2011

FINANCIALSTATEMENTS
MARCH 31, 2010-2011

KITANO CONSTRUCTION CORP.

Contents

Financial Statements

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

Consolidated Statements of Operations............................................................................... 4

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

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

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

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

Board of Directors, Statutory Auditors and Executive Officers........................... 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, 2010 and 2011
Millions of yen
March 31,
2010

2011

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

¥

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

5,067
12,305
5,449
1,568
1,666
33
1,195
1,017
(42)
28,259Fixed Assets:
Tangible Fixed Assets:
Buildings and structures..............................................................
Machinery and equipment...........................................................
Golf course....................................................................................
Land................................................................................................
Construction in progress.............................................................
Other...............................................................................................
Less: accumulated depreciation.................................................
Total tangible fixed assets....................................................

8,924
630
1,231
7,695
1
1,638
(6,387)
13,731

8,890
609
1,231
7,695
—
1,627
(6,558)13,494

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

40

42

4,550
2,521
659
1,536
(1,291)
7,974
21,745¥ 55,990

4,102
2,390
700
1,507
(1,078)
7,622
21,157¥ 49,416

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

The accompanying notes are an integral part of these statements.
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, 2010 and 2011
Millions of yen
March 31,
2010

2011

¥ 16,993
4,000
30
3,520
66
257
35
37
—
852
25,790¥ 13,308
2,500
305
2,621
42
250
35
32
52
627
19,771

4,000
562
3,306
35
227
8,129

4,000
570
3,174
23
242
8,009

LIABILITIESCurrent Liabilities:
Notes and accounts payable..............................................................
Short-term bank loans........................................................................
Income taxes payable.........................................................................
Advances received on construction in progress.............................
Advances received on uncompleted development projects..........
Accrued bonuses to employees.........................................................
Accrued bonuses to directors and statutory auditors....................
Accrued warranty................................................................................
Allowance for losses on construction contracts.............................
Other current liabilities......................................................................
Total current liabilities.................................................................
Long-Term Liabilities:
Long-term debt.....................................................................................
Reserve for retirement benefits to employees.................................
Membership deposit............................................................................
Negative goodwill................................................................................
Other long-term debt...........................................................................
Total long-term liabilities.............................................................
NET ASSETS
Shareholders’ Equity
Common stock.....................................................................................
Authorized — 200,000,000 shares
Issued — 78,368,532 shares as of March 31, 2010 and 2011
Capital surplus.....................................................................................
Retained earnings................................................................................
Treasury stock.....................................................................................
Total shareholders’ equity...........................................................

9,116

9,116

7,405
6,878
(2,161)
21,2387,405
6,869(2,342)
21,049

Accumulated Other Comprehensive Income
Unrealized gain on other securities..................................................
Unrealized gain on hedging derivatives............................................
Foreign currency translation adjustments.......................................
Total accumulated other comprehensive income....................

388
21
(41)
368

130
(7)
(31)
92

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

464

496

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

22,07021,636¥ 55,990¥ 49,416

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 Operations
For the years ended March 31, 2010 and 2011
Millions of yen
March 31,
2010

2011

¥ 62,045
2,985
65,030¥ 52,672
4,391
57,063Gross profit..................................................................................

57,9491,995
59,944
5,086

49,5992,911
52,510
4,553

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

3,817
1,270

3,633
919

179
(149)
4
307
69
1,680

173
(135)
(123)
57
107
999

Special Items:
Gain on sales of investment securities...........................................
Gain on sales of subsidiaries stocks...............................................
Impairment loss on fixed assets......................................................
Loss on sales of investment securities...........................................
Loss on valuation of investment securities....................................
Provision of allowance for doubtful accounts...............................
Loss on revision of retirement benefit system...............................
Other, net............................................................................................
Income before income taxes and minority interests.............

—
121
(341)
—
(205)
161
—
(26)
1,390

63
—
—
(2)
(79)
4
(39)
(3)
944

Income Taxes
Current................................................................................................
Prior year............................................................................................
Deferred..............................................................................................
Net Income Before Minority Interests.....................................................
Minority Interests in Earnings of Consolidated Subsidiaries...............

