2010
FINANCIALSTATEMENTS
MARCH 31, 2009-2010

KITANO CONSTRUCTION CORP.

Contents

Financial Statements

Consolidated Balance Sheets ............................................................................................... 3

Consolidated Statements of Operations ............................................................................. 5

Consolidated Statements of Changes in Net Assets .......................................................... 6

Consolidated Statements of Cash Flows ............................................................................ 7

Notes to Consolidated Financial Statements ..................................................................... 8

Board of Directors, Statutory Auditors and Executive Officers ......................... 17

K I TA N O C O N S T R U C T I O N C O R P.

2

Consolidated Balance Sheets
As of March 31, 2009 and 2010
Millions of yen
March 31,
2009

2010

ASSETS
Current Assets:
Cash in hand and in banks ................................................................
Notes and accounts receivable .........................................................
Real estate for sale .............................................................................
Cost of construction in progress ......................................................
Cost of uncompleted development projects ...................................
Inventories - materials and supplies ................................................
Deferred income taxes.......................................................................
Other current assets ...........................................................................
Less: allowance for doubtful accounts ............................................
Total current assets .....................................................................

¥

6,363
11,476
5,217
14,028
1,281
49
1,197
2,904
(638)
41,876

5,822
13,687
5,579
3,453
1,661
40
1,126
2,930
(53)
34,245

Fixed Assets:
Tangible Fixed Assets:
Buildings and structures .............................................................
Machinery and equipment ..........................................................
Golf course ...................................................................................
Land ...............................................................................................
Construction in progress ............................................................
Other..............................................................................................
Less: accumulated depreciation ................................................
Total tangible fixed assets ...................................................

8,645
771
1,231
7,666
2
1,792
(6,926)
13,181

8,924
630
1,231
7,695
1
1,638
(6,387)
13,731Intangible fixed assets .......................................................................

40

40

4,207
2,399
707
1,548
(1,197)
7,663
20,88462,761

4,550
2,521
659
1,536
(1,291)
7,974
21,74555,990Investments:
Investments in securities ............................................................
Long-term loans ...........................................................................
Deferred income taxes ................................................................
Other investments .......................................................................
Less: allowance for doubtful accounts .....................................
Total investments ..................................................................
Total fixed assets ..................................................................
¥

The accompanying notes are an integral part of these statements.
3¥

K I TA N O C O N S T R U C T I O N C O R P.

¥

Millions of yen
March 31,
2009

2010

LIABILITIESCurrent Liabilities:
Notes and accounts payable .............................................................
Short-term bank loans .......................................................................
Income taxes payable ........................................................................
Advances received on construction in progress ............................
Advances received on uncompleted development projects .........
Accrued bonuses to employees ........................................................
Accrued bonuses to directors and statutory auditors ...................
Accrued warranty ...............................................................................
Allowance for losses on construction contracts ............................
Other current liabilities......................................................................
Total current liabilities ................................................................

¥

17,0257,000
664
11,029
40
301
53
32
120
829
37,093¥

16,993
4,000
30
3,520
66
257
35
37
—
852
25,790Long-Term Liabilities:
Long-term debt....................................................................................
Reserve for retirement benefits to employees................................
Membership deposit ...........................................................................
Other long-term debt ..........................................................................
Total long-term liabilities ............................................................

—
510
3,464
461
4,435

4,000
562
3,306
261
8,129

NET ASSETS
Shareholders’ equity
Common stock ....................................................................................
Authorized — 200,000,000 shares
Issued — 78,368,532 shares as of March 31, 2009 and 2010
Capital surplus ....................................................................................
Retained earnings ...............................................................................
Treasury stock.....................................................................................
Total shareholders’ equity ..........................................................

9,116

9,116

7,426
6,430
(2,156)
20,8167,405
6,878(2,161)
21,238Valuation and translation adjustments
Unrealized gain on other securities .................................................
Unrealized gain on hedging derivatives ...........................................
Foreign currency translation adjustments ......................................
Total valuation and translation adjustments ............................

241
17
(276)
(18)

388
21
(41)
368

Minority interests.........................................................................................

434

464

Total net assets.............................................................................................

¥

21,232¥

22,070¥62,761¥

55,990

The accompanying notes are an integral part of these statements.
K I TA N O C O N S T R U C T I O N C O R P.

4

Consolidated Statements of Operations
For the years ended March 31, 2009 and 2010
Millions of yen
March 31,
2009

2010

¥ 63,081
2,770
65,851¥ 62,045
2,985
65,030Gross profit.................................................................................

