2016

FINANCIALSTATEMENTS
MARCH 31, 2015-2016

KITANO CONSTRUCTION CORP.

Contents

Financial Statements

Consolidated Balance Sheets................................................................................................. 2

Consolidated Statements of Income..................................................................................... 4

Consolidated Statements of Comprehensive Income......................................................... 5

Consolidated Statements of Changes in Equity................................................................... 6

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

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

Board of Directors, Statutory Auditors and Executive Officers........................... 181

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

Consolidated Balance Sheets
As of March 31, 2015 and 2016
Millions of yen
March 31,
2015

2016

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............................................................................................
Deferred income taxes........................................................................
Other current assets............................................................................
Less: allowance for doubtful accounts.............................................
Total current assets......................................................................

¥11,199
11,781
3,743
2,360
41
83
818
1,157
(74)
31,108¥9,184
18,802
3,567
349
41
86
479
947
(247)
33,209Non-current Assets:
Tangible Fixed Assets:
Buildings and structures..............................................................
Machinery and equipment...........................................................
Tools, furniture and fixtures.......................................................
Golf course....................................................................................
Land................................................................................................
Construction in progress.............................................................
Other non-current assets.............................................................
Less: accumulated depreciation.................................................
Total tangible fixed assets....................................................

11,164
2,780
2,862
771
6,401
77
38
(9,737)
14,357

11,141
2,875
2,744
771
6,234
31
47
(9,969)13,873

Intangible fixed assets........................................................................

242

225

Investments:
Investments in securities.............................................................
Long-term loans............................................................................
Deferred income taxes.................................................................
Other investments........................................................................
Less: allowance for doubtful accounts......................................
Total investments..................................................................
Total noncurrent assets........................................................
Total assets.............................................................................

6,096
29
430
1,368
(33)
7,891
22,489¥53,598

5,122
26
412
1,355
(32)
6,883
20,981¥54,190

ASSETS

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.

2

Consolidated Balance Sheets
As of March 31, 2015 and 2016
Millions of yen
March 31,
2015

2016

¥ 10,941
1,000
1,071
5,435
6
247
46
22
306
1,545
20,619¥ 14,160
—
683
4,397
—
311
46
41
—
1,726
21,365

371
2,643
1,666
259
4,939
25,558

366
2,508
1,314
235
4,423
25,788

9,116

9,116

5,066
11,563(1,276)24,470

5,502
12,986(1,262)
26,342

Unrealized gain (loss) on other securities.......................................
Unrealized gain (loss) on hedging derivatives.................................
Foreign currency translation adjustments.......................................
Remeasurements of defined benefit plans.......................................
Total accumulated other comprehensive income....................

1,725
19
271
(116)
1,899

1,085
1
415
(216)
1,285

Non-controlling interests.............................................................................

1,670

775

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

28,04028,402

Debt net assets sum total.............................................................................

¥ 53,598¥ 54,190

LIABILITIESCurrent Liabilities:
Notes and accounts payable..............................................................
Short-term loans payable....................................................................
Income taxes payable.........................................................................
Advances received on construction in progress.............................
Advances received on development business.................................
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................................................................
Non-current Liabilities:
Net defined benefit liability................................................................
Membership deposit............................................................................
Deferred income taxes........................................................................
Other long-term debt...........................................................................
Total non-current liabilities.........................................................
Total liabilities..............................................................................
NET ASSETS
Shareholders’ Equity
Common stock.....................................................................................
Authorized — 200,000,000 shares
Issued — 68,368,532 shares as of March 31, 2015 and 2016
Capital surplus.....................................................................................
Retained earnings................................................................................
Treasury shares...................................................................................
Total shareholders’ equity...........................................................
Accumulated Other Comprehensive Income

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.

Consolidated Statements of Income
For the years ended March 31, 2015 and 2016
Millions of yen
March 31,
2015

2016

¥ 55,373
15,67971,052¥ 67,640
4,689
72,329Gross profit..................................................................................................

50,54911,37861,927
9,125

60,792
3,108
63,901
8,429

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

4,328
4,797

4,739
3,690

112
(67)
324
—
82
5,247

167
(27)
—
(215)
91
3,704

Special Items:
Gain on sales of non-current assets................................................
Gain on sales of investment securities...........................................
Gain on bargain purchases...............................................................
Loss on disposal of non-current assets...........................................
Loss on sales of investment securities...........................................
Loss on valuation of shares of subsidiaries and associates
Impairment loss.................................................................................
Other, net............................................................................................
Income before income taxes and minority interests.............

