ANNUAL REPORT 2022
Year Ended March 31, 2022

- 1 -Contents
Page
Part 1Company Overview……………………………………………………………………………………………………

3

1

History………………………………………………………………………………………………………………

3

2

Overview of Business Activities……………………………………………………………………………………

5

3

Overview of Subsidiaries and Affiliates……………………………………………………………………………

6

4

Employee Data ……………………………………………………………………………………………………

6

Business Overview……………………………………………………………………………………………………

8

1

Management Policies, Operating Environment, and Issues to Address……………………………………………

8

2

Management’s Analysis of Financial Position, Operating Results, and Cash Flows………………………………

11

Financial Reporting …………………………………………………………………………………………………

18

Consolidated Financial Statements…………………………………………………………………………………

18

Part 2

Part 3

Independent Auditor’s Report- 2 -Part 1 Company Overview
1. History
July 1947

The Company was established in July for the purpose of leasing stock exchange buildings in Tokyo, Osaka,
Nagoya, and other cities along with all other associated assets to a newly founded organization comprised ofstock exchanges and their operators following the dissolution of the previous owner, the Japan Securities
Exchange, pursuant to a law enacted in 1947 to decentralize stock exchanges in Japan.
Based in Tokyo, the Company set up a branch in Osaka and offices in six other cities.

May 1949

Listed on the Tokyo Stock Exchange, Osaka Securities Exchange (Currently Osaka Exchange), and Nagoya
Stock Exchange
Listed on the Fukuoka Stock Exchange

July 1949
July 1950

Listed on the Sapporo Securities Exchange

July 1958

Completed construction of the Fukuoka Shoken Building

March 1962

Completed construction of the Kyoto Shoken Building

March 1965

Completed construction of the Fukuoka Heiwa Building

April 1965

Commenced sales of residential land in the city of Nagareyama’s Heiwadai district

April 1969

Upgraded offices in Nagoya and Fukuoka to branches

May 1972

Completed construction of the Kabutocho Heiwa Building

March 1977

Commenced sales of houses in the city of Abiko’s Fusaheiwadai district

May 1980

Commenced sales of condominium units of the Sunny Park Heights Narita condominium complex

October 1984

Completed construction of the trading floor building (currently Arrows) in the Tokyo Stock Exchange
Building complex

December 1984

Established Heiwa Regional Service Co., Ltd. (currently Heiwa Real Estate Property Management Co., Ltd.)

February 1986

Completed construction of the Yokohama Heiwa Building

April 1987

Completed construction of the Osaka Heiwa Building

April 1988

Completed construction of the main building in the Tokyo Stock Exchange Building complex

October 1993

Completed construction of the Daimaru Kyoto Store West Kyodo Building

June 1994

Completed construction of the Daimaru Kyoto Store North Kyodo Building

April 2000

Acquired the Mita Heiwa Building

February 2001

Acquired the Uchisaiwaicho Heiwa Building

September 2002

Acquired the Dogin Building

March 2004

Completed construction of the Nagoya Heiwa Building

December 2004

Completed construction of the Osaka Securities Exchange Building

December 2005

Acquired the Isemachi Heiwa Building

March 2006

Acquired the Sapporo Ekimae Godo Building

August 2006

Opened the Sapporo Branch

June 2007

Acquired the Kayabacho 1-Chome Heiwa Building

August 2007

Completed construction of the Nagoya Stock Exchange Building

February 2008

Made Housing Service Co., Ltd., a consolidated subsidiary

March 2008

Completed Construction of the Hotel Brighton City Osaka Kitahama
Acquired the Tenjin Heiwa Building

May 2008

Acquired the Shin-Odori Building

October 2009
February 2010

Made Canal Investment Trust Co., Ltd., (currently Heiwa Real Estate Asset Management Co., Ltd.) a
consolidated subsidiary
Completed construction of CentRise Sakae

October 2011

Completed construction of the Heiwa Real Estate Kitahama Building

January 2012

Completed construction of the Ichibancho Heiwa Building

January 2013

Made The Tokyo Shoken Building Incorporated a consolidated subsidiary

February 2015

Completed construction of the Kitahama 1-Chome Heiwa Building

March 2015

Completed construction of the Maruzen Nagoya Honten Building

December 2017

Acquired the Osaka Midosuji Building

March 2019

Acquired the Sakae Sun City Building- 3 -August 2021

Opened KABUTO ONE

April 2022

The Company’s shares were listed on the Prime Market of the Tokyo Stock Exchange and the Premier Marketof the Nagoya Stock Exchange following the respective market reorganizations of each exchange- 4 -2 Overview of Business Activities
The Heiwa Real Estate Group (hereafter, “the Group”) is comprised of Heiwa Real Estate Co., Ltd. (hereafter, “the Company”),
which files consolidated financial statements as the parent company, and its four consolidated subsidiaries. The main businessactivities conducted by the Group, the names of the companies engaged in these businesses, and the respective business activitiesof each of these companies are presented below.
The main business activities conducted by the Group are categorized according to its reportable business segments.
(1) Building BusinessHeiwa Real Estate Co., Ltd., and The Tokyo Shoken Building Incorporated develop, lease, manage and sell stock exchangebuildings, office buildings, commercial facilities, and residential buildings. Heiwa Real Estate Property Management Co., Ltd.,
provides property management services.
(2) Asset Management BusinessHeiwa Real Estate Co., Ltd., and Heiwa Real Estate Asset Management Co., Ltd., manage the properties of Heiwa Real Estate
REIT, Inc. Housing Service Co., Ltd. provides real estate agency services.
The details above are shown in the following diagram.

平和不動産株式会社

Heiwa Real Estate Co., Ltd.

ビルディング事業

Building Business

アセットマネジメント事業

Asset Management Business

平和不動産プロパティマネジメント株式会社

Heiwa Real Estate Property Management Co., Ltd.

株式会社東京証券会館

The Tokyo Shoken Building Incorporated

平和不動産アセットマネジメント株式会社

Heiwa Real Estate Asset Management Co. Ltd.

ハウジングサービス株式会社

Housing Service Co., Ltd.

The Company’s Board of Directors resolved, in a meeting held on April 30, 2021, to change its reportable segments from thecurrent fiscal year, effective retroactively from April 1, 2021.
Firstly, the Company transferred the Real Estate Investment Department from the Asset Management Business segment to the
Building Business segment. The Real Estate Investment Department handles the development, sale, and investment in real estate
for sale, and the acquisition and sale of fixed assets. This change was made in consideration of future business development plans
following a decision to transfer two properties for lease from fixed assets to real estate for sale effective from March 31, 2021. Thistransfer is in line with the Company’s portfolio strategy in its current medium-term management plan of acquiring new properties
to lease as a means to expand its portfolio, and generating earnings from the sale of properties in the process of replacing portfolio
properties.
Secondly, the Company transferred its subsidiary, Heiwa Real Estate Property Management Co., Ltd. (renamed from Heiwa
Service Co., Ltd., effective from March 1, 2021), from the Other Businesses segment to the Building Business segment, effectivefrom April 1, 2021. This change was made because the subsidiary is developing comprehensive property management services
while expanding its current building facility maintenance and management business.
As a result of these two changes, the Building Business segment now handles the development, leasing, management, and salesof stock exchange buildings, office buildings, commercial facilities, and residential buildings, while the Asset Management- 5 -Business segment mainly manages the properties of Heiwa Real Estate REIT, Inc., and provides real estate brokerage services
through Housing Service Co., Ltd.

3 Overview of Subsidiaries and Affiliates

Company nameLocation

Common stock(millions of yen)

Main businessactivities2

The Company’s
voting rights andownership (%)

Related activities

Consolidated subsidiaries

Heiwa Real Estate
Property Management
Co., Ltd.1

Chuo-ku, Tokyo

134

Building Business

100.0

Consigned to manage
the Company’s leased
buildings
Rents offices from theCompany
Officers holdconcurrent positions

Housing Service Co., Ltd.

Chuo-ku, Osaka

95

Asset Management
Business

100.0

Officers holdconcurrent positions

100.0

Rents offices from theCompany
Officers holdconcurrent positions

100.0

Rents stores to theCompany
Officers holdconcurrent positions

Heiwa Real Estate AssetManagement Co., Ltd.

Chuo-ku, Tokyo

The Tokyo Shoken
Building Incorporated

Chuo-ku, Tokyo

295

100

Asset Management
Business

Building Business(Notes) 1. The Company absorbed previously consolidated subsidiaries LA3 Inc. and Kabutocho 12 Inc. through a merger effectivefrom March 1, 2022.
2. The main business activities correspond to the business segment names. As stated in 2. Overview of Business Activities
above, the main operations of Heiwa Real Estate Property Management Co., Ltd. were transferred to the Building Business
effective from April 1, 2021.

4 Employee Data
(1) Employees of the Group(As of March 31, 2022)
Segment

Number of employees

Building Business

133

Asset Management Business

80

Group-wide non-segment

27

Total

240

(Notes) 1. Number of employees refers to full-time employees, excluding employees transferred to organizations outside the Groupand including personnel transferred to the Group from other organizations.
2. Group-wide non-segment refers to employees of administrative divisions.
3. The number of employees was compiled based on the Company’s reportable segments following the reorganization of thesegments effective from April 1, 2021.

- 6 -(2) Employees of the Company

Number of employees

Average age of employees

91

43.2

Average years of employment(As of March 31, 2022)
Average annual salary(thousands of yen)

15.9

Segment

10,672

Number of employees

Building Business

64

Asset Management Business－Company-wide non-segment

27

Total

91

(Notes) 1. Number of employees refers to full-time employees, excluding employees transferred to organizations outside the Company
and including personnel transferred to the Company from other organizations.
2. Average annual salary includes bonuses and additional wages.
3. Company-wide non-segment refers to employees of administrative divisions.
4. The number of employees was compiled based on the Company’s reportable segments following the reorganization of thesegments effective from April 1, 2021.
(3) Labor Unions
Employees of The Tokyo Shoken Building Incorporated, a consolidated subsidiary, have formed a labor union, and this company
and the labor union have been maintaining a constructive relationship. There are no matters deserving special mention.

- 7 -Part 2 Business Overview
1. Management Policies, Operating Environment, and Issues to Address
Forward-looking statements in this report were based on judgements made as of March 31, 2022.
Management Policies, Operating Environment, and Issues to Address
The Japanese economy is expected to recover due to various measures implemented by the government, but the impact of geopoliticalrisks and the global spread of the COVID-19 pandemic on the domestic and global economy will need to be closely monitored going
forward.
Management will also need to pay close attention to various factors affecting the Group’s operating environment, including theimpact of the growing shift to telecommuting and other changing office practices on the office building leasing market, and the impactof domestic and foreign interest rate fluctuations on the real estate investment market.
In this operating environment, the Group will execute the following business strategies of its medium-term management plan,
Challenge & Progress, spanning from fiscal 2020 to fiscal 2023.
The Heiwa Real Estate Group’s Vision
As a group of companies that contribute to the revitalization of districts, the Heiwa Real Estate Group will work to raise its value andhelp build a sustainable society by engaging with stakeholders to raise their satisfaction and providing solutions to environmental
problems and issues facing society.
Building a sustainable society as a group of companies that contribute to the revitalization of districts
Through its efforts to revitalize Tokyo’s Nihonbashi Kabutocho and Kayabacho districts, redevelop areas of Sapporo, and manage
real estate assets, the Group will help build a more sustainable society and maintain safe and secure districts that are environmentallyfriendly and prepared for disasters.
Increasing shareholder value as a listed real estate company
The Company will aim to increase shareholder value by generating returns for shareholders and raising capital efficiency, making
maximum use of the sources of the Group’s value while adding value to its real estate properties.
Challenge & Progress medium-term management plan spanning from fiscal 2020 to fiscal 2023
During the three-year period of the plan, the Company will continue revitalizing Tokyo’s Nihonbashi Kabutocho and Kayabacho
districts, redevelop commercial areas in Sapporo, and shift to a business model designed to create added value through external andinternal growth. At the same time, it will take on challenges and promote progress as a company that contributes to the revitalizationof districts through sustainability initiatives that offer solutions to issues facing society today.
Strategies for each business from fiscal 2020 to fiscal 2023
(1) Redevelopment Business
1) Revitalization of Tokyo’s Nihonbashi Kabutocho and Kayabacho districts
With a view to create sustainable and diverse urban areas, the Company will work to foster prosperity in the Nihonbashi
Kabutocho and Kayabacho districts it is redeveloping and contribute to the Tokyo Metropolitan Government’s vision to makeTokyo a “global financial city” through urban redevelopment projects, including the opening of the KABUTO ONE building,construction of the Kitoki building, and the execution of the Kabutocho 12 Project (tentative name).
2) Redevelopment of commercial areas in Sapporo
The Company will promote full-fledged redevelopment of commercial areas in Sapporo through its participation in a city-led
project to redevelop Sapporo Station’s South Exit area (surrounding the Sapporo Ekimae Godo Building), and aim to carry out
the redevelopment of Sapporo’s Odorinishi district (surrounding the Dogin Building and Shin-Odori Building).
(2) Building Business
1) Pursuit of external and internal growth
The Company will acquire new properties for lease as a means to expand its portfolio, and generate earnings from the sale ofreal estate in the process of replacing portfolio properties. It also aims to increase the profitability of the portfolio by increasing
rent amounts based on trends in the office building leasing market.
2) Sustainable building management focusing on improving environmental performance and disaster preparedness
The Company will enhance the environmental performance and disaster preparedness of its buildings through investment infacilities and solutions-oriented building management with a view to reduce CO2 emissions over the long term.
3) Earnings from the sale of portfolio properties
The Company will work to secure earnings by selling revenue-generating properties, maximizing the value of those properties- 8 -through real estate development, lease-ups, renovations, and other initiatives, and by developing residential properties for its HF
Residence series.
(3) Asset Management Business
1) Expansion of asset management revenues
The Company will aim to increase the Group’s revenues from asset management fees by facilitating the growth of Heiwa Real
Estate REIT, Inc.
(4) Corporate Management
1) Capital policy focused on capital costs and capital efficiency
The Company works to lower capital costs and improve capital efficiency as a matter of policy, and has set targets for key
performance indicators (KPIs) to achieve those goals. Specifically, it is targeting return on equity (ROE) of 6% or higher and aconsolidated total shareholder return ratio of around 70% between fiscal 2020 and 2023, and a consolidated dividend payout
ratio of around 50% by fiscal 2023.
2) Measures for strengthening corporate governance
The Company intends to further strengthen its corporate governance through the transition to a company with a nominationcommittee, etc. having a majority of its Board of Directors comprised of external directors, and reducing cross-shareholdings. It
will also strive to ensure strict compliance by raising awareness of compliance-related issues among officers and employees.
3) Sustainable management practices
The Company aims to contribute to the growth and sustainability of society by providing relevant solutions through its businessactivities and implementing measures to help achieve the UN Sustainable Development Goals. To more effectively executesustainable management, the Company, led by its Sustainability Committee, implements a PDCA cycle to monitor sustainabilityrelated activities, including environmental initiatives related to climate change, and has related matters of importance reported
to the Board of Directors. In addition, the Company is taking steps to improve the health of employees, facilitate better internal
communication, and make its organizations more dynamic with the goal of enhancing its corporate value.
Numerical targets(1) KPIs
The Company has set a target for ROE as a means to control capital costs, and maintains a sufficient level of internal reserves forshareholder returns based on current investment returns in the real estate market.