58,066
1,933
59,9995,852

57,9491,995
59,944
5,086

Selling, General and Administrative Expenses ......................................
Operating income ......................................................................

4,291
1,561

3,817
1,270

274
(175)
(157)
(329)
110
1,285

179
(149)
4
307
69
1,680

Special Items:
Gain on sales of investment securities ..........................................
Gain on sales of subsidiaries stocks ..............................................
Impairment loss on fixed assets .....................................................
Loss on valuation of real estate for sale ........................................
Loss on valuation of investment securities ...................................
Gain on bad debts recovered ..........................................................
Provision of allowance for doubtful accounts..............................
Other, net ...........................................................................................
Income before income taxes and minority interests ............

434
520
(218)
(221)
(59)
367
(553)
(14)
1,541

—
121
(341)
—
(205)
—
161
(26)
1,390

Income taxes
Current ...............................................................................................
Prior year ...........................................................................................
Deferred .............................................................................................
Minority Interests in Earnings of Consolidated Subsidiaries ..............

655
—
99
(21)

24
290
16
(34)

Net Sales:
Construction contracts ....................................................................
Real estate development and other ................................................
Cost of Sales:
Construction contracts ....................................................................
Real estate development and other ................................................

Non-Operating Income/(Losses):
Interest and dividend income .........................................................
Interest expenses..............................................................................
Foreign exchange gains/(losses) ....................................................
Equity in gains/(losses) of affiliates ...............................................
Other, net ...........................................................................................

Net income .................................................................................

¥

766

The accompanying notes are an integral part of these statements.
5

K I TA N O C O N S T R U C T I O N C O R P.

¥

1,026

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2009 and 2010
Millions of yen
Adjustments
on foreign

Number ofshares of

Unrealized
Unrealized gain currency
common Common Capital Retained gain on other Treasury on hedging statements Minority Total net
stock surplus earnings securities stocks derivatives translation interests assets
stock(thousands)
Balance at March 31, 2008 .....

71,524

9,116

7,426

6,235

1,096

(1,841)

(17)

(48)

1,608

23,576

ended March 31, 2009 ...

—

—

—

766

—

—

—

—

—

766

Cash dividends ................

—

—

—

(571)

—

—

—

—

—

(571)

(1,391)

—

—

—

—

(320)

—

—

—

(320)

stock ...............................

—

—

(0)

—

—

2

—

—

—

2

Other .................................

—

—

—

—

—

2

—

—

—

2

Adjustment for the year ...

—

—

—

—

(855)

—

33

(229)

(1,173)(2,223)

Balance at March 31, 2009 .....

70,133

9,116

7,426

6,430

241

(2,156)

17

(276)

434

21,232

ended March 31, 2010 ...

—

—

—

1,026

—

—

—

—

—

1,026

Cash dividends ................

—

—

—

(560)

—

—

—

—

—

(560)

(22)

—

—

—

—

(5)

—

—

—

(5)

—

—

(0)

—

—

0

—

—

—

0

—

—

—

(306)

—

—

—

—

—

(306)

equity method ................

—

—

(21)

288

—

—

—

—

—

267

Other .................................

—

—

—

—

—

—

—

—

—

—

Adjustment for the year ...

—

—

—

—

147

—

5

235

29

416

Balance at March 31, 2010 .....

70,112

9,116

7,405

6,878

388

(2,161)

21

(41)

464

22,070Net Gain for the year

Increase in treasury
stock ...............................
Gain on sale of treasury

Net Gain for the year

Increase in treasury
stock ...............................
Gain on sale of treasury
stock ...............................
Change of scope of
consolidation .................
Change of scope of

The accompanying notes are an integral part of these statements.
K I TA N O C O N S T R U C T I O N C O R P.

6

Consolidated Statements of Cash Flows
For the year ended March 31, 2009 and 2010
Millions of yen
2009
Cash flows from operating activities:
Net income before income taxes ..............................................................
Adjustments for:
Depreciation ................................................................................................
Impairment loss on fixed assets................................................................
Equity in (gains)/losses of affiliates..........................................................
Interest and dividend income ....................................................................
Interest expenses ........................................................................................
(Gain)/loss on sales of fixed assets ..........................................................
Foreign exchange (gains)/losses ...............................................................
Gain on bad debts recovered .....................................................................
Gain/(Loss) on sales of investment securities.........................................
Gain/(Loss) on sales of subsidiaries stocks.............................................
Increase/(Decrease) in reserve for retirement benefits toemployees ....................................................................................................
Increase/(Decrease) in accrued warranty ......................................................
Increase/(Decrease) in allowance for losses on construction contracts ...
Increase/(Decrease) in accrued bonuses .......................................................
Increase/(Decrease) in allowance for doubtful accounts ............................
(Increase)/Decrease in notes and accounts receivable ................................
(Increase)/Decrease in cost of construction in progress and cost of
uncompleted development projects .........................................................
(Increase)/Decrease in real estate for sale and inventories ........................
Increase/(Decrease) in notes and accounts payable ....................................
Increase/(Decrease) in advances received on construction in progress ...
Other ...................................................................................................................
Sub-total .................................................................................................
Interest and dividend income received ..........................................................
Interest expenses paid ......................................................................................
Income taxes paid .............................................................................................
Net cash provided by/(used in) operating activities ........................

