2018

FINANCIALSTATEMENTS
MARCH 31, 2017-2018

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........................... 221

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, 2017 and 2018
Millions of yen
March 31,
2017

2018

Current Assets:
Cash in hand and in banks.................................................................
Notes and accounts receivable..........................................................
Securities..............................................................................................
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......................................................................

¥15,111
16,724
—
3,565
708
41
91
510
1,260
(51)
37,959¥8,977
25,073
35
3,536
674
41
99
441
2,514
(41)
41,350Non-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....................................................

12,031
2,840
2,769
771
6,339
10
47
(10,210)
14,596

12,370
2,767
2,833
771
6,380
0
43
(10,624)
14,540Intangible fixed assets........................................................................

228

274

Investments:
Investment securities...................................................................
Long-term loans............................................................................
Net defined benefit asset.............................................................
Deferred income taxes.................................................................
Other investments........................................................................
Less: allowance for doubtful accounts......................................
Total investments..................................................................
Total non-current assets.......................................................
Total assets.............................................................................

6,128
25
—
345
1,375
(32)
7,841
22,665¥60,624

6,793
23
288
280
1,400
(33)
8,751
23,565¥64,916

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, 2017 and 2018
Millions of yen
March 31,
2017

2018

¥14,403
1,362
6,572
0
419
47
67
83
1,680
24,633¥18,670
708
5,392
0
325
48
87
—
1,650
26,881

47
2,370
1,634
194
4,245
28,878

78
2,208
1,710
215
4,212
31,092

9,116

9,116

5,707
15,686(1,266)29,243

5,716
18,526(2,260)31,098

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

1,807
9
355
(94)
2,077

2,005
(2)
272
(8)
2,266

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

426

458

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

31,74633,823

Total liabilities and net assets.....................................................................

¥60,624¥64,916

LIABILITIESCurrent Liabilities:
Notes and accounts payable..............................................................
Income taxes payable.........................................................................
Advances received on construction in progress.............................
Advances received on uncompleted 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 non-current liabilities...............................................................
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, 2017 and 2018
Capital surplus.....................................................................................
Retained earnings................................................................................
Treasury shares...................................................................................
Total shareholders’ equity...........................................................
Accumulated Other Comprehensive Income:The accompanying notes are an integral part of these statements.
3

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Consolidated Statements of Income
For the years ended March 31, 2017 and 2018
Millions of yen
March 31,
2017

2018

¥66,615
4,444
71,058¥79,117
4,685
83,802Gross profit..................................................................................................

58,822
3,081
61,903
9,155

71,077
3,131
74,208
9,594

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

4,299
4,857

4,708
4,886

131
—
(26)
(20)
(111)
98
4,928

129
10
(32)
—
(52)
100
5,041

Special Items:
Gain on sales of non-current assets................................................
Gain on sales of investment securities...........................................
Loss on disposal of non-current assets...........................................
Loss on valuation of investment securities....................................
Other, net............................................................................................
Income before income taxes.....................................................

210
34
(89)
(0)
0
5,083

4
9
(17)
—
—
5,037

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

1,729
30
3,325
3

1,440
109
3,487
25

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

¥3,322¥3,462

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..........................................................
Reversal of allowance for doubtful accounts................................
Interest expenses...............................................................................
Provision of allowance for doubtful accounts...............................
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.

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Consolidated Statements of Comprehensive Income
For the years ended March 31, 2017 and 2018
Millions of yen
March 31,

Profit.............................................................................................................
Other Comprehensive Income:Unrealized gain (loss) on other securities.....................................
Deferred 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..................................................................

2017

2018

¥3,325¥3,487

721
8
(117)
122
734
4,059

198
(11)
(84)
86
189
3,677

4,114
(55)

3,652
25

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.