Earnings per share

Minimum ¥200 by fiscal 2023

Consolidated
operating income

Minimum ¥12 billion* by fiscal 2023

Capital efficiency

ROE

Minimum 6% from fiscal 2020 to 2023

Shareholder returns

Consolidated total
shareholder return
ratio
Consolidated
dividend payout ratio

Around 70% from fiscal 2020 to 2023
Around 50% by fiscal 2023

Profit targets(Note) In addition to the targets above, the Company is aiming for a net debt-to-equity ratio, an indicator of financial
soundness, of 1.8 or lower.
* Breakdown of the consolidated operating income target by business segment
・Building Business: ¥11.8 billion
・Asset Management Business: ¥1.8 billion
・Intercompany eliminations and other adjustments: —¥1.6 billion- 9 -(2) Investment Plan for Fiscal 2020 to 2023
Business

Investment amount

Redevelopment
Business

Approx. ¥32 billion
Breakdown:
Approx. ¥22 billion for redevelopment projects in Tokyo’s Nihonbashi
Kabutocho and Kayabacho districts
Approx. ¥10 billion for redevelopment projects in Sapporo

Building BusinessApprox. ¥60 billion for property acquisitions
Approx. ¥20 billion in returns from replacing portfolio properties
Approx. ¥34 billion in returns from selling currently owned properties

The targeted and planned amounts for the KPIs and investment plans, above, are as of the time this report was submitted.
The Company makes no guarantee that these targets and plans will be achieved, and results could differ substantially.
These targets and investment plans may be revised in the future due to changes in the operating environment or otherfactors.

- 10 -

2 Management’s Analysis of Financial Position, Operating Results, and Cash Flows(1) Overview of financial results
An overview of the Group’s consolidated financial position, operating results, and cash flows (hereafter, “financial results”) in thefiscal year under review is presented as follows.
1) Financial position and operating results
In fiscal 2021, ended March 31, 2022, economic conditions in Japan remained severe amid the worldwide COVID-19 pandemic.
Looking ahead, the economy is expected to recover due to various measures implemented by the government. Nevertheless, theimpact of geopolitical risks and the global spread of the COVID-19 pandemic on the domestic and global economy will need to
be closely monitored going forward.
Conditions in Japan’s real estate industry were mixed. In the office building leasing market, vacancy rates increased and rental
rates declined as occupants tended to consolidate and reduce their office spaces amid changing office practices, such as thegrowing shift to telecommuting, in response to the pandemic. In the real estate investment market, however, property acquisitions
continued to be brisk as investors demonstrated strong interest in Japanese real estate amid favorable financing conditions,
including low interest rates.
In that business environment, the Heiwa Real Estate Group worked to increase its corporate value under its medium-term
management plan, Challenge & Progress, which was announced on April 30, 2020, by promoting redevelopment projects andpursuing external growth in its Building Business and Asset Management Business.
Furthermore, in accordance with its strategy to practice sustainability management, and as initiatives to help build a low-carbon
economy, the Company revised its medium- and long-term goals for reducing greenhouse gas (GHG) emissions. Specifically, it
set a new target to reduce the Group’s total GHG emissions (Scope 1 and 2) by 50% by fiscal 2030, compared with the fiscal
2018 result. The Company also endorsed the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD), which issues guidelines for businesses to disclose relevant climate-related risks and opportunities, and intends toimprove its information disclosure going forward. By enhancing its low-carbon initiatives, Heiwa Real Estate will work tocontinuously increase its value and develop sustainable communities as a company that contributes to the revitalization of urban
areas.
Among consolidated financial results in the fiscal year under review, operating revenue totaled ¥57,818 million, an increaseof ¥22,769 million (65.0%) year on year. Operating income was ¥12,615 million, up ¥1,386 million (12.3%), and ordinary
income came to ¥11,572 million, an increase of ¥1,327 million (13.0%). Net income attributable to owners of parent amounted
to ¥8,705 million, an increase of ¥1,586 million (22.3%) compared with the previous fiscal year, a record-high for the Group.
The Company’s Board of Directors resolved, in a meeting held on April 30, 2021, to make organizational changes to its
reportable business segments from the current fiscal year, effective retroactively from April 1, 2021.
Firstly, the Company transferred its Real Estate Investment Department from the Asset Management Business segment to the
Building Business segment. The Real Estate Investment Department handles the development, sale, and investment in real estate
designated for sale, and the acquisition and sale of properties designated as fixed assets. This change was made in considerationof future business development plans following a decision to transfer two leased properties from fixed assets to real estate forsale effective from March 31, 2021. This transfer is in line with the Company’s portfolio strategy in its current medium-term
management plan of acquiring new properties to lease as a means to expand its portfolio, and generating earnings from the saleof properties in the process of replacing portfolio properties.
Secondly, the Company transferred its subsidiary, Heiwa Real Estate Property Management Co., Ltd. (renamed from Heiwa
Service Co., Ltd., effective from March 1, 2021), from the Other Businesses segment to the Building Business segment, effectivefrom April 1, 2021. This change was made because the subsidiary is developing comprehensive property management services
while expanding its current building facility maintenance and management business.
As a result of these two changes, the Building Business segment now handles the development, leasing, management, andsales of stock exchange buildings, office buildings, commercial facilities, and residential buildings, while the Asset Management
Business segment mainly manages the properties of Heiwa Real Estate REIT, Inc., and provides real estate brokerage services
through Housing Service Co., Ltd.
Segment results in the previous fiscal year have been adjusted to reflect these changes to the reportable business segments.
In addition, effective from April 1, 2021, the Company adopted the Accounting Standard for Revenue Recognition (Statement
No. 29) issued by the Accounting Standards Board of Japan on March 31, 2020.

- 11 -

Consolidated Financial Results by Segment
Fiscal 2020
Segment

Operatingrevenue

Building Business
Asset Management Business
Adjustments
Total(Millions of yen)
Difference

Fiscal 2021

OperatingincomeOperatingrevenue

OperatingincomeOperatingrevenue

Operatingincome32,306

10,97554,433

12,39922,127

1,423

2,742

1,621

3,384

1,977

641

356

—

(1,368)—(1,762)—(393)

35,048

11,22857,818

12,61522,7691,386

Operating revenue from major tenants and their percentage of total operating revenue in fiscal 2020 and 2021 are as follows.
Fiscal 2020
Operating revenue
Percentage of total(millions of yen)operating revenue

TenantFiscal 2021
Operating revenue
Percentage of total(millions of yen)operating revenue

Nippon Open Ended Real Estate
Investment Corporation

8,160

23.3

—

—

Ginza Project Inc. (special-purpose
company)——

18,00031.1

Heiwa Real Estate REIT, Inc.

——

11,43019.8(Note) Only tenants that account for 10% or more of total operating revenue are reported as major tenants.
(1) Building BusinessIn the Building Business segment, leasing revenue increased by ¥3,486 million (15.4%) year on year to ¥26,111 million, mainly
due to contributions from the Kabutocho Heiwa Building No. 7 (Chuo-ku, Tokyo), which was acquired in the previous fiscal
year, Shimbashi Square Building (Minato-ku, Tokyo), Heiwa Real Estate Nihonbashi Building (Chuo-ku, Tokyo), Kabutocho
Heiwa Dia Building (Chuo-ku, Tokyo), which was acquired in the fiscal year under review, and KABUTO ONE (Chuo-ku,
Tokyo), which opened in the fiscal year under review. Penalties for tenant contract cancellations also contributed to this result.
Revenue from sales of properties grew by ¥18,610 million (228.1%) to ¥26,770 million, due to a substantial amount of sales ofreal estate that had been designated for sale. These results combined with other revenues in this segment brought total operating
revenue to ¥54,433 million, an increase of ¥22,127 million (68.5%) year on year. Segment operating income totaled ¥12,399
million, up ¥1,423 million (13.0%) compared with the same period of the previous fiscal year.
As of March 31, 2022, the vacancy rate of buildings leased by the Heiwa Real Estate Group (excluding buildings for whichleases have been suspended due to redevelopment) was 4.46%.
Breakdown of operating revenue
Classification(Millions of yen)
Fiscal 2020
Area (m2)

Fiscal 2021
AmountLeased land area 3,380.75
Leasing revenue

Area (m2)AmountLeased land area 3,380.75
22,624

Leased floor space
422,893.12

Leased floor space
425,431.57

26,111

Revenue from sales ofproperties

—

8,160

—

26,770

Other

—

1,521

—

1,552

—

32,306—54,433Total(2) Asset Management BusinessIn the Asset Management Business segment, asset management revenue increased by ¥121 million (5.9%) year on year to ¥2,192
million, and brokerage commissions rose ¥520 million (77.5%) to ¥1,191 million. As a result, operating revenue totaled ¥3,384
million, up ¥641 million (23.4%) year on year. Segment operating income amounted to ¥1,977 million, an increase of ¥356
million (22.0%) compared with the previous fiscal year.

- 12 -

Breakdown of operating revenue(Millions of yen)Classification

Fiscal 2020

Fiscal 2021

Difference

Asset management revenue

2,071

2,192

121

Brokerage commissions

671

1,191

520

2,742

3,384

641

Total
2) Cash flows

As of March 31, 2022, cash and cash equivalents amounted to ¥28,111 million, a decrease of ¥1,474 million compared with
March 31, 2021.
Fiscal 2021 consolidated results for each category of cash flows and main factors underlying the results are as follows.
Cash flows from operating activities
Net cash provided by operating activities totaled ¥34,189 million, compared with ¥8,292 million in the previous fiscal year. Main
inflows included income before income taxes of ¥12,544 million and a decrease in inventories of ¥18,578 million.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥20,705 million, compared with ¥30,200 million in the previous fiscal year.
Main outflows included ¥18,218 million for the purchase of tangible fixed assets and ¥2,156 million for the purchase of intangible
fixed assets.
Cash flows from financing activities
Net cash used in financing activities amounted to ¥15,490 million, compared with net cash provided by financing activities of¥24,327 million in the previous fiscal year. Main outflows included a decrease in short-term loans payable of ¥5,450 million,
repayment of long-term loans payable of ¥27,159 million, redemption of bonds totaling ¥1,891 million, purchase of treasury
shares of ¥2,820 million, and payment of dividends amounting to ¥3,176 million. Main inflows included proceeds from longterm loans payable of ¥25,010 million.
(Reference) Results for cash flow-related indicators
Indicator

March 31, 2018

March 31, 2019

March 31, 2020

March 31, 2021

March 31, 2022

Equity-assets ratio

34.9%

32.5%

31.6%

31.1%

31.7%

Market cap-to-assets ratio

27.2%

24.6%

31.2%

33.7%

38.4%

Debt repayment period (years)

11.6

—

6.5

26.0

6.0

Interest coverage ratio (times)

10.4

—

22.8

6.2

24.2

Net debt-to-equity ratio

1.4

1.6

1.5

1.6

1.5

(Notes): 1. The following formulas for calculating the indicators shown above are based on consolidated financial results.
Equity-to-assets ratio = shareholders’ equity ÷ total assets
Market cap-to-assets ratio = market capitalization ÷ total assets
Debt repayment period = interest-bearing liabilities ÷ net cash provided by operating activities
Interest coverage ratio = net cash provided by operating activities ÷ interest expenses
Net debt-to-equity ratio = (interest-bearing liabilities – cash and deposits + marketable securities) ÷ net assets
2. Interest-bearing liabilities are comprised of short-term loans payable, current portion of bonds, current portion of longterm loans, bonds, long-term loans payable, and long-term accounts payable, as stated in the consolidated balance sheets.
Interest expenses used for the calculations are recorded in the consolidated statements of income.
3. Net cash provided by operating activities used for the calculations are recorded in the consolidated statements of cash
flows.
4. No figures were recorded for the debt repayment period and the interest coverage ratio as of March 31, 2019, because cash
flows from operating activities were negative in the fiscal year ended March 31, 2019.

- 13 -

3) Production, orders, and operating revenues
Results related to production, orders, and operating revenues for each segment are presented above in Part 2 Business Overview,
2. Management’s Analysis of Financial Position, Operating Results, and Cash Flows, (1) Overview of financial results, 1)
financial position and operating results.

(2) Management’s analysis of business results and issues for consideration
Management’s recognition and analysis of the Group’s financial results as well as issues for consideration are presented below.
Forward-looking statements in this report were based on judgements made as of March 31, 2022.
1) Recognition and analysis of financial position and operating results, and issues for consideration
The Group is striving to increase its corporate value based on the business strategies of its medium-term management plan,
Challenge & Progress, which was announced on April 30, 2020. Specifically, it is carrying out redevelopment projects and taking
steps to realize external growth in its Building Business and Asset Management Business. In the fiscal year under review, theGroup strove to realize external growth through the opening of the KABUTO ONE building (Chuo-ku, Tokyo) and acquisitionof the Kabutocho Heiwa Dia Building (Chuo-ku, Tokyo), and worked towards internal growth by increasing rent amounts inleasing agreements. Among consolidated financial results, operating income rose by ¥1,386 million to ¥12,615 million, marking
a third consecutive year-on-year increase. Higher income from sale of properties and penalties for tenant contract cancellationsin the Building Business segment contributed to the result. Net income attributable to owners of parent grew by ¥1,586 million
to ¥8,705 million, a record-high amount and the fifth consecutive year-on-year increase. This mainly reflected the contribution
from the sell-off of investment securities, specifically cross-shareholdings.
Major factors that could have a significant impact on the Group’s operating results include trends in the domestic economy
and real estate market, particularly the office building leasing market and real estate investment market.
Total assets, total liabilities, and net assets as of March 31, 2021, and March 31, 2022 were as follows:(Millions of yen)March 31, 2021

March 31, 2022

Difference

Total assets

381,353376,210(5,143)

Total liabilities

262,713

256,931(5,782)

Net assets

118,639

119,278638Interest-bearing liabilities

215,727

206,236(9,490)(Note) Interest-bearing liabilities are comprised of short-term loans payable, current portion of bonds, current portion of long-term loans,bonds, long-term loans payable, and long-term accounts payable.