¥

1,541

¥

1,390

308
218
329
(274)
175
(1)
53
(367)
(434)
(520)

296
341
(307)
(179)
149
(1)
3
—
—
(121)

3
2
(540)
(32)
575
(3,562)

52
6
(120)
(44)
(283)
(2,234)

3,304(4,686)2,278
415(2,857)(4,073)
641
(175)
(52)
(3,659)

9,004
(173)
(30)
(7,233)
(184)
332
164
(149)
(941)
(594)

Cash flows from investing activities:
Payment for making time deposit ...................................................................
Proceeds from withdraw of time deposit .......................................................
Payments for purchase of fixed assets ...........................................................
Proceeds from sale of fixed assets..................................................................
Payments for purchase of investments in securities ....................................
Proceeds from sale of investments in securities ...........................................
Payments for loans ............................................................................................
Collections of loans...........................................................................................
Proceeds from sale of shares of a consolidated subsidiary .........................
Other ...................................................................................................................
Net cash provided by/(used in) investing activities .........................

(116)
250
(609)
6
(894)
801
—
2,266
0
(66)
1,638

(262)
313
(891)
2
(143)
—
(61)
519
241
44
(238)

Cash flows from financing activities:
Increase/(decrease) in short-term bank loans, net .......................................
Increase in long-term debt ...............................................................................
Purchase of treasury stock ..............................................................................
Cash dividends paid ..........................................................................................
Other ...................................................................................................................
Net cash provided by/(used in) financing activities .........................

4,000
—
(317)
(574)
(1)
3,108

(3,000)
4,000
(5)
(562)
(58)
375

(67)
1,021
5,381

(0)
(458)
6,251

Effect of exchange rate changes on cash and cash equivalents ........................
Net increase/(decrease) in cash and cash equivalents .......................................
Cash and cash equivalents of beginning of year ..................................................
Increase/(Decrease) in cash and cash equivalents due tothe change in consolidation scope of subsidiaries .......................................
Cash and cash equivalents of end of year.............................................................

¥

(151)
6,251

The accompanying notes are an integral part of these statements.
72010

K I TA N O C O N S T R U C T I O N C O R P.