Consolidated Statements of Changes in Equity
For the years ended March 31, 2017 and 2018
Millions of yen
Accumulated other comprehensive income

Shareholder’s equity
Number ofshares of

Unrealized Deferred

Foreign

gain (loss) gain (loss) currency Remeasurements

common Common Capital Retained Treasury on other on hedging translation of defined Non-controlling Total net
stock surplus earnings shares securities derivatives adjustment benefits plans interests assets
stock(thousands)
Balance at March 31, 2016...... 68,369
Dividends of surplus........
—
Profit attributable toowners of parent............
—
Purchase of treasury
shares...............................
—
Change in treasury sharesof parent arising fromtransactions with
non-controllinginterests...........................
—Net changes of
items other thanshareholders’ equity.......
—
Total changes of items—
during period..................

9,116
—

Balance at March 31, 2017...... 68,369

5,502 12,986 (1,262)
—
(622)
—

1,085
—

1
—

415
—

(216)
—

775 28,402
—
(622)

—

—

3,322

—

—

—

—

—

—

3,322

—

—

—

(4)

—

—

—

—

—

(4)

—

205

—

—

—

—

—

—

—

205

—

—

—

—

722

8

(59)

122

(349)

443

—

205

2,700

(4)

722

8

(59)

122

(349)

3,344

9,116

5,707 15,686(1,266)

1,807

9

355

(94)

426 31,746

Balance at March 31, 2017...... 68,369
Dividends of surplus........
—
Profit attributable toowners of parent............
—
Purchase of treasury
shares...............................
—
Disposal of treasury
shares...............................
—Net changes of
items other thanshareholders’ equity.......
—
Total changes of items—
during period..................

9,116
—

5,707 15,686 (1,266)
—
(622)
—

1,807
—

9
—

355
—

(94)
—

426 31,746—(622)

Balance at March 31, 2018...... 68,369

9,116

—

—

3,462

—

—

—

—

—

—

3,462

—

—

—

(1,009)

—

—

—

—

—

(1,009)

—

9

—

15

—

—

—

—

—

24

—

—

—

—

198

(11)

(83)

86

33

222

—

9

2,840

(994)

198

(11)

(83)

86

33

2,077

5,716 18,526(2,260)

2,005

(2)

272

(8)

458 33,823

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 years ended March 31, 2017 and 2018
Millions of yen
Cash flows from operating activities:
Income before income taxes................................................................................
Adjustments for:
Depreciation...........................................................................................................
Interest and dividend income...............................................................................
Interest expenses...................................................................................................
Foreign exchange (gains) losses..........................................................................
(Gain) loss on sales of investment securities.....................................................
(Gain) loss on valuation of investment securities.............................................
(Gain) loss on sales of non-current assets..........................................................
Loss on disposal of non-current assets...............................................................
Increase (decrease) in net defined benefit asset and liability................................
Increase (decrease) in accrued warranty..................................................................
Increase (decrease) in allowance for losses on construction contracts...............
Increase (decrease) in accrued bonuses to employees...........................................
Increase (decrease) in accrued bonuses to directors and statutory auditors......
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 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 liabilities...........................
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 tangible fixed assets.......................................................
Proceeds from sale of tangible fixed assets..............................................................
Payments for purchase of intangible fixed assets....................................................
Payments for purchase of investment securities......................................................
Proceeds from sales of investment securities...........................................................
Proceeds from redemption of investment securities...............................................
Payments for loans.......................................................................................................
Proceeds from recovery of loans................................................................................
Other...............................................................................................................................
Net cash provided by (used in) investing activities....................................

2017

2018

¥5,083¥5,037

679
(131)
26
107
(34)
0
(210)
89
(145)
26
83
108
1
(196)
2,076

693
(129)
32
93
(9)
—
(4)
17
(132)
20
(83)
(94)
1
(9)
(8,351)

(358)
(5)
(301)
243
2,174
(204)
92
9,206
128
(26)
(1,132)
8,176

34
20
(1,185)
4,268(1,180)(156)(43)(1,160)127(32)(2,042)(3,107)(891)
911(1,695)
295
(33)
(39)
37
50
(7)
8
(33)
(1,398)

(891)
891
(712)
5
(78)
(463)
21
50
(103)
25
(35)
(1,290)Cash flows from financing activities:
Purchase of treasury shares........................................................................................
Disposal of treasury shares.........................................................................................
Cash dividends paid......................................................................................................
Cash dividends paid to non-controlling interests.....................................................
Payments 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)
—
(623)
(2)

(1,009)
24
(623)
(2)

(87)
(15)
(730)

—
(10)
(1,620)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........................................................................

