(Security Code 8803)

Year Ended March 31, 2024

NOTICE CONCERNING THE CONVOCATION OF
THE 104th ORDINARY GENERAL SHAREHOLDERS’ MEETING
Date of the Meeting:June 25, 2024 (Tuesday), 10:00 a.m.
(reception starts at 9:00 a.m.)

Place of the Meeting: KABUTO ONE 4F, HALL & CONFERENCE hall
7-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo, Japan

Table of Contents
NOTICE CONCERNING THE CONVOCATION OF THE 104th ORDINARY GENERALSHAREHOLDERS’ MEETING ............................................................................................1
REFERENCE DOCUMENTS FOR THE GENERAL SHAREHOLDERS’ MEETING .......7
BUSINESS REPORT .........................................................................................................29
STOCK ACQUISITION RIGHTS ....................................................................................... 40
ESTABLISHMENT OF A CORPORATE STRUCTURE TO ENSURE THE PROPERCONDUCT OF BUSINESS AND THE STATUS OF ITS OPERATIONS ......................... 54
BASIC POLICY WITH REGARD TO THE ROLE OF ANY PERSON CONTROLLING THE
DECISION OVER FINANCIAL AND BUSINESS POLICIES OF THE COMPANY .......61
CONSOLIDATED BALANCE SHEET .............................................................................. 65
CONSOLIDATED STATEMENT OF INCOME .................................................................67
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY .....................................68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................................69
NON-CONSOLIDATED BALANCE SHEET.....................................................................85
NON-CONSOLIDATED STATEMENT OF INCOME ....................................................... 87
NON-CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ............................. 88
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS ..................................89
A COPY OF THE AUDIT REPORT OF THE INDEPENDENT AUDITORON THE CONSOLIDATED FINANCIAL STATEMENTS ............................................... 97
A COPY OF THE AUDIT REPORT OF THE INDEPENDENT AUDITORON THE NON-CONSOLIDATED FINANCIAL STATEMENTS.................................... 101
A COPY OF THE AUDIT REPORT OF THE AUDIT COMMITTEE ............................. 105

Heiwa Real Estate Co., Ltd.

Security Code 8803
May 31, 2024
(Date of commencement of electronic provision measures: May 30, 2024)
To the Shareholders
of Heiwa Real Estate Co., Ltd.
Dear Shareholders:
NOTICE OF THE 104th ORDINARY GENERAL SHAREHOLDERS’ MEETING
We hereby inform you that the 104th Ordinary General Shareholders’ Meeting (the“Meeting”) of Heiwa Real Estate Co., Ltd. (the “Company”) will be held as specified in theattached notice.
In convening the Meeting, information contained in the Reference Documents for the
General Shareholders’ Meeting, etc. (matters to be provided electronically) has been postedon the following websites as the Company has taken electronic provision measures. Please
access either of these websites to view the relevant information.
The Company’s website: https://www.heiwa-net.co.jp/en/ir/stock/meeting.html

Tokyo Stock Exchange (TSE) website:
https://www2.jpx.co.jp/tseHpFront/JJK020010Action.do?Show=Show
Please access the above TSE website (Listed Company Search), enter “Heiwa Real Estate” in thefield of “Issue name” or “8803” in the field of “Code”, click “Search”, select “Basic information” andselect “Documents for public inspection/PR information” to view relevant information.

-1-

If you are unable to attend the meeting, you may exercise your voting rights in writing orby electronic method (the Internet, etc.). We would appreciate your exercise of the voting
rights by 5:00 p.m., Monday, June 24, 2024.
Yours faithfully,

Kiyoyuki Tsuchimoto
Director, Representative Executive Officer,
President and CEO
Heiwa Real Estate Co., Ltd.
1-10, Nihonbashi Kabutocho,
Chuo-ku, Tokyo (103-8222)
Japan

Note: This document has been translated from the original Japanese for reference purposes only. In theevent of any discrepancy between this translated document and the original Japanese, the original shallprevail. The Company assumes no responsibility for this translation or for direct, indirect or any otherforms of damages arising from the translation.

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NOTICE1.

Date and Time of the Meeting:June 25, 2024 (Tuesday), 10:00 a.m. (reception starts at
9:00 a.m.)

2.

Place of the Meeting:

KABUTO ONE 4F, HALL & CONFERENCE hall
7-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo, Japan

3.

Items on Meeting Agenda
Items to be reported:

1

2

Items to be voted upon:
Agenda Item:The Business Report, the Consolidated Financial
Statements, and the Non-consolidated Financial
Statements for the 104th fiscal year from April 1, 2023
to March 31, 2024; andIndependent Auditor’s Report of Consolidated Financial
Statements and Audit Report of Consolidated Financial
Statements by the Audit Committee for the 104th fiscal
year.
Election of Nine (9) Directors

If any major changes occur in the operation of the Meeting due to future circumstances, theywill
beannouncedontheCompany’s
website(https://www.heiwanet.co.jp/en/ir/stock/meeting.html).

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Guide to Exercise Voting Rights
Shareholders have the privilege to exercise voting rights.
You may exercise your voting rights by one of the following methods.
We would appreciate your review of the Reference Documents for the General Shareholders’Meeting and your exercise of the voting rights.
Exercise of Voting Rights by Mail
Please indicate your vote for or against each of the agendas on the enclosed attendance
sheet and return the sheet.
Deadline for exercise
The sheet must arrive by 5:00 p.m., Monday, June 24, 2024
Exercise of Voting Rights via the Internet
Please enter your vote for each agenda on the voting site designated by the Company.
Deadline for exercise
The votes must arrive by 5:00 p.m., Monday, June 24, 2024
Exercise of Voting Rights by Attending the Meeting
Please bring the enclosed attendance sheet and submit the sheet at the reception desk.
Date of the meeting
June 25, 2024 (Tuesday), 10:00 a.m.
[Treatment of the Exercise of Voting Rights]
If you submit the attendance sheet indicating neither for or against the agenda item, youwill be deemed to have approved the agenda item.
[Information on Matters Provided Electronically]
 Among the matters provided electronically, the following specific matters below are notstated in paper-based documents delivered to the shareholders who have requested thedelivery of such documents, as they are posted on the Company’s website in accordancewith the relevant laws and regulations and the provision of Article 16 of the Company’s
Articles of Incorporation.
The Audit Committee members and the Independent Auditor have audited all of the
documents subject to their audit, including the following matters.
(1) STOCK ACQUISITION RIGHTS, ESTABLISHMENT OF A CORPORATESTRUCTURE TO ENSURE THE PROPER CONDUCT OF BUSINESS AND THE
STATUS OF ITS OPERATIONS, and BASIC POLICY WITH REGARD TO THE
ROLE OF ANY PERSON CONTROLLING THE DECISION OVER FINANCIAL
AND BUSINESS POLICIES OF THE COMPANY in the Business Report(2) CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY and NOTES TOCONSOLIDATED FINANCIAL STATEMENTS in the Consolidated Financial
Statements(3) NON-CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY and NOTES
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


TO NON-CONSOLIDATED FINANCIAL STATEMENTS in the Non-consolidated
Financial Statements.
If any modifications are made to the matters to be provided electronically, the modified
information will be posted on the Company’s website and on the TSE website.
The results of the resolution of this General Shareholders’ Meeting will be posted on the
Company’s website after conclusion of the Meeting, instead of sending a written noticeof the results of the resolution.

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[Notice Concerning Distribution of Surplus]
The Company has established provisions in its Articles of Incorporation to allow the
distribution of surplus, etc. to be paid by a resolution of the Board of Directors pursuant to
the provisions of Article 459 (1) of the Companies Act.
In accordance with the provisions of the Articles of Incorporation, the Company resolved at
the Board of Directors’ meeting held on May 17, 2024, to pay a year-end dividend for the104th fiscal year (from April 1, 2023 to March 31, 2024) as follows.

(1) Year-end dividend¥108 per share (including a special dividend of ¥50)
(The annual dividend for this fiscal term, combined with the interim dividend of ¥58,
will be ¥166 per share)(2) Effective date and payment commencement dateJune 3, 2024

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REFERENCE DOCUMENTS FOR
THE GENERAL SHAREHOLDERS’ MEETING

Agenda Item:“Election of Nine (9) Directors”

The term of office of all nine Directors will expire at the conclusion of this General Shareholders’Meeting. Accordingly, the Company proposes the election of nine Directors based on the decisionof the Nominating Committee.
Among the nine candidates for Director, five are candidates for External Director, making up amajority.
The candidates for Directors are as follows:
No
.

Name

Current position

1

Kiyoyuki
Tsuchimoto[Male]

Reappointment

2

Kazuo
Yamada[Male]

Reappointment

3

Takahisa
Aoyama[Male]

Reappointment-7-

Representative
Executive Officer,
President and CEO
Nominating
Committee member
Compensation
Committee member
Representative andSenior Managing
Executive Officer
Assistant to the
President
In charge ofDevelopment
Promotion
Department I,
Development
Promotion
Department II andCommunity CoCreation
Department
Executive Officer
In charge ofCorporate Planning
Department,
General Affairs
Department, andFinance
Department
General Manager
of Corporate
Planning
Department

TermofofficeAttendanceof Board of
Directors’Meetings(FY2023)

7
years

12/12
(100%)

13
years

12/12
(100%)

2
years

12/12
(100%)

No.

Current position

TermofofficeAttendanceof Board of
Directors’Meetings(FY2023)

Reappointment
Non-executive

Audit Committee
member

2
years

12/12
(100%)

Reappointment

External Director
Chairman of theNominating
Committee

7
years

12/12
(100%)

4
years

12/12
(100%)

4
years

12/12
(100%)

External Director
Compensation
Committee member

2
years

12/12
(100%)

External Director
Chairman of the
Audit Committee

2
years

12/12
(100%)Name

4

Daisuke
Kobayashi

5Kiichiro
Masui

6

TakahiroMoriguchi

7

Junko
Utsunomiya

8Eiji Yamada

9

Mitsunobu
Yamaguchi[Male][Male]

External
Independent
Reappointment[Male]

External
Independent

Reappointment[Female]External[Male]

Reappointment
External[Male]

Reappointment
External

Independent

Independent

Independent-8-

External Director
Nominating
Committee member
Chairman of theCompensation
Committee
External Director
Nominating
Committee member
Audit Committee
memberNo.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company
April

1982

Joined Tokyo Stock Exchange,
Inc. (TSE)June(Of which,the numberof shares to Junebe provided
based on the
April
stock
Kiyoyuki Tsuchimoto compensation
plan: 17,043)

2013

Managing Director of TSE

2014

Director and Senior Executive
Officer of TSE

2016

Director and Executive Vice
President of TSE

June

2017

Director of Heiwa Real EstateCo., Ltd. (the Company) (current
position)
Senior Managing Executive
Officer of the Company
In charge of Real Estate
Marketing Department of theCompany

June

2018

In charge of Office Building
Development Department of theCompany

May

2019

Representative Director of theCompany
Acting President of the Company

24,340November 19, 1959
<Reappointment>

Attendance of Board of
Directors’ Meetings:
12/12 (100%)
Attendance at Meetingsof the Nominating
Committee:
2/2 (100%)1

Attendance at Meetingsof the Compensation
Committee:
4/4 (100%)Term of office:7 years

December 2019

Representative Director andPresident of the Company
Chief Executive Officer of theCompany

June

Representative Executive
Officer, President and CEO of
the Company (current position)

2022[Significant office(s) concurrently held]
No significant office(s) held by the candidate concurrently.
[Reasons for nominating as a candidate for Director]
Mr. Kiyoyuki Tsuchimoto assumed the office of Director in June 2017, the office ofRepresentative Director and President in December 2019, and the office of Representative
Executive Officer, President and CEO in June 2022, and has engaged in the Company’s
management. He has supervised the Real Estate Marketing Department and Office Building
Development Department, and overseen tenant leasing and other operations in the building
leasing business, while also demonstrating strong leadership since his appointment as
Representative Director and President by promoting the Medium-term Management Plansuch as redevelopment projects in Nihonbashi Kabutocho and Kayabacho, as well as
management as a whole, including utilizing his management experience at Tokyo Stock
Exchange, Inc. and his network of connections within the financial and securities industries
based on his past career.
Mr. Tsuchimoto has management experience at the Company and deep expertise andexperience in Group businesses; he participates in important decision-making as a Director
at the Board of Directors, in his capacity as Chief Executive Officer (concurrent post) with abroad perspective over business management of the Group. By fulfilling his accountability to
deepen discussions at Board of Directors meetings on the overall direction of the Group, heenables the Board of Directors to gain appropriate understanding of the status of business
operations. The Company therefore expects that Mr. Kiyoyuki Tsuchimoto will bring greater
efficacy to oversight functions at the Board of Directors and contribute to medium- and longterm enhancement of corporate value at the Group, and thus has nominated him as a
candidate for Director.

-9-28,093

Kazuo Yamada
February 24, 1957
<Reappointment
Attendance of Board of
Directors’ Meetings:
12/12 (100%)Term of office:13 years

2

April

1980

(Of which, December 2004
the numberof shares tobe provided
2006
based on the Julystockcompensation
plan: 11,067)

Joined Heiwa Real Estate Co.,
Ltd. (the Company)
General Manager of Office
Building Development
Department of the Company
General Manager of Office
Building Development
Department and Manager of
Sapporo Branch of the Company

April

2007

General Manager of Finance
Department of the Company

June

2009

Managing Officer of theCompany

June

2010

Deputy General Manager ofGeneral Affairs Headquarters,
and Group Leader of Planning
Finance Group of the Company

June

2011

Director (current position),Managing Executive Officer, andGeneral Manager of General
Affairs and Planning
Headquarters of the Company

June

2014

In charge of Real Estate
Solutions Department of theCompany

June

2016

In charge of Development
Planning Department(Development) of the Company

June

2018

In charge of Development
Promotion Department(Development) of the Company

June

2020

Senior Managing Executive
Officer of the Company
In charge of Development
Promotion Department of theCompany
In charge of Real Estate
Investment Department of theCompany

June

2022

Representative and Senior
Managing Executive Officer of
the Company (current position)
Assistant to the President of theCompany (current position)

April

2023

In charge of Community CoCreation Department of theCompany (current position)

April

2024

In charge of Development
Promotion Department I and
Development Promotion
Department II of the Company(current position)

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Significant office(s) concurrently held]
No significant office(s) held by the candidate concurrently.
[Reasons for nominating as a candidate for Director]
Mr. Kazuo Yamada assumed the office of Director in June 2011 and the office ofRepresentative and Senior Managing Executive Officer in June 2022, and has engaged in the
Company’s management. He has served as General Manager of Office Building Development
Department, General Manager of Finance Department, and other positions, and hasabundant experience in the Building Business and financial operations, etc. After assuming
the office of Director, he has supervised the Real Estate Solutions Department, Development
Promotion Department, Real Estate Investment Department and other departments, andcontributed considerably to promotion of the Redevelopment Business and expansion of theAsset Management Business.
Mr. Yamada has management experience at the Company and deep expertise and experiencein Group businesses; he participates in major decision-making as a Director at the Board of
Directors, in his capacity as an executive officer (concurrent post) of the Group. By fulfilling
his accountability to deepen discussions at Board of Directors meetings on important themes
in redevelopment projects and others, he enables the Board of Directors to gain appropriate
understanding of the status of business operations. The Company therefore expects Mr.
Kazuo Yamada will bring greater efficacy to oversight functions at the Board of Directors
and contribute to medium- and long-term enhancement of corporate value at the Group, andthus has nominated him as a candidate for Director.

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

8,233

Takahisa Aoyama
August 29, 1969
<Reappointment>

Career summary, position
and assignment of the Company
April

1993

Joined Heiwa Real Estate Co.,
Ltd. (the Company)(Of which, June
the numberof shares tobe provided June
based on thestockcompensation
plan:5,264) June

2014

General Manager of Finance
Department of the Company

2017

General Manager of Real Estate
Marketing Department of theCompany

2018

General Manager of Office
Building Development
Department of the Company

June

2020

Managing Officer of theCompany
In charge of Real Estate
Investment Department of theCompany
General Manager of Real Estate
Investment Department of theCompany

June

2022

Director of the Company (current
position)
Executive Officer of theCompany (current position)
In charge of Corporate Planning
and General Affairs Department,
Finance Department and Legal
Office of the Company
General Manager of Corporate
Planning and General Affairs
Department and Legal Office of
the Company

April

2023

In charge of Corporate Planning
Department, General Affairs
Department and Finance
Department of the Company(current position)
General Manager of Corporate
Planning Department of theCompany (current position)

Attendance of Board of
Directors’ Meetings:
12/12 (100%)Term of office:3

2 years[Significant office(s) concurrently held]
No significant office(s) held by the candidate concurrently.

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Reasons for nominating as a candidate for Director]
Mr. Takahisa Aoyama assumed the office of Managing Officer in June 2020 and the office of
Director and Executive Officer in June 2022, and has engaged in the Company’s
management. He has served as General Manager of Finance Department, General Manager
of Office Building Development Department, and other positions, and has contributed
considerably to the Company’s stable financial operations and expansion of the Office
Building Development Business. He was in charge of Real Estate Investment Department as
a Managing Officer and has been in charge of Corporate Planning Department, General
Affairs Department, and Finance Department after assuming the office of Executive Officer,
and has abundant experience in these departments.
Mr. Aoyama management experience at the Company and has deep expertise and experiencein Group businesses; the Company expects that he will bring greater efficacy to oversightfunctions at the Board of Directors through his participation in important decision-making
as a Director at the Board of Directors, in his capacity as an executive officer (concurrentpost). By fulfilling his accountability to deepen discussions at Board of Directors meetings onimportant themes in management strategy and others, he enables the Board of Directors togain appropriate understanding of the status of business operations. The Company therefore
expects Mr. Takahisa Aoyama will contribute to medium- and long-term enhancement ofcorporate value at the Group, and thus has nominated him as a candidate for Director.

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

3,569

Career summary, position
and assignment of the Company
April

1993

Joined Heiwa Real Estate Co.,
Ltd. (the Company)

August2006

General Affairs Department andIR Office of the Company

June

2013

Manager of Nagoya Branch,
Leasing Headquarters of theCompany

June

2020

Seconded to HEIWA REALESTATE Asset Management
CO., LTD., Director, Business
Planning Division General
Manager

June

2022

Director of the Company (current
position)

Daisuke Kobayashi
May 3, 1969
<Reappointment><Non-executive>
Attendance of Board of
Directors’ Meetings:
12/12 (100%)

4

Attendance at Meetingsof the Audit Committee:
12/12 (100%)Term of office:2 years[Significant office(s) concurrently held]
No significant office(s) held by the candidate concurrently.
[Reasons for nominating as a candidate for Director]
Mr. Daisuke Kobayashi assumed the office of Director in June 2022, and has engaged in
audit of the Company’s management, etc. He has abundant experience and achievements in
the General Affairs Department and the building leasing business of the Company, as wellas insight related to finance and accounting and management experience having history ofservice as Director and Business Planning Division General Manager at a listed REIT
property management company which is a Group member company.
The Company expects that Mr. Kobayashi will bring greater efficacy to oversight functions at
the Board of Directors through his participation in important decision-making as a Director
at the Board of Directors by utilizing his abundant knowledge and experience of Groupbusinesses. In addition, if the appointment of Mr. Kobayashi is approved, it is planned that
he will continue to serve as full-time Audit Committee member after conclusion of this
General Meeting of Shareholders. The Company expects that Mr. Daisuke Kobayashi will
step up the effectiveness of auditing through the Audit Committee by contributing his
intimate knowledge of Group operations, and thus has nominated him as a candidate for
Director.