24
290
16
—
(34)

285
—
83
575
(14)

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

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

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

¥

1,026

¥

561

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, 2010 and 2011
Millions of yen
March 31,2010
Income Before Minority Interests............................................................
Other Comprehensive Income:Net unrealized gain (loss) on other securities, net of taxes........
Deferred gain (loss) on hedging, net of taxes................................
Foreign currency translation adjustment.......................................
Share of other comprehensive income of associates
accounted for using the equity method........................................
Total other comprehensive income.................................................
Comprehensive Income.............................................................................
Comprehensive income attributable to:Shareholders of the Corporation.....................................................
Minority Interests..............................................................................

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

¥

575

—
—
—

(258)
(28)
(17)

—
—
—

28
(276)
299

—
—

285
14

The accompanying notes are an integral part of these statements.
52011

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2010 and 2011
Millions of yen
Adjustments
on foreign

Number ofshares of

Unrealized
Unrealized gain currency
common Common Capital Retained gain on other Treasury on hedging statements Minority Total net
stock surplus earnings securities stocks derivatives translation interests assets
stock(thousands)
Balance at March 31, 2009......

70,133

9,116

7,426

6,430

241

(2,156)

17

(276)

434

21,232

ended March 31, 2010....

—

—

—

1,026

—

—

—

—

—

1,026

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

—

—

—

(560)

—

—

—

—

—

(560)

(22)

—

—

—

—

(5)

—

—

—

(5)

—

—

(0)

—

—

0

—

—

—

0

—

—

—

(306)

—

—

—

—

—

(306)

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

—

—

(21)

288

—

—

—

—

—

267

Adjustment for the year....

—

—

—

—

147

—

5

235

29

416

Balance at March 31, 2010......

70,112

9,116

7,405

6,878

388

(2,161)

21

(41)

464

22,070ended March 31, 2011....

—

—

—

561

—

—

—

—

—

561

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

—

—

—

(559)

—

—

—

—

—

(559)

(883)

—

—

—

—

(212)

—

—

—

(212)

—

—

(0)

—

—

0

—

—

—

0

—

—

0

—

—

30

—

—

—

31

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

—

—

—

(11)

—

—

—

—

—

(11)

Adjustment for the year....

—

—

—

—

(258)

—

(28)

10

32

(244)

Balance at March 31, 2011......

69,228

9,116

7,405

6,869

130

(2,342)

(7)

(31)

496

21,636Net Gain for the year

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

Net Gain for the year

Increase in treasury
stock................................
Gain on sale of treasury
stock................................
Disposal of stocks of theparent company owned
by consolidated
subsidiaries.....................
Change of scope of

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

6

Consolidated Statements of Cash Flows
For the year ended March 31, 2010 and 2011
Millions of yen
2010
Cash flows from operating activities:
Net income before income taxes...............................................................
Adjustments for:
Depreciation.................................................................................................
Impairment loss on fixed assets.................................................................
Equity in (gains)/losses of affiliates...........................................................
Interest and dividend income.....................................................................
Interest expenses.........................................................................................
(Gain)/loss on sales of fixed assets...........................................................
Foreign exchange (gains)/losses................................................................
Gain/(Loss) on sales of investment securities..........................................
Gain/(Loss) on sales of subsidiaries stocks..............................................
Increase/(Decrease) in reserve for retirement benefits toemployees.....................................................................................................
Increase/(Decrease) in accrued warranty.......................................................
Increase/(Decrease) in allowance for losses on construction contracts....
Increase/(Decrease) in accrued bonuses........................................................
Increase/(Decrease) in allowance for doubtful accounts.............................
(Increase)/Decrease in notes and accounts receivable.................................
(Increase)/Decrease in cost of construction in progress and cost of
uncompleted development projects..........................................................
(Increase)/Decrease in real estate for sale and inventories.........................
Increase/(Decrease) in notes and accounts payable.....................................
Increase/(Decrease) in advances received on construction in progress....
Other....................................................................................................................
Sub-total..................................................................................................
Interest and dividend income received...........................................................
Interest expenses paid.......................................................................................
Income taxes refunded......................................................................................
Income taxes paid..............................................................................................
Net cash provided by/(used in) operating activities.........................