(101)
5,947
8,472
¥14,419(117)(6,134)
14,419¥8,285

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

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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, 2018 (4 for 2017). The
consolidated financial statements in fiscal years ended March 31, 2018 include the accounts of the Company and 4(4 for 2017) of its subsidiaries (the “Companies”), which are listed below:•Kawanakajima Tochi Kaihatsu Co., Ltd.......................................... 91.7% owned•Solomon Kitano Mendana Hotel Limited........................................ 100.0% owned•Sakura Hanoi Plaza Investment Co., Ltd. ....................................... 99.5% 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 non-controlling interests
is charged to non-controlling interests.
(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 declining-balance method; provided however, buildings (excluding
leasehold improvements and auxiliary facilities attached to buildings), facilities attached to buildings andstructures acquired on or after April 1, 2016 and real estate for leasing are depreciated by the straight-line method
at rates based on the estimated useful lives of the assets, as prescribed by Japanese income tax laws. The range ofuseful lives is principally from 2 to 50 years for buildings and structures and from 2 to 17 years for machinery andequipment.
(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 recognizes accrued pension and severance costs to employees based on the actual valuationof projected 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.

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(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.
(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: (1) the fair value is available and (2) the
fair value is not available.
(1)	‌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.
(2)	‌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. Evaluation of effectiveness has been
omitted for forward exchange contracts because these are expected to completely offset cash-flow fluctuations
resulting from exchange rate fluctuations as the hedging instrument and the hedged item are in the same
currency.
(o) Reclassification of accounts
Certain prior year amounts have been reclassified to conform with the current year’s presentation.
Changes in accounting policies(New Accounting Standards Not Yet Applied)•‌“Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, revised by the
Accounting Standards Board of Japan on February 16, 2018)•‌“Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, revised by the AccountingStandards Board of Japan on February 16, 2018)
a. Overview
When the practical guidelines on tax effect accounting issued by the Japanese Institute of Certified Public
Accountants (JICPA) were transferred to the Accounting Standards Board of Japan (ASBJ), the ASBJ madenecessary changes mentioned below to the practical guidelines while maintaining the basic framework and issued
the “Guidance on Accounting Standard for Tax Effect Accounting” and the other above.
Major changes to accounting treatments•‌Treatment of taxable temporary differences pertaining to shares of subsidiaries and associates in nonconsolidated financial statements•‌Treatment of recoverability of deferred tax assets for an entity classified as type 1
b. Scheduled date of application
The ASBJ guidance will be applied at the start of the fiscal year beginning on April 1, 2018.
c. Effects of application of the accounting standards
The impact of the application of the Guidance on Accounting Standard for Tax Effect Accounting and theother above on the consolidated financial statements is currently under evaluation.

9

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3.

Notes to Consolidated Balance Sheets(1) Items relating to non-consolidated subsidiaries and associates
Investment securities.............................................................................
(2) Inventories
Materials and supplies............................................................................
Merchandise............................................................................................
(3) The guarantee of housing construction flaw security
Securities..................................................................................................
Investment securities.............................................................................
4.

Millions of yen
March 31,
2017
2018
¥5

¥5

81
10

91
8

—
184

35
158

Notes to Consolidated Statements of Income(1) Allowance for losses on construction contracts
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,
2017
2018
¥83

¥—

2

29

1,534
96
190
(216)
357

1,606
92
145
10
362

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5.

11

Notes to Consolidated Statements 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
2017
2018
Gains (losses) arising during the year..............................................
¥1,018¥287——
Reclassification adjustments.............................................................
		