30
—
48
(3)
(5)
(4)
(601)
(55)
4,656

0
0
—
(29)
—
0
(167)
(1)
3,508

Income Taxes
Current................................................................................................
Deferred..............................................................................................
Profit.............................................................................................................
Profit attributable to non-controlling interests......................................

1,414
298
2,944
92

933
389
2,186
18

Profit attributable to owners of parent....................................

¥2,853¥2,168

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

Non-Operating Income (Expenses):
Interest and dividend income..........................................................
Interest expenses...............................................................................
Foreign exchange gains ...................................................................
Foreign exchange losses..................................................................
Other, net............................................................................................

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 Comprehensive Income
For the years ended March 31, 2015 and 2016
Millions of yen
March 31,2015
Profit.............................................................................................................
Other Comprehensive Income:Unrealized gain (loss) on other securities.....................................
Unrealized gain (loss) on hedging derivatives...............................
Foreign currency translation adjustment.......................................
Remeasurements of defined benefit plans.....................................
Total other comprehensive income................................................
Comprehensive Income.............................................................................
Comprehensive income attributable to:
Owners of parent...............................................................................
Non-controlling interests..................................................................

¥

2,944

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

¥

2,186

897
16
416
180
1,509
4,453

(640)
(18)
29
(100)
(729)
1,457

4,210
243

1,554
(96)

The accompanying notes are an integral part of these statements.
52016

Consolidated Statements of Changes in Equity
For the years ended March 31, 2015 and 2016
Millions of yen
Accumulated other comprehensive income

Shareholder’s equity
Number ofshares ofForeign
Unrealized Unrealized gain currency Remeasurements

common Common Capital Retained Treasury gain on other on hedging translation of defined Non-controlling Total net
stock surplus earnings shares securities derivatives adjustments benefits plans interests assets
stock(thousands)
Balance at March 31, 2014...... 68,369
Cumulative effects ofchanges in accounting
policies............................
—
Restated balance..............
—
Profit attributable toowners of parent............
—
Dividends of surplus........
—
Purchase of treasury
shares...............................
—
Disposal of treasury
shares...............................
—
Total changes of items—
during period...................

9,116

5,066

9,161

(1,269)

828

3

6

(296)

1,485 24,102

—
9,116

—
5,066

108
9,269

—
(1,269)

—
828

—
3

—
6

—
(296)

—
108
1,485 24,210

—
—

—
—

2,853
(559)

—
—

—
—

—
—

—
—

—
—

—
—

2,853
(559)

—

—

—

(7)

—

—

—

—

—

(7)

—

0

—

0

—

—

—

—

—

0

—

0

2,294

(7)

896

16

265

180

185

1,542

Balance at March 31, 2015...... 68,369

9,116

5,066 11,563(1,276)

1,725

19

271

(116)

1,670 28,040

Balance at March 31, 2015...... 68,369
Dividends of surplus........
—
Profit attributable toowners of parent............
—
Purchase of treasury
shares...............................
—
Disposal of treasury
shares...............................
—
Change in treasury shareof parent arising fromtransactions with
non-controllingshareholders...................
—Net changes of
items other thanshareholders' equity.......
—
Total changes of items—
during period..................

9,116
—

5,066 11,563 (1,276)
—
(745)
—

1,725
—

19
—

271
—

(116)
—

1,670 28,040—(745)

Balance at March 31, 2016...... 68,369

9,116

—

—

2,168

—

—

—

—

—

—

2,168

—

—

—

(7)

—

—

—

—

—

(7)

—

6

—

20

—

—

—

—

—

26

—

430

—

—

—

—

—

—

—

430

—

—

—

—

(639)

(18)

143

(100)

(895) (1,510)

—

436

1,423

13

(639)

(18)

143

(100)

(895)

5,502 12,986(1,262)

1,085

1

414

(216)

