Ichigo Preserves and Improves Real Estate[Provisional Translation Only]
This English translation of the original Japanese document is provided solely for information purposes.
Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail.

Ichigo(2337)
Additional Accounting Notes
for the Seventeenth Annual Shareholder Meeting Notes to the Consolidated Financial Statements
 Notes to the Parent Financial Statements

Pursuant to Japanese law and Article 14 of Ichigo’s Articles of Incorporation, notes to theconsolidated and parent financial statements are posted on Ichigo’s website at www.ichigo.gr.jp-1-Notes to Consolidated Financial Statements
I. Material Matters for Preparation of Consolidated Financial Statements
A. Scope of Consolidation
1. Consolidated Subsidiaries
Number of consolidated subsidiaries: 59
Major consolidated subsidiaries
Ichigo Investment Advisors Co., Ltd.
Ichigo Estate Co., Ltd.
Ichigo ECO Energy Co., Ltd.
Ichigo Real Estate Services Fukuoka Co., Ltd.
Ichigo Global Capital Co., Ltd.
Ichigo Marché Co., Ltd.
Miyako City Co., Ltd.
Takara Building Maintenance Co., Ltd.
Seven investment associations in which Ichigo newly invested during the current
fiscal year have been included in the scope of consolidation.
Seventeen investment associations have been excluded from the scope of
consolidation because their importance has decreased during the current fiscal
year.
2. Major Non-Consolidated Subsidiaries
N/A
3. Reason Why Some Companies Were Not Classified as Subsidiaries Despite
the Possession of a Majority of their Voting Rights
N/A
B. Equity-Method Consolidation
1. Equity-Method Affiliates
Number of Equity-Method Affiliate(s): 1
Major Equity-Method Affiliate(s)I Think Rent Co., Ltd. became a major equity-method affiliate from the current
fiscal year because of its increased significance to the consolidated financial
statements.
2. Non-Consolidated Equity-Method Affiliates
N/A
3. Non-Consolidated Non-Equity-Method Affiliates
N/A
4. Non-Equity-Method Affiliates
N/A

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5. Reason Why Some Companies Were Not Classified as Affiliates despite Ichigo
Possessing 20% to 50% or Less of Their Voting Rights
N/A
C. Fiscal Year of Consolidated Subsidiaries
The fiscal years of consolidated subsidiaries are as follows:
January-end
February-end
December-end

28 companies
14 companies
17 companies

For subsidiaries whose fiscal year ends in December or January, financial data as ofthat date have been used. All necessary adjustments for consolidation have been
made with respect to significant transactions which occurred by the current fiscal
year-end in February.
D. Accounting Standards
1. Valuation of Material Assets
a. Other Securities
Securities with market prices

Mark-to-market on the last date of fiscal
year (valuation difference is reported as acomponent of shareholders’ equity; cost of
goods sold is calculated with moving
average cost method)

Securities without market prices

Moving average cost method (Valuation
method for investment associations is notedin 6. (c) Investment Associations.)b. Derivatives

Mark-to-market

c. Real Estate for Sale

Cost (however, impair assets whose
profitability declines)

2. Depreciation Methods for Material Depreciable Assets
Property, Plant, and Equipment
Useful life

Primarily straight-line method
Buildings and structures 7–52 years
Solar power plant equipment 20 years

3. Accounting Standards for Material Allowancesa. Allowance for Doubtful Accounts
Reserved based on the record of bad debts with respect to ordinary receivables,
plus an estimate of uncollectible amounts determined with reference to specificdoubtful receivables from customers experiencing financial difficulties.
b. Allowance for Employee Bonuses
Reserved based on an estimated amount for the current fiscal year.

-3-4. Material Hedge Accounting
a. Hedge accounting method
In general, Ichigo adopts the deferral hedge accounting method. However, withrespect to interest rate swaps which meet certain criteria, Ichigo may use anotherappropriate method.
b. Hedging instruments and hedged items
Hedging instruments