Total before tax effect.................................................................
1,018
287
(297)
(89)
		
Tax effect......................................................................................
		Net unrealized gain (loss) on other securities, net of taxes...
721
198
Deferred gain (loss) on hedging derivatives, net of taxes
Gains (losses) arising during the year..............................................
		Tax effect......................................................................................
		
Deferred gain (loss) on hedging derivatives, net of taxes......

¥11
(3)
8

¥(15)
5(11)

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

¥(117)¥(84)

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

¥73
102
175
(53)
122

¥14
110
124
(38)
86

		

¥734

¥189

Total other comprehensive income...........................................

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

6.

Notes to Consolidated Statements of Changes in Equity(a) Type and number of outstanding shares
March 31, 2017
Number of shares
Increase in shares
Type of shares
Balance at
Beginning of year
during the year
Issued stock
Common stock
68,368,532—
Total
68,368,532—
Treasury shares
Common stockTotal

6,107,301
6,107,301

13,11913,119Decrease in shares
during the year——

68,368,532
68,368,532——

6,120,420
6,120,420

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

Type of shares

Balance at
Beginning of year

March 31, 2018
Number of shares
Increase in shares
during the year

Balance at
end of year

Decrease in shares
during the year

13,119 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

6,120,420
6,120,420

2,360,859
2,360,859

65,47265,472

8,415,807
8,415,807

The summary of the main change reason
Increase by the acquisition of treasury sharesby a resolution of the Board of Directors............................................................................ 2,338,000 shares
Increase by the repurchase of shares less than one unit........................................................
22,859 shares
Decrease by the sales of treasury shares (the Company’s shares)
by a consolidated subsidiary.................................................................................................
65,472 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
Resolution
AmountDate of
Approved
Type of(Thousands
approvalbysharesof Yen)June 23,2017		Commonstock

623,135

Retainedearnings

Annualgeneralmeeting ofshareholders

Commonstock

599,527

Retainedearnings

March 31,2017

June 26,
2017

10.0

March 31,2018

June 25,2018

Notes to 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.....................................................................

13

10.0

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 22,2018

7.

Annualgeneralmeeting ofshareholders

Paid fromAmountPer share Shareholder’s(Yen)
cut-off date

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 31,20172018
¥15,111¥8,977(692)(692)¥14,419¥8,285

8. Fair Value of Financial Instruments	‌The fair values and book values of financial instruments as of March 31, 2017 and March 31, 2018, other thanitems of which fair value are not practically available, are as follows:
Millions of yen
March 31, 2017
Book value
Fair value
Difference
Cash in hand and in banks................................
15,111¥
15,111¥—¥
Notes and accounts receivable........................
16,724
16,724
—
5,027
5,027
—
Securities and investment securities...............
Total.............................................................
¥
36,862¥
36,862¥—Notes and accounts payable.............................
Total.............................................................
Derivative transactions.....................................

¥
¥
¥

14,403
14,403
13

Book value
8,977
25,0735,333¥
39,383

Cash in hand and in banks................................
Notes and accounts receivable........................
Securities and investment securities...............
Total.............................................................

¥

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

¥
¥
¥

18,67018,670
(3)

¥
¥
¥

14,403
14,403
13

¥
¥
¥

Millions of yen
March 31, 2018
Fair value¥
8,977
25,0735,333¥
39,383

¥

¥
¥
¥

¥
¥
¥

18,67018,670(3)———

Difference
—
—
—
¥
—
—
—
—

(a) Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen
March 31, 2017
March 31, 2018
Book value
Book value
Non-listed shares *......................................................................................... ¥1,102¥1,495
Membership deposit *...................................................................................
2,370
2,208
* ‌It is extremely difficult to determine the fair values thereof because neither market quoted prices areavailable nor future cash flows can be estimated.
(b) Redemption schedule for money claims and securities with maturities
Millions of yen
March 31, 2017
Due in 1 year orDue after 1 year
Due after 5 years
lessthrough 5 years
through 10 years
15,111¥—¥—Cash in hand and in banks ¥Notes and accounts
receivable.............................
16,724——
Investment securities
Government bonds........
—
125
57
Corporate bonds............
——
50

Cash in hand and in banks
Notes and accounts
receivable.............................
Securities and investment
securities
Government bonds........
Corporate bonds............