¥

(32)
5,761

Notes to Consolidated
Financial Statements
1. Basis of Presenting Consolidated Financial Statements(a) Accounting Principles
The accompanying consolidated financial statements have been prepared based on the accounts maintainedby Kitano Construction Corp.(the “Company”) and its subsidiaries prepared in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
(b) Scope of Consolidation
The Company had 3 subsidiaries (majority-owned companies) as at March 31, 2010 (5 for 2009). The
consolidated financial statements in fiscal years ended March 31, 2010 include the accounts of the Company and 3(4 for 2009) of its subsidiaries “the Companies”, which are listed below:•Kawanakajima Tochi Kaihatsu Co., Ltd. ....................................... 69.23% owned•Solomon Kitano Mendana Hotel Limited. ..................................... 100.00% owned•Asahi Agency Co., Ltd. ..................................................................... 59.52% owned
The above consolidated subsidiaries, except for Solomon Kitano Mendana Hotel Limited, which has a fiscal
year ending at December 31 of each year, have a fiscal year ending at March 31 of each year, which is the same as
the fiscal year of the Company.
Western Samoa Kitano Limited. was excluded from the scope of consolidation due to liquidation in fiscal
year ended March 31, 2010.
2. Summary of Significant Accounting Policies(a) Principles of Consolidation
All significant intercompany balances, intercompany transactions and unrealized profits among theCompanies have been eliminated in consolidation and the portion thereof attributable to minority interests is
charged to minority interests.
In eliminating investments in shares of consolidated subsidiaries, with the underlying equity in net assets,
any difference between the cost of an investment in a subsidiary and the amount of underlying equity in net assetsof the subsidiary is treated as an asset or a liability, as the case may be, and amortized over a period of five years
on a straight-line basis.
The assets and liabilities of the consolidated subsidiaries are recorded at market value on theirconsolidation. Cost in excess of the net assets of the subsidiaries is amortized over 5 years.
(b) Investment in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates are stated at cost.
The equity method of accounting for such investments is applied to Sakura Hanoi Plaza Investment Company
Limited, and Kawajima Nakayama Kaihatsu Co., Ltd, which are affiliates of the Company, since the application ofthis method has significant effect on the net income and retained earnings of the Companies.
Kitano Arms Corp. and Hakubai Inc. were excluded from the scope of the equity method of accounting
because the Company sold the stocks.
(c) Recognizing Revenues and Costs of Construction Contracts
Until the year ended March 31, 2009, revenues and costs of construction contracts were recognized by thecompleted-contract method, except for those related to the contracts with a construction period exceeding two
years and a contract amount exceeding one billion yen, which were recognized by the percentage-of-completion
method.
Effective April 1, 2009, the Company have applied the “Accounting Standard for Construction Contracts”(ASBJ Statement No.15) and its guidance (ASBJ Guidance No.18).
Under the new accounting standard and guidance, revenues and costs of construction contracts thatcommenced on or after April 1, 2009, of which the percentage of completion can be reliably estimated, arerecognized by the percentage-of-completion method. The percentage of completion is calculated at the cost
incurred as a percentage of the estimated total cost. The completed-contract method continues to be applied to allother construction contracts.
As a result of this change, Net sales of construction contracts increased by ¥6,199 million, Gross profit,
Operating income and Income before income taxes and minority interests increased by ¥692 million for the year
ended March 31, 2010.
(d) Inventory Valuation
The cost of construction in progress, real estate for sale and the cost of uncompleted development projects
are stated at cost, as determined on a specific project basis.
Materials and supplies are stated at cost, as determined based on an average method.
The net book value of inventories in the balance sheet is written down if the net realizable value declines.
(e) Depreciation
Depreciation is computed by the straight-line method for buildings (excluding leasehold improvements andauxiliary facilities attached to buildings) and by the declining-balance method for other assets, at rates based on
the estimated useful lives of the assets, as prescribed by Japanese income tax laws. Depreciation for real estate
for leasing is computed by the straight-line method. The range of useful lives is principally from 3 to 50 years forbuildings and structures and from 2 to 20 years for store fixtures and equipment.

K I TA N O C O N S T R U C T I O N C O R P.

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( f ) Allowance for Doubtful Accounts
The balance of allowance for doubtful accounts represents the amount deemed necessary to cover possible
losses estimated on an individual doubtful account basis. The amount is calculated using a certain percentage
based on past experience for other accounts.
(g) Accrued Warranty
Accrued warranty is provided for against the future costs of warranty from completed construction.
(h) Accrued Bonuses to Employees
Accrued bonuses are computed by estimating the payment required in order to provide for the payment ofbonuses to employees.
( i ) Accrued Bonuses to Directors and Statutory Auditors
Accrued bonuses are computed by estimating the payment required in order to provide for the payment ofbonuses to directors and statutory auditors.
( j ) Reserve for Retirement Benefits to Employees
The Company recognize accrued pension and severance costs to employees based on the actual valuation ofprojected benefit obligation and plan assets at fair value.
Actuarial gains and losses are amortized based on the straight-line method over a period of 10 years startingfrom the beginning of the subsequent year.
(k) Allowance for losses on construction contracts
The Company prepares reasonable estimated amount for future losses from construction works outstanding
at fiscal year-end.
( l ) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash in hand, bankdeposits able to be withdrawn on demand and short-term investments with an original maturity of three months
or less and which represent a minor risk of fluctuations in value.
(m) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local
inhabitants’ taxes and enterprise taxes.
The Company and its subsidiaries account for deferred taxes in accordance with the regulations for
preparation of consolidated financial statements in Japan. Deferred income taxes are determined using the asset
and liability approach, whereby deferred tax assets and liabilities are recognized in respect of temporary
differences between the tax basis of assets and liabilities and those as reported in the financial statements.
(n) Securities Valuation
Held-to-maturity debt securities are carried at amortized cost.
Available-for-sale securities are classified into two categories where: (a) the fair value is available and (b) the
fair value is not available.
(a) Securities whose fair value is available are valued at the quoted market price prevailing at the fiscal yearend. Net unrealized gains or losses on these securities are reported as a separate component of net
assets at a net-of-tax amount. Cost of sales is determined by the moving-average method.
(b) Securities whose fair value is not available are valued at cost, determined by the moving-average method.
(o) Hedge Accounting
Gains or losses arising from changes in the fair value of the derivatives designated as “hedging instruments”
are deferred as an asset or liability and included in net profit or loss in the same period during which the gains
and losses on the hedged items or transactions are recognized.
The derivatives designated as hedging instruments by the Company are principally forward exchange
contracts. The related hedged items are finance for the overseas construction business. The Company is able tofix future cash flows and mitigate the deterioration of income from the construction business due to yen
depreciation. The Company obtains management approval before making forward exchange contracts, andsubsequently the accounting department executes and controls the contract.
(p) Reclassification of Accounts
Certain prior year amounts have been reclassified to conform with the current year’s presentation.
3.