775 28,402

362

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, 2015 and 2016
Millions of yen
Cash flows from operating activities:
Income before income taxes................................................................................
Adjustments for:
Depreciation...........................................................................................................
Impairment loss.....................................................................................................
Interest and dividend income...............................................................................
Interest expenses...................................................................................................
Increase (decrease) in net defined benefit liability...........................................
(Gain) loss on sales of non-current assets..........................................................
Loss on disposal of non-current assets...............................................................
Foreign exchange (gains) losses..........................................................................
(Gain) loss on sales of investment securiries....................................................
Increase (decrease) in provision for directors’ bonuses..................................
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........................................
Loss on valuation of shares of subsidiaries and associates....................................
Gain on bargain purchases..........................................................................................
(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 other current assets.............................................................
Increase (Decrease) in notes and accounts payable................................................
Increase (Decrease) in advances received on construction in progress...............
Increase (Decrease) in other current and non-current assets................................
Other...............................................................................................................................
Sub-total...........................................................................................................
Interest and dividend income received......................................................................
Interest expenses paid.................................................................................................
Income taxes paid.........................................................................................................
Net cash provided by (used in) operating activities...................................
Cash flows from investing activities:
Payment into time deposit...........................................................................................
Proceeds from withdrawal of time deposit...............................................................
Payments for purchase of non-current assets...........................................................
Proceeds from sale of non-current assets.................................................................
Payments for purchase of intangible assets..............................................................
Payments for purchase of investments in securities................................................
Proceeds from sales of investments in securities....................................................
Payments for loans.......................................................................................................
Proceeds from recovery of loans................................................................................
Purchase of shares of subsidiaries and associates...................................................
Other...............................................................................................................................
Net cash provided by (used in) investing activities....................................

2015

2016

¥4,656¥3,508

593
601
(112)
67
(53)
(30)
3
(272)
5
10
(11)
217
(144)
(2)
4
(48)
3,951

777
167
(167)
27
(146)
(0)
29
21
(0)
(0)
18
(306)
64
173
0
—
(7,022)

847
4,922
(401)
(5,839)
483
(139)
24
9,332
111
(67)
(831)
8,545

2,011
171
202
3,219
(1,038)
25
36
1,769
166
(27)
(1,337)
570

(920)
521
(779)
50
(13)
(24)
10
(38)
35
(8)
26
(1,139)

(911)
920
(486)
0
(12)
(5)
6
(22)
5
—
1
(503)

Cash flows from financing activities:
Increase (decrease) in short-term loans, net............................................................
Payments of long-term loans payable........................................................................
Purchase of treasury shares........................................................................................
Disposal of treasury shares.........................................................................................
Cash dividends paid......................................................................................................
Cash dividends paid to non-controlling shareholders.............................................
Proceeds from changes in ownership interests in subsidiaries that do not
result in change in scope of consolidation.........................................................
Other...............................................................................................................................
Net cash provided by (used in) financing activities...................................

—(4,148)
(7)
—
(559)
(2)

(1,000)
—
(6)
49
(743)
(2)

—
(12)
(4,728)(399)(6)(2,107)

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..............................................................
Cash and cash equivalents of end of year........................................................................

307
2,986
7,493
¥10,479

34(2,006)
10,479¥8,472

The accompanying notes are an integral part of these statements.
7

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

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 Act of Japan.
(b) Scope of Consolidation
The Company had 4 subsidiaries (majority-owned companies) as at March 31, 2016 (4 for 2015). The
consolidated financial statements in fiscal years ended March 31, 2015 include the accounts of the Company and 4(4 for 2015) of its subsidiaries "the Companies", which are listed below:•Kawanakajima Tochi Kaihatsu Co., Ltd.......................................... 87.1% owned•Solomon Kitano Mendana Hotel Limited........................................ 100.0% owned•Sakura Hanoi Plaza Investment Co., Ltd. ....................................... 87.6% owned•Asahi Agency Inc. .............................................................................. 59.5% owned
The above consolidated subsidiaries, except for Solomon Kitano Mendana Hotel Limited and Sakura Hanoi
Plaza Investment Co., Ltd., which have a fiscal year ending at December 31 of each year, have a fiscal year endingat March 31 of each year, which is the same as the fiscal year of the Company.
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.
Goodwill is principally amortized over a five year period on a straight-line basis from the year of acquisition.
(b) Recognizing Revenues and Costs of Construction Contracts
Revenues and costs of construction contracts that commenced on or after April 1, 2009, of which thepercentage of completion can be reliably estimated, are recognized by the percentage-of-completion method. The
percentage of completion is calculated based on the cost incurred to date as a percentage of the estimated total
cost. The completed-contract method is applied to all other construction contracts.
(c) 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.
(d) 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 2 to 50 years forbuildings and structures and from 2 to 17 years for store fixtures and equipment.
( e ) 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.
(f) Accrued Warranty
Accrued warranty is provided for against the future costs of warranty from completed construction.
(g) Accrued Bonuses to Employees
Accrued bonuses are computed by estimating the payment required in order to provide for the payment ofbonuses to employees.
( h ) 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.
( i ) 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 were recognized using mainly the straight-line method over a period of 10 years.
Prior service costs were amortized using mainly the straight-line method over a period of 10 years, the period
within the estimated average remaining service life of the employees.
(j) Allowance for losses on construction contracts
The Company prepares reasonable estimated amount for future losses from construction works outstanding
at fiscal year-end.
( k ) 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.
K I TA N O C O N S T R U C T I O N C O R P.