Interest rate swaps

Hedged items

Loansc. Hedging policy
Ichigo hedges the risk from changes in foreign exchange rates and interest rates
in its operational securities investments and financing activities based on internal
policies.
d. Evaluation method for the effectiveness of hedging activities
Ichigo evaluates the effectiveness of hedging activities with reference to theaccumulated gain or loss on the hedging instruments and related hedged items
for a period from the commencement of the hedges to the time of evaluation.
The evaluation of the effectiveness is omitted for interest-rate swaps that meetrequirements for special treatments.
5. Goodwill Amortization Period and Method
Goodwill is amortized on a straight-line basis for a period of 10 to 20 years
depending on the specific characteristics of the respective subsidiary.
6. Other Material Matters for Preparation of Consolidated Financial Statementsa. Consumption tax
For most items, consumption taxes are excluded from the relevant revenue, costs,
or expenses.
Non-deductible consumption taxes are generally accounted for as periodic costsin the current fiscal year; however, certain items paid in connection with theacquisition of assets are amortized based on the straight-line method over five
years.
b. Operational investments
Operational investments conducted by Ichigo are classified as Operational
Securities Investments and Operational Loan Investments within Current Assets.
Gains and losses arising from Operational Investments are shown under
Operating Profit and Operational securities investments Expense.
Although Ichigo may control the decision-making body of investment vehicles
or hold significant influence over them by holding shares, shares are held solely
for operational investment purposes and Ichigo has no intention of holding themas subsidiaries or affiliates. Therefore such investment vehicles are excluded
from subsidiaries or affiliates.
c. Investment associations
Ichigo accounts for investments in investment associations as Operational
Securities Investments. Such investments are recorded at the time the-4-investments are made. Gains and losses distributed from the investment
associations are recorded as Revenue and the investments in associations
increase or decrease by the same amount. Refunds received from the investment
associations are credited to the Investments in associations.
d. Consolidated tax treatment
Ichigo qualifies for consolidated tax treatment.
E. Changes in Accounting Policy
Adoption of Accounting Standard for Business Combination
Starting from the current fiscal year, Ichigo adopted the Revised AccountingStandard for Business Combination (Accounting Standards Board of Japan (ASBJ)
Statement No. 21 issued on September 13, 2013), the Revised Accounting Standard
for Consolidated Financial Statements (ASBJ Statement No. 22 issued on
September 13, 2013), and the Revised Accounting Standard for Business
Divestitures (ASBJ Statement No. 7 issued on September 13, 2013). Ichigo thus
records the difference caused by change in Ichigo’s equity in a subsidiary as Capital
Reserve, and records the acquisition-related expenses as an Expense on the
consolidated financial statements of the fiscal year in which the costs were incurred.
For business combinations conducted from the beginning of the current fiscal year
onward, reallocation of acquisition costs, caused by finalization of provisional
accounting on the relevant business combination, are reflected in the consolidated
financial statements of the fiscal year in which the relevant business combination
occurred. Ichigo has changed the presentation of some accounting titles related to
Net Income and Minority Interests.
With respect to the adoption of the above Accounting Standards, Ichigo complies
with the transitional measures prescribed under the Business Combinations
Accounting Standard, Article 58-2 (4), the Consolidated Accounting Standard,
Article 44-5 (4), and the Business Divestitures Accounting Standard, Article 57-4(4), and thus the actual adoption of changes start from the current consolidated
fiscal year onward.
There is no impact to the consolidated financial statements from these changes.
Adoption of Depreciation Method Change in line with the FY2016 Tax Reform
Starting from the current fiscal year, Ichigo adopted the Practical Solution on a
Change in Depreciation Method due to Tax Reform 2016 (ASBJ Practical issues
Task Force No. 32 issued on June 17, 2016). Ichigo hereby changed its depreciation
method from the declining-balance method to straight-line method with respect tobuilding accessories and structures acquired on April 1, 2016 onward.
The impact to the consolidated financial statements from these changes isimmaterial.

-5-F. Changes in Presentation
Consolidated Balance Sheet
Starting from the current fiscal year, in order to increase the transparency of its balance
sheet, Ichigo has created a separate line-item for Solar Power Plant Equipment, which
had been included in Equipment under Property, Plant, and Equipment. This Solar
Power Plant Equipment was JPY 12,981 million in the previous fiscal year. After
separating out Solar Power Plant Equipment, the amount of Equipment which had beenrecorded separately has decreased to an insignificant level (JPY 110 million in thecurrent fiscal year), thus it is now included in Other under Property, Plant, andEquipment.
Also to increase transparency, Solar Power Plants under Construction which had been
included in Buildings under Construction in the previous fiscal year are now recorded
separately. Solar Power Plants under Construction were JPY 3,172 million in theprevious fiscal year.
Consolidated Income Statement
Starting from the current fiscal year, Debt Financing-Related Fees, which had been
included in Other under Non-Operating Expenses in the previous fiscal year arerecorded separately due to their increased size. Debt Financing-Related Fees were JPY
86 million in the previous fiscal year.
G. Additional Information
Change in the Purpose of Ownership of Real Estate Inventory
As of the current fiscal year-end, the purpose of ownership of some of the real estate on
the balance sheet has been changed to Buildings and Structures, and Land from Real
Estate for Sale in the amounts shown below:
Buildings and Structures
Land
Total

JPY 4,540 million
JPY 7,474 million
JPY 12,015 million

Change in the Purpose of Ownership of Property, Plant, and Equipment
As of the current fiscal year-end, the purpose of ownership of some of the real estate on
the balance sheet has been changed to Real Estate for Sale in the amounts shown
below:
Buildings and Structures
Depreciation
Buildings and Structures (net)
Land
Total

JPY 116 million-JPY 4 million
JPY 112 million
JPY 593 million
JPY 706 million-6-During the current fiscal year, the purpose of ownership of the below solar power
plant equipment on the balance sheet was changed to Solar Power Plant Equipment
for Sale, and the equipment was sold, with the balance sheet value recorded as Costof Goods Sold.
Solar Power Plant Equipment
Depreciation
Solar Power Plant Equipment (net)Land
Leasehold Rights
Total

JPY 7,030 million-JPY 188 million
JPY 6,842 million
JPY 78 million
JPY 330 million
JPY 7,251 million

Impairment Loss
Ichigo recorded an impairment loss on the below asset in the current fiscal year.
1. Asset and Amount Recognized as Impairment Loss
PurposeType

Location

Impairment Loss

Real Estate for Lease

Building/Land

Miyazaki Prefecture

JPY 1,090 million

2. Reason for Impairment
Due to a change in business environment, the expected profitability of the asset has
decreased. Thus, Ichigo impaired the asset’s book value to the recoverable amount,
and an impairment loss has been recorded under Extraordinary Losses.
3. Asset Grouping Method for Impairments
When applying impairment accounting, Ichigo classifies assets into discrete groups
using the minimum asset unit that generates independent cash flow. This asset
grouping method was used in this asset impairment.
4. Calculation Method for Recoverable Amount
Ichigo calculates the recoverable amount for Real Estate for Lease using net salevalue, and the net sale value is based on a third-party real estate appraisal.