Millions of yen
March 31, 2018
Due in 1 year orDue after 1 year
lessthrough 5 years
8,977
¥
—
¥

Due after 10
years
¥
—
—
1
—

Due after 5 years
through 10 years¥—

Due after 10
years
¥
—

25,073

—

—

—

35
—

91
—

63
50

3
—

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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9. Investment Securities	‌The following tables summarize the acquisition cost and book value of available-for-sale securities withmarket value as of March 31, 2017 and 2018:
Millions of yen
March 31, 2017
Book value
Acquisition cost
Difference
Securities with book value exceedingacquisition cost:
Equity securities..................................................... ¥4,793¥2,282¥2,511Government bonds.................................................
184
177
7
50
50
0
Corporate bonds.....................................................
Sub-total.............................................................. ¥5,027¥2,509¥2,518
Securities with book value not exceedingacquisition cost:—
Equity securities..................................................... ¥Government bonds................................................. ¥—
Corporate bonds..................................................... ¥—Sub-total.............................................................. ¥—Total............................................................................. ¥5,027

Book value
Securities with book value exceedingacquisition cost:
Equity securities..................................................... ¥5,068
Government bonds.................................................
187
Corporate bonds..................................................... ¥—Sub-total.............................................................. ¥5,255
Securities with book value not exceedingacquisition cost:
21
Equity securities..................................................... ¥Government bonds.................................................
651
Corporate bonds.....................................................
Sub-total.............................................................. ¥78
Total............................................................................. ¥5,333

15

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

¥
—
¥
—
¥—
¥—
¥2,509

¥
—
¥
—
¥—
¥—
¥2,518

Millions of yen
March 31, 2018
Acquisition cost

Difference¥2,260181¥—¥2,441¥2,8086¥—¥2,814

¥

¥

23
6
52
¥81
¥2,522

(2)
(0)
(1)
¥(3)
¥2,811

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¥
111

Millions of yen
March 31, 2018
Contract
over 1 year¥—Fair value¥(3)

11. Reserve for Retirement Benefits to Employees	‌Employees of the Company are covered by a defined-benefit corporate pension plan and definedcontribution allowance plan. Employees of its 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, 2017.......................................................................................................
Service cost.........................................................................................................................
Interest cost........................................................................................................................
Actuarial loss (gain)..........................................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2018..................................................................................................
(b) Movements in plan assets (except (c) below)
Balance at April 1, 2017.......................................................................................................
Expected return on plan assets.......................................................................................
Actuarial loss (gain)..........................................................................................................
Contributions paid by the employer................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2018..................................................................................................
(c) Movements in net defined benefit liability based on the simplified method
Balance at April 1, 2017.......................................................................................................
Retirement benefit costs...................................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2018..................................................................................................

¥

¥

¥

¥

¥
¥

2,442
156
12
20
(212)
2,418

2,459
49
34
376
(212)
2,706

63
22
(7)
78

(d) Reconciliation from net defined benefit liability and plan assets to liability for retirement benefits
Funded retirement benefit obligations.............................................................................
¥2,445(2,724)
Plan assets............................................................................................................................
(279)
70
Unfunded retirement benefit obligations.........................................................................
Total net defined benefit liability (asset) at March 31, 2018..........................................
(209)
Net defined benefit liability.........................................................................................
Net defined benefit asset.............................................................................................
Total net defined benefit liability (asset) at March 31, 2018...................................

¥

78
(288)
(209)

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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(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, 2018................................
(f) Remeasurements of defined benefit plans, before tax
Past service cost..................................................................................................................
Actuarial gains / losses........................................................................................................
Total................................................................................................................................
(g) Breakdown of items recognized in accumulated other comprehensive income
Unrealized past service cost...............................................................................................
Unrecognized actuarial differences...................................................................................
Total................................................................................................................................
(h) Plan assets
Bonds.....................................................................................................................................
Securities..............................................................................................................................
General accounts.................................................................................................................
Other......................................................................................................................................
Total................................................................................................................................