8

( l ) 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.
(m) 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.
(n) 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.
(o) Consumption Tax
Consumption Tax payable or receivable is excluded from each account in the consolidated statements of income.
(p) Reclassification of Accounts
Certain prior year amounts have been reclassified to conform with the current year’s presentation.
Changes in accounting policies(Application of Accounting Standard for Business Combinations)
The Accounting Standard for Business Combinations (ASBJ Statement No. 21, issued on September 13,2013), the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, issued on
September 13, 2013) and the Accounting Standard for Business Divestitures (ASBJ Statement No. 7, issued on
September 13, 2013) were among standards brought into effect as of the first quarter of the fiscal year. Revisions
were made to methods of recording differences due to changes in equity in subsidiaries remaining under thecontrol of the Company as capital surplus, and recording expenses relating to acquisitions as expenses for the
consolidated accounting year in which they are incurred. For business combinations occurring after the start of
the first quarter of the fiscal year, revisions were also made to methods of reflecting revised allocation of
acquisition costs, based on the establishment of temporary accounting procedures, in quarterly consolidated
financial statements for the quarter in which the business combination occurred. Changes were also made tolisting quarterly net income and listing minority interests as non-controlling interests. To reflect the relevantchanges to listings, quarterly consolidated financial statements and consolidated financial statements are being
reconfigured for the previous cumulative third quarter and the previous fiscal year.
The application of the Accounting Standard for Business Combinations, and other relevant standards, issubject to transitional measures set out in Article 58-2(4) of the Accounting Standard for Business Combinations,
Article 44-5(4) of the Accounting Standard for Consolidated Financial Statements, and Article 57-4(4) of the
Accounting Standard for Business Divestitures.
Standards will therefore be applied in the future, starting from the beginning of the first quarter of the fiscal year.
As a result, income before income taxes for the fiscal year under review decreased by 430 million yen.
Capital surplus for the fiscal year under review on the other hand increased by 430 million yen. In the
consolidated statement of cash flow for the consolidated accounting year under review, cash flows relating to theacquisition or sale of shares in subsidiaries without change in the scope of consolidation are listed under “cashflows from financing activities”.
Cash flows relating to expenses associated with the acquisition of shares in subsidiaries without any change
to the scope of consolidation, and expenses incurred in relation to the acquisition or sale of subsidiaries without
any change in the scope of consolidation, are listed under “cash flows from operating activities.
The end-of-year balance for capital surplus in the consolidated statement of changes in equity for the fiscal
year under review showed an increase of 430 million yen.
Net assets per share increased by 6.91 yen and earnings per share decreased by 6.90 yen.

9

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

(Unapplied accounting standards, etc.)
Guidance on the Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, issued on March 28, 2016)(1) Summary
Guidance on the Recoverability of Deferred Tax Assets sets out guidelines for the application of the
Accounting Standard for Tax Effect Accounting (Financial Services Agency) in relation to the recoverability ofdeferred tax assets. As part of the transfer of practical and auditing guidelines on tax effect accounting from theJapanese Institute of Certified Public Accountants (JICPA) to the Accounting Standards Board of Japan (ASBJ),
the ASBJ has divided companies into five categories in relation to guidelines on the recoverability of deferred tax
assets, particularly those set out in JICPA Auditing Committee Report No. 66(Auditing Treatment Regarding Judgment of Realizability of Deferred Tax Assets), and essentially overturned theframework for handling estimates when posting deferred tax assets in each of the relevant categories. As a result,essential revisions have been made to guidance in selected areas, including classification requirements andhandling posted figures for deferred tax assets.
(Revisions to classification requirements and handling posted figures for deferred tax assets)∙Handling companies that do not meet any classification requirements from Category 1 through Category 5∙Classification requirements for Category 2 and Category 3∙Handling temporary differences on unscheduled deductibles for companies corresponding to Category 2∙‌Handling reasonable estimable periods for taxable income before additions or subtractions (temporary
differences on deductibles, etc.) for companies corresponding to Category 3∙Handling cases in which companies meeting requirements for Category 4 also correspond to Category 2 or Category 3(2) Planned application date
Guidance will be applicable from the beginning of the fiscal year ending March 31, 2017.
(3) Impact of application of the above accounting standard and guidance
The impact that the application of Guidance on the Recoverability of Deferred Tax Assets will have on
consolidated financial statements are currently under evaluation.
3.