Total assets
As of March 31, 2022, total assets amounted to ¥376,210 million, a decrease of ¥5,143 million compared with March 31, 2021.
Among the factors underlying this result, real estate for sale decreased by ¥10,638 million and investment securities decreasedby ¥4,199 million. These and other items more than offset increases in assets, including an increase in tangible fixed assets of¥10,641 million, which reflected the acquisition of the Kabutocho Heiwa Dia Building (Chuo-ku, Tokyo), construction costoutlays for KABUTO ONE (Chuo-ku, Tokyo), and the consolidation of LA3 Inc. and Kabutocho 12 Inc., which had previously
been non-consolidated subsidiaries.
In the consolidated balance sheets, the combined balance of leased property and real estate of which a portion was leased was¥276,714 million as of March 31, 2022, an increase of ¥12,225 million compared with April 1, 2021, and, as of those respective
dates, had a market value of ¥388,980 million, an increase of ¥12,083 million.
Total liabilities
As of March 31, 2022, total liabilities amounted to ¥256,931 million, a decrease of ¥5,782 million compared with March 31,
2021. The main factor underly this result was a decrease in interest-bearing liabilities of ¥9,490 million, which offset an increase- 14 -

in income taxes payable of ¥2,962 million, among other items.
As of March 31, 2022, the balance of interest-bearing liabilities was ¥206,236 million, and the net debt-to-equity ratio stoodat 1.5. The Company has set a net debt-to-equity ratio target of 1.8 in its medium-term management plan, Challenge & Progress,
and will aim to keep the ratio within this range.
Net assets
As of March 31, 2022, net assets stood at ¥119,278 million, an increase of ¥638 million compared with March 31, 2021. Thiswas mainly the result of an increase in retained earnings of ¥5,517 million, which more than offset decreases due to purchase oftreasury shares of ¥2,810 million, and unrealized gain on securities of ¥2,119 million.
The Company implemented concrete measures to raise capital efficiency and return stable profits to shareholders, including
an acquisition of 636,600 of its treasury shares in the fiscal year under review.
The Company’s recognition and analysis of its financial position and operating results by business segment along with related
issues for consideration are as follows.
Analysis of financial position
As of March 31, 2022, Building Business segment assets amounted to ¥310,089 million, down ¥960 million compared with ayear earlier. This decrease was mainly due to a decrease in real estate for sale, which resulted from sell-offs of properties, as well
as a decrease in real estate for sale in process. These and other items offset an increase in tangible fixed assets, which reflected
the acquisition of the Kabutocho Heiwa Dia Building (Chuo-ku, Tokyo), construction cost outlays for KABUTO ONE (Chuoku, Tokyo), and the consolidation of LA3 Inc. and Kabutocho 12 Inc., which had previously been non-consolidated subsidiaries.
Asset Management Business segment assets totaled ¥24,854 million, up ¥785 million compared with a year earlier. This was
mainly due to an increase in investment securities, which resulted from acquisitions of investment units of Heiwa Real Estate
REIT, Inc.
Segment assets(Millions of yen)March 31, 2021

March 31, 2022

Difference

Building Business

311,050

310,089(960)

Asset Management Business

24,06924,854785

Adjustments

46,234

41,265(4,968)381,353376,210(5,143)

Amount in consolidated financial statements

Analysis of operating results
Operating results for each segment are presented above in Part 2 Business Overview, 2. Management’s Analysis of Financial
Position, Operating Results, and Cash Flows, (1) Overview of financial results, 1) Financial position and operating results.
2) Analysis of cash flows, issues for consideration, and sourcing and liquidity of funds
An analysis of cash flows in the fiscal year under review is presented above in Part 2 Business Overview, 2. Management’s
Analysis of Financial Position, Operating Results, and Cash Flows, (1) Overview of financial results, 2) Cash flows.
The Group’s sources of funds include cash inflows from its business activities, loans from financial institutions, and bonds
issued by the Company. The funds it secures are allocated in a manner that ensures a sound balance between working capital,
shareholder returns, internal reserves needed for maintaining stable operations, and investment for future growth, such asredevelopment and building businesses. The Group’s working capital is mainly used to pay expenses for the operation of businessassets, operating expenses, including selling, general and administrative expenses, and non-operating expenses, such as interest
expenses.
As a basic policy, the Company maintains an appropriate level of discipline when financing and procuring funds, using thenet debt-to-equity ratio as an indicator of financial discipline. As of March 31, 2022, interest-bearing liabilities, which include
loans and corporate bonds, stood at ¥206,236 million, net interest-bearing liabilities, which exclude marketable securities andcash and deposits from interest-bearing liabilities, amounted to ¥178,009 million, and the net debt-to-equity ratio came to 1.5.
The Company will return profits to shareholders based on the assumption that its businesses, particularly the redevelopment
and building businesses, will operate stably over the long term, and sufficient internal reserves for raising shareholder value will

- 15 -

be secured. As a basic policy, the Company will aim for a consolidated total shareholder return ratio of 70% from fiscal 2020 to2023, taking into account returns on business investments while focusing on capital cost and capital efficiency. In accordancewith this policy, the Company expects to pay dividends totaling ¥3,489 million for fiscal 2021 and acquired a total of ¥2,499
million in treasury shares during the same year. As a result, the consolidated total shareholder return ratio is expected to reach
68.8%.
3) Significant Accounting Policies and Estimates
The Group prepares its consolidated financial statements in accordance with accounting standards generally accepted in Japan.
When preparing these statements, accounting estimates are made based on reasonable standard.
More details are presented in Part 3 Financial Reporting, Consolidated Financial Statements, 6. Notes to the Consolidated
Financial Statements, Note 2 Significant Accounting Policies.
Accounting estimates are necessary for the impairment of fixed assets and valuation of real estate for sale, in particular.
Information concerning the impact of uncertainty inherent in such estimates and assumptions as well as changes therein on
operating results is presented in Part 3 Financial Reporting, Consolidated Financial Statements, 6. Notes to Consolidated
Financial Statements, Note 3 Significant Accounting Estimates.
Information concerning the impact of the COVID-19 pandemic is presented in Part 3 Financial Reporting, Consolidated
Financial Statements, 6. Notes to Consolidated Financial Statements, Note 5 Additional Information.

- 16 -

Additional information
1. Building Business
Breakdown of operating revenue, segment income, and depreciation
Fiscal 2020
Classification
Operating Segment income
Depreciation
revenue(loss)(Millions of yen)
Operatingrevenue

Fiscal 2021
Segment income(loss)

Depreciation

Leasing revenue

22,624

9,086

5,017

26,111

10,083

5,344

Revenue from sales ofproperties

8,160

2,155

—

26,770

2,511

—

Other

1,521

(265)

4

1,552

(195)

4

32,306

10,9755,021

54,433

12,399

5,349

Total

(Note) Leasing revenue includes sales and expenses associated with the operations of restaurants. These operations contributed ¥83
million to operating revenue, reduced segment incomed by ¥67 million, and accounted for ¥17 million in depreciation in fiscal
2020, and contributed ¥117 million to operating revenue, reduced segment incomed by ¥130 million, and accounted for ¥37
million in depreciation in fiscal 2021.
2. Asset Management Business
Breakdown of operating revenue, segment income, and depreciation
Fiscal 2020
Classification
OperatingSegment
Depreciation
revenueincome(Millions of yen)
Operatingrevenue

Fiscal 2021
Segment
incomeDepreciation

Asset management revenue

2,071

1,502

7

2,192

1,606

8

Brokerage commissions

671

118

8

1,191

371

7

2,742

1,621

15

3,384

1,977

16

Total

- 17 -

Part 3 Financial Reporting
Consolidated Financial Statements
１．Consolidated Balance Sheets(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
AssetsCurrent assets
Cash and deposits (Note 13)
Accounts receivable–trade (Note 7, 13 and 21)
Marketable securities (Notes 13 and 14)
Real estate for sale (Note 7)
Real estate for sale in process (Note 7)
Other inventories
Operating investment (Notes 13 and 14)
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings and structures (Note 7)
Accumulated depreciation
Buildings and structures, net (Note 7)
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net(Note 7)
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net (Note 7)
Land (Note 7)
Construction in progress (Note 7)
Total tangible fixed assets
Intangible fixed assets
Leasehold rights (Note 7)
Other
Total intangible fixed assets
Investments and other assets
Investment securities (Notes 7, 13 and 14)
Long-term loans to employees
Deferred tax assets (Note 18)
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Deferred assets
Bond-issuing cost
Total deferred assets
Total assets- 18 -

Fiscal 2021
(As of March 31, 2022)

29,6851,633
16
30,261
834
1
1,684
3,850
(26)
67,942

23,211
1,809
5,014
19,623
251
—
1,624
2,038
(25)
53,548

163,896(89,763)
74,133
2,236(1,909)172,795(89,847)
82,9472,279(1,787)

327

492

1,913
(1,523)389
154,043
9,843
238,737

2,087(1,527)560
163,6241,754
249,379

26,61897
26,71628,560251
28,811

43,265
0
155
4,310
(0)
47,732
313,185

39,066
—
156
5,079
—
44,301
322,492

224
224
381,353

169
169
376,210(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
Liabilities
Current liabilities
Accounts payable–trade (Note 13)
Current portion of bonds payable (Notes 13 and 25)
Short-term loans payable (Notes 13 and 25)
Current portion of long-term loans
Income taxes payable (Note 18)
Accrued consumption taxes
Accrued bonuses for directors
Accrued bonuses
Asset retirement obligations (Note 19)
Other (Note 7, 21 and 25)
Total current liabilities
Long-term liabilities
Bonds payable (Notes 13 and 25)
Long-term loans payable (Notes 13, 15 and 25)
Long-term accounts payable (Notes 13 and 25)
Leasehold and guarantee deposits received(Note 13)
Deferred tax liabilities (Note 18)
Deferred tax liabilities for land revaluation(Note 7)
Provision for share-based remuneration
Retirement benefit liability (Note 16)
Asset retirement obligations (Note 19)
Other (Note 25)
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Unrealized gain on securities
Land revaluation surplus (Note 7)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

- 19 -

Fiscal 2021
(As of March 31, 2022)

1,818
1,891
9,250
26,961
337
77
86
213
1
1,753
42,391

3,367
4,327
3,800
13,077
3,300
96
118
250
—
2,372
30,71028,216
145,408
4,000

23,889157,143
4,000

22,82922,514

11,378

10,170

7,663

7,613

47
115
662
0
220,322262,713

101
119
669
—
226,221
256,931

21,492
19,72044,740(4,496)81,457

21,492
19,72050,258(7,306)
84,16520,187
16,99537,182
118,639
381,353

18,06817,045
35,113
119,278
376,210

２．Consolidated Statements of Income(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Operating revenue (Note 8, 21 and 22)
Operating costs (Note 8)
Gross profit
Selling, general and administrative expenses
Salaries and allowances
Provision of accrued bonuses for directors
Provision of accrued bonuses
Provision for share-based remuneration
Retirement benefit costs
Commission fee
Other
Total selling, general and administrative expenses
Operating income (Note 22)
Non-operating income
Interest income
Dividends earned
Miscellaneous non-operating income
Total non-operating income
Non-operating expenses
Interest expenses
Amortization of bond issuance cost
Miscellaneous non-operating expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of fixed assets (Note 8)
Gain on sales of investment securities
Total extraordinary income
Extraordinary loss
Loss on sales of fixed assets (Note 8)
Loss on disposal of fixed assets (Note 8)
Loss on building reconstruction (Note 8)
Impairment loss (Note 8 and 22)
Total extraordinary loss
Income before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes (Note 18)
Net income
Net income attributable to owners of parent
See notes to consolidated financial statements.

- 20 -

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

35,048
19,687
15,361

57,81840,126
17,691

1,397
87
137
26
33
496
1,953
4,132
11,228

1,547
121
169
53
88
725
2,371
5,076
12,615

10
445
65
522

5
534
45
585

1,331
54
120
1,506
10,244

1,414
56
158
1,628
11,572

—
—
—

344
761
1,106

1
18
—
8
27
10,216
1,745
1,351
3,097
7,118
7,118

—
49
82
2
133
12,544
4,113
(274)
3,839
8,705
8,705

３．Consolidated Statements of Comprehensive Income(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Net income
Other comprehensive income (Note 9)
Unrealized gain on securities
Land revaluation surplus
Total other comprehensive income
Comprehensive income (Note 9)Comprehensive income attributable to:
Owners of parent
See notes to consolidated financial statements.

- 21 -

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

7,118

8,705

8,602
—
8,602
15,721(2,119)49(2,069)6,635

15,721

6,635

４．Consolidated Statements of Changes in Net Assets
Fiscal 2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)
Shareholders’ equity
Common stock
Balance at the beginning of theperiodCapital surplus

21,492Retained earnings

19,72039,996

Total shareholders’equityTreasury shares(2,487)78,722

Change during the period
Distribution of surplus(2,375)(2,375)

Net income attributable toowners of parent

7,118

7,118

—

—

Changes in scope of
consolidation
Acquisition of treasury shares
Disposal of treasury shares(2,011)(2,011)2

20

Net changes of items otherthan shareholders’ equity
Total change during the period

—

0

4,743

(2,008)2,735

Balance at the end of the period

21,492

19,72044,740(4,496)81,457

Accumulated other comprehensive income
Unrealized gain on
securities
Balance at the beginning of theperiod11,584

Total accumulated
other comprehensive
incomeLand revaluation
surplus16,99528,579Total net assets

107,302

Change during the period
Distribution of surplus(2,375)

Net income attributable toowners of parent

7,118

Changes in scope of
consolidation—

Acquisition of treasury shares(2,011)

Disposal of treasury shares

2

Net changes of items otherthan shareholders’ equity

8,602

—

8,602

8,602

Total change during the period

8,602

—

8,602

11,337

Balance at the end of the period

20,187

16,99537,182

118,639- 22 -

Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)
Shareholders’ equity
Common stock
Balance at the beginning of theperiodCapital surplus

21,492Retained earnings

19,720Total shareholders’equityTreasury shares

44,740(4,496)81,457

Change during the period
Distribution of surplus(3,189)(3,189)Net income attributable toowners of parent

8,705

8,705

2

2

Changes in scope of
consolidation
Acquisition of treasury shares
Disposal of treasury shares(2,810)(2,810)0

00

Net changes of items otherthan shareholders’ equity
Total change during the period

—

0

5,517

(2,810)2,708

Balance at the end of the period

21,492

19,72050,258(7,306)

84,165

Accumulated other comprehensive income
Unrealized gain on
securities
Balance at the beginning of theperiod20,187

Total accumulated
other comprehensive
incomeLand revaluation
surplus16,99537,182

Total net assets

118,639

Change during the period
Distribution of surplus(3,189)Net income attributable toowners of parent

8,705

Changes in scope of
consolidation2

Acquisition of treasury shares(2,810)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity(2,119)49(2,069)(2,069)Total change during the period(2,119)49(2,069)638

Balance at the end of the period

18,06817,045

35,113

119,278

See notes to consolidated financial statements.

- 23 -

５．Consolidated Statements of Cash Flows(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Cash flows from operating activities
Income before income taxes
Depreciation
Loss on disposal of fixed assets
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in accrued bonuses
Increase (decrease) in retirement benefit liability
Interest and dividends income
Interest expenses
Amortization of bond issuance cost
Loss (gain) on sale of investment securities
Loss (gain) on sales of fixed assets
Decrease (increase) in notes and accounts receivable –trade
Decrease (increase) in inventories
Decrease (increase) in operating investments
Decrease (increase) in prepaid expenses
Decrease (increase) in accounts receivable – other
Increase (decrease) in notes and accounts payable –trade
Increase (decrease) in advances received
Increase (decrease) in accrued consumption taxes
Increase (decrease) in deposits received
Increase (decrease) in leasehold and guarantee deposits
received
Other
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by operating activities- 24 -

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

10,216
5,077
18
8
24
2
(176)
(456)
1,331
54
—
1

12,544
5,418
49
2
(1)
36
4
(540)
1,414
56
(761)
(344)

(512)

(175)

(410)
(1,199)6(758)

18,578
60
(25)
(895)

(188)

274

49
(1,320)
(14)

(66)
19
633

609

(281)

793
13,157462(1,320)(4,006)8,292

144
36,144540(1,407)(1,088)34,189(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Cash flows from investing activities
Decrease (increase) in time deposits
Purchase of marketable securities
Proceeds from sales and redemption of securities
Purchase of investment securities
Proceeds from sales and redemption of investment
securities
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchase of intangible fixed assets
Purchase of long-term prepaid expenses
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for asset retirement obligations
Other
Net cash used in investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury shares
Payment of dividends
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Increase (decrease) in cash and cash equivalents
Balance of cash and cash equivalents at beginning of
periodIncrease (decrease) in cash and cash equivalents resulting
from change in scope of consolidation
Balance of cash and cash equivalents at end of period(Note 11)
See notes to consolidated financial statements.