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

2,996

Kiichiro Masui
July 16, 1950
<Reappointment>

Career summary, position
and assignment of the Company
April

1973

Entered the Ministry of Finance

June

2000

Director-General of Kinki Local
Finance Bureau

July

2003

Director-General of the Planningand Coordination Bureau of the
Financial Services Agency(retired in August 2005)

September 2005

Senior Managing Director ofJapan Securities Dealers
Association

May

2006

Vice-Chairman and Senior
Managing Director of Japan
Securities Dealers Association

July

2008

Vice-Chairman of Japan
Securities Dealers Association(retired in June 2013)

June

2012

Director of the Tokyo Shoken
Building Incorporated (retired inJune 2017)

July

2013

Chairman of the Japan Investor
Protection Fund (retired in June
2018)

June

2014

Chairman of the Board of theJapan Securities ResearchInstitute (retired in June 2023)

June

2016

Outside Director of Japan Credit
Rating Agency, Ltd. (current
position)

June

2017

External Director of Heiwa Real
Estate Co., Ltd. (the Company)(current position)

June

2022

Outside Director of AIZAWASECURITIES GROUP CO.,LTD. (current position)<External Director><Independent>

5

Attendance of Board of
Directors’ Meetings:
12/12 (100%)
Attendance at Meetingsof the Nominating
Committee:
2/2 (100%)Term of office:7 years[Significant office(s) concurrently held]
Outside Director of Japan Credit Rating Agency, Ltd.
Outside Director of AIZAWA SECURITIES GROUP CO., LTD.

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Reason for nominating him as a candidate for External Director and an outline of expectedroles]
Mr. Kiichiro Masui has a history of service as Chairman of the Board of The Japan
Securities Research Institute. Although Mr. Kiichiro Masui has never been directly involvedin corporate management, he has served in important positions in securities-relatedorganizations and has abundant experience and deep insight in the world of finance andsecurities.
Mr. Kiichiro Masui plays an appropriate role in supervising the execution of business
effectively from an independent and objective position and providing advice to managementfrom this standpoint. In addition, as a chairman of the Nominating Committee, he has
provided opinions from an objective and neutral standpoint regarding the personnel affairs
of officers at the Company.
For the above reasons, the Company expects that Mr. Kiichiro Masui will contribute to theenhancement of effectiveness of the Board of Directors and committees that will lead to theenhancement of corporate value of the Group in the medium and long term as an External
Director, and thus has nominated him as a candidate for External Director.
[Concerning independence]
There have been transactions related to the leasing of real estate between the Company and
The Japan Securities Research Institute, an entity for which Mr. Kiichiro Masui served as
Chairman of the Board until June 2023. However, the amount of the transactions makes up
less than 1% of the consolidated net sales of the Company. Therefore, Mr. Kiichiro Masuidoes not fall in the category of persons who has executed the business of the Company’s
major suppliers (criteria: the suppliers who pay the Company an amount equivalent to morethan 2% of the Company’s consolidated net sales for the past three years as defined in the“Standards for Assessing the Independence of External Directors” (on page 28) stipulated by
the Company, and fulfills the Standards. In addition, although AIZAWA SECURITIES CO.,LTD., a wholly owned subsidiary of AIZAWA SECURITIES GROUP CO., LTD., for which
Mr. Kiichiro Masui serves as an Outside Director, holds shares of the Company, AIZAWASECURITIES CO., LTD. holds less than 1% of the total number of shares issued by theCompany, and Mr. Masui is not a business executive of a major shareholder of the Company(threshold: 10% or more of the total number of shares issued by the Company) under the“Standards for Assessing the Independence of External Directors” (on page 28) stipulated by
the Company, and fulfills the threshold.
For the above reasons, the Company believes that Mr. Kiichiro Masui will not have potential
conflicts of interest with general shareholders of the Company, such as human relationships,
capital relationships, transactional relationships, or any other interests, and that his
independence is ensured.
The Company has registered him with Tokyo Stock Exchange, Inc. as an independent officer.
If his reelection is approved, the Company will continue to appoint him as an independent
officer.

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No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

1,231

Career summary, position
and assignment of the Company
April

1967

Joined the Bank of Tokyo, Ltd.
(currently MUFG Bank, Ltd.)

June

1995

Member of the Board of Directors of
the Bank of Tokyo, Ltd.
Director and Vice-President ofUnion Bank (retired in May 1997)

April

1996

Member of the Board of Directors of
the Bank of Tokyo-Mitsubishi,Ltd.(currently MUFG Bank, Ltd.)

May

1997

President of UnionBanCal
Corporation (retired in June 2001)
President of Union Bank of
California (retired in June 2001)

June

2000

Managing Director of the Bank ofTokyo-Mitsubishi, Ltd. (BTM)(currently MUFG Bank, Ltd.)

July

2001

Managing Director, General
Manager of Treasury Division and
E-Commerce Promotion Division of
BTM

May

2003

Representative Director, Deputy
President, and General Manager of
Global Banking Operations
Division of BTM

May

2004

Representative Director, Deputy
President, and general operations
manager of BTM (retired in June
2005)

June

2005

Advisor of BTM

January

2006

Advisor of the Bank of TokyoMitsubishi UFJ, Ltd. (currently
MUFG Bank, Ltd.)(retired in
January 2006)

Takahiro Moriguchi
May 22, 1944
<Reappointment><External Director><Independent>
Attendance of Board of
Directors’ Meetings:
12/12 (100%)
Attendance at theNominating Committee:
2/2 (100%)

6

Attendance at Meetingsof the Compensation
Committee:
4/4 (100%)Term of office:4 years

February 2006

Chairman of J.P. Morgan Securities
Asia Pte. Limited Tokyo Branch(currently JPMorgan Securities
Japan Co., Ltd.)

April

2006

Chairman of JPMorgan Securities
Japan Co., Ltd. (JPMSJ)

June

2006

Representative Director, Chairman,
CEO and President of JPMSJ

September 2007

Representative Director andChairman of JPMSJ (retired inJune 2016)

July

2016

Senior Advisor of JPMSJ (retired in
December 2016)

June

2020

External Director of Heiwa Real
Estate Co., Ltd. (the Company)(current position)

-17-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Significant office(s) concurrently held]
No significant office(s) held by the candidate concurrently.
[Reason for nominating him as a candidate for External Director and an outline of expectedroles]
Mr. Takahiro Moriguchi has served as Representative Director and Deputy President of the
Bank of Tokyo-Mitsubishi, Ltd. (currently MUFG Bank, Ltd.) and Representative Director
and Chairman of JPMorgan Securities Japan Co., Ltd. He has served as a president at banks
in the U.S., and has broad knowledge on finance and securities, international businessexperience, and abundant experience and deep insight as a corporate manager.
Mr. Takahiro Moriguchi plays an appropriate role in supervising the execution of businessfrom an independent and objective position and providing advice to management from thisstandpoint. In addition, as a member of the Nominating Committee and a chairman of theCompensation Committee, he has provided opinions from an objective and neutral
standpoint regarding the personnel affairs of officers and officer compensation at theCompany.
For the above reasons, the Company expects that Mr. Takahiro Moriguchi will contribute to
the enhancement of effectiveness of the Board of Directors and committees that will lead tothe enhancement of corporate value of the Group in the medium and long term as anExternal Director, and thus has nominated him as a candidate for External Director.
[Concerning independence]
Mr. Takahiro Moriguchi has no transactional relationship with the Company, andaccordingly fulfills the “Standards for Assessing the Independence of External Directors” (onpage 28) stipulated by the Company.
For the above reasons, the Company believes that Mr. Takahiro Moriguchi will not havepotential conflicts of interest with general shareholders of the Company, such as humanrelationships, capital relationships, transactional relationships, or any other interests, andthat his independence is ensured.
The Company has registered him with Tokyo Stock Exchange, Inc. as an independent officer.
If his reelection is approved, the Company will continue to appoint him as an independent
officer.

-18-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

1,231

Junko Utsunomiya
Official name on thefamily register:
Junko Morita
June 21, 1971
<Reappointment><External Director><Independent>

7

Attendance of Board of
Directors’ Meetings:
12/12 (100%)
Attendance at Meetingsof the Nominating
Committee:
2/2 (100%)
Attendance at Meetingsof the Audit Committee:
12/12 (100%)Career summary, position
and assignment of the Company
April

2000

Registered as a lawyer andjoined the law firm Nagashima,
Ohno & Tsunematsu

October

2007

Seconded to Tokyo Stock
Exchange, Inc. (TSE) (until April
2009)

November 2011

Founded Utsunomiya Law Office

June

2012

External Statutory Auditor ofStart Today Co., Ltd. (currently
ZOZO, Inc.) (retired in June
2023)

April

2013

Outside Corporate Auditor ofSolasto Corporation (retired inJune 2020)

September 2013

Outside Director of AdventureInc. (retired in September 2020)

February 2018

Representative partner of
Utsunomiya & Shimizu andHaruki Management Legal
Office (current position)

October

2018

Outside Audit & Supervisory
Board Member of RAKSUL INC.

October

2019

Outside Director, Audit andSupervisory Committee Memberof RAKSUL INC. (current
position)

June

2020

External Director of Heiwa Real
Estate Co., Ltd. (the Company)(current position)

March

2021

Outside Director (Audit &Supervisory Committee Member)of PeptiDream Inc. (current
position)

June

2023

Outside Director, Audit andSupervisory Committee memberof ZOZO, Inc. (current position)

Term of office:4 years[Significant office(s) concurrently held]
Representative partner of Utsunomiya & Shimizu and Haruki Management Legal OfficeOutside Director, Audit and Supervisory Committee Member of RAKSUL INC.
Outside Director (Audit & Supervisory Committee Member) of PeptiDream Inc.
Outside Director, Audit and Supervisory Committee member of ZOZO, Inc.

-19-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Reason for nominating her as a candidate for External Director and an outline of expectedroles]
Ms. Junko Utsunomiya has acquired high degrees of expertise as a lawyer, and although she
has never been directly involved in corporate management, she has served as an outside
director of other listed companies and has abundant experience and deep insight in the fieldof corporate legal affairs.
Ms. Junko Utsunomiya plays an appropriate role in supervising the execution of business
effectively from an independent and objective position and providing advice to managementfrom this standpoint. In addition, as a member of the Nominating Committee and the Audit
Committee, she has provided opinions from an objective and neutral standpoint regarding
the personnel affairs of officers at the Company, and has appropriately audited the businessexecution from an independent standpoint.
For the above reasons, the Company expects that Ms. Junko Utsunomiya will contribute to
the enhancement of effectiveness of the Board of Directors and committees that will lead tothe enhancement of corporate value of the Group in the medium and long term as anExternal Director, and thus has nominated her as a candidate for External Director.
[Concerning her independence]
Ms. Junko Utsunomiya has no transactional relationship with the Company, and accordingly
fulfills the “Standards for Assessing the Independence of External Directors” (on page 28)
stipulated by the Company.
For the above reasons, the Company believes that Ms. Junko Utsunomiya will not havepotential conflicts of interest with general shareholders of the Company, such as humanrelationships, capital relationships, transactional relationships, or any other interests, andthat her independence is ensured.
The Company has registered her with Tokyo Stock Exchange, Inc. as an independent officer.
If her reelection is approved, the Company will continue to appoint her as an independent
officer.

-20-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate
0

Eiji Yamada
July 18, 1955

Career summary, position
and assignment of the Company
April

1978

Joined Nippon Telegraph andTelephone Public Corporation(currently Nippon Telegraph andTelephone Corporation)

June

2005

Senior Vice President of NTT
DATA Corporation

June

2011

Director and Executive Vice
President of NTT DATA
Corporation

June

2012

Representative Director and Senior
Executive Vice President of NTT
DATA Corporation

June

2015

Advisor of NTT DATA Corporation(retired in June 2017)
President and Representative
Director of Japan Information
Processing Service Co., Ltd. (retired
in June 2021)

June

2017

Outside Director of The Chiba
Kogyo Bank, Ltd. (current position)

June

2021

Advisor of Japan Information
Processing Service Co., Ltd. (retired
in June 2023)
External Director of Kyokuyo Co.,
Ltd. (current position)

June

2022

External Director of Heiwa Real
Estate Co., Ltd. (the Company)(current position)<Reappointment><External Director><Independent>
Attendance of Board of
Directors’ Meetings:
12/12 (100%)

8

Attendance at Meetingsof the Compensation
Committee:
4/4 (100%)Term of office:2 years[Significant office(s) concurrently held]
Outside Director of The Chiba Kogyo Bank, Ltd.
External Director of Kyokuyo Co., Ltd.
[Reason for nominating him as a candidate for External Director and an outline of expectedroles]
Mr. Eiji Yamada has served as Representative Director and Senior Executive Vice Presidentof NTT DATA Corporation, President and Representative Director of Japan Information
Processing Service Co., Ltd., and an outside director of other listed companies, and hasabundant experience in data communication and system development, etc. and deep insight
as a corporate manager.
From this standpoint, Mr. Eiji Yamada has been playing an appropriate role in supervising
the execution of business effectively from an independent and objective position andproviding advice to management. In addition, as a member of the Nominating Committee, he
has provided opinions from an objective and neutral standpoint regarding the officer
compensation at the Company.
For the above reasons, the Company expects that Mr. Eiji Yamada will contribute to theenhancement of effectiveness of the Board of Directors and committees that will lead to theenhancement of corporate value of the Group in the medium and long term as an External
Director, and thus has nominated him as a candidate for External Director.

-21-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Concerning independence]
Mr. Eiji Yamada has no transactional relationship with the Company, and accordingly
fulfills the “Standards for Assessing the Independence of External Directors” (on page 28)
stipulated by the Company.
For the above reasons, the Company believes that Mr. Eiji Yamada will not have potential
conflicts of interest with general shareholders of the Company, such as human relationships,
capital relationships, transactional relationships, or any other interests, and that his
independence is ensured.
The Company has registered him with Tokyo Stock Exchange, Inc. as an independent officer.
If his reelection is approved, the Company will continue to appoint him as an independent
officer.

-22-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company
September 1983

Joined Tetsuzo Ota & Co.
(currently Ernst & Young
ShinNihon LLC)

August1987

Registered as a Certified Public
Accountant

July

1996

Assigned to Detroit offices of Ernst& Young in the United States

May

2001

Employee of Century Ota Showa &Co. (currently Ernst & Young
ShinNihon LLC)

May

2007

Representative of ShinNihon LLC(currently Ernst & Young
ShinNihon LLC) (retired due toretirement age in June 2020)<Independent>

July

2020

Established Mitsunobu Yamaguchi
CPA Office, Head (current position)

Attendance of Board of
Directors’ Meetings:
12/12 (100%)

June

2021

Outside Audit & Supervisory Board
Member of MEITECCORPORATION (retired in
October 2023)

June

2022

External Director of Heiwa Real
Estate Co., Ltd. (the Company)(current position)

October

2023

Outside Director (Audit andSupervisory Committee member) of
MEITEC Group Holdings Inc.

0

Mitsunobu
Yamaguchi
January 24, 1958
<Reappointment><External Director>

9

Attendance at Meetingsof the Audit Committee:
12/12 (100%)Term of office:2 years[Significant office(s) concurrently held]
Head of Mitsunobu Yamaguchi CPA OfficeOutside Director (Audit and Supervisory Committee member) of MEITEC Group Holdings
Inc.
[Reason for nominating him as a candidate for External Director and an outline of expectedroles]Mr. Mitsunobu Yamaguchi has a high degree of specialization as a certified public
accountant, has worked in the United States, and has served as an external auditor at otherlisted company. Though he has never been directly involved in corporate management, he
has abundant experience in the fields of financial accounting and auditing, and experience ininternational service.
From this standpoint, Mr. Mitsunobu Yamaguchi has been playing an appropriate role insupervising the execution of business effectively from an independent and objective positionand providing advice to management. In addition, as a chairman of the Audit Committee, he
has appropriately audited the business execution from an independent standpoint.
For the above reasons, the Company expects that Mr. Mitsunobu Yamaguchi will contributeto the enhancement of effectiveness of the Board of Directors and committees that will leadto the enhancement of corporate value of the Group in the medium and long term as anExternal Director, and thus has nominated him as a candidate for External Director.

-23-

No.

Name and date ofbirth

Number of
the shares of
the Company
held by thecandidate

Career summary, position
and assignment of the Company[Concerning independence]
Mr. Mitsunobu Yamaguchi has no transactional relationship with the Company, andaccordingly fulfills the “Standards for Assessing the Independence of External Directors” (onpage 28) stipulated by the Company.
For the above reasons, the Company believes that Mr. Mitsunobu Yamaguchi will not havepotential conflicts of interest with general shareholders of the Company, such as humanrelationships, capital relationships, transactional relationships, or any other interests, andthat his independence is ensured.
The Company has registered him with Tokyo Stock Exchange, Inc. as an independent officer.
If his reelection is approved, the Company will continue to appoint him as an independent
officer.

-24-

(Notes)
1. No conflict of interest exists between the Company and the candidates for Director.
2. The number of shares of the Company held by the candidate as stated includes thenumber of shares of the Company to be granted to executive officers after theirretirement under the performance-linked stock compensation plan as stated inparentheses (number of shares equivalent to the points already granted under said plan).
In principle, an executive director may receive shares of the Company equivalent to 70%of the points that have been granted up until the completion of the director’s term uponretirement. For the remaining points granted, a cash amount equivalent to the market
price of the shares of the Company will be paid in place of Company shares after it has
been converted.
3. Mr. Kiichiro Masui, Mr. Takahiro Moriguchi, Ms. Junko Utsunomiya, Mr. Eiji Yamada
and Mr. Mitsunobu Yamaguchi are candidates for External Director.
4. The Company has entered into agreements with Mr. Daisuke Kobayashi, Mr. Kiichiro
Masui, Mr. Takahiro Moriguchi, Ms. Junko Utsunomiya, Mr. Eiji Yamada and Mr.
Mitsunobu Yamaguchi to limit their liability for damages as set forth in Article 423,
Paragraph 1 of the Companies Act in accordance with Article 427, Paragraph 1 of theAct; provided, however, that the limit thereof under such agreements shall be theamount prescribed in the Act. If their reelection is approved, the Company will renew
the liability limitation agreements under the same conditions. The Company has enteredinto liability limitation agreements with all of the Directors (excluding those who are
executive directors, etc.) in office.
5. The Company has concluded a directors and officers liability insurance contract, as
stipulated in Article 430-3, Paragraph 1 of the Companies Act, with an insurancecompany that insures directors, executive officers, statutory auditors, managing officers
and employees of the Company and its subsidiaries. The insurance premiums for thecontract are fully borne by the Company. The insurance contract covers damages andlitigation expenses assumed in the event which a claim for damages is made against theinsured person due to an act committed (and including results of inaction) by the insured
person in his/her capacity as an officer, etc. of the Company. This contract is to be
renewed every year and the Company will renew the contract with the same contents in
December 2024. Each candidate for Director, candidates to be reelected is alreadyinsured and will continue to be insured after the reelection. The insurance contract
includes measures taken to ensure that the appropriateness of duties performed by the
insured person will not be impaired by setting limits for the amount to be covered.
6. Ms. Junko Utsunomiya was an External Director of Adventure Inc. from September
2013 to September 2020. During her term of office, an employee of a subsidiary of
Adventure, Inc. was revealed to have embezzled funds from the subsidiary. Although
she was unaware of the said fact in advance, she had habitually offered suggestions at
Adventure Inc. from a standpoint of legal compliance and compliance management.
-25-

Since the revelation of the aforementioned fact, she has appropriately performed her
duties mainly by calling for a thorough investigation and formulation of recurrence
prevention measures and supervising the company’s initiatives.
[Reference: Supplemental explanation regarding independence of the candidates for
Director]
Candidate No. 6: Mr. Takahiro Moriguchi
Loan and other transactions exist between the Company and the Bank of TokyoMitsubishi, Ltd. (currently MUFG Bank, Ltd.), where Mr. Takahiro Moriguchi worked
as Representative Director and Deputy President. However, about 18 years havepassed since he retired from the bank in January 2006. In the meantime, he had no
involvement with the bank management and was not involved in business execution.
Accordingly, the Company judges that Mr. Moriguchi has a sufficient degree of
independence.
Candidate No. 7: Ms. Junko Utsunomiya
There have been transactions related to the leasing of real estate between the
Company and Tokyo Stock Exchange, Inc., to which Ms. Junko Utsunomiya was
temporarily transferred between October 2007 and April 2009. However, about 15
years have passed since the transfer arrangement with the TSE ended; she is byprofession a lawyer, and the transfer was limited to 2 years out of a career total ofover 20 years as a lawyer. Accordingly, the Company judges that Ms. Utsunomiya has
a sufficient degree of independence.