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II. Notes to Consolidated Balance Sheet
A. Assets Provided as Collateral
Assets Provided as Collateral
Cash and cash equivalents
Trade notes and accounts receivable
Operational loan investments
Real estate for sale
Current assets – other
Buildings and structures
Solar power plant equipment
Land
Solar power plants under construction
Solar power plants under construction (reserved forcollateral)
Property, plant, and equipment – other
Leasehold rights
Investments and other assets – other
Total

JPY 2,345 million
JPY 113 million
JPY 1,324 million
JPY 68,188 million
JPY 2 million
JPY 2,587 million
JPY 6,667 million
JPY 10,957 million
JPY 652 million
JPY 11,451 million
JPY 49 million
JPY 62 million
JPY 136 million
JPY 104,541 million

In addition to the above, JPY 2,630 million of shares in affiliates excluded fromconsolidation are collateralized. Furthermore, Ichigo has borrowed securities(market value: JPY 752 million) to be used for collateral, but these borrowed
securities are not recorded on the balance sheet as they are not Ichigo’s assets.
Figures shown in Buildings and Structures, Solar Power Plant Equipment, andProperty, Plant, and Equipment – Other are net amounts.
Secured Obligations
Long-term loans (due within one year)
Long-term loans
Total

JPY 4,039 million
JPY 87,385 million
JPY 91,424 million

B. Non-Recourse Loans and Non-Recourse Bonds
Non-recourse loans and non-recourse bonds are borrowings where funds for
repayment are limited only to the value of the underlying real estate and profits fromsuch real estate. The lender has no recourse to Ichigo in the event of a failure ofpayment.
Assets provided as collateral and secured obligations with respect to the non-recourse
loans and non-recourse bonds are as follows:
Assets Provided as Collateral
Cash and cash equivalents
Real estate for sale
Buildings and structures
Land
Property, plant, and equipment – other
Total

JPY 10,533 million
JPY 97,780 million
JPY 3,292 million
JPY 5,240 million
JPY 0 million
JPY 116,846 million

Figures shown in Buildings and Structures and Property, Plant, and Equipment –Other are net amounts.

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Secured Obligations
Short-term non-recourse loans
Long-term non-recourse loans (due within one year)
Non-recourse bonds
Long-term non-recourse loans
Total

JPY 611 million
JPY 6,825 million
JPY 100 million
JPY 68,319 million
JPY 75,857 million

C. Deferred Gain (Loss) on Long-Term Interest Rate Hedges
Using interest rate hedges, Ichigo has significantly reduced its interest rate risk
should Japanese interest rates rise. Unrealized gains or losses on these hedges arerecorded in Deferred Gain (Loss) on Long-Term Interest Rate Hedges.
III. Notes to Consolidated Statement of Changes in Shareholders’ Equity
A. Type and Number of Shares Issued and Type and Number of Treasury Shares

Shares issued
Common shares
Total
Treasury shares
Common shares
Total
1
2

Number ofshares at the
beginning of
the current
fiscal year

Increase inshares during
the current
fiscal year1

Decrease inshares during
the current
fiscal year2

Number ofshares at theend of thecurrent fiscal
year502,523,100
502,523,100

1,189,200
1,189,200––

503,712,300
503,712,300

884,200
884,200––

554,600
554,600

329,600
329,600

Increase in shares issued due to employee exercise of stock options: 1,189,200 shares
Decrease in treasury shares due to employee exercise of stock options: 554,600 shares-9-B. Stock Options

Stock Options
9thstock option
issuance
10th
stock option
issuance
11th
stock option
issuance
12th
stock option
issuance
13th
stock option
issuance
14th1
stock option
issuance
15th1
stock option
issuance
Total
1

Type ofsharesUnderlying number of shares
Increase
Decrease in
March 1, in current
February
current
2016
fiscal28, 2017
fiscal year
year

Value (as ofFebruary 28,
2017)

Commonshares113,200–

113,200––

Commonshares659,200–

579,600

79,600

JPY 1 million

Commonshares1,817,000–

979,000

838,000

JPY 17 million

Commonshares

1,005,000–

133,900

871,100 JPY 136 million

Commonshares1,859,200–

41,9001,817,300 JPY 177 million

Commonshares1,500,000–

40,0001,460,000 JPY 149 million– 2,000,000–

6,953,600 2,000,000

1,887,600

Commonshares–2,000,000

JPY 9 million

7,066,000 JPY 491 million

The 14th and 15th stock option issuances are currently not exercisable, because their
exercise dates are in the future.
C. Dividends
1. Dividends Paid
In the Regular Meeting of the Board of Directors on April 19, 2016, the following
was resolved.
(a) Total Dividend(b) Source(c) Dividend per Share(d) Record Date(e) Payment Date

JPY 1,504 million
Retained earnings
JPY 3
February 29, 2016
May 30, 2016

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2. Dividends where Record Date is in the Current Fiscal Year but the Payment Dateis in the Next Fiscal YearIn the Regular Meeting of the Board of Directors on April 19, 2017, the following
was resolved.
(a)
(b)
(c)
(d)
(e)