Notes to the Consolidated Balance Sheets(1) Investments in unconsolidated subsidiaries and affiliates ...............
(2) Assets pledged as collateral
Buildings .................................................................................................
Land .........................................................................................................
Real estate for sale .................................................................................

9

K I TA N O C O N S T R U C T I O N C O R P.

¥

Millions of yen
March 31,
2009
2010
282
¥
331
1,161
—

17

316
1,161
4,703

4. Notes to Consolidated Statements of Operations(1) Charges to income for warranty which is included in “Cost of Sales construction contracts” was ¥32 million
for the year ended March 31, 2009, and ¥37 million for the year ended March 31, 2010. Allowance for accrued
bonuses included in “Cost of Sales construction contracts” was ¥199 million for the year ended March 31,
2009, and ¥173 million for the year ended March 31, 2010. Allowance for loss on construction contract
included in “Cost of Sales construction contracts” was ¥120 million for the year ended March 31, 2009.
Millions of yen
for the year ended March 31,
2009
2010
(2) Write-down of inventories included in cost of
sales on real estate development and other ................................
¥
48
¥
165
(3) The major components of “Selling, general andadministrative expenses”
Depreciation ...........................................................................................
237
220
Payroll .....................................................................................................
1,484
1,408
Allowance for accrued bonuses ...........................................................
147
116(4) Impairment loss on fixed assets
The Company recognized impairment losses on fixed assets as follows:
Millions of yen
March 31, 2009
Description
Location
Classification
AmountHotel
Samoa
Building¥
201
Idle property
NaganoLand lease¥17

Description
Idle property

Location
SaitamaClassification
Land, building and others

Millions of yen
March 31, 2010
Amount¥341

The book values of the above assets were reduced to their recoverable amounts.
5.

Notes to the Consolidated Statement of Changes in Net Assets(a) Type and number of outstanding shares
March 31, 2009
Number of shares
Type of shares
Balance atIncrease in shares Decrease in shares
Beginning of year
during the year
during the year
Issued stock
Common stock
78,368,532
—
—
Total
78,368,532——
Treasury stock
Common stockTotal

6,844,282
6,844,282

1,452,154
1,452,154

61,36961,369Balance at
end of year
78,368,532
78,368,532

8,235,067
8,235,067

The summary of the main change reason
Increase by the acquisition of the treasury stock by the board of directors resolution ...... 1,331,000 sharesby the repurchase of shares less than one unit..........................................................
87,239 sharesby the increase in the ratio of possession of subsidiaries ........................................
33,915 shares
Decrease by the sale of shares less than one unit .....................................................................
10,517 sharesby having excluded subsidiaries from scope of consolidation ..............................
50,852 shares

Type of shares

Balance at
Beginning of year

March 31, 2010
Number of shares
Increase in shares
during the year

Decrease in shares
during the year

Balance at
end of year

Issued stock
Common stockTotal

78,368,532
78,368,532

—
—

—
—

78,368,532
78,368,532

Treasury stock
Common stockTotal

8,235,067
8,235,067

23,596
23,596

1,737
1,737

8,256,926
8,256,926

The summary of the main change reason
Increase by the repurchase of shares less than one unit .........................................................
Decrease by the sale of shares less than one unit .....................................................................

23,596 shares
1,737 shares

K I TA N O C O N S T R U C T I O N C O R P.

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(b) Dividends(1) Dividends paid to shareholders
Date ofapproval

Resolution
ApprovedbyType ofsharesAmount(Thousandsof Yen)Paid fromAmountPer share(Yen)

Shareholders’
cut-off date

Effective
date

June 27,
2008

Annualgeneralmeeting ofshareholders

Commonstock

574,591

Retainedearnings

8

March 31,2008

June 30,
2008

June 26,
2009

Annualgeneralmeeting ofshareholders

Commonstock

563,329

Retainedearnings

8

March 31,2009

June 29,2009(2) Dividends with a shareholders’ cut-off date during the current fiscal year but an effective date
subsequent to the current fiscal year
Date ofapproval
June 24,2010

6.