- 25 -

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

500
—
1,003
(296)

—
(2,000)2,016(1,632)

97986(26,894)
4(4,231)
(180)
(198)
14
(20)
1
(30,200)(18,218)984(2,156)
(498)
(237)
42
(1)
11
(20,705)

3,000
27,150(6,307)7,000(2,092)(2,015)(2,366)(40)
24,327(5,450)25,010(27,159)—(1,891)(2,820)(3,176)(2)(15,490)

—

—

2,419

(2,006)27,166

29,585—532

29,585

28,111

６．Notes to Consolidated Financial Statements
Note 1 － Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Heiwa Real Estate Co., Ltd.(the “Company”) and its subsidiaries (collectively,
the “Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japanand its related accounting regulations, and accounting principles generally accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP, and translated into English for the benefit of readers outside Japan. In addition,
the notes to the consolidated financial statements include information which may not be required under Japanese GAAP but ispresented herein as additional information.
Note 2 － Significant Accounting Policies
1. Scope of consolidation(1) Consolidated subsidiaries: 4Names 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(2) Changes in the scope of consolidation
Previously non-consolidated subsidiaries LA3 Inc. and Kabutocho 12 Inc. had been included in the scope of consolidation during
the third quarter of the fiscal year under review because their qualitative importance increased; however, both subsidiaries weredissolved following their absorption by the Company through a merger during the fourth quarter, and, therefore, have been
excluded from the scope of consolidation in the fiscal year under review.
(3) Names, etc. of major non-consolidated subsidiaries
Major non-consolidated subsidiaries
The Company has no major non-consolidated subsidiaries to report.
(Reason for exclusion from scope of consolidation)
All non-consolidated subsidiaries are small-scale businesses and their aggregated total assets, net sales, net income/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 or affiliates not accounted for using the equity method
The Company has no major non-consolidated subsidiaries or affiliates to report.
(2) Reason for exclusion from application of equity method accounting
A non-consolidated subsidiary or affiliate not accounted for using the equity method is excluded from the scope of application ofequity method accounting because its net income/loss (corresponding to the equity owned by the Company) and retained earnings(corresponding to the equity owned by the Company), etc. have an immaterial effect on the consolidated financial statements, andis insignificant as a whole.
3. Accounting policy(1) Method and basis of valuation of significant assets
1) Securities
Held-to-maturity bonds
Held-to-maturity bonds are valued at cost, with cost being determined using the amortized cost method (straight-line method).
Available-for-sale securitiesa) Investments other than stocks without quoted market prices
The market value method is used for investments other than stocks without quoted market prices (differences in valuation
are included directly in net assets, and costs of securities sold are calculated using the moving-average method).
b) Stocks without quoted market prices
They are mainly valued at cost determined using the moving-average method.
2) Inventory
Inventories are valued at cost determined by the specific identification method (the value on the consolidated balance sheet isappraised by the write-down of the book value of inventories based on the deterioration of profitability).

- 26 -

(2) Depreciation method for significant depreciable assets
1) Tangible fixed assets (excluding lease assets)
Depreciation of tangible fixed assets is computed using the declining balance method, except for the Tokyo Stock Exchange
Building, two other buildings, 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 straight-line method is used.
Depreciation of consolidated subsidiaries’ tangible fixed assets is computed using the straight-line method.
The principal useful lives of tangible fixed assets are as follows:
Buildings and structures: 2 – 65 years
Machinery, equipment, and vehicles 2 – 30 years
Tools, furniture and fixtures 2 – 20 years
2) Intangible fixed assets (excluding lease assets)
Amortization of intangible fixed assets is computed using the straight-line method. The cost of software for internal use isamortized using the straight-line method based on the expected useful life of the software (five years).
3) Lease assets
Lease assets are depreciated to a residual value of zero using the straight-line method over the lease period.
(3) Method of accounting for significant deferred assets
Bond issuance cost
Bond issuance cost is amortized using the straight-line method over the period until bond redemption.
(4) Basis of accounting for significant accruals and reserves
1) Allowance for doubtful accounts
An allowance for doubtful accounts is provided to cover losses on bad debts at an amount estimated based on the historical writeoff ratio for general accounts receivables. For doubtful accounts receivable, the allowance is determined at the amount estimatedto be uncollectible on an individual basis.
2) Accrued bonuses for directors
The accrual for bonuses to directors is calculated based on the estimated payments.
3) Accrued bonuses
The accrual for bonuses to employees is calculated based on the estimated payments.
4) Provision for share-based remuneration
The provision for share-based remuneration was calculated based on the expected amount of stock compensation obligations asof the end of the fiscal year under review in order to provide the Company’s stock as compensation to directors and executive
officers in accordance with its share-based remuneration rules, and as compensation to employees in accordance with share-based
remuneration rules concerning the trust for the Company’s stock compensation plan for employees.
(5) Accounting for retirement benefits
In order to provide the retirement benefits of employees and pension recipients, retirement benefit liability is calculated at an
amount equal to the projected benefit obligation as of the end of the fiscal year under review minus the fair value of pension
assets. Retirement benefit liability is not calculated at any consolidated subsidiary that has a defined contribution retirement plan.
(6) Basis for calculating significant revenues and expenses
Details about the primary performance obligations of the Heiwa Real Estate Group’s main businesses that generate revenue fromcontracts with customers, and the points in time when such performance obligations are generally satisfied (the points in time
when revenues are generally recognized) are as follows.
1) Building Business
Revenue from sales of properties
The Company generates revenue from sales of properties by increasing the value of properties it has acquired throughredevelopment, 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 satisfied at the time of delivering a property, and revenue is recognized once the property
is delivered.

- 27 -

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 tomanage properties, handle leasing and financing, and acquire and transfer ownership of properties.
Its performance obligations to manage properties and handle leasing and financing are satisfied by providing these services
over their specified periods of time, and revenue is recognized in proportion to the degree these performance obligations are
satisfied.
Its performance obligations to acquire and transfer ownership of properties are satisfied once an acquisition or transfer of aproperty has been completed, and revenue is recognized at either of those points in time.
(7) Method of significant hedge accounting
1) Method of hedge accounting
The special treatment applies to interest rate swaps because they meet the requirements.
2) Hedging instruments and hedged items
Hedging instruments: interest rate swaps
Hedged items: interest rates of loans payable3) Policy of hedging transactions
Interest rate swap transactions are conducted to reduce the exposure to fluctuations in the interest rates of loans payable.
4) Method of assessing hedge effectivenessThe assessment of hedge effectiveness on the closing date is omitted because interest rate swaps meet the requirements forreceiving special treatment.
(8) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks that can be withdrawn on demand, and short-term investmentswith maturities of three months or less from the acquisition date, which are highly liquid instruments that can be easily converted
into cash and are exposed to little risk of change in value.
(9) Other important matters for the preparation of consolidated financial statements
Accounting for consumption taxes
In principle, non-deductible consumption taxes were charged as expenses in the fiscal year under review.

Note 3 － Significant Accounting Estimates
1. Impairment of fixed assets(1) Amounts recorded in the consolidated financial statements for the fiscal year under review(Millions of yen)
Fiscal 2020

Fiscal 2021

Tangible fixed assets(Mainly in the Building Business segment)

238,737

249,379

Leasehold rights among intangible fixed assets(In the Building Business segment)

26,61828,56082

Impairment loss

(2) Information on the details of the significant accounting estimates for identified items
In principle, individual assets that generate cash flow independently from other asset groups are recognized as the minimum
unit for indications of impairment.
Indications of impairment include recurring operating losses, significant deteriorating of the business environment, andsignificant declines in market value.
If indications of impairment are deemed to exist, the Company will decide whether to recognize an impairment loss. If
recording an impairment loss is deemed necessary, the Company will compare the undiscounted future cash flow with the bookvalue, and if the undiscounted future cash flow is less than the book value, the Company will reduce the book value to arecoverable amount (either the net sales price or the value in use, whichever is higher), and record the reduced book value as an
impairment loss.
The Group sets market values based on the real estate appraisal value determined by external real estate appraisers (hereafter,“externally appraised real estate value”). Recoverable amounts are estimated based on the externally appraised real estate value
and the asset group’s operating results and forecast, which includes the assumption that future results will improve after the- 28 -

impact of the COVID-19 pandemic subsides.
Due to the prolonged impact of the COVID-19 pandemic, the operating results of certain assets worsened markedly,
specifically five hotels (some of which also have office space) located in Sapporo, Tokyo, and Osaka with a combined bookvalue of ¥23,154 million. Therefore, as in the previous fiscal year, the Company determined that there were indications of
impairment and examined whether an impairment loss should be recorded. It decided not to record an impairment loss in thefiscal year under review, however, because the sum of the undiscounted future cash flow as well as the externally appraised realestate value exceeded the book value.
In addition, for its real estate redevelopment projects in Tokyo (Nihonbashi Kabutocho and Kayabacho districts) and Sapporo,
the Company groups together multiple assets from the time when redevelopment plans are deemed feasible based on negotiations
with landowners.
The impact of the COVID-19 pandemic and the feasibility of development projects in the future remain uncertain. Due tothese and other factors, the Company may need to recognize impairment losses in the future, which could impact its consolidated
financial results.
2. Valuation of real estate for sale(1) Amounts recorded in the consolidated financial statements for the fiscal year under review.
(Millions of yen)
Fiscal 2020

Fiscal 2021

Real estate for sale(In the Building Business segment)

30,261

19,623

Real estate for sale in process(In the Building Business segment)

834

251

Loss on revaluation of inventories (recorded in cost of sales)48—(2) Information on the details of the significant accounting estimates for identified items
The net sales price of real estate for sale and real estate for sale in process is estimated based on the expected sales price minus
the expected amount of site preparation and building construction costs and the expected amount of selling expenses. If the net
sales price is less than the book value, the difference is recorded in cost of sales as a loss on revaluation of inventories.
To estimate the expected sales price, the Group takes into account the externally appraised real estate value, its rental rates
and forecast yields, and the impact of falling demand in the future, among other factors.
As of March 31, 2022, the Group had estimated the expected sales prices of its residential buildings based on its rental rates
and forecast yields, and assumed no major fluctuations in rental rates and forecast yields in the real estate market going forward.
This assumption could change in the future, however, as falling demand in the real estate market could lead to a decline in
expected sales prices of properties. In that event, the Company may record a loss on revaluation of inventories, which could impact
its consolidated financial results.
Note 4 － Changes in accounting policies
1. Adoption of accounting standard related to revenue recognition
Effective from April 1, 2021, the Company adopted the Accounting Standard for Revenue Recognition (Statement No. 29) issued
by the Accounting Standards Board of Japan on March 31, 2020. Accordingly, the Company recognizes the fees it expects toreceive for promised goods or services as revenues at the time when those goods or services have been delivered.
Due to this change, the Company has changed its method for recognizing revenue received from building tenants for utilities
fees. Specifically, this revenue had previously been deducted from operating costs, but after determining the roles (principal or
agent) involved in providing goods or services to customers, this revenue in the gross amountis now included in operating revenue.
With the adoption of the Accounting Standard for Revenue Recognition, the Company began applying a new accounting policy
from April 1, 2021. If this new accounting policy was applied retroactively before April 1, 2021, in accordance with the transitional
treatment stipulated in Paragraph 84 of the standard, cumulative effects would be added or deducted from retained earnings as ofApril 1, 2021, with the balance used for the new policy starting from that date. The Company, however, having applied the method
stated in Paragraph 86 of the standard, did not apply this new accounting policy retroactively to revenue amounts in contracts forwhich almost all of those amounts prior to April 1, 2021, had been recognized in accordance with the previous accounting
treatment.
As a result of these changes, operating revenue and cost of sales each increased by ¥1,141 million in the fiscal year underreview. There was no impact, however, on results for operating income, ordinary income, income before income taxes, or retained- 29 -

earnings.
In addition, in accordance with the transitional treatment subject to Paragraph 89-3 of the Accounting Standard for Revenue
Recognition, a note regarding revenue recognition for the previous fiscal year was not presented.
2. Adoption of accounting standard related to fair value measurement
Effective from April 1, 2021, the Company adopted the Accounting Standard for Fair Value Measurement (Statement No. 30)
issued by the Accounting Standards Board of Japan on July 4, 2019. Accordingly, the Company began applying a new
accounting policy based on this standard in accordance with the transitional treatment stipulated in Paragraph 19 of the standard,
as well as Paragraph 44-2 of the Accounting Standard for Financial Instruments (Statement No. 10), also issued by the board on
July 4, 2019. These changes had no impact on the Company’s consolidated financial statements for the fiscal year under review.
In addition, items falling under different levels of the fair value of financial instruments have been presented in Note 12 －“Financial Instruments.” In accordance with the transitional treatment stipulated in Paragraph 7-4 of the revised Implementation
Guidance on Disclosures about Fair Value of Financial Instruments (Guidance No. 19), also issued by the board on July 4, 2019,
this note for the previous fiscal year was not presented.

Note 5 － Unapplied Accounting Standards
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, issued on June 17, 2021)(1) Overview
A revised version of the Implementation Guidance on Accounting Standard for Fair Value Measurement (Guidance No. 31) was
issued by the Accounting Standards Board of Japan on June 17, 2021, over one year after the issuance of the Accounting Standard
for Fair Value Measurement on July 4, 2019, because a certain amount of time was deemed necessary to consult with relevant
parties about how to estimate the fair value of investment trusts, and some consideration was needed for notes on the fair value ofinvestment in partnerships for which the net amount of equity stakes are recorded in balance sheets.
(2) Scheduled date of application
The Company applied the accounting standards, etc. from April 1, 2022.
(3) Impact of applying the accounting standards, etc.
The impact of applying the Implementation Guidance on Accounting Standard for Fair Value Measurement on the consolidated
financial statements was being assessed at the time of issuing this report.

Note 6 － Additional Information
1. Performance-linked stock compensation plan for directors and executive officers
Pursuant to a resolution of the 99th Ordinary General Shareholders’ Meeting held on June 26, 2019, the Company adopted aperformance-linked stock compensation plan for directors (excluding external directors and non-residents of Japan) and executive
officers (excluding non-residents of Japan), 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
directors and executive officers under the plan. Through the trust, company stock or a cash amount equivalent to the value of thestock is delivered to the directors and officers in an amount commensurate with the number of points each has earned based onshare-based remuneration rules set by the Company’s Board of Directors. As a rule, directors and officers 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. The book value of the applicable treasury shares amounted to ¥137 million as of March 31,
2021, and ¥137 million as of March 31, 2022, and the amount of stock totaled 59,300 shares as of March 31, 2021, and 59,300
shares as of March 31, 2022.