Total Dividend
SourceDividend per Share
Record Date
Payment Date

JPY 2,516 million
Retained earnings
JPY 5
February 28, 2017
May 29, 2017

IV. Notes on Financial Instruments
A. Matters Concerning Status of Financial Instruments
1. Policies on Financial Instruments
Ichigo finances its necessary operating capital primarily via bank loans and bonds inlight of new investment and asset disposition plans. Short-term excess funds aremanaged in liquid financial instruments such as bank deposits, and short-termworking capital is financed via bank loans. As Company policy, derivatives
transactions are used for the purpose to avert risks mentioned below. Speculative
derivatives transactions are not conducted.
2. Details and Risks of Financial Instruments
Trade notes, accounts receivable, and operational loan investments are operatingreceivables that are exposed to customer credit risks. Foreign currency-denominatedfinancial instruments in overseas business operations are exposed to currency risks.
Operational securities investments include investments in corporate equities both
inside and outside of Japan and domestic real estate funds, and securities
investments primarily take the form of equity and are typically investments incompanies with which Ichigo has a business relationship. All of these investments
are exposed to issuer credit risk, interest rate risk and price fluctuation risks.
Financial instruments denominated in foreign currencies are exposed to currency
risk.
Most of trade notes and accounts payable are operating payables that are due within
three months and denominated in Japanese yen.
Bank loans, bonds, non-recourse bonds, and non-recourse loans are for the purposeof financing investments and capital expenditures, and are expected to be redeemedor repaid within approximately thirty years after the fiscal year end. Floating-rateloans are exposed to interest rate risk, a part of which is hedged using derivatives
transactions (e.g., interest rate swaps and caps). Please refer to 1. Material Mattersfor Preparation of Consolidated Financial Statements (4) Material Hedge
Accounting, (D) Accounting Standards for method, objects, policies, and evaluationof effectiveness of hedging activities.

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3. Risk Management of Financial Instruments(a) Management of Credit Risk
Operating receivables exist primarily at subsidiaries. Responsible departments
monitor the collection status pursuant to the designated procedure for mitigationof collection risk. Other operating receivables arise irregularly, e.g., at time ofinvestment monetization, the responsible department determines the execution of
the transaction based on the time needed for collection and the credit worthinessof the counterparty, and monitors the receivable until it is collected in accordancewith the agreement. Ichigo monitors operational securities investments andsecurities investments with respect to the financial status of the issuers andreviews holding policies, as necessary and appropriate.
(b)Management of Market Risk
Ichigo uses interest rate swaps and caps for the purpose of reducing interest raterisk on loans. Ichigo monitors operational securities investments and securities
investments, which have market risks (e.g., real estate funds) or are denominatedin foreign currencies regularly for the impact from changes in market value andcurrency rates and reviews the holding policies as necessary. Derivativetransactions are executed and controlled in the Finance Department in accordancewith the designated procedure.
(c) Management of Liquidity Risk
Ichigo establishes and updates its funding plan as necessary based on newinvestment and disposition plans established by the responsible departments, aswell as manages liquidity risk by maintaining short-term liquidity.
4. Supplement to Matters Concerning Market Values of Financial Instruments
Market values of financial instruments include prices based on market prices as wellas prices calculated based on rational assumptions where market price are notavailable. Such prices may fluctuate, since they include variables that can vary basedon assumptions.

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B. Adjustments to Market Values of Financial Instruments
Amounts recorded on the consolidated balance sheet, corresponding market values,
and their differences as of February 28, 2017 are shown below. Items for which it
was deemed highly difficult to obtain market values are not included (See Note 2 on
the following page).
(JPY million)(1) Cash and cash equivalents

Amount Recordedon Consolidated
Balance Sheet
47,678Market Value

Difference

47,678

–

913

913

–

1,324

1,324

–

18

18

–

1,176

1,176

–

–

–

–

51,111

51,111–(1) Trade notes and accounts payable

110

110

–

(2) Short-term loans

805

805

–

(3) Short-term non-recourse loans

611

611

–

(4) Bonds (due within one year)

112

112

(5) Long-term loans (due within one year)

5,209

5,209

–

(6) Long-term non-recourse loans (due within
one year)

6,825

6,825

–

(7) Income taxes payable

1,655

1,655

–

(8) Bonds(9) Non-recourse bonds

632
100

622
100

-9
–

(10) Long-term loans

91,60492,308703(11) Long-term non-recourse loans

68,31968,587267

Total Liabilities

175,987

176,948

961

-337

-337

–

(2) Trade notes and accounts receivable(3) Operational loan investments(4) Operational securities investments(5) Securities investments(6) Long-term loans1
Total Assets

Derivatives2
1
2

Excluding allowance for doubtful accounts which are recorded separately.
The receivables and payables related to derivative transactions are shown as a net amount.

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(Note1) Calculation Method of Market Value of Financial Instruments and Matters
Concerning Securities and Derivatives Transactions
Assets(1) Cash and Cash Equivalents
Carried at book value due to short settlement period.
(2) Trade Notes and Accounts Receivable
Carried at book value less allowance for doubtful accounts due toshort settlement period and because allowance for doubtful accounts
appropriately takes into consideration credit risks.
(3) Operational Loan Investments
Carried at book value less allowance for doubtful accounts due toshort settlement period and because allowance for doubtful accounts
appropriately takes into consideration credit risks.
(4) Operational Securities investments and (5) Securities Investments
The market values of equities are the last traded exchange price, andbonds are the last-traded exchange price or dealer-indicated price.
(6) Long-Term Loans
The market values of long-term loans are calculated based on thepresent value of the total amount of the principal and interest using a
discount rate for similar new loans. Certain debts such as loans withdefault risk are at book value less the estimated doubtful accounts.
Liabilities(1) Trade Notes and Accounts Payable, (2) Short-Term Loans, (3)Short-Term Non-Recourse Loans, (4) Bonds (due within one year), (5)Long-Term Loans (due within one year), (6) Long-Term
Non-Recourse Loans (due within one year), and (7) Income Tax
PayableCarried at book value due to short settlement period.
(8) Bonds
The fair value of bonds issued by Ichigo is calculated based on thecurrent value by applying a discount rate to the total of principal andinterest.
(9) Non-Recourse Bonds, (10) Long-term loans, and (11) Long-Term
Non-Recourse Loans
Floating-rate borrowings for non-recourse bonds, long-term loans,and long-term non-recourse loans are carried at book value because
their book values closely track their market values. The market valuesof partial floating-rate long-term loans and long-term non-recourse
loans are subject to the special accounting treatment of interest rate
swaps. They are therefore calculated based on the present value of thetotal amount of principal and interest reflecting the interest rate swap
arrangements using a discount rate for similar new loans.
The market values of fixed-rate loans are calculated based on thepresent value of the total amount of principal and interest using a
discount rate for similar new loans.