Notes to the Consolidated Balance Sheets(1) Inventories
Materials and supplies............................................................................
Merchandise............................................................................................
(2) Assets pledged as collateral
Buildings..................................................................................................
Land..........................................................................................................
(3) The guarantee of housing construction flaw security
Investment in securities.........................................................................
4.

Millions of yen
March 31,
2015
2016
¥73
10

¥76
10

282
1,161

—
—

180

184

Notes to Consolidated Statements of Operations(1) Allowance for loss on construction contract
included in cost of sales of construction contracts.....................
(2) Write-down of inventories included in cost of
sales on real estate development and other.................................
(3) The major components of “Selling, general andadministrative expenses”
Payroll......................................................................................................
Retirement benefit expenses.................................................................
Allowance for accrued bonuses............................................................
Provision of allowance for doubtful accounts....................................
Depreciation............................................................................................

Millions of yen
for the year ended March 31,
2015
2016
¥217

¥—

200

43

1,469
73
130
—
340

1,462
69
155
177
389

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

10

5.

6.

Notes to Consolidated Statement of Comprehensive Income
Reclassification adjustments and tax effects related to other comprehensive income were as follows:
Millions of yen
for the year ended March 31,
Net unrealized gain (loss) on other securities, net of taxes
2015
2016
Gains (losses) arising during the year..............................................
¥1,260¥(974)—(0)
Reclassification adjustments.............................................................
		 Total before tax effect.................................................................
1,260
(974)
(363)
335
		 Tax effect......................................................................................
		 Net unrealized gain (loss) on other securities, net of taxes...
897
(640)
Deferred gain (loss) on hedging, net of taxes
Gains (losses) arising during the year..............................................
		 Tax effect......................................................................................
		 Deferred gain (loss) on hedging, net of taxes..........................

¥24
(8)
16

¥(27)
9(18)

Foreign currency translation adjustments
Gains (losses) arising during the year..............................................

¥416

¥29

Remeasurements of defined benefit plans, net of tax
Gains (losses) arising during the year..............................................
Reclassification adjustments.............................................................
		
Amount before income tax effect..............................................
		
Income tax effect.........................................................................
		 Remeasurements of defined benefit plans, net of tax.............

¥240
47
287
(107)
180

¥(177)
37
(140)
40
(100)

		

¥1,509¥(729)Total other comprehensive income...........................................

Notes to the Consolidated Statement of Changes in Equity(a) Type and number of outstanding shares
March 31, 2015
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
68,368,532
—
—
Total
68,368,532——
Treasury shares
Common stockTotal

6,152,666
6,152,666

20,89020,89097
97

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.....................................................................

Type of shares

Balance at
Beginning of year

March 31, 2016
Number of shares
Increase in shares
during the year

Decrease in shares
during the year

68,368,532
68,368,532
6,173,459
6,173,459

20,890 shares
97 shares

Balance at
end of year

Issued stock
Common stockTotal

68,368,532
68,368,532

—
—

—
—

68,368,532
68,368,532

Treasury shares
Common stockTotal

6,173,459
6,173,459

20,506
20,506

86,664
86,664

6,107,301
6,107,301

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.....................................................................
Decrease by the sales of treasury shares (the Company's shares)
by a consolidates subsidiary.................................................................................................

11

Balance at
end of year

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

20,506 shares
360 shares
86,304 shares

(b) Dividends		(1) Dividends paid to shareholders
Resolution
AmountDate of
Approved
Type of(Thousands
approvalbysharesof Yen)June 19,2015		Commonstock

748,162

Retainedearnings

Annualgeneralmeeting ofshareholders

Commonstock

623,267

Retainedearnings

March 31,2015

June 22,2015

10

March 31,2016

June 27,2016

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.....................................................................
8.