-26-

[Reference: Skill matrix of the Board of Directors after the end of the General Meeting of
Shareholders]
The Company has developed the following “skill set” categories: “Corporate management,”“Financial affairs / accounting,” “Legal affairs,” “International perspective,” “Finance / securities,”“Planning / sales,” and “DX / IT,” as categories of expertise and experience created to enableappropriate Board decision-making and management oversight functions. The following is the“skills matrix” of the Board of Directors in the event of the election of the candidates in the NoticeConcerning the Convocation of this meeting as originally proposed.
Candidate for
Director

Corporate
management

Kiyoyuki
Tsuchimoto
Kazuo
YamadaTakahisa
AoyamaDaisuke
Kobayashi

Financialaffairs /accounting

Legalaffairs

International
perspective

Finance /securities

Planning /
sales

●

●

●
●

●

●

●

●

●

●

●

●

Kiichiro
Masui
TakahiroMoriguchi

●

●

Junko

YamadaMitsunobu
Yamaguchi★: Chairperson

●

●

★

●

●

●
●

●
●

●

●

●

●
●

Nominating Audit Compensation●●

Utsunomiya
Eiji●

Committee to be appointed
DX / IT

★
●

●

●
★

* This list does not indicate all of the skills possessed by each candidate for Director.

[Reference: Measures to reduce cross-shareholdings]
As a measure to reduce cross-shareholdings, ¥1,377 million (selling price) worth of shares was
sold off by the Company in the year ended March 31, 2024. In addition, in a new medium-term
management plan, “WAY 2040 Stage 1” announced on April 30, 2024, the Company set a KPI of
reducing the ratio of cross-shareholdings to consolidated net assets to 10% or less by fiscal 2026.
The Company will continue to work to reduce cross-shareholdings.

-27-

(Reference)

Standards for Assessing the Independence of External Directors
The Company judges that External Directors are independent when they do not meet the standards set forth inParagraph 2 below as well as the standards of independence specified by the financial instruments exchange.
1. Policies for Election of External Directors
In the election of External Directors, the Company considers it desirable that the Company has no personal
relations, capital relations, business relations or any other interests with the External Officers. Meanwhile, theCompany also emphasizes a clear understanding of the Company’s business and the expectation of useful roles
for the Company’s business expansion.
2. Standards of Independence of External Directors(1) Persons who execute the business of the Company’s major suppliers *Notes 1 and 2(2) Persons who execute the business of companies whose major supplier is the Company *Note 3(3) Persons who execute the business of the Company’s principal creditors *Note 4(4) Attorneys, certified public accountants, licensed tax accountants, consultants or any other experts who
receive a large amount of money and other properties in addition to the executive compensation from theCompany *Note 5(5) Persons who execute the business of entities that receive a large amount of donations from the Company*Note 6
(6) Persons who execute the business of the Company’s major shareholders *Note 7(7) Close relatives of those who fall under Items (1) to (6) above *Note 8(8) Those who fall under Items (1) to (7) above for the past three (3) years(Notes) 1. “Persons who execute the business” shall refer to the executive director, executive officer andmanaging officer.
2. “The Company’s major suppliers” shall refer to an entity that pays the Company an amount equivalent
to more than 2% of the Company’s consolidated net sales for the most recent fiscal year.
3. “Companies whose major supplier is the Company” shall refer to an entity that receives from theCompany the payment of an amount equivalent to more than 2% of the entity’s consolidated net sales
for the most recent fiscal year.
4. “Principal creditors” shall refer to an entity that provides the Company with loans in an amountequivalent to more than 2% of the Company’s consolidated total assets for the most recent fiscal year.
5. “A large amount of money and other properties” shall refer to the payment of more than 10 million
yen annually.
6. “A large amount of donations” shall refer to donations of more than 10 million yen annually.
7. “Major shareholders” shall refer to the shareholders who own the shares equivalent to 10% or moreof the total number of shares issued for the most recent fiscal year.
8. “Close relatives” shall refer to relatives within the second degree of relationship.

-28-

BUSINESS REPORT

1.

Outline of Operations (from April 1, 2023 to March 31, 2024):(1)

Update and Results of Business -In fiscal 2023, ended March 31, 2024, the Japanese economy continued to pick up moderately on
the back of improved employment and income conditions as well as various economic measures
implemented by the government. Nevertheless, the impacts of rising prices, economic downturns
in other countries, and financial capital market trends and volatility risks will need to be closely
monitored going forward.
Against this backdrop, conditions were favorable in Japan’s real estate industry. In the officebuilding leasing market, vacancy rates declined in central Tokyo, reflecting a rebound in demandfor office space despite substantial availability in newly constructed buildings. In the real estate
investment market, investment demand for real estate remained firm and stable due tocomparably low interest rates in Japan’s financing market.
In this operating environment, the Company’s consolidated financial results were mixed. Net
sales totaled ¥44,433 million, a decrease of ¥89 million (0.2%) compared with the previous fiscal
year. Operating profit increased by ¥2,237 million (20.7%) to ¥13,022 million, while ordinary
profit rose by ¥1,816 million (18.8%) to ¥11,463 million. Profit attributable to owners of parent
amounted to ¥8,450 million, down ¥686 million (7.5%) year on year. Nevertheless, the Company
achieved its targets for all key performance indicators set in its medium-term management plan,
Challenge & Progress, particularly its fiscal 2023 operating profit target of ¥12.0 billion,
consolidated operating profit reached a record high.
Building BusinessIn the Building Business segment, leasing revenue increased by ¥1,251 million (5.0%) year on
year to ¥26,382 million, primarily due to contributions from buildings acquired in the previous
fiscal year, namely the Heiwa Real Estate Nagoya Fushimi Building and the Heiwa Real Estate
Sakura-dori Building (both in Nagoya-shi, Aichi), as well as to the leasing of newly occupied officespace. Revenue from sales of properties decreased by ¥1,284 million (9.1%) to ¥12,780 million,
reflecting a year-on-year decrease in proceeds from the sell-off of properties designated as realestate for sale. These results combined with other net sales in this segment brought total net
sales to ¥40,544 million, a decrease of ¥303 million (0.7%) compared with the previous fiscal year.
On the other hand, segment operating profit rose by ¥2,066 million (19.5%) to ¥12,639 million.
As of March 31, 2024, the vacancy rate of buildings leased by the Heiwa Real Estate Group-29-

(excluding buildings for which leases have been suspended due to redevelopment) was 2.83%.
Asset Management BusinessIn the Asset Management Business segment, asset management revenue increased by ¥82
million (3.3%) to ¥2,565 million, and brokerage commissions rose by ¥131 million (11.0%) to¥1,322 million. As a result, segment net sales came to ¥3,888 million, up ¥214 million (5.8%)
year on year. Segment operating profit totaled ¥2,197 million, an increase of ¥126 million (6.1%)
compared with the previous fiscal year.
(2)

Investment in fixed assets -During the fiscal year ended March 31, 2024, the Company paid out total capital expenditures of¥15,668 million, including the expenditure for the acquisition of Pregio Shin-Osaka Rouge(Osaka-shi, Osaka) and the construction of Caption by Hyatt Kabutocho Tokyo (Chuo-ku, Tokyo).
(3)

Status of financing -Not applicable(4)

Issues to be resolved by the Company -Over the four-year period from fiscal 2020 to fiscal 2023, the Heiwa Real Estate Group advanced
its medium-term management plan, Challenge & Progress, positioning itself to strive for new
heights as a company contributing to district revitalization.
We progressed with revitalization of the Nihonbashi Kabutocho and Kayabacho district, as wellas large-scale redevelopment projects in Sapporo, and transitioned to a business model centeredon creating added value through both external and internal growth. Meanwhile, our commitment
to sustainability initiatives led us to actively address social issues. As a result, we achieved all
key performance indicators (KPIs), including consolidated operating profit exceeding ¥12 billion,
earnings per share (EPS) over ¥200, and a return on equity (ROE) over 6%. These achievements
represent a significant leap forward for the Group over the past four years.
The Japanese economy is expected to pick up moderately due to improvements in employment
and income conditions as well as the impact of various economic measures to be implemented by
the government. Nevertheless, potential economic downturns around the world triggered by
global inflation and monetary tightening will need to be closely monitored.
In Japan, the urban landscape and lifestyles are undergoing major changes due to various factors,
including the diversification and qualitative shifts in workstyles, expanded demand from inboundtourism, population decline, a dwindling birthrate and an aging society, and intensifiedcompetition between cities and between regions. Additionally, heightened expectations for
improved capital efficiency, the advancement of sustainability management, progress in digitaltechnology, and the increasing threat of natural disasters are all contributing to the rapidly-30-

evolving operating environment surrounding the Group.
After considering this operating environment, the Company announced the Heiwa Real EstateGroup Purpose, “Enriching everyone’s future with Bazukuri that draws people in,” and the Heiwa
Real Estate Group Long-term Vision, “WAY 2040,” on March 29, 2024, followed by a new mediumterm management plan, “WAY 2040 Stage 1,” on April 30, 2024. In accordance with these plans,
the Group will work to expand its redevelopment business, cultivate profit growth while
enhancing capital efficiency, boost social value, and strengthen its business foundations, in aneffort to increase corporate value.
Background and Positioning of the New Medium-Term Management Plan
In the new medium-term management plan, WAY 2040 Stage 1 (fiscal 2024 to fiscal 2026), we
have positioned this period as the initial sprint toward dynamic growth. This involves
establishing the Nihonbashi Kabutocho and Kayabacho district brand, undertaking our largestever redevelopment projects, located in Sapporo, and venturing into new business domains torealize our vision, characterized by the slogan: Pursue perpetual dynamic growth to become the“Bazukuri Company.”
Key Strategies of the Plan to Realize Our Vision(1) Expand redevelopment business: Deploy Bazukuri endeavors that draw people in throughout
Japan1) Establish the Nihonbashi Kabutocho and Kayabacho district brand The introduction of new features through the opening of Caption by Hyatt Kabutocho
Tokyo, the first of this series in Tokyo, will generate synergies among different aspects andservices within the city, enhancing overall urban functionality. Further, we will implement
diverse Bazukuri endeavors that draw people in and entrench our Nihonbashi Kabutocho
and Kayabacho district brand. This will be achieved primarily through the expansion of
FinGATE, a platform supporting the establishment and growth of entrepreneurs andstartups, as well as the attraction and operation of unique commercial establishments thatbring vibrancy both on weekdays and weekends, and cutting-edge urban sustainability
initiatives.
2) Advance our largest-ever redevelopment projects, located in Sapporo
 We will steadily advance toward the completion in 2028 of our largest-ever redevelopment
projects —the Odori Nishi 4 south area, Type 1 District Redevelopment Project and the
Sapporo Station South Exit North 4 West 3, Type 1 District Redevelopment Project(provisional names)—as part of our Bazukuri endeavors in Sapporo that draw people in.
Through this, we aim to help boost the competitiveness of the city.
3) Expand redevelopment projects nationwide
 To enhance our presence as a Bazukuri Company, we will drive the implementation ofredevelopment projects centered around our assets in major cities throughout Japan.
-31-

(2) Cultivate profit growth while enhancing capital efficiency: Expand leasing business, promote
reinvestment by realizing gains from property sales, and diversify into new business areas
1) Develop a business model for creating added value in the Building Business We will realize gains from property sales by renewing our portfolio and sustainably develop
our business model focused on creating added value.
2) Expand revenue in the Asset Management Business We will strive to increase asset management fees by supporting the growth of HEIWAREAL ESTATE REIT, Inc. and to enhance Group earnings with high capital efficiency
through stable growth in brokerage business.
3) Venture into new business domains to realize our Long-term Vision
 To achieve the dynamic growth emphasized in our Long-term Vision, we will strengthen
our hotel business and explore opportunities for expansion into new business domains,primarily through M&A.
(3) Boost social value: Promote sustainability initiatives
1) Implement sustainability management
 We, as a Bazukuri Company, will contribute to realizing a sustainable society byaddressing environmental and social issues, including achieving net-zero greenhouse gas(GHG) emissions, while encouraging interactive communication with all stakeholders.
2) Promote the creation of sustainable districts
 We will enhance the competitiveness of our asset portfolio by addressing social issues suchas environmental friendliness and boosting disaster preparedness. This will be achieved
through building development and operation as well as facility investment, and continuing
efforts to reduce GHG emissions, among other initiatives.
(4) Strengthen its business foundations: Maximize human capital for accelerated growth1) Implement management with an awareness of the cost of shareholders’ equity and stockprice We set a return on equity (ROE) target for fiscal 2024 to fiscal 2026 of at least 7%,
exceeding the cost of shareholders’ equity. For shareholder returns from fiscal 2024 to fiscal
2026, we aim to maintain a consolidated dividend payout ratio of 50% in consideration of
the cost of shareholders’ equity, capital efficiency, and other factors. We will also flexibly
implement share buybacks, taking into account aspects such as stock price, investment
plans, and financial condition.
2) Maximize human capital As part of our Long-term Vision, we will promote human capital management to drive-32-dynamic growth. This involves cultivating human resources capable of realizing our
Purpose through career development, as well as individuals proficient in digitaltransformation (DX). Additionally, we will create an organization that promotes andmaximizes diversity, while fostering comfortable and vibrant workplaces through healthand productivity management, among other measures.
3) Further strengthen corporate governance We will bolster corporate governance mainly by enhancing the functions of the Board of
Directors and reducing cross-shareholdings.

-33-

(5)

Status of asset and profit and loss of the Group Fiscal year

Classification

The 101st
The 102nd
The 103rd
The 104th
fiscal year
fiscal year
fiscal year
fiscal year
(Fiscal year ended (Fiscal year ended (Fiscal year ended (Current fiscal year)(Fiscal year ended
March 31, 2021)
March 31, 2022)
March 31, 2023)
March 31, 2024)

Net sales¥35,048 million¥57,818 million¥44,522 million¥44,433million

Operating profit

11,228 million

12,615 million

10,784 million

13,022 million

Ordinary profit

10,244 million

11,572 million

9,647 million

11,463 million

Profit attributableto owners ofparent7,118 million

8,705 million

9,137 million

8,450 million

189.76236.74254.27236.13

Earnings per share(in exact yen)
Total assets

381,353 million

376,210 million

398,333 million

405,979 million

Net assets

118,639 million

119,278 million

119,324 million

125,645 million

Net assets per share(in exact yen)

3,190.09

3,269.74

3,334.34

3,510.66(Notes) 1. Earnings per share is calculated based on the average number of shares issued during
the fiscal year, and net assets per share are calculated based on the number of sharesissued at the end of the fiscal year.
The average number of shares issued during the fiscal year and the number of sharesissued at the end of the fiscal year are calculated after deducting the number of shares
held as treasury stock.
2. The Company adopted a performance-linked stock compensation plan for directors andexecutive officers effective from the 100th fiscal year and a stock compensation planfor employees effective from the 102nd fiscal year, and established a trust comprisedof common stock for the plans. The Company’s stock held in the trust under the plans
is recorded as treasury stock in consolidated financial statements and is included in
the treasury stock to calculate net assets per share and earnings per share.
3. The amounts for the 102nd fiscal year and thereafter have been adjusted to reflect theCompany’s adoption, effective from April 1, 2021, of the Accounting Standard for
Revenue Recognition (ASBJ Statement No. 29, March 31, 2020).

-34-

(6)

Status of significant parent companies and subsidiaries 1) Status of parent companies
Not applicable2) Status of significant subsidiaries
Company nameCommonstock

Percentage ofvoting rights heldby the Company

HEIWA REAL ESTATE
Property Management
Co., Ltd.

¥134 million

100.0%

Housing Service Co.,Ltd.
HEIWA REAL ESTATE
Asset Management CO.,LTD.
The Tokyo Shoken
Building Incorporated¥95 million

100.0%¥295 million

100.0%

Major operating business
Property management,
construction
management,
comprehensive building
management,
preservation, operationand maintenance ofbuildings and facilities
Real estate brokerage, etc.

Asset management of
HEIWA REAL ESTATE
REIT, Inc.
¥100 million
100.0%
Ownership and leasing ofreal estate;
management of halls,
conference rooms, andrestaurants, etc.
Tokyo Hibiya Hotel¥10 million
100.0%
Hotel management andCorporation
administration, etc.
(Note) Tokyo Hibiya Hotel Corporation was added to the Status of significant subsidiaries due
to its increased significance following the start of its operation in the fiscal year underreview.

(7)

Contents of principal businesses of the Group Business Segment

Business Activities

Building

Development, leasing, management and sales, etc. of stock
exchanges, offices, commercial facilities and housing, etc.

Asset Management

Asset management of HEIWA REAL ESTATE REIT, Inc. andbrokerage of real estate, etc.

-35-

(8)

Principal sales offices Heiwa Real Estate Co., Ltd.

Head Office: Chuo-ku, Tokyo
Osaka Branch: Chuo-ku, Osaka
Nagoya Branch: Naka-ku, Nagoya
Fukuoka Branch: Chuo-ku, Fukuoka
Sapporo Branch: Chuo-ku, Sapporo

HEIWA REAL ESTATE Property
Management Co., Ltd.

Head Office: Chuo-ku, Tokyo
Osaka Branch: Chuo-ku, Osaka
Nagoya Branch: Naka-ku, Nagoya(9)

Housing Service Co., Ltd.

Chuo-ku, Osaka

HEIWA REAL ESTATE AssetManagement CO., LTD.

Chuo-ku, Tokyo

The Tokyo Shoken Building
Incorporated

Chuo-ku, Tokyo

Tokyo Hibiya Hotel Corporation

Chiyoda-ku, Tokyo

Employees of the Group –1) Employees of the businesses of the Company group
Business Segment

Increase/(decrease)as compared with priorperiod end

No. of Employees

Building

140

0

Asset Management

87

0

28

+2

255

+2

Corporate (common among
the Company group)
Total(Notes) 1. Number of employees is number of ordinary employees.
2. Number of employees included in the Corporate (common among the Company
group) segment is the number of employees who belong to administrative
departments.
2) Employees of the Company
Increase/(decrease)
No. ofas compared with
Employees
prior period end
98(Note)+2

Average age(years)Average length ofservice(years)

43.1

15.1

Number of employees is number of ordinary employees.

-36-(10) Principal creditors and balances of their loans outstandingCreditors

BalanceResona Bank, Ltd.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking Corporation
The 77 Bank, Ltd.
MUFG Bank, Ltd.

-37-

(Millions of yen)

¥27,069
25,48925,16017,68010,981

2.

Status of Shares:(1) Number of shares authorized to be issued -110,000,000 shares(2) Number of shares issued and outstanding -38,859,996 shares(including 2,901,344 sharesof treasury stock)
23,680(3) Number of shareholders (4) Major shareholders Name

No. of shares(000’s)Holding ratio(%)

Mitsubishi Estate Co., Ltd.

4,274

11.89

The Master Trust Bank of Japan, Ltd. (Trust Account)

4,239

11.79

CGML PB CLIENT ACCOUNT/COLLATERAL

3,900

10.85

Custody Bank of Japan, Ltd. (Trust Account)

3,105

8.64

BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)

625

1.74

TAISEI CORPORATION

532

1.48

STATE STREET BANK WEST CLIENT - TREATY 505234

486

1.35

Resona Bank, Ltd.