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Derivative Transactions
The market values of derivative transactions are the prices presented byfinancial institutions. The market value of interest rate swaps under
special treatment is included in long-term loans and long-term
non-recourse loans since it is accounted for along with the instrument it
hedges.
(Note 2) Financial Instruments for which it is Difficult to Obtain Market Values(JPY million)
Amount Recorded in
Consolidated Balance Sheet
1, 007175
8,038

Classification(1) Operational Securities Investments*(2) Securities Investments*(3) Long-term Security Deposits Received* Excluding allowance for doubtful accounts which are recorded separately.
(1) Operational Securities investments are not subject to market value
disclosure despite being investment securities, because they are not priced
in the market and it is difficult to estimate their market values.
(2) Securities investments are not subject to market value disclosure because
they are non-listed securities with no market price and it is difficult toestimate their market values.
(3) Long-term security deposits received which are security deposits received
from tenants of rental properties are not subject to market value disclosure
because they are not priced in the market and it is difficult to estimate the
cash flow in advance of the security deposit period.
V. Notes on Leased Real Estate not Currently Held for Sale
A. Income from Leased Real Estate not Currently Held for Sale
Ichigo and some of its consolidated subsidiaries own leased real estate in Tokyo andother locations that are not currently held for sale. Income on this leased real estate in
the current fiscal year is JPY 1,508 million (rental revenue is recorded in Revenue andthe cost of lease is recorded in Costs of Goods Sold), and impairment loss is JPY
1,090 million (recorded as Extraordinary Losses).
B. Market Value of Leased Real Estate not Currently Held for Sale
1Book Value on Consolidated Balance Sheet
Mar 1, 2016
15,969

Increase/Decrease2
10,0161

Feb 28, 2017
25,986(JPY million)
Market Valueas of Feb 28,
20173
30,219Book Value on Consolidated Balance Sheet = Acquisition Cost – (Cumulative
Depreciation + Cumulative Impairment)
2
The main component of the increase for the fiscal year is JPY 12,015 million
transferred from Real Estate for Sale due to the change in the purpose of ownership
and JPY 58 million increase in Capital Expenditures. The main component of thedecrease for the fiscal year is JPY 1,090 million recorded in Impairment Loss, JPY
706 million transferred to Real Estate for Sale due to the change in the purpose ofownership, and JPY 241 million of Depreciation.
3
Market value as of February 2017 is primarily based upon third-party real estate appraisals.
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VI. Per Share Data
Net assets per share

JPY 159.60

Net income per share

JPY 29.66

Net income per share (fully diluted)

JPY 29.59

VII. Material Subsequent Events
Sale of Subsidiary
Ichigo completed the sale of its 100% consolidated subsidiary Takara Building
Maintenance on March 1, 2017.
A. Reason for Sale
Ichigo acquired Takara Building Maintenance as a wholly-owned subsidiary in March2010 and worked since then to increase its corporate value.
Ichigo decided that further growth in Takara Building Maintenance can be best achievedby selling it to Sinanen Holdings, which is building out property management as one ofits core businesses and thus seeking to offer comprehensive property management
services.
This sale marks the beginning of a cooperative relationship between Ichigo and Sinanen
Holdings in the energy and property management businesses, and can be expected tocontribute to the growth in corporate value at both companies.
B. Buyer Name
Sinanen Holdings Co., Ltd.
C. Settlement Date
March 1, 2017
D. Takara Building Maintenance Overview(1) Name
Takara Building Maintenance Co., Ltd.
(2) BusinessComprehensive facility management services (building management, outsourced
operations, staffing services, and security services)(3) Relationship with Ichigo
100% subsidiary
E. Shares Sold and Post-Sale Ichigo Ownership(1) Shares Sold
20,000 shares(2) Post-Sale Ichigo OwnershipNone
F. Earnings Outlook
Ichigo expects to record an extraordinary gain of JPY 1 billion in FY18/2.

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Notes to Parent Financial Statements
I. Material Accounting Policies
A. Valuation Method for Securities
1. Shares in subsidiaries and affiliates

Moving average cost method

2. Other securities
Securities with market prices

Mark-to-market on the last date of fiscal
year (valuation difference is reported as acomponent of shareholders’ equity; cost of
goods sold is calculated with moving
average cost method)

Securities without market prices

Moving average cost method. (Valuation
method for investment associations is notedin (F) Material Changes in Presentation (3)Investment Associations.)

3. Derivatives

Mark-to-market

4. Real estate for sale

Cost (however, impair assets whose
profitability declines)

B. Depreciation Method for Fixed Assets
1. Property, Plant, and Equipment:

Primarily straight-line method

Useful life

Buildings and Structures 8–39 years

2. Intangible Assets

Straight-line method

Useful life

Software 5 years

C. Amortization of Deferred Assets
Issuance cost of shares: Full amount is recorded as cost.
D. Accounting Standards for Allowances
Allowance for doubtful accounts
The allowance is provided for doubtful accounts based on the historical experience
for normal receivables and an estimate of the collectability for receivables fromcompanies which are experiencing financial difficulties.