12

Effectivedate(2)	‌D ividends with a shareholders’ cut-off date during the current fiscal year but an effective date
subsequent to the current fiscal year
Resolution
AmountAmountDate of
Approved
Type of(Thousands
Per share Shareholder’s Effective
approvalbysharesof Yen)Paid from(Yen)
cut-off datedate
June 24,2016

7.

Annualgeneralmeeting ofshareholders

Paid fromAmountPer share Shareholder’s(Yen)
cut-off date¥¥Millions of yen
March 31,2015
2016
11,199
¥
9,184
(720)
(712)
10,479¥
8,472

Fair Value of Financial Instruments(a)	‌The fair value and book value of financial instruments as of March 31, 2015 and March 31, 2016, otherthan items of which fair value are not practically available, are as follows:
Millions of yen
March 31, 2015
Book value
Fair value
Difference
Cash and deposits..............................................
¥11,199¥11,199¥—
Notes and accounts receivable........................
11,781
11,781
—
5,069
5,069
—
Investments in securities..................................
Total.............................................................
28,04928,049¥—Notes and accounts payable.............................
Short-term loans.................................................
Total.............................................................
Derivative transactions.....................................

¥10,941
1,000
11,941¥¥28¥10,941
1,000¥
11,941
¥28

¥—
—
¥—
¥—

Cash and deposits..............................................
Notes and accounts receivable........................
Investments in securities..................................
Total.............................................................

Book value¥9,184
18,802
4,092¥32,078

Millions of yen
March 31, 2016
Fair value¥9,184
18,802
4,092¥32,078

Difference
¥—
—
—
¥—

Notes and accounts payable.............................
Total.............................................................
Derivative transactions.....................................

¥14,160¥14,160¥1¥14,160¥14,160
¥1

¥—
¥—
¥—

(1) Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen
March 31, 2015
March 31, 2016
Book value
Book value
Non-listed shares *......................................................................................... ¥
1,027
¥
1,031
Membership deposit *...................................................................................
2,643
2,508
* ‌It is extremely difficult to determine the fair values thereof because neither market quoted prices areavailable nor future Cash Flows can be estimated.

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

12

(2) Redemption schedule for money claims and securities with maturities
Millions of yen
March 31, 2015
Due in 1 year orDue after 1 year
Due after 5 years
lessthrough 5 years
through 10 years
11,189¥
1¥—Cash and deposits................. ¥
Notes and accounts
receivable.............................
11,781——
Investments in securities
Government bonds........
—
35
123
Corporate bonds............
——
100
Millions of yen
March 31, 2016
Due in 1 year orDue after 1 year
lessthrough 5 years
9,174
¥—
Cash and deposits................. ¥
Notes and accounts
receivable.............................
18,802—
Investments in securities
Government bonds........
—
109
Corporate bonds............
——

Due after 10
years
¥—
—
—
—

Due after 5 years
through 10 years¥—

Due after 10
years
¥—

—

—

73
100

—
—

9. Investments in Securities	‌The following tables summarize the acquisition cost and book value of available-for-sale securities withmarket value as of March 31, 2015 and 2016:
Millions of yen
March 31, 2015
Book value
Acquisition cost
Difference
Securities with book value exceedingacquisition cost:
Equity securities..................................................... ¥4,760¥2,257¥2,503
Government bonds.................................................
180
172
7
101
100
1
Corporate bonds.....................................................
Sub-total.............................................................. ¥5,041¥2,530¥2,511
Securities with book value not exceedingacquisition cost:
Equity securities..................................................... ¥28
Sub-total.............................................................. ¥28
Total............................................................................. ¥5,069

Book value
Securities with book value exceedingacquisition cost:
Equity securities..................................................... ¥3,777
Government bonds.................................................
184
101
Corporate bonds.....................................................
Sub-total.............................................................. ¥4,062
Securities with book value not exceedingacquisition cost:
Equity securities..................................................... ¥30
Sub-total.............................................................. ¥30
Total............................................................................. ¥4,092

13

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

¥29
¥29
¥2,558

¥(1)
¥(1)
¥2,511

Millions of yen
March 31, 2016
Acquisition cost

Difference¥2,246174
100¥2,520¥1,53110
1¥1,542¥35¥35¥2,555

¥(5)
¥(5)
¥1,536

10. Derivative transactions
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¥42Millions of yen
March 31, 2016
Contract
over 1 year¥—Fair value¥1

11. Reserve for Retirement Benefits to Employees	‌Employees of the Company is covered by a defined-benefit corporate pension plan and defined-contribution
allowance plan. Employees of its domestic subsidiaries are covered by termination allowance plan ordefined-contribution pension plan.
Defined benefit plans(a) Movements in retirement benefit obligations (except (c) below)
Balance at April 1, 2015.......................................................................................................
Service cost.........................................................................................................................
Interest cost........................................................................................................................
Actuarial loss (gain)..........................................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2016..................................................................................................