445

1.24

JP MORGAN CHASE BANK 385781

433

1.21

SSBTC CLIENT OMNIBUS ACCOUNT

427

1.19

(Notes) 1. The holding ratio is calculated after deducting the number of shares held astreasury stock (2,901,344 shares) from the total number of issued shares.
2. The Company holds 2,901,344 shares of treasury stock, which are excluded fromthe major shareholders listed above. 169,000 shares of the Company’s stock heldby Custody Bank of Japan, Ltd. (Trust Account) as trust assets of the trust forthe stock compensation plan for directors and executive officers and the stockcompensation plan for employees are not included in the applicable treasury stock.
(5) Shares issued to corporate officers as consideration for execution of duties during thecurrent fiscal year
Category
Executive Officers-38-

No. of shares

No. of eligible corporate officers

3,500 shares

1 person(6) Other important matters related to shares
1) Performance-linked stock compensation plan for executive officers and managing
officers of the Company and certain subsidiaries
The Company has adopted a performance-linked stock compensation plan for
executive officers of the Company (excluding non-residents of Japan) and managing
officers of the Company (excluding a managing officer on special appointment who isin charge of the secretariat of the Audit Committee, a group managing officer, andnon-residents of Japan), and also for directors of major subsidiaries (excluding parttime directors, those on secondment from the Company, and non-residents of Japan)
and managing officers of major subsidiaries (excluding those on secondment from theCompany and non-residents of Japan), and established a trust comprised of common
stock for the plan.
As of March 31, 2024, the amount of the applicable treasury stock held in the trust
totaled 98,700 shares.
2) Stock compensation plan for employees
The Company has adopted a stock compensation plan for employees as an incentive
plan for the Company’s employees, and established a trust comprised of common
stock for the plan.
As of March 31, 2024, the amount of the applicable treasury stock held in the trust
totaled 70,300 shares.

-39-

3.

Stock Acquisition Rights:

1) Stock acquisition rights granted in consideration of the performance of duties and held by
Corporate Officers of the Company
Not applicable2) Stock acquisition rights granted to employees in consideration of the performance of duties
during the current fiscal year
Not applicable

-40-

4.

Matters related to Corporate Officers:(1) Directors and Executive Officers
1) Directors
Assignment
Nominating
Committee member
Compensation
Committee member

Significant office(s)concurrently held

Position
Director

Name
Kiyoyuki Tsuchimoto

Director

Kazuo Yamada

Director

Takahisa Aoyama

Director

Daisuke Kobayashi

Audit Committee
memberExternal
Director

Kiichiro Masui

Chairman ofNominating
Committee

External
Director

Takahiro Moriguchi

Nominating
Committee member
Chairman ofCompensation
Committee

External
Director

Junko Utsunomiya

Nominating
Committee member
Audit Committee
memberRepresentative partner of
Utsunomiya & Shimizu andHaruki Management Legal
OfficeOutside Director, Audit andSupervisory Committee
Member of RAKSUL INC.
Outside Director (Audit &Supervisory Committee
Member) of PeptiDream Inc.
Outside Director, Audit andSupervisory Committee
member of ZOZO, Inc.

External
Director

Eiji Yamada

Compensation
Committee member

Outside Director of The Chiba
Kogyo Bank, Ltd.
External Director of KyokuyoCo., Ltd.

External
Director

Mitsunobu Yamaguchi

Chairman of Audit
Committee

Head of Mitsunobu
Yamaguchi CPA OfficeOutside Director (Audit andSupervisory Committee
member) of MEITEC Group
Holdings Inc.

Outside Director of Japan
Credit Rating Agency, Ltd.
Outside Director of AIZAWASECURITIES GROUP CO.,LTD.

(Notes)
1. Kiichiro Masui, Takahiro Moriguchi, Junko Utsunomiya, Eiji Yamada and Mitsunobu-41-

Yamaguchi are External Directors.
2. All of the Company’s External Directors are independent officers subject to no possible
conflicts of interest with general shareholders that the Company is required to designate
under the rules of each stock exchange.
3. Mitsunobu Yamaguchi who is a Chairman of the Audit Committee has professional
knowledge and experience as a Certified Public Accountant, and Daisuke Kobayashi who
is a member of the Audit Committee has insight related to finance and accounting andmanagement experience through his service as Director and Business Planning Division
General Manager at a listed REIT property management company which is a Group
member company.
4. From the perspective of enhancing the audit function, the Company selected andappointed Daisuke Kobayashi who has intimate knowledge of Group operations as a fulltime member of the Audit Committee.
5. Kiichiro Masui retired as Chairman of the Board of the Japan Securities ResearchInstitute as of June 30, 2023.
6. Junko Utsunomiya retired as External Statutory Auditor of ZOZO, Inc. and assumed
the office of Outside Director, Audit and Supervisory Committee member of the company
as of June 28, 2023.
7. Eiji Yamada retired as Advisor of Japan Information Processing Service Co., Ltd. as ofJune 30, 2023.
8. Mitsunobu Yamaguchi retired as Outside Audit & Supervisory Board Member of
MEITEC CORPORATION and assumed the office of Outside Director (Audit andSupervisory Committee member) of MEITEC Group Holdings Inc. as of October 1, 2023.
2)

Executive Officers

Position
Representative
Executive Officer,
President and CEO

Name
Kiyoyuki Tsuchimoto

Representative andSenior Managing
Executive Officer

Kazuo Yamada

Assistant to the President
In charge of Development Promotion
Department and Real Estate
Investment Department

Managing Executive
Officer

Tomoharu Nakao

In charge of Office Building
Development Department

Executive Officer

Nobuhiro Seo

In charge of Real Estate Investment
Department

Executive Officer

Takahisa Aoyama

In charge of Corporate Planning
Department, General Affairs
Department and Finance
Department
General Manager of Corporate
Planning Department-42-

Assignment

(Notes)
1. No significant office(s) held by the Executive Officers concurrently.
2. Executive Officers transferred as of April 1, 2024 as follows.
Position
Representative andSenior Managing
Executive Officer

Name
Kazuo Yamada

Assignment
Assistant to the President
In charge of Development
Promotion Department I,
Development Promotion
Department II and Community
Co-Creation Department

3. The Company has introduced a Managing Officer system. The Managing Officers andtheir duties are as indicated hereunder.
PositionManaging Officer

Name
Naoyuki Matsumoto

Assignment
In charge of Finance
Department
General Manager of Finance
Department

Managing Officer

Kiichi Kikuchi

In charge of General Affairs
Department and Legal Office
General Manager of General
Affairs Department and Legal
OfficeManaging Officer
on Special
Appointment

Shosaku Shimomura

In charge of Audit Committee
OfficeGroup Managing
Officer

Hiroki Mizuta

4. Shosaku Shimomura retired as Managing Officer on Special Appointment as of March
31, 2023.
5. The Managing Officers appointed as of April 1, 2024 and their duties are as indicatedhereunder.
Position
Senior Managing
Officer

Name
Naoyuki Matsumoto

Assignment
In charge of Finance
Department
General Manager of Finance
Department

Managing Officer

Ichiro Wagatsuma

In charge of Development
Promotion Department I
General Manager ofDevelopment Promotion
Department I-43-(2) Summary of the Agreement on Limitation of Liability In accordance with the provisions in Article 427, Paragraph 1, of the Companies Act, theCompany has entered agreements with the Directors (excluding those who are executive
directors, etc.) to limit their liabilities for damages as set forth in Article 423, Paragraph 1,of the Companies Act; provided, however, that the limit of the liabilities for damages undersuch agreements shall be the amount prescribed in the Act.
(3) Summary of the Directors and Officers Liability Insurance Contract The Company has concluded a directors and officers liability insurance contract, as
stipulated in Article 430-3, Paragraph 1, of the Companies Act, with an insurance company.
The insurance covers directors, executive officers, statutory auditors, managing officers andemployees of the Company and its subsidiaries. The insurance premiums for the contract
are fully borne by the Company. The insurance pays for damages and litigation expenses
assumed in the event that a claim for damages is made against the insured person due to an
act committed (including errors of omission) by the insured person in his/her capacity as an
officer, etc. of the Company, and this contract is to be renewed every year.
The insurance will be renewed with the same contents in December 2024. The insurance
includes measures taken to ensure that the appropriateness of duties performed by the
insured will not be impaired by setting limits for the amount to be covered.

-44-

(4) Remuneration paid to Directors and Executive Officers 1) Policy on decisions pertaining to remuneration for individual Directors, etc.
The Company revised its policy on decisions pertaining to remuneration for individual
Directors, etc. (referring to Directors, Executive Officers, and Managing Officers) at themeeting of the Compensation Committee held on July 31, 2023. The Compensation
Committee also has conducted sufficient deliberations from various angles on details of
remuneration for individual Directors, etc. in the current fiscal year, and has judged that themethod of determining the remuneration for individual Directors, etc. and the details of thedetermined remuneration, etc. are consistent with the relevant Decision-making Policy andare deemed to be in accordance with the Decision-making Policy.
Details of the policy as revised at the meeting of the Compensation Committee held on July
31, 2023 are as follows.
1. Basic policyRemuneration, etc. for Directors, Executive Officers, and Managing Officers (hereinafter,
the “Officer Compensation”) shall be based on the following basic policy in accordancewith the principles of the Corporate Governance Code in order to realize themanagement policies of the Company.
(1) Provide motivation to improve the business performance and enhance corporate
value in the medium and long term;(2) Seek shared value with shareholders;(3) Establish standards and systems to contribute to securing excellent humanresources; and(4) Maintain a decision-making process with sufficient transparency and impartiality.


Officer Compensation shall be composed of the fixed-amount compensation as basic
compensation, the bonuses as short-term incentives, and the performance-linked stockcompensation plan as medium- and long-term incentives.



Directors who concurrently serve as Executive Officers shall only receive compensation
for Executive Officers.

Compensation for Directors (excluding those who concurrently serve as Executive
Officers) and Managing Officers on special appointment managing the secretariat of the
Audit Committee shall solely consist of basic remuneration in consideration of their roles
and other factors. In addition, compensation for Group Managing Officers shall be inaccordance with the remuneration system of each group company in which they execute
their duties, and only basic compensation shall be paid by the parent company.

2. Policy on determining amounts of individual remuneration, etc. for basic compensation(monetary remuneration) (including policy on determining time period or conditions forproviding remuneration, etc.)Basic compensation shall be determined based on the significance of roles and the scopeof responsibility for each rank, in consideration of business performance, etc. based on
the Officer Compensation system.
Basic compensation shall be fixed-amount compensation provided monthly.
3. Policy on determining details and calculation method of amount or number of shares for-45-

performance-linked remuneration, etc. and non-monetary remuneration, etc. (including
policy on determining time period or conditions for providing remuneration, etc.)(1) Bonuses
Short-term incentives shall be provided through bonuses paid as cash remunerationin June every year in order to raise awareness for improving business performanceeach fiscal year.
Bonuses shall be calculated by multiplying the standard amount corresponding torank by a coefficient corresponding to the results for profit attributable to owners ofparent, and then adding an amount obtained by multiplying the monthly fixedamount compensation for that rank by a coefficient corresponding to individual
evaluations and an amount by multiplying the monthly fixed-amount compensation
for that rank by a coefficient corresponding to ESG evaluations. The coefficient for
profit attributable to owners of parent shall be within the range of 0% to 150%, thecoefficient for individual evaluations shall be within the range of 0% to 100%, andthe coefficient for ESG evaluations shall be within the range of –20% to 20%.
However, the Representative Executive Officer, President and CEO shall not be paidcompensation based on individual evaluation or the associated monthly fixedcompensation for each position.

The Compensation Committee has the authority to forgo or reduce bonus payments
in cases where an Executive Officer or Managing Officer has been dismissed orwhere they have caused damage to the Company intentionally or through grossnegligence, etc.
Bonuses for Managing Officers shall be determined in accordance with the bonuses
for Executive Officers.
(2) Performance-linked stock compensationMedium- and long-term incentives are provided through performance-linked stockcompensation, which consists of a fixed-amount portion and a performance-linked
portion.

The fixed-amount portion is determined according to rank, and the performancelinked portion is determined according to the achievement of performance
conditions, stock prices, etc.

The fixed-amount portion aims to strengthen shared value with shareholders, andthe performance-linked portion aims to provide motivation to improve businessperformance and enhance corporate value in the medium and long term, in addition
to strengthening the link between business performance and remuneration.

Share benefits shall be provided using a trust comprised of common stock, inprinciple, on the retirement of the eligible Executive Officers and Managing Officers.
<Standards for calculating performance-linked stock compensation>
The evaluation indices for the performance-linked portion shall be consolidated
operating profit, which is a concise indication of the earning power of the corebusiness, and TSR (Total Shareholder Return), which indicates the return provided
to shareholders as a result of increased corporate value, from the viewpoint of
improving business performance over the medium to long term.

Stock compensation for the performance-linked portion shall be determined within
the range of 0% to 150%, corresponding to the achievement of performance targets
for consolidated operating profit and a comparative assessment of the stock priceindex for TSR.

Details shall be prescribed in the stock compensation rules established by the
resolution of the Compensation Committee.
4. Policy on determining the proportion of the amounts of monetary remuneration,
performance-linked remuneration, etc., and non-monetary remuneration to remuneration-46-

for individual Directors, etc. (excluding Managing Officers)The proportion of each type of remuneration for Executive Officers (including those
who concurrently serve as Directors) shall be decided by the Compensation
Committee in accordance with the report of the Compensation Committee, taking
into account the remuneration standards of other companies in the same industry,
and the following ratios will be used as an approximate reference for the case inwhich performance targets are achieved.
Item

Fixed-amountcompensation

Position

Basic compensation

Ratio of total
remuneration(approximate)

Short-term
incentive

Performance-linked
stock compensation
Medium and longterm incentive

55% – 60%

25% – 30%

15% – 20%

Bonuses2) Total amount of remuneration, etc. for the current fiscal year

Category

Directors(of which, External
Directors)
Executive Officers

Total amount of
remuneration,etc. (Millions ofyen)

Total amount of remuneration, etc. by type(Millions of yen)
PerformancePerformanceBasic
linkedlinked stockcompensation remuneration,compensationetc.

Number of
eligible
officers

63
(42)

63
(42)

—

—

6
(5)

262

148

79

33

5

(Note) The total amount of remuneration, etc. for Executive Officers who concurrently
serve as Directors and the number of eligible officers are shown in the column of
Executive Officers.

3) Performance-linked remuneration, etc.
Performance-linked remuneration, etc. is provided through bonuses paid as short-term
incentives with the performance index of profit attributable to owners of parent in order toraise awareness for improving business performance each fiscal year. Bonuses are calculated
by multiplying the standard amount corresponding to that rank by a coefficientcorresponding to the results for profit attributable to owners of parent, and then adding anamount obtained by multiplying the monthly fixed-amount compensation for that rank
(excluding Representative Executive Officer, President and CEO) by a coefficientcorresponding to individual evaluations and an amount by multiplying the monthly fixedamount compensation for that rank by a coefficient corresponding to ESG evaluations. The
coefficient for profit attributable to owners of parent is within the range of a minimum of 0%(when profit attributable to owners of parent is negative) and a maximum of 150% (whenprofit attributable to owners of parent is ¥9,000 million or more), the coefficient forindividual evaluations is within five levels from 0% to 100%, with 50% as the standard, andthe coefficient for ESG evaluations is within three levels from –20% to 20% with 0% as thestandard. Details are as described in “1) Policy on decisions pertaining to remuneration for-47-

individual Directors, etc.”
The performance target for profit attributable to owners of parent for the current fiscal yearis ¥8,200 million as initially forecast, and the results are as described in “1. (5) Status ofasset and profit and loss of the Group.” Performance-linked remuneration, etc. described in
the above table in 2) is the provision for bonuses for directors (and other officers) pertaining
to the current fiscal year.
4) Performance-linked stock compensation
The Company has adopted a performance-linked stock compensation plan as medium- to longterm incentives. Said stock compensation is composed of a fixed-amount portion and aperformance-linked portion, and the performance-linked stock compensation in the table in
Item 2) above includes a fixed-amount portion of ¥22 million and a performance-linked portionof ¥11 million. The evaluation indices for the performance-linked portion shall be consolidated
operating profit, which is a concise indication of the earning power of the core business, andTSR (Total Shareholder Return), which indicates the return provided to shareholders as aresult of increased corporate value, from the viewpoint of improving business performance overthe medium to long term, and the stock compensation for the performance-linked portion shallbe determined within the range of 0% to 150%, corresponding to the achievement of
performance targets for consolidated operating profit and a comparative assessment of thestock price index for TSR. Furthermore, for each evaluation index, the coefficient is 100%, witha standard level of achievement or comparative assessment of 100% or more and less than
120%. Details are as described in “1) Policy on decisions pertaining to remuneration for
individual Directors, etc.”
The performance target for consolidated operating profit for the current fiscal year is ¥12,300
million as initially forecast, and the results are as described in “1. (5) Status of asset andprofit and loss of the Group”. The Company has not established a target for the comparative
assessment of the stock price index for TSR. The result of the comparative assessment forthe current fiscal year is 72%.
Performance-linked stock compensation described in the above table in 2) is the provision forshare awards for the current fiscal year based on the said plan.

-48-

(5) External Officers 1) Relationship between the Company and the entities in which Directors concurrently holdsignificant offices
Category

Director

Director

Director

Director

Name

Kiichiro
Masui

Junko
Utsunomiya

Eiji
YamadaMitsunobu
Yamaguchi

Status of significant
office(s)concurrently held
Outside Director ofJapan Credit Rating
Agency, Ltd.

Outside Director of
AIZAWA SECURITIESGROUP CO., LTD.

Representative partnerof Utsunomiya &Shimizu and Haruki
Management Legal
OfficeOutside Director, Audit
and Supervisory
Committee Member of
RAKSUL INC.
Outside Director (Audit& Supervisory
Committee Member) of
PeptiDream Inc.
Outside Director, Audit
and Supervisory
Committee member of
ZOZO, Inc.
Outside Director of The
Chiba Kogyo Bank, Ltd.
External Director of
Kyokuyo Co., Ltd.
Head of Mitsunobu
Yamaguchi CPA OfficeOutside Director (Audit
and Supervisory
Committee member) of
MEITEC Group
Holdings Inc.

-49-

Relationship with the Company
No important relationship exists.
The Company holds shares of
AIZAWA SECURITIES GROUP
CO., LTD. At the same time,
AIZAWA SECURITIES CO., LTD., awholly owned subsidiary of AIZAWASECURITIES GROUP CO., LTD.,
holds shares of the Company.
However, AIZAWA SECURITIESCO., LTD. holds less than 1% of thetotal number of shares issued by theCompany.
No important relationship exists.

No important relationship exists.

No important relationship exists.

No important relationship exists.
No important relationship exists.
No important relationship exists.
No important relationship exists.
No important relationship exists.

2) Principal activities during the current fiscal year
Attendance of Board of
Directors’ Meetings andMeetings of theNominating
Principal activities and duties
Category
Name
Committee,
performed in relation to expected roles
Compensation
Committee, and Audit
Committee
He has provided opinions at the Boardof Directors from an objective
standpoint, taking advantage of his
knowledge and experience. In
particular, he has played an
appropriate role in ensuring thesuitable and appropriate management
Board of Directors’of decision-making by providing
Meetings
supervision and advice from a
12/12 (100%)
specialized point of view accumulated
Kiichiro
Directorin the world of finance and securities.
Masui
Meetings of the
In addition, as a chairman of theNominating Committee
Nominating Committee, he attended
2/2 (100%)
meetings of the Nominating
Committee held in the current fiscal
year and took the lead in decisionmaking and supervising regarding
personnel affairs of officers, etc. at theCompany from an objective andneutral standpoint.
He has provided opinions at the Boardof Directors from an objective
standpoint, taking advantage of his
knowledge and experience. In
particular, he has played an
appropriate role in ensuring thesuitable and appropriate management
Board of Directors’of decision-making by providing
Meetings
supervision and advice from the
12/12 (100%)standpoint of corporate management
and an international perspective.
Meetings of theNominating Committee In addition, as a member of the
Takahiro
Director
2/2 (100%)
Moriguchi
Nominating Committee and achairman of the Compensation
Meetings of theCommittee, he attended meetings ofCompensation
the Nominating Committee and theCommittee
Compensation Committee held in the
4/4 (100%)
current fiscal year and decided andsupervised personnel affairs ofofficers, etc. at the Company from an
objective and neutral standpoint while
taking the lead in decision-making
and supervising regarding officer
compensation, etc. at the Company.