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E. Hedge Accounting Method
1. Hedge accounting method
In general, Ichigo adopts the deferral hedge accounting method. However, withrespect to some interest rate swaps which meet certain criteria, Ichigo uses analternative accounting method, as reasonable and appropriate.
2. Hedging instruments and hedged items
Hedging instruments
Hedged items

Interest rate swaps
Loans

3. Hedging Policy
Ichigo uses derivative financial instruments in its financing activities to hedge
possible future movements in interest rates.
4. Assessment of Hedge EffectivenessIchigo omits evaluating hedge effectiveness since it only applies to interest rate
swaps which meet certain criteria.
F. Material Changes in Presentation
1. Consumption Tax
Consumption taxes are excluded from the relevant revenue, costs or expenses.
Non-deductible consumption taxes are generally accounted for as expenses,
depreciated equally over five years.
2. Operating Investments
Operational securities investments are included in operational securities
investments and operational loan investments in current assets, separate from
non-operating investments. Profits and losses incurred from operating
investments are recorded as operating profits and losses. Operating investments
in which Ichigo has a control stake are not considered as subsidiaries or affiliates
since Ichigo does not have an intention to control management.
3. Investment Associations
Assets held by investment associations are categorized as operational securities
investments and investment in securities of other affiliates (Investments ininvestment associations) in proportion to the holding percentage. Profits on
dividends are recorded as revenue and an adjustment to Investments ininvestment associations. Redemption of principal is recorded as a decrease of
Investments in investment associations.
4. Consolidated Tax Treatment
Ichigo qualifies for consolidated tax treatment.

- 18 -

II. Changes in Accounting Policy
Adoption of Depreciation Method Change in line with the FY2016 Tax Reform
Starting from the current fiscal year, Ichigo adopted the Practical Solution on a Change inDepreciation Method due to Tax Reform 2016 (ASBJ Practical Issues Task Force No.32
issued on June 17, 2016). Ichigo thus changed depreciation method from thedeclining-balance method to straight-line method with respect to building accessories andstructures acquired on April 1, 2016 onward.
The impact to the financial statements from this change is immaterial.

III. Changes in Presentation
Parent Balance Sheet
Starting from the current fiscal year, Accounts Receivable due to Consolidated Taxation
which had been included in Other under Current Assets in the previous fiscal year arerecorded separately, because they have increased in size.
Accounts Receivable due to Consolidated Taxation were JPY 420 million in the previous
fiscal year.
Parent Income Statement
Starting from the current fiscal year, Deposits Received which had been included in Other
under Non-Operating Profit are recorded separately, because they have increased in size.
Deposits Received were JPY 11 million in the previous fiscal year.
Debt Financing-Related Fees which had been included in Other under Non-Operating
Expenses are recorded separately as well, because they have increased in size. Debt
Financing-Related Fees were JPY 47 million in the previous fiscal year.

- 19 -

IV. Balance Sheet
A. Assets Provided as Collateral and Secured Obligations
Assets provided as collateral are as follows:
Cash and cash equivalents
Real estate for sale
Buildings and structure
Land
Property, plant, and equipment – other
Shares of affiliated companies
Long-term loans to affiliates
Total

JPY 39 million
JPY 2,374 million
JPY 171 million
JPY 2,094 million
JPY 1 million
JPY 2,630 million
JPY 1,399 million
JPY 8,710 million

In addition, Ichigo has borrowed securities (market value: JPY 752 million) to be
used for collateral. However, these borrowed securities are not presented on thebalance sheet, because they are not Ichigo’s assets.
Figures in Buildings and Structures and Property, Plant, and Equipment – Other are
net amounts.
Secured obligations are as follows:
Long-term loans (due within one year)
Long-term loans
Total- 20 -

JPY 484 million
JPY 2,873 million
JPY 3,357 million

B. Contingent Liabilities
1. Ichigo is guaranteeing the following subsidiaries’ loans from financial institutions:
Ichigo Estate Co., Ltd.
Ichigo Real Estate Services Fukuoka Co, Ltd.
Ichigo ECO Energy Co., Ltd.
GK Daiba Jisho
GK Kawabata Holdings
GK Nakasu Holdings
GK Ichigaya Jisho
GK Shinsaibashi Jisho
GK Azabu Juban Jisho
GK Nagoya Sakae Holdings
GK Naha Holdings
GK Ichigo Showamura Ogose ECO Power Plant
GK Ichigo Hamanaka Bokujo ECO Power Plant
GK Ichigo Yonago Izumi ECO Power Plant
GK Ichigo Yamaguchi Sayama ECO Power Plant
GK Sera Aomizu Ushinoro ECO Power Plant
GK Ichigo Higashi Hiroshima Saijocho Taguchi ECO Power Plant
GK Ichigo Toride Shimotakai ECO Power Plant
GK Ichigo Yamaguchi Aionishi ECO Power Plant
GK Ichigo Toki Oroshicho ECO Power Plant
GK Ichigo Yubetsu Barou ECO Power Plant
GK Ichigo Kijo Takajo ECO Power Plant
GK Ichigo Betsukai Kawakamicho ECO Power Plant
GK Ichigo Akkeshi Shirahama ECO Power Plant
GK Ichigo ECO Fuchu Jogecho Yano Power Plant
GK Ichigo Toyokoro Sasadamachi ECO Power Plant