Resolution
ApprovedbyAnnualgeneralmeeting ofshareholders

Type ofsharesCommonstock

Amount(Thousandsof Yen)563,155

Paid fromAmountPer share(Yen)

Retainedearnings

8

Shareholders’
cut-off date

Effective
date

March 31,2010

June 25,2010

Notes to the Consolidated Statements of Cash Flows

Cash in hand and in banks ....................................................................
Time deposits with a deposit term of over 3 months ........................
Cash and cash equivalents ....................................................................

¥¥

Millions of yen
March 31,
2009
2010
6,363
¥
5,822
(113)
(62)
6,251
¥
5,761

7. Fair Value of Financial Instruments(a) Effective From the fiscal year ended March 31, 2010, the “Accounting Standard for Financial Instruments”(ASBJ Statement No.10) and its guidance (ASBJ Guidance No.19) have been applied.
(b) The fair value and book value of financial instruments as of March 31, 2010, other than items of which fairvalue are not practically available, are as follows:
Millions of yen
March 31, 2010
Book value
Fair value
Difference
Cash and deposits .............................................
¥
5,822
¥
5,822
¥
—
Notes and accounts receivable .......................
13,687
13,687
—
3,301
3,301
—
Investments in securities .................................
Total .............................................................
¥
22,810¥22,810¥—Notes and accounts payable ............................
¥
16,993¥
16,993
Short-term bank loans ......................................
4,000
4,000
4,000
4,000
Long-term debt ..................................................
Total .............................................................
¥
24,993¥24,993
Derivative transactions ....................................
¥
36
¥
36
(1) Financial instruments for which it is extremely difficult to determine the fair value

¥

¥
¥

—
—
—
—
—

Millions of yen
March 31, 2010
Book value
Non-listed shares * .....................................................................................................................
¥
1,249
Membership deposit * ...............................................................................................................
3,306* It is extremely difficult to determine the fair values thereof because neither market quoted prices areavailable nor future Cash Flows can be estimated.

11

K I TA N O C O N S T R U C T I O N C O R P.

(2) Redemption schedule for money claims and securities with maturities
Millions of yen
March 31, 2010
Due in 1 year orDue after 1 year
lessthrough 5 years
Cash and deposits .............................................
¥
5,805
¥
—
Notes and accounts receivable .......................
13,632
55
Investments in securities
Government bonds ....................................
——
Corporate bonds ........................................
——
8.

Due after 5 years
through 10 years
¥
—
—
50
100

Investments in Securities(a) The following tables summarize the acquisition cost and book value of available-for-sale securities withmarket value as of March 31, 2009 and 2010:
Millions of yen
March 31, 2009
Book value
Acquisition cost
Difference
Securities with book value exceedingacquisition cost:
¥
2,260
¥
1,679
¥
581
Equity securities ......................................................
Sub-total ...............................................................
¥
2,260
¥
1,679
¥
581
Securities with book value notexceeding acquisition cost:
Equity securities ......................................................
Corporate bonds ......................................................
Sub-total ...............................................................
Total ...............................................................................

¥
¥
¥
¥

697
99
796
3,056

Book value

¥
¥
¥
¥

873
100
973
2,651

¥
¥
¥
¥

Millions of yen
March 31, 2010
Acquisition cost

(176)
(1)
(176)
405

Difference

Securities with book value exceedingacquisition cost:
Equity securities ......................................................
Corporate bonds ......................................................
Sub-total ...............................................................

¥
¥
¥

2,657
102
2,759

¥
¥
¥

1,935
100
2,035

¥
¥
¥

722
2
724

Securities with book value notexceeding acquisition cost:
Equity securities ......................................................
Government bonds ..................................................
Sub-total ...............................................................
Total ...............................................................................

¥
¥
¥
¥

498
43
541
3,301

¥
¥
¥
¥

570
44
614
2,649

¥
¥
¥
¥

(72)
(1)
(73)
651

Among above tables, non-listed shares are not included in the above because determining their fairvalues is extremely difficult.
(b) Impairment losses of ¥145 million were recorded to write down book value of investments in securities
for the year ended March 31, 2010.

K I TA N O C O N S T R U C T I O N C O R P.

12

9.