- 30 -

2. Establishment of an employee stock ownership plan
Following a resolution by its Board of Directors on May 18, 2021, the Company established an employee stock ownership plan
as an incentive plan for its employees.
1) Overview of the ownership plan
The plan provides employees with the Company’s stock or a cash amount equivalent to the market value of the stockcommensurate with a number of points awarded based on share-based remuneration rules concerning the trust for theCompany’s stock compensation plan for employees set by the Board of Directors. The shares for the plan are acquired by atrust 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 isincluded in treasury shares under net assets. As of March 31, 2022, the book value of the applicable treasury shares amounted
to ¥298 million, and the amount of stock totaled 71,100 shares.
3. Accounting estimates related to the impact of the COVID-19 pandemic
While the impact of the COVID-19 pandemic on consolidated profit and loss has been limited, the Group’s management assumes
that the pandemic will continue having a certain degree of impact on accounting estimates, such as the impairment of fixed assets
and recoverability of deferred tax assets, based on information available at the time of preparing the consolidated financial
statements.

- 31 -

Note 7 － Consolidated Balance Sheets
1. Net balances of receivables from contracts with customers, contract assets, and contract liabilities are as follows:(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Receivables from contracts with customers (Note 1)
197
Contract assets (Note 1)
465
Contract liabilities (Note 2)25(Notes) 1. Receivables from contracts with customers and contract assets are included in “accounts receivable–trade.”
2. Contract liabilities are included in “other” under “current liabilities.”

2. Guarantees liabilities
The Company-guaranteed loans owed by employees to financial institutions are as follows:(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
Housing loans for employees of Heiwa Real
Estate Co., Ltd.

Fiscal 2021
(As of March 31, 2022)
157

Housing loans for employees of Heiwa Real
Estate Co., Ltd.

142

3. 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), the Company 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 ofdeferred taxes, are reported as “land revaluation surplus” 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 of land values thatserve 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, Paragraph 4 of the Order for Enforcement of Act on Revaluation ofLand (Cabinet Order No. 119 of March 31, 1998).
- Date of revaluation: March 31, 2001
- Since the fair value of the revalued land exceeded the carrying value of the land after the revaluation as of March 31, 2021,
and March 31, 2022, the difference between the amounts has not been stated.

4. Items relevant to non-consolidated subsidiaries and affiliates are as follows:(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
Investment securities

Fiscal 2021
(As of March 31, 2022)
2,512

—

5. Assets included under investment securities are as follows:(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
Investment units of Heiwa Real Estate REIT,
Inc.

21,628(139,179 units)- 32 -

Fiscal 2021
(As of March 31, 2022)
22,047(147,179 units)

6. Amount of reduction entry associated with state subsidies, etc.
The following is the amount of reduction entry deducted from acquisition costs resulting from the receipt of state subsidies, etc.
(Millions of yen)
Fiscal 2020
(As of March 31, 2021)

Fiscal 2021
(As of March 31, 2022)

Real estate for sale
Buildings and structures

—
288

48
239

Total

288

288

7. The amounts below were transferred due to a change in their purpose of ownership(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
Transferred from fixed assets to real estate forsale

Fiscal 2021
(As of March 31, 2022)
5,239

7,355

Note 8 － Consolidated Statements of Income
1. Revenues from contracts with customers
Revenues from contracts with customers and revenues other than those from contracts with customers are not recorded
separately under operating revenue. Revenues from contracts with customers are shown as follows.
(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
32,087

2. Ending balances of inventories indicate an amount after write-down due to deteriorating profitability, and the loss on revaluationof inventories stated below is included in the cost of sales.
(Millions of yen)
Fiscal 2021
Fiscal 2020
(From April 1, 2021 to(From April 1, 2020 toMarch 31, 2022)
March 31, 2021)
48—

3. Details of gains on sales of fixed assets are as follows:

Buildings and structures, etc.
Land

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
—
—

Total

—

- 33 -(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
139
204
344

4. Details of losses on sales of fixed assets are as follows:
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
00

Buildings and structures, etc.
Land
Total

(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
—
—

1

—

5. Details of losses on disposal of fixed assets are as follows:

Buildings and structures
Other

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
17
1

Total

18

(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)45
349

6. Loss on building reconstruction are construction costs associated with KABUTO ONE

7. Impairment losses
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Location
Abiko City, Chiba

Principal use
Parking lot

Category
Land

Impairment losses¥8 million

The Group recorded impairment losses on the asset group above. Upon the calculation of the impairment losses, the Group groups
assets based on the minimum unit generating cash flows in a manner largely independent of cash flows provided by other assets orasset groups.
The book values of real properties for lease with declines in profitability were written down to a recoverable amount. The Group
recorded the amount written off as impairment losses in extraordinary losses (¥8 million).
The recoverable amount of the above asset group is determined by net sales value. For the net sales value, the Group uses theindices which are considered as reflecting appropriate market prices.
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Location
Abiko City, Chiba

Principal use
Sports facilities

Category
Land

Impairment losses¥2 million

The Group recorded an impairment loss on the asset group above. Upon the calculation of the impairment losses, the Group groups
assets based on the minimum unit generating cash flows in a manner largely independent of cash flows provided by other assets orasset groups.
The book values of real properties with declines in profitability were written down to a recoverable amount. The Group recorded
the amount written off as impairment losses in extraordinary losses (¥2 million).
The recoverable amount of the above asset group is determined by net sales value. For the net sales value, the Group uses theindices which are considered as reflecting appropriate market prices.

- 34 -

Note 9 － Consolidated Statements of Comprehensive Income
Reclassification adjustment and tax effect related to other comprehensive income(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

12,399—(2,289)(764)

Before tax effect adjustment
Tax benefit (expense)

12,399(3,796)(3,054)935

Unrealized gain on securities

8,602(2,119)

—

49

8,602

(2,069)Unrealized gain on securities:
Unrealized gain on securities in the fiscal year
Reclassification adjustment

Land revaluation surplus:
Tax benefit (expense)
Total other comprehensive income- 35 -

Note 10 － Consolidated Statements of Changes in Net Assets
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
1. Type and number of shares issued and treasury shares(Number of shares)
At the beginning of
the fiscal year

Increase in the fiscal
year

Decrease in thefiscal year

At the end of the
fiscal year

38,859,996——

38,859,996

Total

38,859,996——

38,859,996

Common shares (Notes 1, 2, 3).

1,041,458

629,569

1,160

1,669,867

Total

1,041,458

629,569

1,160

1,669,867

Shares issued
Common shares

Treasury shares(Notes) 1. The 629,569 common shares of treasury shares that increased were comprised of 625,900 shares acquired by the Company
pursuant to a resolution of the Board of Directors and 3,669 odd-lot shares acquired.
2. The 1,160 common shares of treasury shares that decreased were comprised of 900 shares provided to the trust for theCompany’s stock compensation plan for directors and executive officers, and 260 odd-lot shares sold.
3. The total number of common shares of treasury shares as of March 31, 2021, included 59,300 shares held in the trust for theCompany’s stock compensation plan for directors and executive officers.
2. Dividends(1) Payments of dividends(Resolution)

Type of shares

Total amount ofdividends(millions of yen)

Ordinary General
Shareholders’ Meeting
held on June 24, 2020

Common shares

1,174

October 30, 2020
Meeting of Board of
Directors

Common shares

1,200

Dividend per share(yen)

Record date

Effective date

31.0

March 31, 2020

June 25, 2020

32.0

September 30, 2020

December 1, 2020

(Notes) 1. The total amount of dividends resolved at the Ordinary General Shareholders’ Meeting held on June 24, 2020, included ¥1
million in dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for
directors and executive officers.
2. The total amount of dividends resolved at the Board of Directors meeting held on October 30, 2020, included ¥1 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers.
(2) Dividends with a record date falling in the consolidated fiscal year ended March 31, 2021 and an effective date falling in the
consolidated fiscal year ended March 31, 2022
(Resolution)

Type of shares

Ordinary General
Shareholders’Common shares
Meeting held on June24, 2021

Total amount ofdividends(millions of yen)

1,676

Source ofdividends

Dividend pershare (yen)Retainedearnings

45.0

Record date

Effective date

March 31, 2021

June 25, 2021

(Note) The total amount of dividends included ¥2 million in dividends for the Company’s stock held as trust assets in the trust for theCompany’s stock compensation plan for directors and executive officers.

- 36 -

Fiscal 2021 (From April 1, 2021 to March 31, 2022)
1. Type and number of shares issued and treasury stock(Number of shares)
At the beginning of
the fiscal year

Increase in the fiscal
year

Decrease in thefiscal year

At the end of the
fiscal year

38,859,996——

38,859,996

Total

38,859,996——

38,859,996

Common shares (Notes 1, 2, 3)

1,669,867

710,670118

2,380,419

Total

1,669,867

710,670118

2,380,419

Shares issued
Common shares

Treasury shares(Notes) 1. The increase of 710,670 common shares of treasury shares were comprised of 636,600 shares acquired by the Company
pursuant to a resolution of the Board of Directors, 71,100 shares acquired for the trust for the Company’s stock compensation
plan for employees, and 2,970 odd-lot shares acquired.
2. The decrease of 118 common shares of treasury shares was due to the sale of odd-lot shares.
3. The total number of common shares of treasury shares as of March 31, 2022, included 130,400 shares held in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.
2. Dividends(1) Payments of dividends(Resolution)

Type of shares

Total amount ofdividends(millions of yen)

Ordinary General
Shareholders’ Meeting
held on June 24, 2021

Common shares

1,676

Meeting of Board of
Directors held on
October 29, 2021

Common shares

1,512

Dividend per share(yen)

Record date

Effective date

45.0

March 31, 2021

June 25, 2021

41.0

September 30, 2021

December 1, 2021

(Notes) 1. The total amount of dividends resolved at the Ordinary General Shareholders’ Meeting held on June 24, 2021, included ¥2
million in dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation planfor directors and executive officers.
2. The total amount of dividends resolved at the Board of Directors meeting held on October 29, 2021, included ¥5 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers, and the trust for the Company’s stock compensation plan for employees.
(2) Dividends with a record date falling in the consolidated fiscal year ended March 31, 2022 and an effective date falling in the
consolidated fiscal year ending March 31, 2023
The following resolution is scheduled.
(Resolution)

Type of shares

Ordinary General
Shareholders’Common shares
Meeting to be held on
June 24, 2022

Total amount ofdividends(millions of yen)

1,976

Source ofdividends

Dividend pershare (yen)Retainedearnings

54.0

Record date

Effective date

March 31, 2022

June 27, 2022

(Note) The total amount of dividends included ¥7 million in dividends for the Company’s stock held as trust assets in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.

- 37 -

Note 11 － Consolidated Statements of Cash Flows
Reconciliation of the balance of cash and cash equivalents at the end of the period and account items on the consolidated balance
sheet(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Cash and deposits

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

29,68523,21116

5,014Time deposits with terms of more than 3 months
Bonds with redemption periods of more than 3months

(100)

(100)

(16)

(14)

Cash and cash equivalents

29,585

28,111Marketable securities

Note 12 － Lease Transactions
1. Finance lease transactions(As lessee)
Finance lease transactions not involving transfer of ownership
1) Types of leased assets
・Tangible fixed assets
Office equipment (devices, and fixtures)
2) Leased assets depreciation method
Included in Note 2 “Significant Accounting Policies 3. Accounting Policy, (2) Depreciation method for significant depreciable
assets.”
2. Operating lease transactions(As lessor)
Future lease payments on operating leases for which leasing contracts cannot be cancelled.
(Millions of yen)
Fiscal 2020
(As of March 31, 2021)

Fiscal 2021
(As of March 31, 2022)

Due within 1 year

3,347

4,852

Due after 1 year

8,928

12,254

Total

12,275

17,106Note 13 － Financial Instruments
1. Items related to financial instruments(1) Measures and policies concerning financial instruments
The Group procures necessary funds specified in its capital investment plans mainly by borrowing from banks and issuing bonds. It
invests temporary surplus cash in highly liquid assets, and raises short-term working capital through bank loans. The Group does notengage in speculative investments as a matter of policy, and uses derivatives to hedge against the following risks.
(2) Details of financial instruments and related risks
Accounts receivables-trade as operating receivables expose the Company to credit risk of building tenants and other clients.
Marketable securities and investment securities, which are mainly comprised of shares of companies with which the Company has
business relationships, expose the Company to the risk of market price fluctuations.
Accounts payable-trade as operating payables are due within a period of three months.
The Company secures loans payable, issues corporate bonds, and holds long-term accounts payable mainly for the purpose of
procuring funds needed for capital investment, with the repayment and redemption dates extending no more than 18 years after thesettlement date. Some of these financial instruments are subject to variable interest rates, and are, therefore, exposed to the risk of- 38 -

interest rate fluctuations; however, the Company uses derivatives in the form of interest rate swaps to hedge against these risks.
Interest rate swaps are also used for the purpose of hedging against the risk of fluctuating interest payments on loans. For
information regarding hedging instruments, hedged items, hedging policies, and methods for evaluating the effectiveness of hedging,please refer to Note 2 “Significant Accounting Policies 3. Accounting Policy, (7) Method of significant hedge accounting.”(3) Financial instrument-related risk management
1) Management of credit risk (including risk relating to non-performance of contract by a counterparty)
With respect to operating receivables, relevant departments of the Company regularly monitor the status of major counterparties,
manage due dates and balances for each counterparty, quickly identify concerns regarding collection due to worsening financial
conditions or other factors, and take steps to mitigate a damage. Consolidated subsidiaries manage these risks in the same way inaccordance with the Company’s credit management rules.
2) Management of market risks (including risk relating to fluctuating exchange rates and interest rates)
The Company uses interest rate swaps to mitigate the risk of fluctuating interest payments on loans.
The Company regularly checks the market price of marketable securities and investment securities along with the financial statusof their issuers, which are the Company’s business partners. The Company also continually reviews its holdings of securities otherthan held-to-maturity bonds, taking into consideration market conditions and its relationships with business partners.
3) Management of fund procurement-related liquidity risk (including risk of being unable to pay by due dates)
The Company manages liquidity risk by having departments in charge prepare and update on the timely basis financing plans basedon reports submitted by all relevant departments, and by maintaining liquidity on hand.
(4) Additional information regarding items related to the fair value of financial instruments
Variable factors are considered when calculating the fair value of financial instruments, and therefore, the amount of fair value couldchange due to adoption of different assumptions. In addition, the contract amounts of derivatives, shown in Note 15 － “Derivatives,”
do not represent derivative-related market risks.

- 39 -

2. Items related to the fair value of financial instruments
The amount recorded in the consolidated balance sheet, fair value, and their differences are presented as follows.
Fiscal 2020 (As of March 31, 2021)
Amount on consolidatedbalance sheet(millions of yen)
(1) Marketable securities and investment

Fair value(millions of yen)

Differences(millions of yen)

39,92939,930039,92939,9300(1) Bonds payable

30,10730,12316(2) Long-term loans payable

172,370

172,296(74)(3) Long-term accounts payable

4,000

3,915

(84)

Liabilities

206,477

206,335(142)

Derivatives

—

—

—

securities
Assets(Notes) 1. In the table above, cash was not included, and deposits, accounts receivable–trade, and short-term loans payable were also
not included because their fair value approximates their book value since they are settled over short periods of time.
2. Amounts recorded in the consolidated balance sheets include the following financial instruments for which determining fairvalue is extremely difficult.
(Millions of yen)
Fiscal 2020
Financial instrument(As of March 31, 2021)(1) Unlisted stocks (Note 1)

3,352(2) Operating investments (Note 2)

1,684(3) Leasehold and guarantee
deposits received (Note 3)

22,829(Notes) 1. Unlisted stocks are not included in the table above under (1) Marketable securities and investment securities,
because they have no market prices and determining their fair value is extremely difficult.
2. The fair value of operating investments is not disclosed because they have no market prices and determining
their fair value is extremely difficult.
3. Leasehold and guarantee deposits received deposited by lessees of leased properties is not subject to disclosureof fair value since reasonably estimating cash flows is extremely difficult because they have no market prices,the duration of deposits between the time a tenant moves in and moves out is difficult to calculate, and theduration of other deposits is also difficult to calculate.