¥

¥

¥
¥

¥
¥

156
12
(49)
117
(8)
22
250

(8)
131
124

(15)
27
12

24%
21%
46%
9%
100%

(i) Long-term expected rate of return
Current and target asset allocations as well as historical and expected returns on various categories ofplan 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 ¥52
million.

17

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

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 31,20172018
Deferred tax assets:
Write-down of fixed assets.................................................................
¥
747
¥
750
27
27
Allowance for doubtful accounts......................................................
Write-down of marketable securities................................................
156
163
Intercompany profits..........................................................................
228
215
Loss on valuation of real estate for sale...........................................
304
329
Deferred gains (loss) on hedging derivatives..................................
—
1
Operating loss carry forwards...........................................................
63
73
8
15
Net defined benefit liability................................................................
669
608
Other.....................................................................................................
Total gross deferred tax assets..................................................
2,202
2,180
(1,362)(1,438)Valuation allowance.....................................................................
839
742
Deferred tax liabilities:
Reserve for special depreciation.......................................................
(96)
(72)
Reserve for advanced depreciation...................................................
(90)
(87)
Unrealized gain (loss) on other securities........................................
(747)
(836)
Difference from fair value of subsidiaries........................................
(681)
(648)
(4)
—
Deferred gains (loss) on hedging derivatives..................................
Net defined benefit asset....................................................................
—(88)(1,618)(1,731)
Total gross deferred tax liabilities.............................................
Net deferred tax assets (liabilities)............................................

¥

(778)

¥

(989)

(b)	‌The reconciliation between the statutory tax rate and the effective tax rate as at March 31, 2017 and 2018is presented below:
As of March 31,
2017
2018
Statutory tax rate.....................................................................................
30.7%—%
Permanent differences on expenses not deductible.......................
0.6—
Permanent differences on income not taxable................................
(0.2)—
Accrued bonuses to directors and statutory
auditors not deductible.....................................................................
0.3—
Inhabitant taxes per capita.................................................................
0.4—
Valuation allowance............................................................................
1.8
—
1.0
—
Other......................................................................................................
34.6%—%
Effective tax rate..................................................................................
(Note)	‌In fiscal year 2018, 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.

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

18

13. Segment Information(a) The Company and its subsidiaries operate principally in the following 4 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(b)	‌The segment information of the Company and its subsidiaries for the years ended March 31, 2017 and2018 is presented below:
Millions of Yen
2017
Golf
Advertisingcourses
Hotelsagent
Total
Construction
Reconciliations Consolidated
Ⅰ. Net sales and operating income
Net sales
Customers
Intersegment ortransfer
Total
Operating income
Ⅱ. Other¥ 67,348

¥

233

1
¥

Depreciation

67,3494,846
280

Construction

¥

4
¥

238
(3)
39

1,881

¥

9
¥

1,890
(67)
379

¥

1,596

¥ 71,058

76

91

1,673
53
9

Golf
coursesMillions of Yen
2018
Advertising
Hotels
agent

¥241

¥2,225¥

71,149
4,829
707

Total

¥

¥

—

¥ 71,058

(91)

—

(91)
28
(28)

¥

71,058
4,857
679

Reconciliations Consolidated

Ⅰ. Net sales and operating income
Net sales
Customers
Intersegment ortransfer
Total
Operating income
Ⅱ. Other¥79,797¥83,802¥—¥83,802

65

5

2

108

180

(180)

—

79,861¥4,678

246
¥(1)

2,227
¥136

1,648
¥45

83,982¥4,858

(180)
¥28

83,802¥4,886

280

42

388

12

721

(28)

693

Depreciation19¥1,540

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

14. Per Share Data
Net assets per share and earnings per share as of and for the years ended March 31, 2017 and 2018 are as
follows:
Yen
2017
2018
Net assets per share................................................................................
¥503.15¥556.52
Earnings per share – primary.................................................................
53.36
56.97
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............................