¥

1,390

¥

944

296
341
(307)
(179)
149
(1)
3
—
(121)

276
—
(57)
(173)
135
(1)
81
(62)
—

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

8
(6)
52
(7)
(16)
1,380

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

1,880
134
(3,685)
(899)
1,568
1,551
194
(135)
72
(20)
1,662

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

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

(404)
261
(88)
2
(195)
197
(50)
40
—
(9)
(247)

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

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

(1,500)
—
(212)
(562)
(50)
(2,223)

(0)
(458)
6,251

(90)
(899)
5,761

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

¥

(32)
5,761

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

2011

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

¥

—
4,862

Notes to Consolidated
Financial Statements
1. Basis of Presenting Consolidated Financial Statements(a) Accounting Principles
The accompanying consolidated financial statements have been prepared based on the accounts maintainedby Kitano Construction Corp.(the “Company”) and its subsidiaries prepared in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
(b) Scope of Consolidation
The Company had 4 subsidiaries (majority-owned companies) as at March 31, 2011 (3 for 2010). The
consolidated financial statements in fiscal years ended March 31, 2011 include the accounts of the Company and 3(3 for 2010) of its subsidiaries "the Companies", which are listed below:•Kawanakajima Tochi Kaihatsu Co., Ltd.......................................... 69.23% owned•Solomon Kitano Mendana Hotel Limited. . .................................... 100.00% owned•Asahi Agency Co., Ltd. ..................................................................... 59.52% owned
The above consolidated subsidiaries, except for Solomon Kitano Mendana Hotel Limited, which has a fiscal
year ending at December 31 of each year, have a fiscal year ending at March 31 of each year, which is the same as
the fiscal year of the Company.
The remaining 1 unconsolidated subsidiary is not consolidated, as it is not significant in terms of total assets,
net sales, net income or retained earnings.
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) Investment in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates are stated at cost.
The equity method of accounting for such investments is applied to Sakura Hanoi Plaza Investment Company
Limited, which is affiliates of the Company, since the application of this method has significant effect on the net
income and retained earnings of the Companies.
Kawajima Nakayama Kaihatsu Co.,Ltd is excluded from the scope of the equity method of accounting
because it has little influence and little importance.
(c) 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.
(d) Inventory Valuation
The cost of construction in progress, real estate for sale and the cost of uncompleted development projects
are stated at cost, as determined on a specific project basis.
Materials and supplies are stated at cost, as determined based on an average method.
The net book value of inventories in the balance sheet is written down if the net realizable value declines.
(e) Depreciation
Depreciation is computed by the straight-line method for buildings (excluding leasehold improvements andauxiliary facilities attached to buildings) and by the declining-balance method for other assets, at rates based on
the estimated useful lives of the assets, as prescribed by Japanese income tax laws. Depreciation for real estate
for leasing is computed by the straight-line method. The range of useful lives is principally from 3 to 50 years forbuildings and structures and from 2 to 20 years for store fixtures and equipment.
( f ) Allowance for Doubtful Accounts
The balance of allowance for doubtful accounts represents the amount deemed necessary to cover possible
losses estimated on an individual doubtful account basis. The amount is calculated using a certain percentage
based on past experience for other accounts.
(g) Accrued Warranty
Accrued warranty is provided for against the future costs of warranty from completed construction.
(h) Accrued Bonuses to Employees
Accrued bonuses are computed by estimating the payment required in order to provide for the payment ofbonuses to employees.
( i ) Accrued Bonuses to Directors and Statutory Auditors
Accrued bonuses are computed by estimating the payment required in order to provide for the payment ofbonuses to directors and statutory auditors.
( j ) Reserve for Retirement Benefits to Employees
The Company recognize accrued pension and severance costs to employees based on the actual valuation ofprojected benefit obligation and plan assets at fair value.