Derivative transactions(a) Derivative transactions for which hedge accounting is not applied.
Not applicable.
(b) Derivative transactions for which hedge accounting is applied.
Currency-related transaction

Hedging
methodDeferredhedge
methodTransaction
type
Foreignexchange
forwardcontract
Buy
U.S. dollar

Main hedged
item
Forecasted
foreigncurrencytransactions

Contract
amount¥1,245Millions of yen
March 31, 2010
Contract
over 1 year¥
157

Fair value¥

36

10. Reserve for Retirement Benefits to Employees(a) Employees of the Company and its domestic subsidiaries are covered by a qualified pension plan and aseverance payment plan.
(b) The reserve for retirement benefits as of March 31, 2009 and 2010 is analyzed as follows:
Millions of yen
March 31,2009
2010
Projected benefit obligations ........................................................
¥(5,191)¥(5,023)3,885
3,938
Plan assets .......................................................................................
Unfunded benefit obligations ........................................................
(1,306)(1,085)
Unrecognized actuarial differences..............................................
796
523
—
—
Unrecognized prior service cost ...................................................
Total ..................................................................................................
(510)
(562)
—
—
Prepaid pension costs ....................................................................
¥
(510)
¥
(562)
Reserve for retirement benefits to employees ............................
(c) The net periodic expenses related to retirement benefits for the fiscal year 2009 and 2010 are as follows:
Millions of yen
March 31,2009
2010
Service costs ....................................................................................
¥
178
¥
188
Interest costs ...................................................................................
124
102
Expected return on plan assets.....................................................
(91)
(77)
Amortization of actuarial differences ..........................................
24
109
—
—
Amortization of prior service cost ................................................
¥
234
¥
322
(d) Assumptions used in calculation of the above information were as follows:

Discount rate ...................................................................................
Expected rate of return on plan assets ........................................
Method of attributing the projected benefits to periodof services ........................................................................................
Amortization periods of actuarial differences ............................

13

K I TA N O C O N S T R U C T I O N C O R P.

As of March 31,
2009
2010
2.0%
2.0%
2.0%
2.0%
Straight-line
Straight-line
basis
basis
10 years
10 years

11. Income Taxes(a) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
are presented below:
Millions of yen
March 31,20092010
Deferred tax assets: ...............................................................................
Write-down of fixed assets ................................................................
¥
1,684
¥
1,814
Allowance for doubtful accounts .....................................................
1,204
949
Write-down of marketable securities ...............................................
300
321
Intercompany profits .........................................................................
373
345
Loss on valuation of real estate for sale ..........................................
740
842
Operating loss carryforwards ...........................................................
205
179
857
817
Other ....................................................................................................
Total gross deferred tax assets .................................................
5,363
5,266
(3,213)(3,136)
Valuation allowance ....................................................................
2,150
2,131
Deferred tax liabilities: .........................................................................
Reserve for advanced depreciation .................................................
(72)
(72)
Unrealized gain on other securities..................................................
(163)
(259)
(11)
(15)
Unrealized gain on hedging derivatives ..........................................
Total gross deferred tax liabilities ............................................
(246)
(346)
Net deferred tax assets ...............................................................

¥

1,904

¥

1,785

(b) The reconciliation between the statutory tax rate and the effective tax rate as at March 31, 2009 and 2010is presented below:
As of March 31,
2009
2010
Statutory tax rate ...................................................................................
40.4%
40.4%
Permanent differences on expenses not deductible .....................
3.3
3.5
Permanent differences on income not taxable ..............................
(3.0)
(2.1)
Accrued bonuses to directors and statutory auditors not deductible ..........
1.3
1.0
Inhabitant taxes per capita ...............................................................
1.6
1.7
Income taxes for prior year ..............................................................
—
3.0
Valuation allowance...........................................................................
12.7(18.5)(7.4)(5.3)
Other ....................................................................................................
48.9%
23.7%
Effective tax rate................................................................................
12. Rental Properties(a) Effective From the fiscal year ended March 31, 2010, the “Accounting Standard for Disclosure of Fair
Value of Real Estate” (ASBJ Statement No.20) and its guidance (ASBJ Guidance No.23) have been
applied.
(b) The Company holds some office buildings and residential units. For the year ended March 31, 2010, net
operating losses from rent business of ¥21 million were recorded as operating losses of Real estatedevelopment and other.
(c) The book value and fair value of properties for rent were as follows:
Millions of yen
2010
Book value ...................................................................................................................................
At the end of previous period ................................................................................................
¥
611
Increase (decrease) – net .......................................................................................................
1,360
At the end of current period ...................................................................................................
1,971
Fair value at the end of current period ....................................................................................
¥
1,944
The changes during the year primarily consist of real estate acquisitions (increase:¥1,410 million) anddepreciation (decrease:¥50 million).