Millions of yen
2017
2018
¥3,322¥3,462¥3,322¥3,462
62,255 thousand
60,774 thousand
sharessharesMillions of Yen
2017
2018
¥31,746¥33,823
426
458
426
458
31,32033,36562,248 thousand
59,952 thousand
sharesshares(Significant Events after Reporting Period)(1) Change in number of shares per share unit and consolidation of shares
The Company resolved at the meeting of the Board of Directors held on May 14, 2018, to partially amend
the Articles of Incorporation in relation to change in number of shares per share unit, and to refer the matterof a share consolidation to the 73rd annual general meeting of shareholders held on June 22, 2018, at which
the consolidation was approved.
		(i) Purposes of change in number of shares per share unit and consolidation of shares
Japanese stock exchanges have announced the “Action Plan for Consolidating Trading Units,”
aiming to consolidate trading units for common stocks (number of shares per share unit) of all listedcompanies in Japan to 100 shares by October 1, 2018. The Company respects this initiative, and willchange the number of shares per share unit from 1,000 to 100 shares, as well as consolidation of sharesto one share for every ten shares currently issued, in order to maintain stable shareholding of theCompany’s shares, and appropriately adjust the level of investment units, giving consideration to
medium to long-term fluctuations in share price.
		(ii) Details of change in number of shares per share unit
The Company will change the number of shares per share unit of common stocks from 1,000 sharesto 100 shares.
		(iii) Details of consolidation of sharesa) Details of consolidation of sharesClass of shares to be consolidated Common stocksb) Method and ratio of consolidation of shares
Effective October 1, 2018, the Company will consolidate the shares at a ratio of 1 share per every
10 shares held by shareholders registered on the final shareholder register as of September 30, 2018.
c) Decrease in number of shares resulting from the consolidation of shares
Total number of issued stocks before the consolidation of shares
68,368,532 shares(as of March 31, 2018)
Decrease in number of shares resulting from the consolidation of shares
61,531,679 shares
Total number of issued stocks after the consolidation of shares
6,836,853 shares(Note)	‌The decrease in number of shares resulting from consolidation and the total number ofissued stocks after consolidation are theoretical numbers calculated based on the total
number of issued shares before consolidation and the share consolidation ratio.
d) Processing for fractional sharesIf fractional shares arise as a result of the consolidation of shares, the Company will sell all such
fractional shares and distribute the proceeds to shareholders having fractional shares in proportion
to their respective fractions, in accordance with the provisions of the Companies Act.
e) Total number of issued stocks after the consolidation of shares
20,000,000 shares (200,000,000 shares before consolidation)

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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(iv) Schedule of change in number of shares per share unit and consolidation of shares
Date of resolution of the Board of Directors
May 14, 2018
Date of resolution of the general meeting of shareholders
June 22, 2018
Effective date of the change in number of shares per share unit
October 1, 2018
and consolidation of shares		(v) Effect on per share data
If the consolidation of shares had hypothetically been carried out at the beginning of the current
fiscal year, the per share data in the current fiscal year would be as shown below.

Net assets per share
Earnings per share

21

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

For the year ended
March 31, 2018
¥5,565.19¥569.71

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 Directors

		Itsuo Takeuchi		Yoshinori Uda

		 Zentaro Ozawa *		Fumiko Yazaki

		Kiyoto Kitagawa

Statutory Auditors

Executive Officers

Permanent Auditor

		Shuichi Moriyasu

		Noboru Takizawa

		Satoshi Kubo
		Mitsuya Minamisawa

Outside Auditors

		Kenji Yamanaka

		Yoshichika Owa

		Shinichi Kitmura

		Toshiyuki Nishimura

		Masakatsu Kobayashi

		Nobuyoshi Sakai

		Issei Mori
		Atsushi Gomyo
		Yoshikazu Tsukada
		Tomonari Iwanami
		Sadao Sugimura		* : 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.

22