- 40 -

Fiscal 2021 (As of March 31, 2022)
Amount on consolidatedbalance sheet(millions of yen)
(1) Marketable securities and investment

Fair value(millions of yen)

Differences(millions of yen)

43,081

43,081(0)

43,081

43,081(0)(1) Bonds payable

28,216

28,114(101)(2) Long-term loans payable

170,220

169,629(590)(3) Long-term accounts payable

4,000

3,904

(95)

22,514

22,116(397)

Liabilities

224,950

223,765(1,185)Derivatives

—

—

—

securities
Assets(4) Leasehold and guarantee deposits
received(Notes) 1. In the table above, cash was not included, and deposits, accounts receivable–trade, accounts payable–trade, and short-termloans payable were also not included because their fair value approximates their book value since they are settled over shortperiods of time.
2. Unlisted stocks are not included in (1) Marketable securities and investment securities in the table above. The amount of thisfinancial instrument in the consolidated balance sheets is shown below.
(Millions of yen)
Fiscal 2021
Financial instrument(As of March 31, 2022)
Unlisted stocks

720

3. The table above does not include investment in partnerships for which the net amount of equity stakes is recorded in the
consolidated balance sheets (totaling ¥1,902 million in the consolidated balance sheets).
(Note) 1. Amounts of monetary claims and marketable securities with maturity dates expected to be redeemed after the balance sheet
date
Fiscal 2020 (As of March 31, 2021)
Within one year
(millions of yen)

Within one to five years Within five to 10 years(millions of yen)(millions of yen)Over 10 years(millions of yen)

Cash and deposits

29,685———

Accounts receivable–trade

1,633

—

—

—

(1) National and municipal
bonds

16

20

—

—

(2) Bonds payable

—

—

—

—

(3) Other

—

—

—

—

(1) Corporate bonds

—

—

—

—

(2) Other

—

—

—

—

31,33520——

Marketable securities andinvestment securities
Held-to-maturity bonds

Available-for-sale securities
with maturity dates

Total- 41 -

Fiscal 2021 (As of March 31, 2022)
Within one year
(millions of yen)

Within one to five years Within five to 10 years(millions of yen)(millions of yen)Over 10 years(millions of yen)

Cash and deposits

23,211———

Accounts receivable–trade

1,809

—

—

—

(1) National and municipal
bonds

14

5

—

—

(2) Bonds payable

—

—

—

—

4,999

—

—

—

(1) Corporate bonds

—

—

—

—

(2) Other

—

—

—

—

30,0355——Marketable securities andinvestment securities
Held-to-maturity bonds(3) Other
Available-for-sale securities
with maturity dates

Total(Note) 2. Amounts of bonds payable, long-term loans payable, and other interest-bearing liabilities scheduled for repayment after thebalance sheet dateFiscal 2020 (As of March 31, 2021)
Within one year
(millions of yen)

Within one to Within two to Within three to Within four toOver five years
two years
three years
four years
five years(millions of yen)(millions of yen) (millions of yen) (millions of yen) (millions of yen)

Short-term loans payable

9,250

—

—

—

—

—

Bonds payable

1,891

4,327

3,259

3,060

3,695

13,875Long-term loans payable

26,961

12,09013,214

13,445

13,671

92,985

—

—

—

258

258

3,483

38,102

16,417

16,473

16,763

17,624

110,344

Long-term accounts
payableTotal
Fiscal 2021 (As of March 31, 2022)

Within one year
(millions of yen)

Within one to Within two to Within three to Within four toOver five years
two years
three years
four years
five years(millions of yen)(millions of yen) (millions of yen) (millions of yen) (millions of yen)

Short-term loans payable

3,800

—

—

—

—

—

Bonds payable

4,327

3,259

3,060

3,695

150

13,725Long-term loans payable

13,077

14,201

14,431

14,65824,65389,198

—

—

258

258

258

3,225

21,204

17,46017,74918,611

25,061

106,149

Long-term accounts
payableTotal- 42 -

3. Items related to different levels of the fair value of financial instruments
The fair value of financial instruments is classified according to the following three levels based on the observability and materialityof the inputs used to calculate fair value.
Level 1:
Level 2:
Level 3:

Fair values determined based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Fair values determined based on inputs other than Level 1 inputs that are observable, either directly or indirectly
Fair values determined based on significant unobservable inputs

When multiple inputs that have material impacts on fair value calculations are used, the fair value falls under the lowest level inwhich the respective inputs correspond to the fair value calculations.
(1) Financial instruments recorded at fair value in the consolidated balance sheets
Fiscal 2021 (As of March 31, 2022)
Items

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Investment securities
Available-for-sale securities
StocksTotal assets

15,394——

15,394

15,394——

15,394(Note) The fair value of investment trusts is not included in the table above. The amount for investment trusts recorded in
the consolidated balance sheets was ¥22,667 million.
(2) Financial instruments other than those recorded at fair value in the consolidated balance sheets
Fiscal 2021 (As of March 31, 2022)
Items

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities andinvestment securities
Held-to-maturity bonds
National and municipal
bonds

20

—

—

20

Other

—

4,999

—

4,999

20

4,999

—

5,019

Bonds payable—

28,114—

28,114Long-term loans payable—

169,629—

169,629

Long-term accounts payable

—

3,904

—

3,904

Leasehold and guarantee
deposits received—

22,116—

22,116

Total liabilities—

223,765—

223,765

Total assets(Note) Valuation methods and inputs used to calculate fair value are explained as follows.
Marketable securities and investment securities
Quoted market prices of stocks and other securities are used to measure the fair value of marketable securities and investment
securities. They are classified as a Level 1 in calculation of fair value since they are stocks and bonds traded in an active
market. The fair value of commercial paper, which is included in “other” under “held-to-maturity bonds” in the table above,is measured using market prices provided by financial institutions dealing in such instruments. Commercial paper is classified
as Level 2 in calculation of fair value because the relatively low frequency in which it trades on the market means it cannot
be regarded as having quoted market prices in active markets.
Bonds payable
Bonds payable are classified as Level 2, and their fair value is calculated by discounting the total amount of the principal andinterest at an interest rate that reflects their remaining maturity and credit risk.

- 43 -

Long-term loans payable and long-term accounts payable
Long-term loans payable and long-term accounts payable with fixed interest rates are classified as Level 2, and their fair value
is calculated by discounting the total amount of principal and interest at an interest rate estimated based on the scenario of asimilar loan or account. Those with variable interest rates are classified as Level 2, and their fair value is based on their bookvalue, which are assumed to be similar since variable interest rates reflect market interest rates over the short term. Among
long-term loans payable and long-term accounts payable with variable interest rates, those subject to special treatment ofinterest rate swaps are calculated by discounting the total amount of principal and interest treated together with the interest
rate swaps at an interest rate reasonably estimated based on the scenario of a similar loan.
Leasehold and guarantee deposits received
Leasehold and guarantee deposits received are classified as Level 2, and their fair value is calculated by discounting thecurrent amount of deposits at an interest rate that reflects the remaining period of redemption and credit risk.
Derivatives
The fair value of derivatives subject to special treatment of interest rate swaps is included in the fair value of long-term loans
payable since they are treated together with long-term loans payable designated as hedged items. (Refer to the explanation
under “Long-term loans payable and long-term accounts payable,” above.)- 44 -

Note 14 － Securities
1. Held-to-maturity bonds
Fiscal 2020 (As of March 31, 2021)
Category

Held-to-maturity bonds withfair value exceeding theamount recorded in the
consolidated balance sheets

Held-to-maturity bonds withfair value not exceeding theamount recorded in the
consolidated balance sheets

Amount inconsolidatedbalance sheets(millions of yen)

Fair value(millions of yen)

Difference(millions of yen)

(1) National and municipal
bonds

36

37

0

(2) Bonds payable

—

—

—

(3) Other———

Subtotal

36

37

0

(1) National and municipal
bonds

—

—

—

(2) Bonds payable

—

—

—

(3) Other

—

—

—

—

—

—

36

37

0

Subtotal
Total
Fiscal 2021 (As of March 31, 2022)
Category

Held-to-maturity bonds withfair value exceeding theamount recorded in the
consolidated balance sheets

Held-to-maturity bonds withfair value not exceeding theamount recorded in the
consolidated balance sheets

Amount inconsolidatedbalance sheets(millions of yen)

Fair value(millions of yen)

Difference(millions of yen)

(1) National and municipal
bonds

20

20

0

(2) Bonds payable

—

—

—

(3) Other———

Subtotal

20

20

0

(1) National and municipal
bonds

—

—

—

(2) Bonds payable

—

—

—

4,999

4,999

(0)

4,999

4,999

(0)

5,020

5,019

(0)

(3) Other
Subtotal

Total- 45 -

2. Available-for-sale securities
Fiscal 2020 (As of March 31, 2021)
Category

Amount inconsolidatedbalance sheets(millions of yen)

(1) Stocks

Purchase amount(millions of yen)

Difference(millions of yen)

16,583

4,011

12,571

1) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

22,267

5,535

16,731

38,8509,547

29,303

1,041

1,207

(165)

1) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

0

0

(0)

1,042

1,208

(165)

39,893

10,755

29,137(2) Bonds
Available-for-sale securitiesof which the amountrecorded in the consolidatedbalance sheets exceeds theacquisition cost

Subtotal(1) Stocks(2) Bonds
Available-for-sale securitiesof which the amountrecorded in the consolidatedbalance sheets does notexceed the acquisition cost

Subtotal
Total(Note) Unlisted stocks (totaling ¥3,352 million in the consolidated balance sheets) and operating investments (totaling ¥1,684 million
in the consolidated balance sheets) are not included in available-for-sale securities on the above, because they have no market
prices and determining their fair value is extremely difficult.
Fiscal 2021 (As of March 31, 2022)
Category

Amount inconsolidatedbalance sheets(millions of yen)

(1) Stocks

Purchase amount(millions of yen)

Difference(millions of yen)

14,467

3,986

10,4801) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

22,666

6,823

15,84337,133

10,81026,323

927

1,167

(240)

1) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

0

0

(0)

927

1,168

(240)

38,061

11,97826,083(2) Bonds
Available-for-sale securitiesof which the amount stated in
the consolidated balance
sheets exceeds the acquisition
cost

Subtotal(1) Stocks(2) Bonds
Available-for-sale securitiesof which the amount stated in
the consolidated balance
sheets does not exceed theacquisition cost

Subtotal
Total(Note) Stocks without quoted market prices (totaling ¥720 million in the consolidated balance sheets) and investment in partnerships- 46 -

for which the net amount of equity stakes is recorded in the consolidated balance sheets (totaling ¥1,902 million in the
consolidated balance sheets) are not included in available-for-sale securities shown in the tables above.
3. Held-to-maturity bonds soldFiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
4. Available-for-sale securities soldFiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Category

Gain on sale recorded(millions of yen)

Sale amount(millions of yen)

(1) Stocks

Loss on sale recorded(millions of yen)

828

761

—

1) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

—

—

—

828

761

—

(2) Bonds

Total
5. Impairment losses on marketable securities
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable- 47 -

Note 15 － Derivatives
1. Derivatives for which hedge accounting is not applied
Not applicable
2. Derivative for which hedge accounting is applied
Interest rate-related derivatives
Fiscal 2020 (As of March 31, 2021)
Hedge accounting
methodType of transaction

Major hedged items

Contract amount(millions of yen)

Special treatment ofinterest rate swaps

Interest rate swaps:
Receivable floating
rate/payable fixedrate

Long-term loans
payable37,254Contract amount
Fair value
over one year
(millions of yen)(millions of yen)

34,723(Note)(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions is included in the fair valueof long-term loans payable since they are treated together with long-term loans payable designated as hedged items.
Fiscal 2021 (As of March 31, 2022)
Hedge accounting
methodType of transaction

Major hedged items

Contract amount(millions of yen)

Special treatment ofinterest rate swaps

Interest rate swaps:
Receivable floating
rate/payable fixedrate

Long-term loans
payable40,076

Contract amount

Fair value
over one year
(millions of yen)(millions of yen)

36,022(Note)(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions is included in the fair valueof long-term loans payable since they are treated together with long-term loans payable designated as hedged items.

- 48 -

Note 16 － Retirement Benefits
1. Overview of retirement benefit plans in place
The Company and its consolidated subsidiaries have both a lump-sum retirement payment plan and a defined benefit pension plan.
Certain consolidated subsidiaries have adopted a defined contribution plan and other types of plans.
Simplified accounting methods are used to calculate retirement benefit liability and retirement benefit costs for the lump-sum
retirement payment plan and defined benefit pension plan adopted by the Company and its consolidated subsidiaries.
2. Defined benefit plan
(1) Reconciliation of beginning and ending balances of retirement benefit liability
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
292

Balance at the beginning of the fiscal year
Retirement benefit costs
Retirement benefits paid
Contributions to the plan
Balance at the end of the fiscal year

(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
115

10
(153)
(34)

105
(67)
(33)

115

119

(2) Reconciliation between net liability recorded in the consolidated balances sheets and the balances of benefit obligation andpension assets at the end of the period.
(Millions of yen)

Benefit obligation
Pension assets

Fiscal 2020

Fiscal 2021

(As of March 31, 2021)(As of March 31, 2022)

1,301(1,185)

1,285(1,166)

Net balance of liabilities and assets recorded in the
consolidated balance sheets

115

119

Retirement benefit liability

115

119

Net balance of liabilities and assets recorded in the
consolidated balance sheets

115

119

(3) Retirement benefit costs
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Retirement benefit costs calculated using simplified
accounting methods

10(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
105

3. Defined contribution plan
The required contributions for the defined contribution plans of consolidated subsidiaries amounted to ¥27 million in the fiscal
year ended March 31, 2021 and ¥28 million in the fiscal year ended March 31, 2022.

Note 17 － Stock Options
Not applicable- 49 -

Note 18 － Income Taxes
1. Breakdown of main components of deferred tax assets and deferred tax liabilities(Millions of yen)
Fiscal 2020
(As of March 31, 2021)
Deferred tax assets
Accrued bonuses
Accrued enterprise taxes
Inventory depreciation
Accounts receivable—other
Loss on building reconstruction
Impairment losses
Provision for share-based remuneration
Retirement benefit liability
Loss carryforward
Asset retirement obligations
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Reserve for reduction entry
Unrealized gain (loss) on securities
Difference in valuation of fixed assets
Retirement expenses for asset retirement obligations
Other
Total deferred tax liabilities
Net amount of deferred tax assets (liabilities)

Fiscal 2021
(As of March 31, 2022)

69
59
198
60
531
327
14
39
—
199
298
1,799
(1,030)
768

78
200
94
43
517
327
18
39
27
209
452
2,010
(974)
1,035

(1,007)(8,927)(1,942)(114)—(11,992)(11,223)(987)(7,992)(1,961)(104)(3)(11,050)(10,014)

Changes in Presentation Methods“Provision for share-based remuneration” which was included in “other” under “deferred tax assets” in the previous fiscal year ispresented as a separate item in this fiscal year since its materiality is increased. Relevant results in the previous fiscal year were
updated to reflect this change in the presentation method.
As a result, the amount of ¥313 million for “other” under “deferred tax assets” in the previous fiscal year was reclassified to theamounts of ¥14 million for “provision for share-based remuneration” and ¥298 million for “other” were presented in the fiscal year
under review.
2. Breakdown of main items underlying a significant difference between the effective statutory tax rate and the tax burden rate ofcorporate and other taxes after the application of tax effect accounting
Fiscal 2020
(As of March 31, 2021)
This information has
been omitted because thedifference between theeffective statutory tax
rate and the tax burden
rate of corporate andother taxes after theapplication of tax effectaccounting was less than
5% of the effective
statutory tax rate.