-50-

Category

Name

Attendance of Board of
Directors’ Meetings andMeetings of theNominating
Committee,
Compensation
Committee, and Audit
Committee

Board of Directors’Meetings
12/12 (100%)
Director

Junko
Utsunomiya

the Nominating
Committee
2/2 (100%)
Meetings of the Audit
Committee
12/12 (100%)

Director

Director

Eiji
YamadaMitsunobu
Yamaguchi

Board of Directors’Meetings
12/12 (100%)
Meetings of theCompensation
Committee
4/4 (100%)

Board of Directors’Meetings
12/12 (100%)
Meetings of the Audit
Committee
12/12 (100%)-51-

Principal activities and duties
performed in relation to expected roles

She has provided opinions at theBoard of Directors from an objective
standpoint, taking advantage of her
knowledge and experience. In
particular, she has played an
appropriate role in ensuring thesuitable and appropriate managementof decision-making by providing
supervision and advice from a
specialized standpoint as an attorney.
In addition, as a member of theNominating Committee and the Audit
Committee, she attended meetings of
the Nominating Committee and the
Audit Committee held in the current
fiscal year and decided and supervised
personnel affairs of officers, etc. at theCompany while appropriately
auditing the business execution froman independent standpoint.
He has provided opinions at the Boardof Directors from an objective
standpoint, taking advantage of his
knowledge and experience. In
particular, he has played an
appropriate role in ensuring thesuitable and appropriate managementof decision-making by providing
supervision and advice from a
specialized standpoint accumulated in
the areas of data communications andsystem development.
In addition, as a member of theCompensation Committee, heattended meetings of theCompensation Committee held in thecurrent fiscal year and decided andsupervised officer compensation, etc.
at the Company from an objective andneutral standpoint.
He has provided opinions at the Boardof Directors from an objective
standpoint, taking advantage of his
knowledge and experience. In
particular, he has played an
appropriate role in ensuring thesuitable and appropriate managementof decision-making by providing
supervision and advice from a
specialized standpoint as a certified
public accountant.
In addition, as a chairman of the
Audit Committee, he attended
meetings of the Audit Committee heldin the current fiscal year and took thelead in audit of business execution
from an independent standpoint.

(Note) In addition to the above number of the Board of Directors’ Meetings, there were tworesolutions in writing that were deemed to have been adopted by the Board of
Directors pursuant to Article 370 of the Companies Act and Article 24 of theCompany’s Articles of Incorporation.

-52-

5.

Matters related to Independent Auditor:(1) Name of Independent Auditor KPMG AZSA LLC(2) Amount of Independent Auditor’s fee 1)

Total fee the Company will pay Independent Auditor for the current fiscal term
40 million yen

2)

Total amount of money and other profits the Company and the Company’s subsidiaries
will pay Independent Auditor
45 million yen(Notes) 1. The total amounts described in “Total fee the Company will pay Independent
Auditors for the current fiscal term” above include Independent Auditors’ fee for
audit based on the Companies Act and the Financial Instruments and ExchangeAct, because the Company does not classify fee for audit based on the Companies
Act and fee for audit based on the Financial Instruments and Exchange Act byaudit agreement between the Company and the Independent Auditors.
2. HEIWA REAL ESTATE Asset Management CO., LTD., a consolidated subsidiaryof the Company, entrusts to the Independent Auditor the investigation related to
the value of specified assets, etc., which is a service other than the services
provided in Article 2, Paragraph 1 of the Certified Public Accountants Act.
3. The Audit Committee has obtained necessary materials or received reports fromthe related departments and the Independent Auditor and has confirmed anddeliberated the content of the auditing plan, the basis for calculating theestimated amount of fee, etc., and thereupon has determined to give consent tothe amount of the Independent Auditor’s fee.

(3) Policy on determining the dismissal or disapproval of reappointment of the Independent
Auditor If the Independent Auditor is deemed applicable to any of the provisions in Article 340,
Paragraph 1, of the Companies Act, the Audit Committee will dismiss the Independent
Auditor upon unanimous approval of all members of the Audit Committee.
Further, if the performance of duties of the Independent Auditor is deemed difficult to beappropriately performed based on the Audit Committee’s review of the Independent
Auditor’s audit system, independence, specialization, and performance of duties, or whenthe Audit Committee has reasonable grounds to change the Independent Auditor for the
purpose of further enhancing the appropriateness of the audit, the Audit Committee will
decide upon the content of a proposal for the dismissal or disapproval of reappointment of
the Independent Auditor to be submitted to the General Shareholders’ Meeting.
-53-

6.

Establishment of a Corporate Structure to Ensure the Proper Conduct ofBusiness and the Status of its Operations:(1) Corporate structure to ensure the proper conduct of businessIn its efforts to establish a lawful and efficient corporate structure, the Company maintains
and operates a structure to ensure that the Executive Officers comply with laws and thearticles of incorporation in the execution of their operations, and other structures to ensure
the proper conduct of the business of the Company and the businesses of the Company groupmade up of the Company and its subsidiaries, as follows.
1) Corporate structure to ensure legal compliance and compliance with the articles ofincorporation in the execution of operations by Executive Officers and employees of theCompany(1) The Company elects External Directors as independent officers to reinforce thesupervisory functions of the Board of Directors and the audit function of the Audit
Committee.
(2) The Company has established a “Code of Conduct,” “Standards for Behavior of
Heiwa Real Estate Group,” and “Compliance Regulations,” and steps are taken to
ensure that all of its members are fully aware of their contents. Accordingly,
Executive Officers, Managing Officers, and employees of the Company are requested
to maintain fair and high ethical principles and strictly adhere to laws, regulations,and the articles of incorporation, in order to secure a management structure on
which the community can rely.
(3) Based on its “Internal Whistleblowing Regulations,” “External Whistleblowing
Regulations,” and other relevant regulations, the Company has established acompliance hotline and other systems as contact points for notification andconsultation from people in or outside of the Company, including business partners,
when problems or other matters related to compliance occur, and detects andresponds to any such problems as promptly as possible.
(4) The Company responds firmly against antisocial forces that jeopardize the order andsafety of the civil society.
2) System for the storage and maintenance of information in relation to the performance of
duties by the Executive Officers of the Company
The Company properly records the decision-making documents at the General
Shareholders’ Meetings, the Board of Directors’ Meetings, the Meetings of Executive
Officers, and other important meetings, approval documents, and information related tothe performance of duties by the Executive Officers, and properly stores and maintains
these documents in accordance with the relevant laws and “Criteria for the Storage and-54-

Disposal of Documents.”
Directors and Executive Officers may access these documents at any time.
3) Rules of the Company related to the management of the risk of loss and other systems(1) In recognition of the importance of risk management as a management issue, theCompany has established a set of “Risk Management Rules,” has established a “RiskManagement Committee” under the rules, and endeavors to secure the effectivenessof risk management by defining the targeted risk and the responsibility for
management of the risk.
(2) The “Risk Management Committee” reports on the matters under its management
to the Board of Directors and the Audit Committee, as necessary.
4) System to ensure the efficient performance of duties by the Executive Officers of theCompany(1) The Company segregates the functions and responsibilities of management andbusiness execution by adopting an organizational design of a company withnominating committee, etc. and delegating a great deal of decision-making authority
for business execution to Executive Officers in order to accelerate the process ofdecision-making.
(2) Through the system for allocating Directors-in-charge, the system for job
authorization, and the system for decision-making provided in various in-company
regulations, including the “Regulations of the Board of Directors’ Meetings,” the“Regulations of the Meetings of Executive Officers,” and the “Rules on the Divisionof Authorities,” the Company works to achieve the efficient execution of duties by
its Executive Officers.
(3) By formulating annual business plans and other plans, the Company establishes
company-wide objectives to promote the efficient execution of business.
5) System to ensure the proper execution of business by the Company group made up of theCompany and its subsidiaries(1) The Company has formulated a set of “Administrative Rules on Subsidiaries andAffiliates” covering the Company and its subsidiaries (collectively the “Company
Group”) and endeavors to secure the propriety of operations as the Company Groupby defining the responsibility for administration, etc.
(2) The Company manages the planning of strategy related to the Company Group,
guidance and monitoring related to subsidiaries and other matters pertaining tobusiness administration, financial operations, and administration related toconsolidated accounting, the improvement and operation of internal control related
to financial reporting and administration related to the evaluation of effectiveness,-55-and administration related to the operation of business.
(3) The “Code of Conduct,” the “Standards for Behavior for Heiwa Real Estate Group,”
and the “Compliance Regulations” prescribed by the Company also apply to theCompany Group, and the Company takes steps to ensure that all members of theGroup are fully aware of their contents. Accordingly, the Company requests theofficers and employees of the Company Group to maintain fair and high ethicalprinciples and strictly adhere to laws, regulations, and the articles of incorporation
so as to secure a management structure on which the community can rely.
(4) In recognition of the importance of risk management as a management issue, theCompany endeavors to secure the effectiveness of risk management by defining thetargeted risk and the responsibility for management of the risk in the Company
Group in accordance with a set of “Risk Management Rules” prescribed by theCompany.
(5) In accordance with a set of “Administrative Rules on Subsidiaries and Affiliates,”
the Company made mandatory for subsidiaries to report important matters related
to subsidiaries in advance, in principle.
(6) The Company dispatches its personnel to serve as Directors and Statutory Auditorsof major subsidiaries. The Directors of the Company oversee the performance of theduties of the Directors of the subsidiaries, and the Statutory Auditors of theCompany oversee the execution of business of the subsidiaries.
(7) In order to report and discuss matters related to consolidated group management,
the Company has established a conference with managers from its subsidiaries andmeetings with relevant personnel from its subsidiaries to share ownership ofbusiness policies, management information, etc., and reports important mattersrelated to subsidiaries to the Board of Directors.
(8) The Company has formulated a set of “Basic Principles for the Maintenance andOperation of Internal Control Related to Financial Reporting,” in order to secure
reliable financial reporting. The Company has also established an “Internal Control
Liaison Committee Related to Financial Reporting” to maintain a cooperative
structure that cuts across the whole Company Group for the purpose of realizing the
aforesaid principles.
6) Matters concerning relevant Directors and employees when the Audit Committee request
the deployment of Directors and employees to assist the Audit Committee in its work,
matters related to the independence of those Directors and employees from Executive
Officers of the Company, and matters to secure the effectiveness of instructions from the
Audit Committee to those Directors employees(1) The Company has established the Audit Committee Office and deploys dedicatedemployees to the office. Employees assigned to the office assist the duties performedby the Audit Committee.
-56-(2) The employees belonging to the Audit Committee Office, when assisting the Audit
Committee in their work, follow the orders and instructions of the Audit Committee
and do not receive any orders and instructions from the Executive Officers.
(3) The appointment and transfer of the employees belonging to the Audit Committee
Office require the consent of the Audit Committee, and they are assessed based
sufficiently on the Audit Committee’s views.
7) Policy for handling expenses, etc. incurred from the performance of duties by themembers of the Audit Committee of the Company
If member of the Audit Committee, when performing their duties, request the Company
to pay expenses in advance pursuant to Article 404, Paragraph 4 of the Companies Act,
the Company shall promptly pay such expenses or debts unless such expenses or debts
are determined not to be necessary for the performance of duties by the Audit Committee.
8) System of whistleblowing to the Audit Committee of the Company, system to ensure thata person so whistleblowing is not treated unfavorably because of the whistleblowing, andother systems to ensure effective auditing by the Audit Committee of the Company(1) The full-time members of the Audit Committee present at important conferences,including the Meetings of Executive Officers, express their views, and obtain copiesof the minutes of the meetings and approval documents. The Audit Committee also
request to be briefed on these matters. Further, the Audit Committee regularly
holds meetings with the Representative Executive Officer, Internal Audit Office, or
the Independent Auditor.
(2) If a Director or Executive Officer discovers any matters that may cause material
damage to the Company, he or she will immediately notify the Audit Committee
members or the Audit Committee of those matters.
(3) The Company reports to the Audit Committee members or the Audit Committee on
important matters, including matters pertaining to the subsidiaries reported at theconferences with managers from its subsidiaries and the meetings with relevant
personnel from its subsidiaries, the results of internal audits of subsidiaries, thecontents of notifications by the compliance hotline, and other matters.
(4) The Company prohibits unfavorable treatment of the officers and employees of theCompany Group who report to the Audit Committee members or the Audit
Committee due to such whistleblowing, and keeps all of the officers and employeesof the Company Group well informed of the prohibition.
(2) Operations of a corporate structure to ensure the proper conduct of business
Following are the operations of a corporate structure to ensure the proper conduct ofbusiness.
-57-

1) Initiatives for the compliance structure
The Company established “Standards for Behavior of Heiwa Real Estate Group” andensures that officers and employees thoroughly and strictly adhere to laws andregulations. The Company also holds training sessions, etc. on compliance, including
those for the management, on a regular basis.
The status of annual compliance-related initiatives is reported to the Board of Directors
for monitoring.
The Company checks compliance, information security, etc. simultaneously across theCompany and makes the results thoroughly known within the Company to foster
awareness of compliance.
The Company has put several systems in place to facilitate the early detection ofcompliance breaches. It has set up an internal whistleblowing system for the entire
Group, which includes a hotline made available for officers and employees of subsidiaries,
and has taken steps to ensure that all members are aware of the system and how to use
it. In addition, the Company has adopted a system of multiple internal and externalreporting channels and made reporting mandatory in order to improve the effectivenessof the whistleblowing system.
The Company has also established an external whistleblowing system to allow business
partners and other stakeholders from both inside and outside the Group to report on
incidents of misconduct. In addition, the Company has established an internal
consultation office to provide its members with advice on a wide range of workplaceconcerns besides those related to misconduct.
The Company has formulated “Our Values,” which include the perspective ofstrengthening compliance, together with the Long-term Vision and the Heiwa Real
Estate Group Purpose, and announced them in March 2024.
2) Initiatives for risk management system
As a part of the Group’s internal controls, the Company applies “Risk Management Rules”
to subsidiaries as well, and thereby has established a system necessary for risk
management for the Group as a whole. The Company holds a Risk Management
Committee (four times in the current term) chaired by the Representative Executive
Officer, President and CEO to understand risks that have actualized in the Group anddeliberates on measures to prevent the recurrence of risks, etc. in accordance with the
Risk Management Rules.
With regards to the acquisition and sale of property, the Company holds a meeting of the“Investment Committee” prior to deliberations at the Meetings of Executive Officers. The
committee analyzes risks associated with the acquisition and sale of property, confirmsthat related procedures are carried out properly, handles other relevant matters, and-58-

reports the results of these activities to the Meetings of Executive Officers.
The Company has established a “Business Continuity Plan (BCP),” prepared a responsemanual based thereon, regularly checks the same, conducts periodic drills, and thereby
strives to mitigate corporate crisis risk at times of emergency.
3) Initiatives for a system to ensure the efficient performance of duties by Executive Officers
The Company has delegated a large amount of decision-making authority for businessexecution to Executive Officers to accelerate the process of decision-making and improve
management efficiency.
When formulating the “annual business plan,” an important agenda item for deliberation
at the Board of Directors meetings, the plan is fully deliberated at each department, theissues to address in the management plan and the measures to respond to them are
discussed, organized, and summarized at the conferences with managers from its
subsidiaries and the Meetings of Executive Officers, and the business plan is thereupon
submitted to the Board of Directors. By adopting these procedures, the Company
promotes the efficient performance of duties.
In order to evaluate the effectiveness of the Board of Directors, the Company conducts aself-assessment questionnaire targeting all Directors. Based on the evaluation resultsfrom the questionnaires, arguments for improvement are discussed in an effort ofenhancing the effectiveness of the Board of Directors.
The Company has established an Independent External Directors Council, to facilitate
information exchange and creation of consensus among Independent External Directors,
to help put in place through such activities an appropriate management model for theGroup.
4) Initiatives for the Company group system
The Company has determined the departments in charge of business execution ofsubsidiaries in the “Administrative Rules on Subsidiaries and Affiliates” to strengthenbusiness cooperation in the Group.
The Company periodically holds conferences with managers from its subsidiaries in orderto monitor the progress of the subsidiaries’ business plans. The Company also verifies
that internal control systems are properly implemented throughout the Group at
periodically held meetings with relevant personnel from its subsidiaries.
The Company administrates subsidiaries by dispatching to subsidiaries its officers that
concurrently serve as officers of the subsidiaries to oversee or audit the execution ofduties by the Directors, etc. of the subsidiaries. The Company has introduced a GroupManaging Officer system to strengthen the management of group companies.
5) Initiatives for system for auditing by the Audit Committee-59-

Full-time members of the Audit Committee attend the Meetings of Executive Officers
and other important meetings, express their opinions, receive copies of the minutes ofsuch meetings, approval documents, etc., and request reports on them.
In addition, members of the Audit Committee hold a meeting for deliberations withRepresentative Executive Officers, the Internal Audit Office, and the Independent
Auditor on a regular basis.
The Company deploys one employee to assist the Audit Committee in its work. To ensure
the independence of the employee from Executive Officers, the employee is assessed
based sufficiently on the Audit Committee’s views.
Based on the “Internal Whistleblowing Regulations,” an internal whistleblowing systemis operated as a hotline available for use by the officers and employees of the Company
Group. The Company has established a system under which officers and employees of
the Company Group who report to the Audit Committee are not to be unfavorably treated
due to such whistleblowing.

-60-

7.

Basic Policy with Regards to the Role of Any Person Controlling the Decision
over Financial and Business Policies of the Company:
1. Outline of Basic Policy with Regards to the Role of Any Person Controlling the Decision
over Financial and Business Policies of the Company
In the event of a purchase proposal being made by a specified party that would entail atransfer of controlling rights over the Company, the final say on whether to respond to or
reject such a move should be based on the opinions of all shareholders of the Company.
However, the Company believes that a person who controls the decisions on financial andbusiness policies of the Company should have a good understanding of the financial situation
and business description of the group of the Company as well as the source of the corporate
value of the Company, and should continue to increase the corporate value of the Company
and the common interest of our shareholders. Furthermore, some large-volume purchaseactivities, etc. could be prejudicial to the corporate value of the Company or the common
interests of shareholders that the Company has been consistently building up.
In light of this, all of the shareholders of the Company believe that all shareholders musthave the opportunity to assess carefully the impact of large-volume purchase activities, etc.
on corporate value or common shareholder interests. Regarding the purpose and terms ofany large-volume purchase and the possible impact on corporate value or common interestsof the shareholders, we believe that necessary and sufficient information and opinions
should be provided to shareholders of the Company, by both the large-volume buyer and theBoard of Directors of the Company, and that the large-volume buyer and the Board of
Directors should necessarily be given a sufficient deliberation period for consideration ofboth of these questions (in other words, avoiding as far as possible a situation in which
influences on the judgment of shareholders are coercive in nature).
Based on such fundamental thinking, the Board of Directors of the Company shall require
the provision of necessary and sufficient information by the would-be large-volume buyer
enabling shareholders to make an appropriate judgment as to whether or not to proceed withany large-volume sale, in order to ensure optimization of corporate value and commonshareholder interests. In addition, the Company shall take measures deemed appropriate
within the scope of the Financial Instruments and Exchange Act, the Companies Act andother laws and regulations, and the Articles of Incorporation, including disclosure in a timely
and appropriate manner of information so provided.