¥2,801
145
14
89
(351)
¥2,697(b) Movements in plan assets (except (c) below)
Balance at April 1, 2015.......................................................................................................
Expected return on plan assets.......................................................................................
Actuarial loss (gain)..........................................................................................................
Contributions paid by the employer................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2016..................................................................................................

¥2,478
50
(88)
293
(351)
¥2,382(c) Movements in net liability for retirement benefits based on the simplified method
Balance at April 1, 2015.......................................................................................................
Retirement benefit costs...................................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2016..................................................................................................

¥48
5
(3)
¥50

(d) Reconciliation from retirement benefit obligations and plan assets to liability for retirement benefits
Funded retirement benefit obligations.............................................................................
¥2,745(2,414)
Plan assets............................................................................................................................
331
35
Unfunded retirement benefit obligations.........................................................................
Total net liability (asset) for retirement benefits at March 31, 2016.............................
366
Asset for retirement benefits.......................................................................................
Total net liability (asset) for retirement benefits at March 31, 2016......................

366
¥366

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

14

(e) Retirement benefit costs
Service cost...........................................................................................................................
Interest cost..........................................................................................................................
Expected return on plan assets.........................................................................................
Net actuarial loss amortizations........................................................................................
Past service cost amortization...........................................................................................
Retirement benefit costs calculated by simplified method............................................
Total retirement benefit costs for the year ended March 31, 2016................................

¥145
14
(50)
44
(8)
5
¥151

(f ) Remeasurements of defined benefit plans, before tax
Past service cost..................................................................................................................
Actuarial gains / losses........................................................................................................
Total................................................................................................................................

¥(8)
(133)
¥(140)(g) Breakdown of items recognized in accumulated other comprehensive income
Unrealized past service cost...............................................................................................
Unrecognized actuarial differences...................................................................................
Total................................................................................................................................

¥341
(30)
¥311

(h) Plan assets
Securities..............................................................................................................................
Bonds.....................................................................................................................................
General accounts.................................................................................................................
Other......................................................................................................................................
Total................................................................................................................................

22%
21%
47%
10%
100%

(i) Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets
have been considered in determining the long-term expected rate of return(j) Actuarial assumptions
Discount rate........................................................................................................................
Rate of expected return on plan assets.............................................................................

0.5%
2.0%

(k) Defined contribution plans
Amount of contributions to defined contribution plans by the Company and its subsidiaries was ¥51
million.
12. 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 31,2015
2016
Deferred tax assets:
Write-down of fixed assets.................................................................
¥
737
¥
746
34
87
Allowance for doubtful accounts......................................................
Write-down of marketable securities................................................
166
155
Intercompany profits..........................................................................
255
242
553
304
Loss on valuation of real estate for sale...........................................
Operating loss carry forwards...........................................................
111
63
Net defined benefit liability................................................................
119
111
649
481
Other.....................................................................................................
Total gross deferred tax assets .................................................
2,624
2,190
(1,283)(1,263)
Valuation allowance.....................................................................
1,341
927
Deferred tax liabilities:
Reserve for special depreciation.......................................................
(152)
(120)
Reserve for advanced depreciation...................................................
(57)
(54)
(785)
(450)
Unrealized gain on other securities...................................................
Difference from fair value of subsidiaries........................................
(756)
(724)
Deferred gains or losses on hedges...................................................
(9)(0)(1,759)(1,350)Total gross deferred tax liabilities.............................................
Net deferred tax assets................................................................