JPY 33,744 million
JPY 4,297 million
JPY 1,501 million
JPY 8,000 million
JPY 3,700 million
JPY 2,600 million
JPY 2,424 million
JPY 2,365 million
JPY 690 million
JPY 400 million
JPY 100 million
JPY 10,797 million
JPY 1,353 million
JPY 676 million
JPY 638 million
JPY 520 million
JPY 488 million
JPY 383 million
JPY 381 million
JPY 377 million
JPY 256 million
JPY 231 million
JPY 216 million
JPY 197 million
JPY 166 million
JPY 151 million

2. Ichigo is also guaranteeing the payment of a construction assistance fund and the return of asecurity deposit by GK Myodani Fudosan.
JPY 259 million
JPY 76,916 million

Total

C. Affiliate Receivables and Payables (excluding items separately indicated)
Short-term receivables from affiliates
Long-term receivables from affiliates
Short-term payables to affiliates
Long-term payables to affiliates

JPY 915 million
JPY 26 million
JPY 10 million
JPY 40 million- 21 -

D. Deferred Gain (Loss) on Long-Term Interest Rate Hedges
Using interest rate hedges, Ichigo has significantly reduced its interest rate risk
should Japanese interest rates rise. Unrealized gains or losses on these hedges arerecorded in Deferred Gain (Loss) on Long-Term Interest Rate Hedges.
V. Income Statement
Transactions with affiliates
Revenue
Revenue
Operating Expenses
Non-operational transactions

JPY 18,556 million
JPY 67 million
JPY 753 million

VI. Statement of Changes in Shareholders' Equity
Type and Number of Treasury Shares
Common shares329,600

VII. Taxes
A. Breakdown of Deferred Tax Assets and Liabilities
Deferred Tax Assets
Accrued income taxes
Surplus for provision of allowance for doubtful
accounts
Valuation loss on operational securities investments
Valuation loss on securities investments
Valuation loss on investments in real estate
Valuation loss on securities of affiliates
Deferred gain (loss) on long-term interest rate hedges
Loss carried forward
Other
Subtotal
Allowance for valuation
Deferred Tax Assets total

JPY 141 million
JPY 426 million
JPY 59 million
JPY 16 million
JPY 1,839 million
JPY 747 million
JPY 150 million
JPY 44 million
JPY 319 million
JPY 3,746 million-JPY 3,218 million
JPY 528 million

Deferred Tax Liabilities
Unrealized gain on other securities
Adjustments to carrying value due to consolidated
taxation
Asset retirement obligation expense
Deferred Tax Liabilities Total-JPY 1 million-JPY 134 million

Net Deferred Tax Assets

JPY 393 million- 22 --JPY 39 million-JPY 94 million

B. Revisions to Deferred Tax Assets and Liabilities Due to Change in Corporate
Tax Rate
Based on the Partial Amendment of the Income Tax Act (Act No. 15, 2016) and thePartial Amendment to Regional Tax Act (Act No.13, 2016) issued on March 29, 2016,
corporate taxes will decrease from the fiscal year starting on April 1, 2016.
The consumption tax increase to 10% was postponed from April 1, 2017 to October 1,
2019 via a tax reform proposal that was passed on November 18, 2016, amending the
Act for Partial Amendment of the Consumption Tax Act and Others for theFundamental Reform of the Taxation System for Ensuring Stable Financial Resources
for Social Security (Act No. 85, 2016) and the Act for Partial Amendment of the
Local Allocation Tax System and Others for the Fundamental Reform of the Taxation
System for Ensuring Stable Financial Resources for Social Security (Act No. 86,
2016). Consequently, the abolishment of the special local corporate tax andrestoration of the corporate enterprise tax, revision of the local corporate tax, andrevision of the corporation levy for corporate inhabitant taxes have been postponed
for the fiscal year starting after April 1, 2017 to the fiscal year starting after October 1,
2019.
Reflecting this change, the effective statutory tax rate used for the calculation ofdeferred tax assets and liabilities has been reduced from 32.26% to 30.86% for
temporary differences that become taxable in the fiscal year beginning on March 1,
2017 and March 1, 2018, and from 32.26% to 30.62% for temporary differences that
become taxable in the fiscal year beginning on March 1, 2019.
The impact from this change in tax rate is minimal.

- 23 -

VIII. Related Party Transactions(JPY million)
Affiliation

Name

Subsidiary

Ichigo EstateCo., Ltd.

Subsidiary

Ichigo ECOEnergy Co.,Ltd.

Voting Rights
Nature ofTransaction
Balance
Held
Transaction
Account
RelationshipAmountOutstanding
by Ichigo
Short-termloans to
5,898
affiliates
9,838
Lending1
Long-termloans to
6,634
affiliates
Othercurrent
57
assetsInterest
256
received
Othercurrent3
liabilities
Provision of
33,744––Service credit
100%2contract guarantee
Receipt ofcredit1,920––
guarantee3,4Receipt ofcreditguarantee
6,150
–
–
and
collateral5
Advance0
Payment of
payment
credit– Otherguarantee
investments3
fee
and assets
Short-term
Lending1
4,840 loans to984
affiliates
Other
Service Interest
100%
68 current
4
contract received
assetsProvision of
credit1,501––
2
guarantee- 24 -