-61-

2. Outline of Efforts to Realize the Basic Principles(1) Special Efforts to Realize the Basic Principles
1) Efforts to Increase Corporate ValueAt the Board of Directors’ meeting held on March 29, 2024, a decision was made toformulate the Heiwa Real Estate Group Purpose, “Enriching everyone’s future with

Bazukuri that draws people in,” and the Long-term Vision “WAY 2040” as roadmaps
toward the future. In the new medium-term management plan, “WAY 2040 Stage 1”(fiscal 2024 to fiscal 2026), we have positioned this period as the initial sprint toward
dynamic growth. This involves establishing the Nihonbashi Kabutocho and Kayabacho
district brand, undertaking our largest-ever redevelopment projects, located in Sapporo,and venturing into new business domains to realize our vision, characterized by theslogan: Pursue perpetual dynamic growth to become the “Bazukuri Company.” Inaccordance with these plans, the Group will work to expand its redevelopment business,
cultivate profit growth while enhancing capital efficiency, boost social value, andstrengthen business foundations.
2) Efforts to Improve Corporate Governance Structure
The Company considers the enhancement of corporate governance as an importantbusiness issue, and the Company’s group as a whole endeavors to strengthen corporate
governance in order to meet the trust placed in us by shareholders and otherstakeholders and carry out fair and efficient corporate management.
In line with such thinking, the Company decided to transition to the “company withnominating committee, etc.” and changed the composition of the Board of Directors tohave a majority of External Directors at the 102nd Ordinary General Shareholders’Meeting held on June 24, 2022, with the aim of further refining its governance system.
(2) Measures to Prevent Persons Deemed Inappropriate in Light of the Basic Policy fromControlling Decisions on Financial and Business Policies of the Company
At a meeting of the Board of Directors held on May 14, 2021, the Company approved aresolution to discontinue “measures against large-volume purchases of shares of theCompany (Defense Measures Against Takeover),” because the policy expired as of theconclusion of the 101st Ordinary General Shareholders’ Meeting on June 24, 2021.
The Company shall require the provision of necessary and sufficient information by thewould-be large-volume buyer enabling shareholders to make an appropriate judgment as
to whether or not to proceed with any large-volume sale. In addition, the Company shalltake measures deemed appropriate within the scope of the Financial Instruments andExchange Act, the Companies Act and other laws and regulations, and the Articles ofIncorporation, including disclosure in a timely and appropriate manner of information so
provided.
-62-

3. Decisions on Specific Measures by the Board of Directors and the Reasons for Such
Decisions
The Company judges that the measures described in 2 above are in accordance with thebasic policy in 1. above and contribute to ensure and enhance the corporate value of theGroup as well as the common interests of our shareholders, and neither damage thecommon interests of our shareholders nor are intended to maintain the positions of theofficers of the Company.

-63-

8.

Policy on Determination of Distribution of Surplus, etc.:
When returning profits to shareholders, it is assumed that the Company will secure theinternal reserves necessary to enhance our shareholder value through the stabledevelopment of the redevelopment business, the building business, and other businessesof the Company over the long term. We make it a basic policy to return profits toshareholders with a target consolidated total return ratio of around 70% for the period
from fiscal 2020 to fiscal 2023, taking into consideration the level of returns on business
investments, and maintaining an awareness of the cost of capital and capital efficiency.
Based on the above-mentioned policy, by the resolution of the Board of Directors’ meeting
held on May 17, 2024, the year-end dividend for the current term is ¥108 per share(including a special dividend of ¥50), and the annual dividend for this fiscal term,
together with the interim dividend, will be ¥166 per share, an increase of ¥62 from theannual dividend of the previous fiscal year. The effective date and the state date ofpayment are June 3, 2024.
The Company newly established the provisions in the Articles of Incorporation that allow
the distribution of surplus, etc. to be paid by a resolution of the Board of Directors.

-64-

CONSOLIDATED BALANCE SHEETMARCH 31, 2024
ASSETS(Millions of yen)

Current assets:
Cash and deposits
Trade accounts receivable
Securities
Real estate for sale
Real estate for sale in process
Operating investments in capital
Other
Allowance for doubtful accounts
Total current assets¥20,416
2,114
8,005
20,645
567
551
956
(0)
53,257

Non-current assets:
Property, plant and equipment Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Construction in progress
Total property, plant and equipment

84,557425
829
184,669
5,039
275,522

Intangible assets Leasehold interests in land
Goodwill
Other
Total intangible assets

30,492645
181
31,320Investments and other assets Investment securities
Deferred tax assets
Other
Total investments and other assets

38,072250
7,175
45,498

Total non-current assets

352,341

Deferred assets Bond issuance costs
Total deferred assets

381
381

Total assets

405,979-65-

CONSOLIDATED BALANCE SHEETMARCH 31, 2024
LIABILITIES AND NET ASSETS(Millions of yen)

Liabilities
Current liabilities:
Trade accounts payable
Current portion of bonds payable
Short-term borrowings
Current portion of long-term borrowings
Income taxes payable
Accrued consumption taxes
Provision for bonuses for directors (and other officers)
Provision for bonuses
Other
Total current liabilities¥1,9233,624
800
16,681
1,674
1,738
109
272
2,228
29,052

Non-current liabilities:
Bonds payable
Long-term borrowings
Long-term accounts payable – other
Leasehold and guarantee deposits received
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Provision for share awards
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities

27,864
173,703
8,391
23,636
9,466
7,186
213
126
683
9
251,282

Total liabilities

280,334

Net Assets
Shareholders’ equity:
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity

21,492
19,72061,012(9,989)92,235

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Total accumulated other comprehensive income

17,339(6)
16,07633,409Total net assets

125,645

Total liabilities and net assets

405,979-66-

CONSOLIDATED STATEMENT OF INCOME
FROM: APRIL 1, 2023
TO:
MARCH 31, 2024
(Millions of yen)
¥44,433

Net sales
Cost of sales

25,863Gross profit

18,569Selling, general and administrative expenses

5,547

Operating profit

13,022Non-operating income Interest and dividend income
Miscellaneous income
Total non-operating income

400
44
444

Non-operating expenses Interest expenses
Interest expenses on bonds
Amortization of bond issuance costs
Miscellaneous losses
Total non-operating expenses

1,440
223
50
287
2,003

Ordinary profit

11,463Extraordinary income Gain on sales of investment securities
Subsidy income
Total extraordinary income

1,215
2
1,218

Extraordinary losses Loss on retirement of non-current assets
Impairment losses
Loss on tax purpose reduction entry of non-current assets
Loss on valuation of investment securities
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
ProfitProfit attributable to owners of parent

20
66
2
181
271
12,409
4,040
(81)
8,450
8,450

-67-

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFROM: APRIL 1, 2023
TO:
MARCH 31, 2024

Balance at beginning of
periodChanges during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
shares
Reversal ofrevaluation reserve
for landNet changes in items
other thanshareholders’ equity
Total changes during
periodBalance at end of period

Share capital

Capital surplus

21,492

19,720Shareholders’ equity
Retained
Treasury sharesearnings
56,298

Total shareholders’equity87,513(4,027)(4,027)

8,450

8,450

0

(12)

(12)

20

20

290

290

—

0

4,713

7

4,721

21,492

19,72061,012(9,989)92,235

Accumulated other comprehensive income

Balance at beginning of
periodChanges during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
shares
Reversal ofrevaluation reserve forland
Net changes in items
other thanshareholders’ equity
Total changes during
periodBalance at end of period(9,997)(Millions of yen)

Valuationdifference on
available-forsale securities

Deferred gains
or losses onhedges

Revaluation
reserve for land

Total
accumulated
othercomprehensive
income15,443—

16,366

31,810Total net assets

119,324(4,027)
8,450
(12)
20
290

1,896

(6)

1,896

(6)

(290)

1,599

6,321

17,339(6)

16,07633,409125,645

-68-

(290)

1,599

1,599

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS[Basis of presenting consolidated financial statements]
1. Scope of consolidation(1) Consolidated subsidiaries: 5
Names of consolidated subsidiaries: Heiwa Real Estate Property Management Co., Ltd.,
Housing Service Co., Ltd., HEIWA REAL ESTATE Asset Management CO., LTD., The Tokyo
Shoken Building Incorporated, Tokyo Hibiya Hotel Corporation(2) Names, etc. of major non-consolidated subsidiariesMajor non-consolidated subsidiaries
The Company has no major non-consolidated subsidiaries to report.
(Reason for exclusion from scope of consolidation)
Non-consolidated subsidiaries are small-scale businesses whose combined total assets, net
sales, profit/loss (corresponding to the equity owned by the Company), and retained earnings(corresponding to the equity owned by the Company) have no significant effect on the overall
results of the consolidated financial statements.
2. Application of the equity method:(1) Names of major non-consolidated subsidiaries not accounted for using the equity methodThe Company has no major non-consolidated subsidiaries to report.
(2) Reason for exclusion from application of equity method accountingA non-consolidated subsidiary or affiliate not accounted for using the equity method is
excluded from the scope of application of equity method accounting due to the minimal effectthat the exclusion has on the consolidated financial statements, taking into account its
relatively low profit/loss (corresponding to the equity owned by the Company), retained
earnings (corresponding to the equity owned by the Company), etc., and its relative
immateriality as a whole in the context of the consolidated financial statements.
3.

Matters related to the fiscal year period of consolidated subsidiaries:
The accounting year of consolidated subsidiary Tokyo Hibiya Hotel Corporation, ends on thelast day of February. This closing date was used for the preparation of these consolidated
financial statements, however, if any significant transactions occur between March 1 and theend of the consolidated fiscal year on March 31, adjustments for the consolidated financial
statements will be implemented as necessary.

-69-

4. Accounting policy:(1) Method and basis of valuation of important assets
1) Method and basis of valuation of marketable securities and other investmentsHeld-to-maturity bonds: Held-to-maturity bonds are valued at cost, with cost being
determined using the amortized cost method (straight-line
method).
Other marketable securities and investments:a. Investments other than non-marketable securities:
The market value method is used for investments other than non-marketablesecurities (differences in valuation are included directly in net assets, and costs of
securities sold are calculated using the moving-average method).
b. Non-marketable securities:
Non-marketable securities are mainly valued at cost, determined using theaggregate average method.
2) Method and basis of valuation of inventory Inventories are valued at cost determined by the specific identification method (the valueon the consolidated balance sheet is appraised by the write-down of the book value of
inventories based on the deterioration of profitability)(2) Depreciation method for important depreciable assets:
1) Property, plant and equipment (excluding leased assets) Depreciation of property, plant and equipment is computed using the declining balancemethod, except for the Tokyo Stock Exchange Building, one other building, buildings(excluding attached facilities) acquired on or after April 1, 1998, and facilities andstructures attached to buildings acquired on or after April 1, 2016, for which the straightline method is used. Depreciation of consolidated subsidiaries’ property, plant andequipment is computed using the straight-line method.
The principal useful lives of property, plant and equipment are as follows.
Buildings and structures

2-65 years

Machinery, equipment, and vehicles

2-30 years

Tools, furniture and fixtures

2-20 years-70-2) Intangible assets (excluding leased assets)Amortization of intangible assets is computed using the straight-line method. The cost of
software for internal use is amortized using the straight-line method based on the expected
useful life of the software (five years).
3) Leased assets Leased assets are depreciated using the straight-line method over the lease period without
residual value.
(3) Method of accounting of significant deferred assets:
Bond issuance costs are amortized using the straight-line method over the period until bondredemption.
(4) Basis of accounting for significant allowances and provisions:1) Allowance for doubtful accounts An allowance for doubtful accounts is provided to cover losses on trade accounts receivableand bad debts at an amount estimated based on the historical write-off ratio for generalaccounts receivables. For doubtful accounts receivable, the allowance is determined at theamount estimated to be uncollectible on an individual basis.
2) Provision for bonuses for directors (and other officers) Provision for bonuses for directors (and other officers) is calculated based on the total
amount of estimated bonus payments.
3) Provision for bonuses Provision for bonuses for employees is calculated based on the total amount of estimatedbonus payments.
4) Provision for share awards The provision for share awards was calculated based on the expected amount of stockcompensation obligations as of the end of the fiscal year under review in order to provide
the Company’s stock as compensation to executive officers and managing officers of theCompany and certain subsidiaries in accordance with its share-based remuneration rules,
and as compensation to the Company’s employees in accordance with share-based
remuneration rules concerning the trust for the Company’s employee stock ownership plan.
(5) Basis for calculating significant revenues and expenses:
Details regarding the primary performance obligations of the Group’s main businesses thatgenerate revenue from contracts with customers, and the points in time at which such
performance obligations are generally satisfied (and, accordingly, when revenues arerecognized) are as follows.
-71-1) Building Business  Revenue from sales of properties
The Company generates revenue from sales and acquisitions of properties by increasing
the value of properties it has acquired through development, lease-ups, and renovations,and then selling them for prices that exceed their acquisition prices. The Company has
performance obligations to deliver properties based on real estate sales agreements.
These performance obligations are met at the time of delivering a property, and revenue
is recognized once the property is delivered.
2) Asset Management Business  Asset management revenue from management fees
The Company generates asset management revenue from management fees obtained
through asset management services provided to Heiwa Real Estate REIT, Inc. Based on
property lease agreements, the Company has performance obligations to manage
properties, handle leasing and financing, and acquire and transfer ownership ofproperties.
Its performance obligations to manage properties and handle leasing and financing are
met by providing these services over their specified periods of time, and revenue isrecognized in proportion to the degree these performance obligations are met.
Its performance obligations to acquire and transfer ownership of properties are met oncean acquisition or transfer of a property has been completed, and revenue is recognizedat either of those points in time.
(6) Method of significant hedge accounting:1) Method of hedge accounting Deferral hedge accounting is applied. The special treatment applies to interest rate swaps
that meet the requirements for the special treatment.
2) Hedging instruments and hedged items Hedging instruments: interest rate swaps
Hedged items: interest rates of borrowings
3) Policy of hedging transactions Interest rate swap transactions are conducted to reduce the exposure to fluctuations in theinterest rates of borrowings.
4) Method of assessing hedge effectiveness Hedge effectiveness is assessed by comparing the percentage differences between amountsof cash flow items subject to hedging and cash flow items for which hedging instruments
are applied.
Interest rate swaps for which special treatment is applied, however, are excluded from thisassessment of effectiveness.
(7) Method and period of goodwill amortization-72-

Goodwill is amortized using the straight-line method over the period in which it has an effect.
(8) Other important matters for the preparation of consolidated financial statements:
1) Accounting for retirement benefitsRetirement benefit liability is calculated at an amount equal to the projected benefit
obligation as of the end of the current consolidated fiscal year minus the fair value ofpension assets. Retirement benefit liability is not calculated at any consolidated subsidiarythat has a defined contribution retirement plan.
2) Accounting for consumption taxes In principle, non-deductible consumption taxes were treated as expenses in the fiscal year
under review.
[Notes to accounting estimates](Impairment losses on non-current assets)(1) Amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Property, plant and equipment¥275,522 million

Leasehold interests in land and goodwill in intangible assets ¥31,138 million
Impairment losses¥66 million(2) Information related to the details of significant accounting estimates for items identified
1) Calculation method for the amounts recorded in the consolidated financial statements forthe current fiscal year
The Company identifies indications of impairment based on the minimum unit generating
cash flows in a manner largely independent of cash flows provided by other assets (or asset
groups) (at the individual asset level, in principle).
The Company considers continuous negative income from operating activities, etc.,
significant deteriorations in the management environment, significant declines in market
prices, and other factors as indications of impairment.
If it is recognized that there is an indication of impairment, the Company assesses thenecessity of recognizing an impairment loss. If, as a result of this assessment, the total ofundiscounted future cash flows is found to be less than total book value on comparison ofthese two items, the book value is written down to a recoverable amount (the net sales
value or value in use, whichever is higher), and the Company records the amount of the
reduction in the book value as an impairment loss.
2) Major assumptions used in significant accounting estimates
For market prices, the Group uses amounts based on the Real Estate Appraisal Standard
by independent real property appraisers, etc. (“independent valuation amounts, etc.”). In
addition, future cash flows and recoverable amounts are estimated based on independentvaluation amounts, etc. and the operating plans of assets (or asset groups), combined withthe assumptions about levels of rental fees, occupancy rates, operating costs, etc. in the-73-

future.
In addition, regarding redevelopment projects in Nihonbashi Kabutocho and Kayabacho,
as well as Sapporo, the Company classifies multiple assets into same asset groups fromwhen it may be judged that the redevelopment projects are feasible, based on negotiations
with land rights holders and other factors.
3) Impact on the consolidated financial statements for the following consolidated fiscal year
The major assumptions stated in 2) above are the best estimates based on information
available at the end of the current fiscal year. However, the Group’s business performance
may be affected owing to the reporting of impairment losses or other reasons if there arechanges in the above assumptions, including changes in development plans, market
conditions, etc.
(Valuation of real estate for sale)(1) Amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Real estate for sale

¥20,645 million

Real estate for sale in process¥567 million(2) Information related to the details of significant accounting estimates for items identified
1) Calculation method for the amounts recorded in the consolidated financial statements forthe current fiscal year
If the net sales value of real estate for sale and real estate for sale in process, minus future
expected building and construction costs and expected sales expenses, etc., falls below thebook value, the difference is reported under operating costs as loss on revaluation of
inventories.
2) Major assumptions used in significant accounting estimates
The Group estimates expected sales values after considering independent valuation
amounts, etc. or estimating rental fees, expected yields, etc., together with the impact ofany future worsening of demand, etc.
As of March 31, 2023, assets for which the Group estimated expected sales values after
estimating rental fees, expected yields, etc. were used for residential purposes, and theCompany did not assume any significant fluctuations in rent rates or expected yields infuture real estate markets.
3) Impact on the consolidated financial statements for the following consolidated fiscal year
The major assumptions stated in 2) above are the best estimates based on information
available at the end of the current fiscal year. However, the Group’s business performance
may be affected owing to the reporting of loss on revaluation of inventories or other reasons
if there are changes in the above assumptions, including a decline in estimated sales values
as a result of a worsening of demand in the real estate market, etc.
[Additional information]-74-

(A performance-linked stock compensation plan for executive officers and managing officers of
the Company and certain subsidiaries)
The Company has adopted a performance-linked stock compensation plan for executive
officers of the Company (excluding non-residents of Japan) and managing officers of theCompany (excluding managing officer on special appointment who is in charge of thesecretariat of the Audit Committee, group managing officer, and non-residents of Japan), andalso for directors of major subsidiaries (excluding part-time directors, those on secondmentfrom the Company, and non-residents of Japan) and managing officers of major subsidiaries(excluding those on secondment from the Company and non-residents of Japan, hereinaftercollectively the “Executive Officers and Managing Officers of the Company and Certain
Subsidiaries”), and established a trust comprised of common stock for the plan.
(1) Overview of the compensation system
The trust was established using funds provided by the Company, and acquires company stock
to be used as compensation for the Executive Officers and Managing Officers of the Company
and Certain Subsidiaries under the plan. Through the trust, company stock or a cash amountequivalent to the value of the stock is delivered to the Executive Officers and Managing
Officers of the Company and Certain Subsidiaries in an amount commensurate with thenumber of points each has earned under the stock compensation plan, based on stockcompensation rules set by the Company’s Board of Directors. As a rule, the Executive Officers
and Managing Officers of the Company and Certain Subsidiaries will receive thiscompensation upon retiring from their respective post.
(2) Company stock held in the trust
Company stock held in the trust is calculated based on the book value of the stock (excluding
incidental expenses) and is included in treasury shares under net assets. As of March 31,
2024, the book value of the applicable treasury shares amounted to ¥304 million, and theamount of stock totaled 98,700 shares.

-75-

(Employee stock ownership plan)
The Company has introduced an employee stock ownership plan as an incentive plan for its
employees.
(1) Overview of the ownership plan
The plan compensates employees with the Company’s shares or monetary equivalent to themarket value of the shares commensurate with a number of points awarded based on stockcompensation rules for employees set by the Board of Directors. The shares for the plan are
acquired by a trust that has been set up using funds contributed by the Company.
(2) Company stock held in the trust
Company stock held in the trust is calculated based on the book value of the stock (excluding
incidental expenses) and is included in treasury shares under net assets. As of March 31,
2024, the book value of the applicable treasury shares amounted to ¥295 million, and theamount of stock totaled 70,300 shares.
[Notes to consolidated balance sheet]
1. Balances of receivables from contracts with customers, contract assets, and contract liabilities
Receivables from contracts with customers (Note 1)¥281 million

Contract assets (Note 1)¥510 million

Contract liabilities (Note 2)¥44 million(Notes) 1. Receivables from contracts with customers and contract assets are included in in“trade accounts receivable.”
2. Contract liabilities are included in “other” under “current liabilities.”
2. Accumulated depreciation of property, plant and equipment¥99,885 million

3. Guarantees due from the Company
The Company-guaranteed loans owed by employees to financial institutions are as follows:
Housing loans for employees of Heiwa
Real Estate Co., Ltd.