- 50 -

Fiscal 2021
(As of March 31, 2022)
This information has
been omitted because thedifference between theeffective statutory tax
rate and the tax burden
rate of corporate andother taxes after theapplication of tax effectaccounting was less than
5% of the effective
statutory tax rate.

Note 19 － Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheets
1. Summary of the asset retirement obligations
The obligations are for the removal of asbestos from buildings used as operating assets.
2. Method for calculating the amount of the asset retirement obligations
The amount of asset retirement obligations is calculated at discount rates between 0.0% and 2.3% over expected period of use
estimated between 2 and 50 years.
3. Changes in the asset retirement obligations(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
Beginning balance
Adjustment due to passage of time
Reduction due to fulfillment of asset retirement
obligations
Ending balance

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

677
6

664
6

(20)

(1)

664

669

Note 20 － Lease Property, etc.
The Company and some consolidated subsidiaries own lease properties such as office buildings, and commercial facilities in Tokyoand other areas for the purpose of earning leasing revenue. Some lease office buildings used by the Company and consolidated
subsidiaries are presented as the real estate that includes the portion used as lease property, etc.
The amounts of such lease property, etc. and real estate that includes the portion used as lease property, etc. in the consolidatedbalance sheet, increase and decrease during the period, and their market values are as follows:(Millions of yen)
Fiscal 2020
Fiscal 2021
(From April 1, 2020 to(From April 1, 2021 toMarch 31, 2021)
March 31, 2022)
Lease property, etc.
Amount on the consolidated balance
sheet
Beginning balance

224,652

245,108

Increase (decrease)

20,456

7,377

Ending balance

245,108

252,485

Market value at fiscal-year end

345,311

349,750

Beginning balance

19,396

19,380

Increase (decrease)

(16)

4,847

Ending balance

19,38024,228Market value at fiscal-year end

31,58639,230Real estate that includes the portion usedas lease property, etc.
Amount on the consolidated balance
sheet(Notes) 1. The amount on the consolidated balance sheet is equal to the acquisition cost minus the accumulated depreciation andaccumulated impairment losses.
2. The net increase in lease property, etc., in fiscal 2020 was mainly due to acquisitions of real estate totaling ¥20,817 million
and outlays for construction in progress amounting to ¥7,130 million, which offset a transfer of ¥5,229 million to realestate for sale. In fiscal 2021, the net increase was mainly due to acquisitions of real estate amounting to ¥16,094 million
and increased assets of ¥4,783 million resulting from the consolidation of LA3 Inc. and Kabutocho 12 Inc. These items
offset a transfer of ¥7,316 million to real estate for sale.
3. The market values of principal properties at the end of the current consolidated fiscal year are based on the standards ofreal estate appraisal by independent real estate appraisers, and those of other properties are calculated by the Company
based on the Real Estate Appraisal Standard. If, however, certain appraisal values and indices considered to appropriatelyreflect the fair values have not changed significantly from the time of acquisition from a third party or the latest appraisal,
an amount appropriately adjusted using the appraisal values and indices is used.

- 51 -

Profit and loss on lease property, etc. and real estate that includes the portion used as lease property, etc. are as follows.
(Millions of yen)
Fiscal 2021
Fiscal 2020
(From April 1, 2021 to(From April 1, 2020 toMarch 31, 2022)
March 31, 2021)
Lease property, etc.
Leasing revenue

18,86521,921

Leasing expenses

10,215

12,224

Net

8,649

9,697

Other profit (loss)

(17)

227

Leasing revenue

2,552

3,017

Leasing expenses

1,367

1,666

Net

1,184

1,350

(5)

(2)

Real estate that includes the portion usedas lease property, etc.

Other profit (loss)(Notes) 1. Because the real estate that includes the portion used as lease property, etc. includes portions used by the Company andsome consolidated subsidiaries for the delivery of services and business management, the relevant leasing revenue was notreported. Expenses for real estate (depreciation, repair expenses, insurance premiums, taxes and other duties, etc.) were
included in the leasing expenses.
2. The amounts of “other profit (loss)” were comprised of a gain on sales of fixed assets, a reconstruction-related loss, a loss
on disposal of fixed assets, and impairment losses.

Note 21 － Revenue Recognition
1. Revenues from contracts with customers
Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)
Reportable segments
Total

Building Business

Asset Management
Business

Revenue from sales of properties

26,770—26,770Management fee included in theasset management revenue

—

1,377

1,377

Other

2,747

1,191

3,939

Revenues from contracts withcustomers

29,5172,569

32,087

Other revenue (Note)

24,916815

25,731

Operating revenue from externalcustomers

54,433

3,384

57,818(Note) Other revenue includes leasing revenue calculated based on accounting standards related to leasing transactions.
2. Basis for understanding revenues from contracts with customers
The basis for understanding revenues from contracts with customers is explained in Note 2 － “Significant Accounting Policies,”(6) “Basis for calculating significant revenues and expenses.”- 52 -

3. Satisfaction of performance obligations in accordance with contracts with customers and cash flows generated from such contracts,
and the timing and amounts of revenue expected to be recognized in the current fiscal year from contracts with customers in effectduring the fiscal year under review(1) Balance of contract assets and contract liabilities(Millions of yen)
Fiscal 2021
Receivables from contracts with customers as ofApril 1, 2021 (Beginning balance)

238

Receivables from contracts with customers as ofMarch 31, 2022 (Ending balance)

197

Contract assets as of April 1, 2021 (Beginningbalance)

435

Contract assets as of March 31, 2022 (Endingbalance)

465

Contract liabilities as of April 1, 2021 (Beginningbalance)

32

Contract liabilities as of March 31, 2022 (Endingbalance)25

Contract assets are the Group’s right to consideration in exchange for services that have yet to be billed, and are recognized asrevenue over the course of satisfaction of its performance obligations. Contract assets are transferred to receivables from contracts
with customers at the time when the Group’s right to consideration becomes unconditional.
Contract liabilities are mainly advances received from customers and are reversed upon the recognition of revenue.
(2) Transaction prices allocated to remaining performance obligations
Transaction prices allocated to remaining performance obligations have not been described because the Group applied a practical
expedient since it has no significant contracts with an initially expected contract period extending beyond one year. Furthermore,transaction prices did not comprise any material amounts among considerations arising from contracts with customers.

Note 22 － Segment and Other Information
Segment Information
1. Reportable segments overview
The reportable segments of the Company are the business units for which the separate financial information is available in order for
the Board of Directors to conduct periodic reviews to determine the distribution of management resources and evaluate their businessresults.
The Company’s two reportable segments are the Building Business segment and Asset Management Business segment.
The Building Business segment deals with the development, leasing, management, and sale of stock exchange buildings, officebuildings, commercial facilities, and residential buildings. The Asset Management Business segment manages the properties of
Heiwa Real Estate REIT, Inc., and provides real estate brokerage services through Housing Service Co., Ltd.
The Company’s Board of Directors resolved, in the meeting held on April 30, 2021, to change its reportable segments from thecurrent fiscal year, and such change is applied retroactively from April 1, 2021.
The Company plans to expand its portfolio by obtaining new properties for lease and acquiring profits from sales of properties in
the process of replacing portfolios as business strategies in its mid-term management plan. Under such a policy, the Company
transferred two properties for lease from fixed assets to real estate for sale effective from March 31, 2021 and proceeds its portfolio
strategy.
In consideration of future business development plans, the Company will transfer the Real Estate Investment Department from theAsset Management Business segment to the Building Business segment. The Real Estate Investment Department deals with thedevelopment, sale, and investment in real estate for sale, and the acquisition and sale of fixed assets.
In addition, the Company transferred its subsidiary, Heiwa Real Estate Property Management Co., Ltd. (renamed from Heiwa
Service Co., Ltd., effective from March 1, 2021), from the Other Businesses segment to the Building Business segment, effective- 53 -

from April 1, 2021. This change was made because the subsidiary is developing comprehensive property management services while
expanding its current building facility maintenance and management business.
Segment results in the previous fiscal year have been adjusted to reflect these changes to the reportable business segments.

2. Methods of calculating the amounts of operating revenue, income/loss, assets, liabilities, and other items by reportable segments
The accounting methods for the reportable segments are the same as those described in the Note 2 “Significant Accounting Policies.”
The amount of income of each reportable segment is based on operating income. Inter-segment revenue is based on prevailingmarket prices.
As stated in the Changes to Accounting Policies section, the Company adopted the Accounting Standard for Revenue Recognition
effective from April 1, 2021. Accordingly, the method for calculating business segment profits and losses have been changed toreflect changes in accounting treatment methods related to revenue recognition.
Compared with the previous methods, operating revenue in the Building Business segment increased by ¥1,141 million for the
fiscal year under review as a result of applying these changes, while segment profits have not been affected.

3. Information on operating revenue, income/loss, assets, liabilities, and other items by reportable segments
Fiscal 2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)Amount inReportable segments
consolidated
Adjustments
financial
Building
Asset Management(Note 1)statements
Total
Business
Business(Note 2)
Operating revenue
Operating revenue fromexternal customers

32,306

2,742

35,048—35,048

37

—

37

(37)

—

Total

32,343

2,742

35,086(37)

35,048Segment income

10,975

1,621

12,595(1,368)

11,228Segment assets

311,050

24,069335,119

46,234

381,353

Depreciation (Note 3)

5,021

15

5,037

40

5,077

Increase in tangible andintangible fixed assets(Note 3)30,821

3

30,82447

30,872

Inter-segment revenue andtransfer

Other items(Notes) 1. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,368 million mainly include corporate expenses amounting
to ¥1,368 million that belong to the administration division and are not allocated to any of the reportablesegments.
(2) Adjustments to segment assets of ¥46,234 million mainly include unallocated corporate assets amounting to¥57,485 million, which primarily consist of cash and deposits, marketable securities, and investment securities
that belong to the administration division.
(3) The adjusted amounts of increases in tangible and intangible fixed assets are the amount of increase of theunallocated corporate assets that have not been assigned to the reportable segments.
2. Segment income is adjusted with operating income in the consolidated statements of income.
3. The depreciation and increases in tangible and intangible fixed assets in the other items include the amortization ofand an increase in long-term prepaid expenses.

- 54 -

Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)Amount inconsolidated
Adjustments
financial(Note 1)statement(Note 2)

Reportable segments
Building
Business

Asset Management
Business

Total

Operating revenue
Operating revenue fromexternal customers

54,433

3,384

57,818—57,818

27

—

27

(27)

—

Total

54,461

3,384

57,845(27)

57,818Segment income

12,3991,977

14,377(1,762)

12,615

Segment assets

310,089

24,854

334,944

41,265376,210Depreciation (Note 3)

5,349

16

5,365

52

5,418

Increase in tangible andintangible fixed assets(Note 3)

26,331

68

26,39929

26,429Inter-segment revenue andtransfer

Other items(Notes) 1. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,762 million mainly include corporate expenses amounting
to ¥1,767 million that belong to the administration division and are not allocated to any of the reportablesegments.
(2) Adjustments to segment assets of ¥41,265 million, mainly include unallocated corporate assets amounting to¥43,069 million, which primarily consist of cash and deposits, marketable securities, and investment securities
that belong to the administration division.
(3) The adjusted amounts of increases in tangible and intangible fixed assets are the amount of increase of theunallocated corporate assets that have not been assigned to the reportable segments.
2. Segment income is adjusted with operating income in the consolidated statements of income.
3. The depreciation and increases in tangible and intangible fixed assets in the other items include the amortization ofand an increase in long-term prepaid expenses.

- 55 -

Related Information
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
1. Information by products and services
These details have been omitted because the same information is disclosed in the segment information.
2. Information by geographical area
(1) Operating revenue
There are no applicable details to report because the Company receives no operating revenue from tenants or other clients outside
Japan.
(2) Tangible fixed assets
There are no applicable details to report because the Company possesses no tangible fixed assets outside Japan.
3. Information by major tenants(Millions of yen)
Name of tenantOperating revenue

Nippon Open Ended Real Estate Investment
Corporation

Applicable business segment

8,160

Building Business

Fiscal 2021 (From April 1, 2021 to March 31, 2022)
1. Information by products and services
These details have been omitted because the same information is disclosed in the segment information.
2. Information by geographical area
(1) Operating revenue
There are no applicable details to report because the Company receives no operating revenue from tenants or other clients outside
Japan.
(2) Tangible fixed assets
There are no applicable details to report because the Company possesses no tangible fixed assets outside Japan.
3. Information by major tenants(Millions of yen)
Name of tenantOperating revenue

Applicable business segment

Ginza Project Inc. (special purpose company)

18,000

Building BusinessHeiwa Real Estate REIT, Inc.