Affiliation

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Voting Rights
Nature ofTransaction
Balance
Held
Transaction
Account
RelationshipAmountOutstanding
by Ichigo
Short-term
Lending1
1,168 loans to
1,168
affiliates
Ichigo Real
Other
Estate Services
Service Interest
100%
40 current
11
Fukuoka Co.,
contract received
assetsLtd.
Provision of
credit4,297––
2
guarantee
Long-term
1
1,207
Lending– loans toaffiliates6
Financial
A. F. Co., Ltd.
100%
Support
Other
Interest– investments
26
received
6
and assets
Receipt of100%
creditKK Kimura
Subsidiary(Indirectly
guarantee
1,920––
Building
TK Equity
held)andcollateral4, 5Long-term
1
1,399
Lending– loans toaffiliates
YK Satsuki
Financial
100%
Holdings
support
Other
Interest
83 current
16
received
assets
Receipt of
GK Minami
creditIkebukuro07
TK Equity guarantee
1,920
–
–
Jisho
and
collateral4, 5Receipt ofcreditguarantee
1,290
–
–
and
collateral5
GK Gotanda
07
TK Equity
Holdings
Advance
Payment of–
payment
creditguarantee– Otherfee toinvestments
1
guarantor
and assets
Name- 25 -

Affiliation

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Voting Rights
Nature ofTransaction
Balance
Held
Transaction
Account
RelationshipAmountOutstanding
by Ichigo
Receipt ofcreditguarantee
1,816
–
–
and
collateral5
GK Shinagawa
07
TK Equity
Holdings
Advance
Payment of–
payment
creditguarantee– Otherfee toinvestments
2
guarantor
and assets
Provision of
credit2,424––
2
guarantee
GK Ichigaya
Subsidiary07
Receipt ofJisho
TK Equity
creditAdvance–5
guarantee
received
fee
Provision of
credit
2,365
–
–
GK
2
guarantee
Shinsaibashi
07
TK Equity
Receipt of
Jisho
Advancecredit3
5
received
guaranty fee
Provision of
8,000
–
–
credit2
guarantee
GK Daiba
07
TK Equity Receipt ofJisho
creditAdvance–23
guarantee
received
fee
Provision of
credit3,700––
guarantee2
GK Kawabata
07
TK Equity Receipt ofHoldings
creditAdvance1
9guarantee
received
fee
Provision of
credit2,600––
2guarantee
GK Nakasu
07
TK Equity Receipt ofHoldings
creditAdvance–7
guarantee
received
fee
Name- 26 -

Affiliation

Name

SubsidiaryGK
Nishinihon
Holdings

Subsidiary

Subsidiary

Subsidiary

Voting Rights
Nature ofTransaction
Balance
Held
Transaction
Account
RelationshipAmountOutstanding
by Ichigo
Additional
Securities
equity for
70
TK Equity
2,130 of other
4,245
asset
affiliates
acquisition

GK Ichigo
Showamura
Ogose ECO
Power Plant
GK Ichigo
Hamanaka
Bokujo ECOPower Plant
GK Ichigo
ECO Nago
Futami Power
Plant

07

Provision of
TK Equity credit
guarantee2

10,797––

07

Provision of
TK Equity credit
guarantee2

1,353

–

–

07

TK Equity

1,660

–

–

Advancepayment8

1

The interest rate on loans from Ichigo to affiliates is based upon Ichigo’s actual borrowing
costs, with due consideration to the particular circumstances of the affiliates.
2
Ichigo has guaranteed loans from banks.
3
Ichigo has received guarantees for loans from banks.
4
Ichigo has received guarantees or collaterals from its subsidiaries for a loan of JPY 1,920
million from banks.
5
Ichigo has received both guarantees and collateral for loans from banks.
6
Ichigo has reserved JPY 865 million of allowances for bad accounts for long-term loans toaffiliates. In addition, Ichigo reversed JPY 35 million of allowances for bad accounts in thecurrent fiscal year.
7
Ichigo holds 0% of voting rights and the subsidiary holds 100% of managerial authority over
the Tokumei Kumiai. However, the subsidiary is considered to be Ichigo’s subsidiary, because
Ichigo has adopted the accounting standard Practical Solution on Application of Control
Criteria and Influence Criteria to Investment Associations (Accounting Standards Board ofJapan Practical Issues Task Force No. 20, March 25, 2011).
8
Ichigo has repaid the bank loans, and the claims pertaining to this transaction have been
recovered in full.
9
The above amounts do not include consumption tax and other taxes. However, the amounts
recorded on the balance sheet do include consumption tax and other taxes.
IX. Per Share Data
A. Net assets per share

JPY 146.31

B. Net income per share

JPY 27.53

C. Net income per share (diluted)

JPY 27.46- 27 -

X. Material Subsequent Events
Sale of Subsidiary
Ichigo completed the sale of its 100% consolidated subsidiary Takara Building
Maintenance on March 1, 2017.
A. Reason for Sale
Ichigo acquired Takara Building Maintenance as a wholly-owned subsidiary in March2010 and worked since then to increase its corporate value.
Ichigo decided that further growth in Takara Building Maintenance can be best
achieved by selling it to Sinanen Holdings, which is building out property
management as one of its core businesses and thus seeking to offer comprehensive
property management services.
This sale marks the beginning of a cooperative relationship between Ichigo andSinanen Holdings in the energy and property management businesses, and can be
expected to contribute to the growth in corporate value at both companies.
B. Buyer Name
Sinanen Holdings Co., Ltd.
C. Settlement Date
March 1, 2017
D. Takara Building Maintenance Overview(1) Name
Takara Building Maintenance Co., Ltd.
(2) BusinessComprehensive facility management services (building management, outsourced
operations, staffing services, and security services)(3) Relationship with Ichigo
100% subsidiary
E. Shares Sold and Post-Sale Ichigo Ownership(1) Shares Sold
20,000 shares(2) Post-Sale Ichigo OwnershipNone
F. Earnings Outlook
Ichigo expects to record an extraordinary gain of JPY 1 billion in FY18/2.

- 28 -