¥91 million

4. Revaluation of land
Pursuant to the Act on Revaluation of Land (Act No. 34 of March 31, 1998) and the Act for
Partial Revision of the Act on Revaluation of Land (Act No. 19 of March 31, 2001), theCompany revalued its land held for business. Corporation taxes equivalent to net unrealized
gains are reported as “deferred tax liabilities for land revaluation” in liabilities, and net
unrealized gains, net of deferred taxes, are reported as “revaluation reserve for land” in net
assets.

-76-

(Method of revaluation)
Fair values are determined by applying appropriate adjustments to values computed using
the method published by the Commissioner of the National Tax Agency for the calculation ofland values that serve as the basis for taxable amounts of land-holding tax set forth in Article
16 of the Land-holding Tax Act as set forth in Article 2, Item 4 of the Order for Enforcementof Act on Revaluation of Land (Cabinet Order No. 119 of March 31, 1998).
(Date of the revaluation)

March 31, 2001

(Difference between fair values at the fiscal year-end and book values after the revaluation of
the land revaluated)
Since the fair value of the revalued land exceeded the carrying value of the land after therevaluation as of March 31, 2024, the difference between the amounts has not been stated.
5. Investment securities
Assets included under investment securities are as follows:
Investment units of HEIWA REAL

¥21,596 million

ESTATE REIT, Inc.

(151,979 units)

6. Changes in purpose of ownership
An amount of ¥13,035 million was reclassified from non-current assets to real estate for saledue to a change in the purpose of ownership[Notes to consolidated statement of income]Revenues from contracts with customers¥19,719 million

Net sales from contracts with customers and revenues from sources besides those contracts
are not recorded as specific categories under net sales.
[Notes to consolidated statements of changes in equity]
1. Shares issued
Common shares

38,859,996 shares

2. Treasury shares
Common shares

3,070,344 shares(Note) The number of common shares of treasury shares includes the number of shares of
the Company’s stock held in the trusts for its stock compensation plan for directors
and officers and for the stock compensation plan for employees (169,000 shares for thecurrent consolidated fiscal year).

-77-

3. Dividends of surplus(1) Payments of dividends
1) The following was resolved and approved at the Ordinary General Shareholders’Meeting held on May 17, 2023.
Distribution of common shares・Total amount of dividends¥1,941 million

・Dividend per share¥54

・Record date

March 31, 2023

・Effective dateJune 5, 2023

(Note) The total amount of dividends includes ¥9 million in dividends for theCompany’s stock held in the trust for its stock compensation plan for directors
and officers and for the stock compensation plan for employees as trust assets.
2) The following was resolved and approved at the Board of Directors’ meeting held on
October 31, 2023.
Distribution of common shares・Total amount of dividends¥2,085 million

・Dividend per share¥58

・Record date

September 30, 2023

・Effective date

December 1, 2023

(Note) The total amount of dividends includes ¥9 million in dividends for theCompany’s stock held in the trusts for its stock compensation plan for directors
and officers and for the stock compensation plan for employees as trust assets.
(2) Dividends with a record date falling in the current consolidated fiscal year and an effective
date falling in the following consolidated fiscal year
The following is scheduled to be resolved and approved at the Board of Directors’ meeting
to be held on May 17, 2024.
Distribution of common shares・Total amount of dividends¥3,883 million

・Source of dividends

Retained earnings

・Dividend per share¥108

・Record date

March 31, 2024

・Effective dateJune 3, 2024

(Note) The total amount of dividends includes ¥18 million in dividends for theCompany’s stock held in the trusts for its stock compensation plan for directors
and officers and for the stock compensation plan for employees as trust assets.
The dividend per share includes a special dividend of ¥50 per share.

-78-

[Notes to financial instruments]
1. Financial instruments
The Group limits fund management to short-term deposits, etc. and procures funds byborrowing money from banks and other financial institutions.
Among investment securities, the fair value of listed securities is assessed on a quarterly
basis.
Borrowings are used for working capital (chiefly for short-term purposes) and funds for capital
investments (for long-term purposes). The Company fixes interest expenses by applying
interest rate swap transactions to a portion of the long-term borrowings with interest rate
volatility risk.
2. Fair value, etc. of financial instruments
The balance sheet amount, the fair value, and the difference between the two were as follows
as of March 31, 2024 (settlement date of the current consolidated fiscal year). The following
table does not include any non-marketable securities (amount on consolidated balance sheet:¥524 million (investment securities)). The following table also does not include investmentsin partnerships and other similar entities for which equity interests are recorded on a net
basis on the consolidated balance sheet (amount on consolidated balance sheet: ¥818 million(operating investments in capital and investment securities)) in accordance with thetreatment prescribed in Article 24, Paragraph 16 of the Implementation Guidance on
Accounting Standard for Fair Value Measurement (Guidance No. 31) issued by the
Accounting Standards Board of Japan on June 17, 2021. Also omitted are explanatory notes
on cash, and notes on deposits, trade accounts receivable, trade accounts payable, and shortterm borrowings, as their fair values are close to carrying amounts due to their shortmaturities.

Consolidatedbalance sheet
amount (*)(Millions of yen)
Market value(*)

Difference(1) Securities

8,005

8,006

1

(2) Investment securities

37,28137,2898(3) Bonds payable(31,489)(30,686)(-802)(4) Long-term borrowings(190,384)(187,705)(-2,678)(8,650)(8,327)(-322)(23,636)(23,103)(-533)

(9)

(9)

–

(5) Long-term accounts payable – other(6) Leasehold and guarantee deposits
received(7) Derivatives(*) Figures in parentheses are presented in Liabilities.
(*) Net receivables and payables arising from derivatives are presented in net.

-79-

3. Fair value information by level within the fair value hierarchy
The fair value of financial instruments is classified into the following three levels according
to the observability and materiality of inputs used to measure fair value.
Level 1 fair value: Fair value measured using observable inputs, i.e., quoted prices in
active markets for assets or liabilities that are the subject of themeasurement.
Level 2 fair value: Fair value measured using observable inputs other than Level 1 inputs.
Level 3 fair value: Fair value measured using unobservable inputs.
If multiple inputs are used that are significant to the fair value measurement, the fair value
measurement is categorized in its entirety in the level of the lowest level input that issignificant to the entire measurement.
(1) Financial assets and financial liabilities measured at fair value(Millions of yen)Classification

Fair value
Level 1

Level 2

Level 3

Total

Investment securities
Other securities
Shares15,111––

15,111

Investment trusts, etc.

21,978––21,97837,090––37,090Interest rate related

–

9

–

9

Total liabilities

–

9

–

9

Total assets
Derivatives-80-

(2) Financial assets and financial liabilities not measured at fair value(Millions of yen)Classification

Fair value
Level 1

Level 2

Level 3

Total

Securities and investment
securities
Held-to-maturity bonds
Government bonds

5

–

–

5

Bonds

–

199

–

199

Other

–

8,000

–

8,000

5

8,200

–

8,205

Bonds payable–

30,686–30,686Long-term borrowings–

187,705–

187,705

–

8,327

–

8,327

–

23,103–

23,103–249,823–

249,823

Total assets

Long-term accounts
payable – other
Leasehold and guarantee
deposits received
Total liabilities(Note)A description of the valuation techniques and inputs used in the fair value
measurements
Securities and investment securities
The fair value of shares, investment trusts, etc., and government bonds are valued
using quoted prices. As these are traded in active markets, their fair value isclassified as Level 1. Additionally, commercial paper classified as bonds and other,and money trusts are valued using prices indicated at handling financial
institutions, but their fair value is classified as Level 2 because they are not tradedfrequently in the public market and not considered to have quoted prices in active
markets.
Bonds payable
Those with fixed rates are posted at the present value of the bonds payable and areequal to the total of capital and interests discounted by the remaining terms andinterest rates adjusted for credit risk. Their fair value is classified as Level 2. Thosewith floating rates are posted at their book value because floating rates reflectmarket rates in a short period of time and their fair value approximates their bookvalue. Their fair value is classified as Level 2.
Long-term borrowings and long-term accounts payable – otherThose with fixed rates are calculated by discounting the total principal and interestby the assumed interest rate for a borrowing under the same terms and conditions,and their fair value is classified as Level 2. Those with floating rates are posted at-81-

their book value because floating rates reflect market rates in a short period of time
and their fair value approximates their book value. Their fair value is classified as
Level 2. Those with floating rates subject to exceptional treatment for interest-rate
swaps are calculated by discounting the total of principal and interest accounted
for as a unit with the interest-rate swap by an assumed interest rate reasonably
estimated for a borrowing under the same terms and conditions.
Leasehold and guarantee deposits received
The fair values are calculated from current market prices, discounted at interest
rates that factor in the remaining period until return of deposit amounts and credit
risk. Such fair values are classified as Level 2.
Derivatives
The fair values of derivatives are calculated based on the prices provided byfinancial institutions and classified as Level 2. A derivative transaction subject to
exceptional treatment for interest-rate swaps is accounted for as a unit together
with long-term borrowings subject to hedge. For this reason, the market value ofsuch a transaction is included in the fair value of the long-term borrowings (Referto “long-term borrowings and long-term accounts payable – other” above).
[Notes to lease property, etc.]
1. Lease property, etc.
The Company and some subsidiaries own lease office buildings, and lease commercial
facilities in Tokyo and other areas.
2. Market value of lease property, etc.
・Amount on the consolidated balance sheet¥304,487 million

・Market value¥421,246 million(Notes)1. The consolidated balance sheet amount is equal to the acquisition cost minus theaccumulated depreciation and accumulated impairment losses.
2. The market value of principal properties, at the end of current consolidated fiscal year are
based on the Real Estate Appraisal Standard by independent real property appraisers, andthose of other real estate units at the end of this term are calculated by the Company basedon the Real Estate Appraisal Standard (including that adjusted using indexes, etc.).

-82-

[Notes to revenue recognition]
1. Disaggregation of revenue from contracts with customers
Reportable segments
Asset
Building
Management
Business
Business

Revenue from sales and acquisitions ofproperties(Millions of yen)Total

12,780–12,780

–

1,598

1,598

Other

4,017

1,322

5,339

Revenue from contracts withcustomers

16,7972,921

19,719

Revenue from other sources (Note)

23,747966

24,714

Net sales from external customers

40,544

3,888

44,433

Management fees in asset
management earnings(Note)“Revenue from other sources” includes rental/lease income etc. based on the
Accounting Standard for Lease Transactions.

2. Useful information in understanding revenue from contracts with customers
Useful information in understanding revenue is as presented in “[Basis of presenting
consolidated financial statements] 4. Accounting policy (5) Basis for calculating importantrevenues and expenses”
3. Information regarding relations between performance obligation satisfaction based on
customer contracts and cash flows arising from such contracts, and regarding the timing andtotals of revenue expected to be recognized in and from the following consolidated fiscal year,
from customer contracts existing at the end of the current consolidated fiscal year.
(1) Contract asset and contract liability balances

Receivables from contracts with customers

Balance at beginningof period(Millions of yen)
Balance at end of
period

186

281

485

510

5

44

Contract assets
Contract liabilities

Within the portion of revenue recognized as reflecting progress in satisfaction of
performance obligations, contract assets primarily relate to Group entitlements toconsiderations on which no claim has as yet been made. Once the Group has an
unconditional right to consideration, it reclassifies contract assets to receivables fromcontracts with customers.
Contract liabilities primarily relate to advances received from customers. Contract
liabilities are reversed as revenue is recognized.

-83-

(2) Transaction price allocated to the remaining performance obligations
The Group has applied the practical expedient to the transaction prices allocated to theremaining performance obligations and omits this information here as there are nomaterial contracts at the Group that have an original expected duration of over one year.
No material amounts exist in which considerations arising from customer contracts are
not included in transaction prices.
[Per share data]
Net assets per share¥3,510.66

Earnings per share¥236.13(Note) To calculate net assets per share, the Company’s stock held in the trusts for its stockcompensation plan for directors and officers and for the stock compensation plan for
employees is included in treasury shares subtracted from calculations of the total
number of shares issued as of the end of the period (169 thousand shares for thecurrent consolidated fiscal year).To calculate earnings per share, the Company’s stock
held in the trust is included in treasury shares subtracted from calculations of theaverage number of shares during the period (170 thousand shares for the current
consolidated fiscal year).
[Other notes](Notes to impairment losses)
Location
Abiko-shi, Chiba

Principal use
Stores and othercommercial facilities

Category

Impairment losses

Land and buildings¥66 million

The Group recorded impairment losses on the asset group above. To calculate impairment
losses, assets are grouped according to the smallest entities that generate cash flows largely
independent of cash flows provided by other assets or asset groups.
The book value of lease real estate of which profitability substantially decreased were written
down to a recoverable amount, and recorded as impairment losses of ¥66 million under
extraordinary losses.
The recoverable amount of this asset group was determined by its net sales value, which was
based on amounts assessed by real estate appraisers.

-84-

NON-CONSOLIDATED BALANCE SHEETMARCH 31, 2024
ASSETS(Millions of yen)

Current assets:
Cash and deposits
Trade accounts receivable
Securities
Real estate for sale
Real estate for sale in process
Operating investments in capital
Prepaid expenses
Short-term loans receivable
Accounts receivable – otherAccrued revenue
Advances paid
Suspense payments
Allowance for doubtful accounts
Total current assets¥16,152
1,283
8,005
20,645
567
551
59
511
51
1
654
44
(0)
48,529Non-current assets:
Property, plant and equipment Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plant and equipment

80,965
301
425
0
776
177,347
5,039
264,856

Intangible assets Leasehold interests in land
Trademark right
Software
Goodwill
Telephone subscription right
Right to use facilities
Total intangible assets

30,499
8
118
645
9
0
31,281

Investments and other assets Investment securities
Shares of subsidiaries and associates
Investments in capital
Long-term accounts receivable - other
Long-term prepaid expenses
Guarantee deposits
Total investments and other assets

37,319
8,361
21
422
1,748
1,281
49,155

Total non-current assets

345,293

Deferred assets Bond issuance costs
Total deferred assets

381
381

Total assets

394,203-85-

NON-CONSOLIDATED BALANCE SHEETMARCH 31, 2024
LIABILITIES AND NET ASSETS(Millions of yen)

Liabilities
Current liabilities:
Trade accounts payable
Current portion of bonds payable
Short-term borrowings
Current portion of long-term borrowings
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Provision for bonuses for directors (and other officers)
Provision for bonuses
Total current liabilities¥1,6113,624
2,500
16,681
378
174
1,406
1,628
1,186
119
79
171
29,562

Non-current liabilities:
Bonds payable
Long-term borrowings
Long-term accounts payable – other
Leasehold and guarantee deposits received
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Provision for share awards
Provision for retirement benefits
Asset retirement obligations
Derivative liabilities
Total non-current liabilities

27,864
173,703
8,391
19,249
7,527
7,186
199
35
659
9
244,826

Total liabilities

274,388

Net assets
Shareholders’ equity:
Share capital
Capital surplus
Capital reserve
Other capital surplus
Total capital surplus
Retained earnings:
Legal retained earnings
Other retained earnings:
Reserve for tax purpose reduction entry
General reserve
Retained earnings brought forward
Total other retained earnings
Total retained earnings
Treasury shares
Total shareholders’ equity
Valuation and translation adjustments:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Total valuation and translation adjustments

21,492
19,720019,7201,453
1,732
10,11542,255
54,10355,556(9,989)86,78016,964(6)
16,07633,034

Total net assets

119,815

Total liabilities and net assets

394,203-86-

NON-CONSOLIDATED STATEMENT OF INCOME
FROM: APRIL 1, 2023
TO:
MARCH 31, 2024
(Millions of yen)
¥38,891

Net sales
Cost of sales

24,209Gross profit

14,682

Selling, general and administrative expenses

3,071

Operating profit

11,610Non-operating profit Interest and dividend income
Proceeds from miscellaneous income
Total non-operating income

1,412
35
1,447

Non-operating expenses Interest expense
Interest expenses on bonds
Amortization of bond issuance costs
Miscellaneous losses
Total non-operating expenses

1,445
223
50
285
2,005

Ordinary profit

11,052Extraordinary income Gain on sales of investment securities
Subsidy income
Total extraordinary income

1,215
2
1,218

Extraordinary losses Loss on retirement of non-current assets
Impairment losses
Loss on tax purpose reduction entry of non-current assets
Loss on valuation of investment securities
Total extraordinary losses

7
66
2
181
258

Profit before income taxes
Income taxes - current
Income taxes - deferred

12,012
3,562(84)

Profit

8,534

-87-

NON-CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFROM: APRIL 1, 2023
TO:
MARCH 31, 2024
(Millions of yen)

Shareholders’ equity
Capital surplus

Balance at beginningof period
Changes during period
Dividends of surplus
Reversal of reserve
for advanced
depreciation
ProfitPurchase of treasury
shares
Disposal of treasury
shares
Reversal ofrevaluation reserve
for landNet changes in items
other thanshareholders’equityTotal changes during
periodBalance at end of
periodSharecapitalCapitalreserve

21,492

19,720

Other capitalsurplusTotal
capitalsurplusLegalreserve

Reserve foradvanceddepreciation

Generalreserve

Retainedearnings
carriedforwardTotal
retainedearnings

0

19,720

1,453

1,888

10,11537,30250,759(4,027)(4,027)

155

–

8,534

8,534

290

290

(155)

0

0

–

–

0

0

–

(155)

–

4,952

4,797

21,492

19,720019,720

1,453

1,732

10,11542,25555,556

Shareholders’ equity
Total
shareholders’equityTreasurysharesBalance at beginningof period
Changes during period
Dividends of surplus
Reversal of reserve
for advanced
depreciation
ProfitPurchase of treasury
shares
Disposal of treasury
shares
Reversal ofrevaluation reserve
for landNet changes in items
other thanshareholders’equityTotal changes during
periodBalance at end of
periodRetained earnings
Other retained earnings(9,997)

Valuation and translation adjustments
Valuation
Total
Deferred
Revaluationdifference on
valuationgains
orreserve foravailable-forandlosses onsaletranslation
landhedgessecurities
adjustments

81,974

15,105–

16,366

31,472

Total net
assets

113,447(4,027)(4,027)

–

–

8,534

8,534

(12)

(12)

(12)

20

20

20

290

290
1,859

(6)

(290)

1,562

1,562

7

4,805

1,859

(6)

(290)

1,562

6,367

(9,989)86,78016,964(6)

16,07633,034

119,815-88-

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS[Significant accounting policies]
1. Method and basis of valuation of assets:(1) Method and basis of valuation of marketable securities and other investments 1) Held-to-maturity bonds: Held-to-maturity bonds are valued at cost, with cost being
determined using the amortized cost method (straight-line
method).
2) Stocks of subsidiaries and affiliates:
Stocks of subsidiaries and affiliates are valued at cost,
determined using the moving-average method.
3) Other marketable securities and investments:a. Investments other than non-marketable securities:
The market value method is used for investments other than non-marketablesecurities (differences in valuation are included directly in net assets, and costs of
securities sold are calculated using the moving-average method).
b. Non-marketable securities:
Non-marketable securities are mainly valued at cost, determined using theaggregate average method.
(2) Method and basis of valuation of inventory Inventories are valued at cost determined by the specific identification method (the value on
the non-consolidated balance sheet is appraised by the write-down of the book value of
inventories based on the deterioration of profitability).
2. Depreciation method for non-current assets:(1) Property, plant and equipment Depreciation of property, plant and equipment is computed using the declining balancemethod, except for the Tokyo Stock Exchange Building, one other building, buildings(excluding attached facilities) acquired on or after April 1, 1998, and facilities and structuresattached to buildings acquired on or after April 1, 2016, for which the straight-line method isused. The principal useful lives of property, plant and equipment are as follows:
Buildings and structures

2-65 years

Machinery, equipment, and vehicles

2-30 years

Tools, furniture and fixtures

2-20 years-89-(2) Intangible assets Amortization of intangible assets is computed using the straight-line method. The cost of
software for internal use is amortized using the straight-line method based on the expected
useful life of the software (five years).
3. Method of accounting of deferred assets:
Bond issuance costs are amortized using the straight-line method over the period until bondredemption.
4. Principles for providing allowances and provisions:(1) Allowance for doubtful accounts An allowance for doubtful accounts is provided to cover losses on bad debts at an amountestimated based on the historical write-off ratio plus any amounts deemed necessary to coverpossible losses on an individual account.
(2) Provision for bonuses for directors (and other officers) Provision for bonuses for directors (and other officers) is calculated based on the estimatedpayments.
(3) Provision for bonusesProvision for bonuses is calculated based on the estimated payments.
(4) Provision for share awardsThe provision for share awards was calculated based on the expected amount of stockcompensation obligations as of the end of the fiscal year under review in order to provide theCompany’s stock as compensation to the Company’s executive officers, etc. in accordance with
its share-based remuneration rules, and as compensation to the Company’s employees inaccordance with share-based remuneration rules concerning the trust for the Company’s
employee stock ownership plan.
(5) Accrued severance indemnities for employees Accrued severance indemnities for employees are calculated at an amount equal to theprojected benefit obligation minus the fair value of pension assets.