11,430

Building Business
Asset Management BusinessInformation Regarding Impairment Losses of Fixed Assets by Reportable Segment
Fiscal 2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)
Asset Management
Building BusinessBusiness
Impairment
losses8—

Inter-segment
eliminations

Total

—

8

Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)
Asset Management
Building BusinessBusiness
Impairment
losses2—- 56 -

Inter-segment
eliminations
—

Total
2

Amortization and Unamortized Balance of Goodwill by Reportable Segment
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
Information on Gain on Negative Goodwill by Reportable Segment
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable

Information on Related Parties
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable- 57 -

Note 23 － Per Share Information(Yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Net assets per share

3,190.09

3,269.74

Earnings per share

189.76236.74(Notes) 1. Diluted net income per share is not presented, as there are no potentially dilutive shares.
2. To calculate net assets per share and earnings per share in fiscal 2020, the Company’s stock held in the trust for its stockcompensation plan for directors and officers was included in the amount of treasury shares subtracted from calculations of
the total number of shares issued as of March 31, 2021, and the average number of shares outstanding during fiscal 2020. To
calculate net assets per share and earnings per share in fiscal 2021, the Company’s stock held in the trust for its stockcompensation plan for directors and executive officers as well as the trust for its employee stock ownership plan were includedin the amount of treasury shares subtracted from calculations of the total number of shares issued as of March 31, 2022, andthe average number of shares outstanding during fiscal 2021. The number of such treasury shares issued as of the end of theperiod subtracted from calculations of the total number of shares issued as of the end of the period came to 59,000 shares infiscal 2020 and 130,000 shares in fiscal 2021, and the average number of such treasury shares during the period subtracted
from calculations of the average number of shares outstanding during the period was 59,000 shares in fiscal 2020 and 124,000
shares in fiscal 2021.
3. Earnings per share is calculated based on the following.
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

7,118

8,705

Amount not attributable to common shareholders(millions of yen)——

Net income attributable to common shareholders of
the parent (millions of yen)

7,118

8,705

Average number of shares outstanding during theperiod (thousands of shares)

37,51436,769Net income attributable to owners of parent(millions of yen)

Note 24 － Significant Subsequent Events
Acquisition of the Company’s treasury shares
At a meeting held on April 28, 2022, the Company’s Board of Directors resolved to acquire its treasury shares in accordance with theprovisions of Article 156 of the Companies Act of Japan, applicable pursuant to Article 165, Paragraph 3, of the said act.
1. Reasons for acquisition of treasury shares
To improve capital efficiency and increase shareholder returns
2. Terms and conditions for the acquisition(1) Type of shares to be acquired: Common stock of the Company(2) Maximum number of shares to be acquired: 750,000 shares(equivalent to 2.05% of outstanding shares, excluding treasury shares)(3) Maximum aggregate amount for shares to be acquired: ¥2,500 million(4) Period of acquisition: From May 2 to August 31, 2022
(5) Method of acquisition: Purchase of shares through the Tokyo Stock Exchange- 58 -

Note 25 － Consolidated Supplemental Schedules
1. Schedule of Bonds Payable
Issuing company

Bond nameDate of issuance

Balance at theBalance at the
beginning of theend of the period
period(millions of yen)(millions of yen)

CouponSecurity

Redemption
date

Unsecured

Septemberbond

30, 2022

Unsecured

Septemberbond29, 2023

Unsecured

March 25,

bond

2024

Unsecured

March 29,

bond

2024

Unsecured

Septemberbond25, 2024

Unsecured

Septemberbond25, 2024

Unsecured

Septemberbond

30, 2024

Unsecured

Septemberbond

30, 2021

Unsecured

Decemberbond

30, 2022

Unsecured

June 30,

bond

2025

Unsecured

Septemberbond

30, 2025

Unsecured

March 31,

bond

2026

Unsecured

March 31,

bond

2023

19th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 28,

1,150

1,050

0.85%

Co., Ltd.

to authorized institutional

2012

(100)

(1,050)annually

investors)
21st Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

625

575

0.97%

Co., Ltd.

to authorized institutional

2013

(50)

(50)

annually

investors)
22nd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 25,

600

400

0.88%

Co., Ltd.

to authorized institutional

2014

(200)

(200)

annually

investors)
23rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 31,

910

840

0.89%

Co., Ltd.

to authorized institutional

2014

(70)

(70)

annually

750

750

investors)
24th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 25,

Co., Ltd.

to authorized institutional

2014

1.03%
annually

investors)
25th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 25,

262

187

0.81%

Co., Ltd.

to authorized institutional

2014

(75)

(75)

annually

investors)
26th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,012

937

0.79%

Co., Ltd.

to authorized institutional

2014

(75)

(75)

annually

investors)
27th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

500

Co., Ltd.

to authorized institutional

2014

(500)

－

0.60%
annually

investors)
28th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

December 30,

1,400

1,300

0.65%

Co., Ltd.

to authorized institutional

2014

(100)

(1,300)annually

2,392

2,227

0.76%

(165)

(165)

annually

investors)
30th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limitedCo., Ltd.

to authorized institutional

June 30, 2015

investors)
32nd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,667

1,552

0.62%

Co., Ltd.

to authorized institutional

2015

(115)

(115)

annually

investors)
33rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 25,

825

770

0.52%

Co., Ltd.

to authorized institutional

2016

(55)

(55)

annually

investors)
34th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 31,

990

888

0.19%

Co., Ltd.

to authorized institutional

2016

(102)

(888)

annually

investors)- 59 -

Issuing company

Bond nameDate of issuance

Balance at theBalance at the
beginning of theend of the period
period(millions of yen)(millions of yen)

CouponSecurity

Redemption
date

Unsecured

Septemberbond29, 2023

Unsecured

March 31,

bond

2025

35th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,397

1,263

0.11%

Co., Ltd.

to authorized institutional

2016

(134)

(134)

annually

1,000

1,000

1,275

1,200

0.71%

Unsecured

December

(75)

(75)

annuallybond

8, 2032

5,000

5,000

0.755%

Unsecured

Decemberannuallybond

13, 2028

1,350

1,275

0.76%

Unsecured

January 31,

(75)

(75)

annually

bond

2034

7,000

7,000

Unsecured

January 21,

bond

2031

30,10728,216(1,891)(4,327)

investors)
Heiwa Real EstateCo., Ltd.

36th Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real EstateCo., Ltd.

37th Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real EstateCo., Ltd.

Heiwa Real EstateCo., Ltd.

38th Unsecured Bond

39th Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real EstateCo., Ltd.

Total

40th Unsecured Bond—

March 31,2017

December 8,
2017

December 13,
2018

January 31,
2019

January 21,
2021

—

0.42%
annually

0.78%
annually———(Notes) 1. Amounts shown in parentheses are scheduled for redemption within one year.
2. Amounts scheduled for redemption each year within five years from March 31, 2022
Within one to two
Within two to three
Within three to fourWithin one year
years
years
years
(millions of yen)(millions of yen)(millions of yen)(millions of yen)
4,327

3,259

3,060

- 60 -

3,695

Within four to fiveyears
(millions of yen)150

2. Schedule of Borrowings
Balance as of
Balance as ofApril 1, 2021 March 31, 2022
(millions of yen) (millions of yen)

Item

Averageinterest
rate(%)

Repayment period

Short-term loans payable

9,250

3,800

0.3

—

Long-term loans payable within one year

26,961

13,077

0.9—

Lease obligations payable within one year

0

0

—

—

145,408

157,1430.7

2023–2037

0

—

—

—

4,000

4,000

0.5

2024–2039

185,621

178,020——

Long-term loans payable (excluding those payable within
one year)Lease obligations (excluding those payable within one year)
Other interest-bearing liabilities
Long-term accounts payable
Total(Notes) 1. The average interest rate is the weighted average interest rate for the respective item in the table as of March 31, 2022.
2. The average interest rate for lease obligations is not shown because lease obligations are recorded at an amount before
subtracting the interest included in total lease payments are recorded in the consolidated balance sheets.
3. The payment period and amounts of long-term loans payable (excluding those payable within one year) and long-term
accounts payable within five years from March 31, 2022 are shown below.
Within one to two
Within two to three
Within three to four
years
years
years
(millions of yen)(millions of yen)(millions of yen)
Long-term loans
14,201
14,431
14,658payableLong-term accounts
payable

—

258

258

Within four to fiveyears
(millions of yen)
24,653258

3. Schedule of Asset Retirement Obligations
Pursuant to Article 92-2 of the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements,
the amounts of asset retirement obligations as of April 1, 2021, and March 31, 2022, have been omitted because the amounts are lessthan one percent of total balance of liabilities and net assets at the beginning and end of the fiscal year under review.

- 61 -

Independent auditor’s report
To the Board of Directors of Heiwa Real Estate Co., Ltd.:
OpinionWe have audited the accompanying consolidated financial statements of Heiwa Real Estate Co., Ltd.
(“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”), which
comprise the consolidated balance sheets as at March 31, 2022 and 2021, the consolidated statements ofincome and comprehensive income, changes in net assets and cash flows for the years then ended, andnotes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2022 and 2021, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Appropriateness of the Company’s judgment as to whether impairment losses should berecognized on fixed assets used as a hotel
The key audit matter

How the matter was addressed in our audit

Tangible fixed assets of ¥249,379 million andLeasehold rights among intangible fixed assets of¥28,560 million were recognized in the
consolidated balance sheet of Heiwa Real EstateCo., Ltd. (the “Company”) and its consolidated
subsidiaries for the current fiscal year. Of theseassets, 5 properties located in Sapporo, Tokyo andOsaka totaled ¥23,154 million, part of which were
fixed assets used as a hotel.

The primary procedures we performed to assess
the appropriateness of the Company’s judgment as
to whether impairment losses should berecognized on fixed assets which are partly used
as a hotel included the following:

As described in Note 3, “Significant Accounting
Estimates, Impairment of fixed assets” to theconsolidated financial statements, whenever there
is an impairment indicator for fixed assets, theyneed to be tested for impairment.
Domestic and inbound demand declined acrossthe hotel industry due to the prolonged impact of
COVID-19. As a result, a sign of impairment was
identified following the previous fiscal year, suchas a decrease in the hotel capacity in properties
which were partly used as a hotel. Accordingly,
the Company performed an impairment test
during the current fiscal year; however, it
determined that the recognition of an impairment
loss was not necessary as the undiscounted future
cash flows arising from individual properties
exceeded their carrying amount. The Company
obtained real estate appraisal reports and otherdocuments prepared by external experts andconsidered them in judging whether an
impairment loss should be recognized.

(1) Internal control testing
We tested the design and operating effectivenessof certain of the Company’s internal controls
relevant to determining impairment losses on
fixed assets to be recognized.
(2) Assessment of appropriateness of theCompany’s judgment concerning therecognition of impairment losses on fixed
assetsTo assess the appropriateness of the Company’s
judgment concerning the recognition of
impairment losses on fixed assets, we:inspected the board minutes, the minutes ofthe executive officers, the future plan and therequests for approval, which the Company
prepared, as well as the relevant materials
and inquired of management and the head ofthe department in charge in order tounderstand the Company’s recognition of thepresent situation and the future prospects
about the impact of COVID-19;

assessed the accuracy and reasonableness offorecast such as future plans including thefuture cash flows arising from the Company’s
individual properties by comparing them withthe actual data such as occupancy rates andaverage unit prices of guest rooms for each
property and materials obtained from tenants,
and inspecting relevant materials such as
negotiation records with tenants, as well as
assessed the consistency of the forecasts withthe management environment, the real estate
rental market, the trends in land prices issued
by external organizations;compared materials which the Company
submitted to external real estate appraiserswhen requesting them to perform a real estateappraisal with the data on actual operating
profit and loss and cash flows for theCompany’s each property and the forecast of
future plans to assess the consistency;

The estimates of undiscounted future cash flows
involve a high degree of uncertainty andmanagement’s subjective judgment, because they
are based on future plans for individual properties
and include key assumptions such as the level ofrental rate in the future real estate market, rent
negotiations with tenants and demand forecasts
reflecting the alleviation of COVID-19 impact.
Therefore, the undiscounted future cash flows
may not be properly measured, and the resulting
impairment losses may not be recognized.
We, therefore, determined that our assessment of
the appropriateness of the Company’s judgment as
to whether impairment losses should berecognized on fixed assets which are partly used
as a hotel was one of the most significant in our
audit of the consolidated financial statements forthe current fiscal year, and accordingly, a key
audit matter.

inquired of external real estate appraiserscommissioned by the Company and the headof the department in charge about the resultsof the real estate appraisals and theunderlying basis for the establishment of
future cash flows, discount rates and asnecessary, had our property valuation
specialists evaluate the appropriateness ofvaluation methods and discount rates; and

assessed whether the results of the real estateappraisals of assets held by the Company
were appropriately reflected in the
Company’s judgment concerning therecognition of impairment losses on fixed
assets.

Appropriateness of the Company’s judgment concerning the identification of an impairment
indicator for fixed assets held for redevelopment projects
The key audit matter

How the matter was addressed in our audit

Tangible fixed assets of ¥249,379 million andLeasehold rights among intangible fixed assets of¥28,560 million were recognized in the
consolidated balance sheet of Heiwa Real EstateCo., Ltd. (the “Company”) and its consolidated
subsidiaries for the current fiscal year. Theseassets included fixed assets held by the Company
and its consolidated subsidiaries for multiple realestate redevelopment projects in Tokyo(Nihonbashi Kabutocho and Kayabacho districts)
and Sapporo.

The primary procedures we performed to assess
the appropriateness of the Company’s judgment
concerning the identification of an impairment
indicator for fixed assets held for redevelopment
projects included the following:

As described in Note 3, “Significant Accounting
Estimates, Impairment of fixed assets” to theconsolidated financial statements, forredevelopment projects, in order to identify an
impairment indicator for fixed assets, relevant
assets are grouped for each block to be revitalized,
and then the feasibility of the project as well as
the progress are assessed. As a result, if there is an
impairment indicator for these assets, they need to
be tested for impairment. The impairment
indicators include recurring operating losses, asignificant decline in market value, significant
deterioration of the business environment, and achange in usage.
In redevelopment projects, there is a high degreeof uncertainty about the recovery of investment
due to the large amount of investment, the longdevelopment period and the possibility of changes
in development plans, and therefore if businessrisks become obvious, the materiality in amount islikely to increase.
In order to identify an impairment indicator for
fixed assets held for redevelopment projects, it isnecessary to evaluate development plans, which
management prepared by summing up various
assumptions about projected negotiations withother landowners of the blocks to be revitalized
and those for eviction with tenants of existingbuildings, development costs including the future
construction cost, as well as tenants’ rent andoccupancy rates after development. Theseassumptions involve a high degree of future
uncertainties and management’s subjective
judgment. Therefore, the impairment indicators
may not be properly identified, and the resulting
impairment losses may not be recognized.
We, therefore, determined that our assessment of
the appropriateness of the Company’s judgment(1) Internal control testing
We tested the design and operating effectivenessof certain of the Company’s internal controls to
identify an impairment indicator for fixed assets.
(2) Assessment of the appropriateness of theCompany’s judgment concerning theidentification of an impairment indicator for
fixed assets
To assess the appropriateness of the Company’s
judgment concerning the identification of an
impairment indicator for fixed assets, we:inspected the board minutes, the minutes ofthe executive officers, the development planand the requests for approval, which theCompany prepared, as well as the relevantmaterials, and inquired of management andthe head of the department in charge, toconfirm the blocks to be revitalized, thedetails of projects and the progress ofprojects;

evaluated the consistency between grouping
units of assets and the latest development
plans prepared by the Company;



examined the feasibility of development
plans by inquiring of the head of thedepartment in charge about the prospects ofnegotiations with other landowners andnegotiations for eviction with tenants ofexisting buildings, inspecting negotiation
records with other landowners and tenants ofexisting buildings and other relevant
documents, and then evaluating theconsistency between these documents and theresults of queries;

assessed the underlying construction cost andtenants’ rent and occupancy rate after
development by inspecting the concluded
construction and lease contracts and otherrelevant documents and compared withsimilar projects in cases where a specificdevelopment plan was prepared, as well asconcerning the identification of an impairment
indicator for fixed assets held for redevelopment
projects was one of the most significant in our
audit of the consolidated financial statements forthe current fiscal year, and accordingly, a key
audit matter.

assessed the consistency with the
management environment, the real estate
rental market, the trends in land prices issued
by external organizations;agreed the progress of projects which werealready under construction by observing theconstruction sites and inspecting thedevelopment plans and other materials; and

assessed whether impairment indicators for
fixed assets of the Company were identified
appropriately based on the feasibility ofdevelopment plans as well as the progress.

Other Information
The other information comprises the information included in the Annual Report, but does not include
the consolidated financial statements, the financial statements, and our auditor’s reports thereon.
Management is responsible for the preparation and presentation of the other information. Corporate
auditors and the board of corporate auditors are responsible for overseeing the directors’ performanceof their duties with regard to the design, implementation and maintenance of the reporting process forthe 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 to read theother information and, in doing so, consider whether the other information is materially 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 misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors
for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties with regard to the design, implementation and maintenance of the Group’s
financial reporting process.
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’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

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

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions 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’sreport 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 tocease to continue as a going concern.



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

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

We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we
determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

/S/ Yohei Morimoto
Designated Engagement Partner
Certified Public Accountant/S/ Hirofumi Hanyu
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
July 15, 2022

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