K I TA N O C O N S T R U C T I O N C O R P.

14

13. Segment Information
Industry Segment Information
The Company and its subsidiaries operate principally in the following five industrial segments:
Construction .................................................................................... Construction and engineering works
Development.................................................................................... Development and sale of real estate
Golf ................................................................................................... Management of golf courses
Hotel ................................................................................................. Management of hotels
Advertising Agency ......................................................................... Advertising agent
The segment information of the Company and its subsidiaries for the year ended March 31, 2009 and 2010 ispresented below:
Millions of yen
2009
2010
Net sales:
Construction............................................................................................
¥
63,082¥
62,046Development ...........................................................................................
484
1,056
Golf ...........................................................................................................
313
282
Hotel .........................................................................................................
543
430
1,530
1,304
Advertising agency .................................................................................
65,952
65,117(100)(87)
Less: intersegment transaction .............................................................
65,85165,030Operating expenses:
Construction............................................................................................
Development ...........................................................................................
Golf ...........................................................................................................
Hotel .........................................................................................................
Advertising agency .................................................................................

61,480
495
333
567
1,514
64,390(100)
64,290Less: intersegment transaction .............................................................

Operating income ...........................................................................................
Assets:Construction............................................................................................
Development ...........................................................................................
Golf ...........................................................................................................
Hotel .........................................................................................................
Advertising agency .................................................................................

¥

1,561

¥

1,270

¥

38,759
8,336
4,091
680
998
52,864
9,897
62,761¥30,155
10,490
4,006
515
1,012
46,178
9,812
55,990

177
40
28
54
8
308

¥

17
—
—
201
—
218

¥

440
3
10
155
—
609

¥

Other assets .............................................................................................
¥
Depreciation:
Construction............................................................................................
Development ...........................................................................................
Golf ...........................................................................................................
Hotel .........................................................................................................
Advertising agency .................................................................................

¥¥
Impairment loss on fixed assets:
Construction............................................................................................
Development ...........................................................................................
Golf ...........................................................................................................
Hotel .........................................................................................................
Advertising agency .................................................................................

¥¥
Capital expenditure:
Construction............................................................................................
Development ...........................................................................................
Golf ...........................................................................................................
Hotel .........................................................................................................
Advertising agency .................................................................................

¥

¥

15

K I TA N O C O N S T R U C T I O N C O R P.

61,025
832
288
410
1,292
63,848(87)
63,761

¥

¥

¥

¥

164
60
24
42
6
296

341
—
—
—
—
341
83
1,411
7
20
—
1,520

14. Per Share Data
Net assets per share and net income per share as of and for the year ended March 31, 2009 and 2010 are as
follows:
Yen
2009
2010
Net assets per share ...............................................................................
¥
296.55¥308.17
Net income per share – primary ...........................................................
10.78
14.63

Net income ..............................................................................................
Net income pertaining to common stock ............................................
Average outstanding shares of common stock ...................................

Millions of yen
2009
2010
¥
766
¥
1,026
¥
766
¥
1,026
71,055 thousand
70,121 thousand
sharessharesK I TA N O C O N S T R U C T I O N C O R P.

16

BOARD OF DIRECTORS, STATUTORY AUDITORSAND EXECUTIVE OFFICERS AS OF MARCH 31, 2010
Board of Directors
Chairman and President, Representative Director
Takahiro Kitano

Vice President, Representative Director
Kimio Shiozawa

Directors
Shinsuke Nishida

Executive Officers
President and Executive Officer
Takahiro Kitano *Vice President and Executive Officer
Kimio Shiozawa *Senior Executive Officers
Shinsuke Nishida *Yoshitada Mikami
Yoshikatsu Yamazaki
Zentaro Ozawa

Managing Executive Officer
Yoshitada Mikami *Toshiro Maki

Outside Director
Yoshinori Uda

Itsuo Takeuchi
Yoshikatsu Yamazaki *Zentaro Ozawa *Statutory Auditors

Nagayoshi Matsumoto

Permanent Auditor
Tadaaki Takamizawa

Executive Officer
Toshiaki Yamagishi

AuditorKiyonori Nakashima

Toshiyuki Tsukada
Akira Koike
Yoshichika Owa

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K I TA N O C O N S T R U C T I O N C O R P.

* : Member of Board of Directors