-90-

5. Basis for calculating revenues and expenses Details about the main performance obligations in the major businesses related to revenue
from contracts with the Company’s customers and the timing at which the Company typicallysatisfies these performance obligations (when it typically recognizes revenue) are as follows: Revenue from sales and acquisitions of properties
The Company generates revenue from sales and acquisitions of properties by increasing
the value of properties it has acquired through development, lease-ups, and renovations,and then selling them for higher prices than their acquisition prices. The Company has
performance obligations to deliver properties based on real estate sales agreements.
These performance obligations are met at the time of delivering a property, and revenue
is recognized once the property is delivered.
6. Method of important hedge accounting:(1) Method of hedge accounting Deferral hedge accounting is applied. The special treatment applies to interest rate swaps
that meet the requirements for the special treatment.
(2) Hedging instruments and hedged items Hedging instruments: interest rate swaps
Hedged items: interest rates of borrowings(3) Policy of hedging transactions Interest rate swap transactions are conducted to reduce the exposure to fluctuations in theinterest rates of borrowings.
(4) Method of assessing hedge effectiveness Hedge effectiveness is assessed by comparing the percentage differences between amounts ofcash flow items subject to hedging and cash flow items for which hedging instruments areapplied.
Interest rate swaps for which special treatment is applied, however, are excluded from thisassessment of effectiveness.
7. Method and period of goodwill amortization Goodwill is amortized using the straight-line method over the period in which it has an effect
8. Other important matters for the preparation of non-consolidated financial statements:
Accounting for consumption taxes As a rule, the non-credited portion is charged as an expense in the period under review inwhich the consumption taxes are paid.
-91-

[Notes to accounting estimates](Impairment losses on non-current assets)(1) Amount recorded in the non-consolidated financial statements for the current fiscal year
Property, plant and equipment¥264,856 million

Leasehold interests in land and goodwill in intangible assets
Impairment losses¥31,144 million¥66 million(2) Information related to the details of significant accounting estimates for items identified
The calculation methods for the amounts in Item (1) are the same as those described in“[Notes to accounting estimates] (Impairment losses on non-current assets) (2) Information
related to the details of significant accounting estimates for items identified” in the Notes toConsolidated Financial Statements.
(Valuation of real estate for sale)(1) Amount recorded in the non-consolidated financial statements for the current fiscal year
Real estate for sale

¥20,645 million

Real estate for sale in process¥567 million(2) Information related to the details of significant accounting estimates for items identified
The calculation methods for the amounts in Item (1) are the same as those described in“[Notes to accounting estimates] (Valuation of real estate for sale) (2) Information related tothe details of significant accounting estimates for items identified” in the Notes toConsolidated Financial Statements.

-92-[Additional information](A Performance-linked stock compensation plan for executive officers and managing officers of
the Company and certain subsidiaries)
The Company has adopted a performance-linked stock compensation plan for executive
officers of the Company (excluding non-residents of Japan) and managing officers of theCompany (excluding a managing officer on special appointment who is in charge of thesecretariat of the Audit Committee, a group managing officer, and non-residents of Japan),and also for directors of major subsidiaries (excluding part-time directors, those on
secondment from the Company, and non-residents of Japan) and managing officers of major
subsidiaries (excluding those on secondment from the Company and non-residents of Japan),and established a trust comprised of common stock for the plan.
Details are described in [Additional information] of the Consolidated Financial Statements.
(Employee stock ownership plan)
The Company has introduced an employee stock ownership plan as an incentive measure forCompany employees.
Details are described in [Additional information] of the Consolidated Financial Statements.

-93-[Notes to non-consolidated balance sheet]
1. Accumulated depreciation of property, plant and equipment¥93,117 million

2. Guarantees due from the Company
The Company-guaranteed loans owed by employees to financial institutions are as follows:
Housing loans for employees of Heiwa Real¥91 million

Estate Co., Ltd.
3. Assets or debts due from or to subsidiaries and affiliates
Assets¥553 million

Debts¥1,964 million

4. Revaluation of land
Pursuant to the Act on Revaluation of Land (Act No. 34 of March 31, 1998) and the Act for
Partial Revision of the Act on Revaluation of Land (Act No. 19 of March 31, 2001), theCompany revalued its land held for business. Corporation taxes equivalent to net unrealized
gains are reported as “deferred tax liabilities for land revaluation” in liabilities, and net
unrealized gains, net of deferred taxes, are reported as “revaluation reserve for land” in net
assets.
(Method of revaluation)
Fair values are determined by applying appropriate adjustments to values computed using
the method published by the Commissioner of the National Tax Agency for the calculation ofland values that serve as the basis for taxable amounts of land-holding tax set forth in Article
16 of the Land-holding Tax Act as set forth in Article 2, Item 4 of the Order for Enforcementof Act on Revaluation of Land (Cabinet Order No. 119 of March 31, 1998).
(Date of the revaluation)

March 31, 2001

(Difference between fair values at the fiscal year-end and book values after the revaluation of
the land revaluated)
Since the fair value of the revalued land exceeded the carrying value of the land after therevaluation as of March 31, 2024, the difference between the amounts has not been stated.
5. Investment securities
Assets included under investment securities are as follows:
Investment units of HEIWA REAL

¥21,122 million

ESTATE REIT, Inc.

(148,645 units)

6. Changes in purpose of ownership
An amount of ¥13,035 million was reclassified from non-current assets to real estate for saledue to a change in the purpose of ownership-94-

[Notes to non-consolidated statement of income]Transactions with subsidiaries and affiliates
Operating transactions¥1,922 million

Non-operating transactions¥1,026 million[Notes to non-consolidated statement of changes in equity]
Treasury shares
Common shares

3,070,344 shares(Note) The number of common shares of treasury shares includes the number of shares of
the Company’s stock held in the trusts for its stock compensation plan for directors
and officers and for the stock compensation plan for employees (169,000 shares for thecurrent fiscal year).
[Notes to tax effect accounting]Breakdown of deferred tax assets and deferred tax
liabilities by major factors
Deferred tax assets
Provision for bonuses¥52 million

Accrued corporation tax¥110 million

Amortization of inventories, etc.

¥114 million

Accounts receivable – other¥37 million

Loss on rebuilding¥517 million

Impairment losses¥384 million

Provision for share awards¥40 million

Provision for retirement benefits¥10 million

Asset retirement obligations¥201 million

Asset adjustment account¥278 million

Other¥309 million

Sub-total of deferred tax assets¥2,059 million

Valuation allowance(¥1,025 million)

Total of deferred tax assets¥1,033 million

Deferred tax liabilities
Reserve for tax purpose reduction entry
Valuation difference on available-for-sale securities
Loss on valuation of non-current assets
Retirement expense corresponding to asset
retirement obligations
Other(¥764 million)(¥7,487 million)(¥216 million)(¥86 million)(¥6 million)

Total of deferred tax liabilities(¥8,560 million)-95-

Net of deferred tax assets (liabilities)(¥7,527 million)[Transactions with affiliated parties]
Not applicable[Notes to revenue recognition]
Useful information in understanding revenue from contracts with customers is omitted as thesame details are presented in [Notes to revenue recognition] of the Consolidated Financial
Statements.
[Per share data]
Net assets per share¥3,347.76

Earnings per share¥238.46(Note) To calculate net assets per share, the Company’s stock held in the trusts for its stockcompensation plan for directors and officers and for the stock compensation plan for
employees is included in treasury shares subtracted from calculations of the total
number of shares issued as of the end of the period (169 thousand shares for thecurrent fiscal year). To calculate earnings per share, the Company’s stock held in thetrust is included in treasury shares subtracted from calculations of the average
number of shares during the period (170 thousand shares for the current fiscal year).
[Adoption of dividend restrictions on a consolidated basis]
The Company will be subject to dividend restrictions on a consolidated basis once the end of
this fiscal year becomes the end of a fiscal year whose financial statements are approved.
[Other notes](Notes to impairment losses)
Location
Abiko-shi, Chiba

Principal use
Stores and othercommercial facilities

Category

Impairment losses

Land and buildings¥66 million

The Company recorded impairment losses on the asset group above. To calculate impairment
losses, assets are grouped according to the smallest entities that generate cash flow largely
independent of cash flows provided by other assets or asset groups.
The book value of lease real estate of which profitability substantially decreased was written
down to a recoverable amount, and recorded as impairment losses of ¥66 million under
extraordinary losses.
The recoverable amount of this asset group was determined by its net sales value, which was
based on amounts assessed by real estate appraisers.
-96-

A COPY OF THE AUDIT REPORT OF THE INDEPENDENT AUDITOR ON THE
CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditor’s Report
May 15, 2024
To the Board of Directors of Heiwa Real Estate Co., Ltd.:KPMG AZSA LLC
Tokyo Office, Japan

PartnerPartner

Yohei Morimoto
Designated Limited Liability
Engagement Partner
Certified Public Accountant
Hirofumi Hanyu
Designated Limited Liability
Engagement Partner
Certified Public Accountant

OpinionWe have audited the consolidated financial statements, which comprise the consolidatedbalance sheet, the consolidated statement of income, the consolidated statement of changes
in equity and the related notes of Heiwa Real Estate Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group”), as at March 31, 2024 andfor the year from April 1, 2023 to March 31, 2024 in accordance with Article 444-4 of theCompanies Act.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position and the results of operations of theGroup for the period, for which the consolidated financial statements were prepared, 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 Group in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
-97-

Other Information
The other information comprises the business report and its supplementary schedules.
Management is responsible for the preparation and presentation of the other information.
The audit committee is responsible for overseeing the executive officers’ and directors’
performance of their duties with regard to the design, implementation and maintenance ofthe reporting process for the other information.
Our opinion on the consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information ismaterially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatementof this other information, we are required to report that fact.
We have nothing to report in this regard.

Responsibilities of Management and the Audit Committee 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 thepreparation 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, as applicable, matters related
to going concern in accordance with accounting principles generally accepted in Japan.
The audit committee is responsible for overseeing the executive officers’ and directors’
performance of their duties with regard to the design, implementation and maintenance of
the Group’s financial reporting process.

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. Misstatements can arise fromfraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis ofthese consolidated financial statements.
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:-98-



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 selection and application of audit procedures
depends on the auditor’s judgment.

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 theaudit is not to express an opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting 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.



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.

Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision andperformance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the audit committee 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 the audit committee 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, actions taken to eliminate threats or safeguards applied.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company
and its subsidiaries which is required to be disclosed pursuant to the provisions of theCertified Public Accountants Act of Japan.

Notes to the Reader of Independent Auditor’s Report:
The Independent Auditor’s Report herein is the English translation of the Independent-99-

Auditor’s Report as required by the Companies Act of Japan for the conveniences of thereader.

-100-

A COPY OF THE AUDIT REPORT OF THE INDEPENDENT AUDITOR ON THE NONCONSOLIDATED FINANCIAL STATEMENTS

Independent Auditor’s Report
May 15, 2024
To the Board of Directors of Heiwa Real Estate Co., Ltd.:KPMG AZSA LLC
Tokyo Office, Japan

PartnerPartner

Yohei Morimoto
Designated Limited Liability
Engagement Partner
Certified Public Accountant
Hirofumi Hanyu
Designated Limited Liability
Engagement Partner
Certified Public Accountant

OpinionWe have audited the financial statements, which comprise the balance sheet, the statementof income, the statement of changes in equity and the related notes, and the accompanying
supplementary schedules (“the financial statements and the accompanying supplementaryschedules”) of Heiwa Real Estate Co., Ltd. (“the Company”) as at March 31, 2024 and for the104th fiscal year from April 1, 2023 to March 31, 2024 in accordance with Article 436-2-1 of
the Companies Act.
In our opinion, the financial statements and the accompanying supplementary schedules
referred to above present fairly, in all material respects, the financial position and the resultsof operations of the Company for the period, for which the financial statements and theaccompanying supplementary schedules were prepared, 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 Financial Statements and the Accompanying
Supplementary Schedules section of our report. We are independent of the Company inaccordance with the ethical requirements that are relevant to our audit of the financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordancewith these requirements. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.
-101-

Other Information
The other information comprises the business report and its supplementary schedules .
Management is responsible for the preparation and presentation of the other information.
The audit committee is responsible for overseeing the executive officers’ and directors’
performance of their duties with regard to the design, implementation and maintenance ofthe reporting process for the other information.
Our opinion on the financial statements and the accompanying supplementary schedules
does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements and the accompanying
supplementary schedules, our responsibility is to read the other information and, in doingso, consider whether the other information is materially inconsistent with the financial
statements and the accompanying supplementary schedules or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatementof this other information, we are required to report that fact.
We have nothing to report in this regard.

Responsibilities of Management and the Audit Committee for the Financial Statements andthe Accompanying Supplementary Schedules
Management is responsible for the preparation and fair presentation of the financial
statements and the accompanying supplementary schedules in accordance with accounting
principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of financial statements and theaccompanying supplementary schedules that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements and the accompanying supplementary schedules,
management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern in accordance withaccounting principles generally accepted in Japan.
The audit committee is responsible for overseeing the executive officers’ and directors’
performance of their duties with regard to the design, implementation and maintenance of
the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements and the Accompanying
Supplementary Schedules
Our objectives are to obtain reasonable assurance about whether the financial statements
and the accompanying supplementary schedules 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. Misstatements can arise from fraud or error and are considered material if,-102-

individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements and the accompanying
supplementary schedules.
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 financial statements andthe accompanying supplementary schedules, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The selection andapplication of audit procedures depends on the auditor’s judgment.

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 theaudit is not to express an opinion on the effectiveness of the Company’s internal
control.



Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company’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 financial statements and the accompanying supplementaryschedules 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 Company to cease to continue as agoing concern.



Evaluate whether the presentation and disclosures in the financial statements and theaccompanying supplementary schedules are in accordance with accounting standards
generally accepted in Japan, the overall presentation, structure and content of thefinancial statements and the accompanying supplementary schedules, including thedisclosures, and whether the financial statements and the accompanying
supplementary schedules represent the underlying transactions and events in amanner that achieves fair presentation.

We communicate with the audit committee 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 the audit committee 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, actions taken to eliminate threats or safeguards applied.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company
which is required to be disclosed pursuant to the provisions of the Certified Public-103-Accountants Act of Japan.

Notes to the Reader of Independent Auditor’s Report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as
required by the Companies Act of Japan for the conveniences of the reader.

-104-

A COPY OF THE AUDIT REPORT OF THE AUDIT COMMITTEE
AUDIT REPORT
We, the Audit Committee, have audited the business activities of the directors and executive
officers for the 104th fiscal year from April 1, 2023 to March 31, 2024. We hereby submit our
auditing methods and the results to you as follows.
1.

Outline of auditing method:

With regard to the resolutions adopted by the Board of Directors regarding the matters set forthin Article 416, Paragraph 1, Items 1 (b) and 1 (e) of the Companies Act and the status of thesystems (Internal Control System) established in accordance with the resolution of the Board of
Directors, the Audit Committee regularly received reports from the directors, executive officers,
and employees on the status of the establishment and operations thereof, requested them for
explanations as necessary and expressed opinions, and conducted the audit in the following
manner.
1) In accordance with the auditing standards, allocation of duties, etc., as determined by the
Audit Committee, and in cooperation with the internal control department of the Company,
the members of the Audit Committee attended the important meetings to receive reports
on matters regarding performance of duties from directors, executive officers, etc. andrequested explanations as necessary. Each member also inspected the significant approved
documents and examined the status of operations and conditions of assets at its head officeand branches. With regards to subsidiaries, each member communicated and exchanged
information with Directors and Statutory Auditors, etc. of the subsidiaries and received
reports from the subsidiaries on the status of their business, as necessary.
2) The basic policies stipulated in Article 118, Item 3 (a) and each of the efforts stipulated in
Article 118, Item 3 (b) of Enforcement Regulations of the Companies Act are reviewed
based on the status of deliberations of the Board of Directors and other management
entities.
3) The members of the Audit Committee monitored and verified that Independent Auditor
maintained independence and conducted the audits appropriately. Each Statutory Auditor
also received reports of the status of the execution of duties from Independent Auditor andrequested explanation as necessary. In addition, we were informed of the arrangement of
the "System for ensuring that the duties are performed appropriately" (matters stipulated
in the items of Article 131 of the Corporate Calculation Regulations in accordance with
“Standards for the Quality Control of Audits” (Business Accounting Council) from the
Independent Auditor and requested explanations as necessary.
In accordance with the procedures mentioned above, we reviewed the business reports andsupplementary schedules, the non-consolidated financial statements (the non-consolidatedbalance sheet, non-consolidated statement of income, non-consolidated statement of changes inequity and notes to the non-consolidated financial statements), and the supplementary schedules,
as well as the consolidated financial statements (the consolidated balance sheet, consolidated
statement of income, consolidated statement of changes in equity and notes to the consolidated
financial statements), and the supplementary schedules, for the year ended March 31, 2024.
2.

Results of Audit(1) Results of audit of business report
1) The business reports and supplementary schedules present fairly the financial conditionof the Company in conformity with related laws, regulations, and the Articles ofIncorporation of the Company.
2) Regarding the performance of duties by Directors and Executive Officers, there were no
instances of misconduct or material matters in violation of laws, regulations, nor the
Articles of Incorporation of the Company.
3) Resolution of the Board of Directors regarding the internal control system is fair andreasonable. There are no matters requiring additional mention regarding the contents ofthe business report and the execution of duties by Directors and Executive Officers
regarding the internal control system.
4) The Basic Policy with Regards to the Role of Any Person Controlling the Decision overFinancial and Business Policies of the Company stated in the business reports is fair andreasonable. The efforts stipulated in Article 118, Item 3 (b) Enforcement Regulations of the-105-Companies Act, which are stated in the business reports, are in alignment with the said Basic
Policy, do not harm the common interests of the Company’s shareholders, and are not aimed
at maintaining the status of corporate officers of the Company.
(2) Results of audit of non-consolidated financial statements and supplementary schedules
The auditing methods and results of the Independent Auditor, KPMG AZSA LLC, are fair andreasonable.
(3) Results of audit of consolidated financial statements and supplementary schedules
The auditing methods and results of the Independent Auditor, KPMG AZSA LLC, are fair andreasonable.
May 15, 2024
Audit Committee
Heiwa Real Estate Co., Ltd.
Audit Committee member
Mitsunobu Yamaguchi
Audit Committee member
Junko Utsunomiya
Audit Committee member
Daisuke Kobayashi(Note)

Audit Committee members Mitsunobu Yamaguchi and Junko Utsunomiya are External
Directors as stipulated in Article 2, Item 15 and Article 400, Paragraph 3 of theCompanies Act.

The above represents a translation, for reference purposes only, of the original report issued in
the Japanese language.

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