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, 2021 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, 2021

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.
From the matters communicated with corporate auditors and the board of corporate auditors, we determine those matters that were of most significance inthe audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits ofsuch communication.

Sumitomo Realty & Development Co., Ltd.