15

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

¥

(418)

¥

(423)

(b)	‌The reconciliation between the statutory tax rate and the effective tax rate as at March 31, 2015 and 2016is presented below:
As of March 31,
2015
2016
Statutory tax rate.....................................................................................
—
32.8%
Permanent differences on expenses not deductible.......................
—
1.5
Permanent differences on income not taxable................................
—(0.2)
Accrued bonuses to directors and statutory
auditors not deductible.....................................................................
—
0.4
Inhabitant taxes per capita.................................................................
—
0.6
Valuation allowance............................................................................
—
1.8
Influence by effective tariff change...................................................
—
0.8
—
0.0
Other......................................................................................................
—
37.7%
Effective tax rate..................................................................................
In fiscal year 2015, since the difference between statutory effective tax rate and actual effective tax rate after
applying tax effect accounting is less than 5% of statutory effective tax rate, note is omitted.
13. Segment Information(1)	‌The segment information of the Company and its subsidiaries for the year ended March 31, 2015 and2016 is presented below:
		
The Company and its subsidiaries operate principally in the following four industrial segments:
		Construction............. Construction, engineering works, development and sale of real estate.
		Golf courses.............. Management of golf courses
Hotels......................... Management of hotels
		Advertising agent..... Management of advertising agent.
(2)	‌The segment information of the Company and its subsidiaries for the year ended March 31, 2015 and2016 is presented below:
Millions of Yen
March 31, 2015
Golf
Advertisingcourses
Hotelsagent
Total
Construction
Reconciliations Consolidated
Ⅰ. Net sales and Operating income
Net sales
Customers¥67,572 ¥248
Intersegment or
74transfer
Total
67,578252
Operating income¥4,645 ¥1(loss)
Ⅱ. OtherDepreciation and259
38
amortization

Construction

Golf
coursesⅠ. Net sales and Operating income
Net sales
Customers¥68,421 ¥248
Intersegment or
33
4transfer
Total
68,454251
Operating income¥3,454 ¥(4)Ⅱ. OtherDepreciation and293
44
amortization¥1,781¥1,451¥71,052¥—¥71,052

7

94

111

(111)

—

1,789

1,545

71,164(111)

71,052¥81¥41¥4,768¥29¥4,797

319

6

622

(29)

593

Millions of Yen
March 31, 2016
Advertising
Hotels
agent

Total

Reconciliations Consolidated¥2,038¥1,623¥72,329¥—¥72,329

5

114

155

(155)

—

2,042
¥156

1,737
¥62

72,485¥3,668

(155)
¥22

72,329¥3,690

460

8

805

(28)

777

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

16

14. Per Share Data
Net assets per share and earnings per share as of and for the year ended March 31, 2015 and 2016 are as
follows:
Yen
2015
2016
Net assets per share................................................................................
¥423.98¥443.73
Earnings per share – primary.................................................................
45.86
34.84
1.

Basis of net income per share of common stock

Profit attributable to owners of parent.................................................
Profit pertaining to common stock.......................................................
Average outstanding shares of common stock....................................
2.

Basis of net assets per share of common stock

Net assets..................................................................................................
Amounts deducted from net assets.......................................................
Non-controlling interests........................................................................
Net assets applicable to common stock...............................................
Number of shares of common stock at end of year............................

17

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

Millions of yen
2015
2016
¥2,853¥2,168¥2,853¥2,168
62,205 thousand
62,218 thousand
sharessharesMillions of Yen
2015
2016
¥28,040¥28,402
1,670
775
1,670
775
26,36927,62762,195 thousand
62,261 thousand
sharessharesBOARD OF DIRECTORS, STATUTORY AUDITORSAND EXECUTIVE OFFICERS
Board of Directors
Chairman and President, Representative Director
		Takahiro Kitano
Directors
		Yoshikatsu Yamazaki

Executive Officers
President and Executive Officer
		Takahiro Kitano *Senior Executive Officer		Yoshikatsu Yamazaki *		Zentaro Ozawa
Managing Executive Officers
Outside Director

		Itsuo Takeuchi		Yoshinori Uda

		Zentaro Ozawa *		Fumiko Yazaki

		Kiyoto Kitagawa

Statutory Auditors

Executive Officers

Permanent Auditor

		Shuichi Moriyasu

		Noboru Takizawa

		Yoshito Iwasaki
		Atsushi Gomyo

Outside Auditors

		Tsuneaki Yamada

		Yoshichika Owa

		Masakatsu Kobayashi

		Toshiyuki Nishimura

		Sadao Sugimura

		Nobuyoshi Sakai

		Hironori Terashima
		Kenichi Oguma
		Satoshi Kubo
		* : Member of Board of Directors

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

18