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

8

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.
(Additional Information)
The company abolished the approved retirement annuity system at March 31, 2011 and adopts the defined
contribution pension plan and the defined-benefit corporate pension plan system from April 1, 2011.
(k) Allowance for losses on construction contracts
The Company prepares reasonable estimated amount for future losses from construction works outstanding
at fiscal year-end.
( l ) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash in hand, bankdeposits able to be withdrawn on demand and short-term investments with an original maturity of three months
or less and which represent a minor risk of fluctuations in value.
(m) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local
inhabitants’ taxes and enterprise taxes.
The Company and its subsidiaries account for deferred taxes in accordance with the regulations for
preparation of consolidated financial statements in Japan. Deferred income taxes are determined using the asset
and liability approach, whereby deferred tax assets and liabilities are recognized in respect of temporary
differences between the tax basis of assets and liabilities and those as reported in the financial statements.
(n) Securities Valuation
Held-to-maturity debt securities are carried at amortized cost.
Available-for-sale securities are classified into two categories where: (a) the fair value is available and (b) the
fair value is not available.
(a)	Securities whose fair value is available are valued at the quoted market price prevailing at the fiscal yearend. Net unrealized gains or losses on these securities are reported as a separate component of net
assets at a net-of-tax amount. Cost of sales is determined by the moving-average method.
(b)	Securities whose fair value is not available are valued at cost, determined by the moving-average method.
(o) Hedge Accounting
Gains or losses arising from changes in the fair value of the derivatives designated as “hedging instruments”
are deferred as an asset or liability and included in net profit or loss in the same period during which the gains
and losses on the hedged items or transactions are recognized.
The derivatives designated as hedging instruments by the Company are principally forward exchange
contracts. The related hedged items are finance for the overseas construction business. The Company is able tofix future cash flows and mitigate the deterioration of income from the construction business due to yen
depreciation. The Company obtains management approval before making forward exchange contracts, andsubsequently the accounting department executes and controls the contract.
(p) Reclassification of Accounts
Certain prior year amounts have been reclassified to conform with the current year’s presentation.
(q) Asset Retirement Obligation
Effective from the fiscal year ended March 31, 2011 ,we have adopted new accounting standards, the“Accounting Standard for Asset Retirement Obligations”(ASBJ Statement No.18, March 31, 2008) and the“Guidance on Accounting Standard for Asset Retirement Obligations”(ASBJ Guidance No.21, March 31, 2008).
This change does not have the influence for the our profit and loss.
( r ) Change of Presentation Method
Effective from the fiscal year ended March 31, 2011, we have adopted a new regulation, the “Cabinet Office
Ordinance Partially Revising Regulations for Terminology, Forms and Preparation of financial statements,etc”(Cabinet Office Ordinance No.5, March 24, 2009) based on the “Accounting Standard for Consolidated
Financial Statements”(ASBJ Statement No.22, December 26, 2008), and presented net income before minority
interests.
We expressed “Income taxes refunded” on cash flows from operating activities of consolidated statements ofcash flows, because it’s importance increased. And we had expressed “income taxes paid” including “Income
taxes refunded” at the fiscal year ended March 31, 2010.
“Income taxes refunded” was 1 million of yen at the fiscal year ended March 31, 2010.
3.

Notes to the Consolidated Balance Sheets(1) Investments in unconsolidated subsidiaries and affiliates................
(2) Assets pledged as collateral
Buildings..................................................................................................
Land..........................................................................................................
Real estate for sale..................................................................................
(3) The guarantee of housing construction flaw security
Investment in securities.........................................................................
(4) The guarantee of a debt
Morimoto Co, Ltd....................................................................................

9

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

¥Millions of yen
March 31,
2010
2011
17
¥

12

316
1,161
4,703

304
1,161
4,683

—

99

—

309

4. Notes to Consolidated Statements of Operations(1)	Charges to income for warranty which is included in “Cost of Sales construction contracts” was ¥37 million
for the year ended March 31, 2010, and ¥32 million for the year ended March 31, 2011. Allowance for accrued
bonuses included in “Cost of Sales construction contracts” was ¥173 million for the year ended March 31,
2010, and ¥160 million for the year ended March 31, 2011. Allowance for loss on construction contract
included in “Cost of Sales construction contracts” was ¥52 million for the year ended March 31, 2011.
Millions of yen
for the year ended March 31,
2010
2011
(2) Write-down of inventories included in cost of
sales on real estate development and other.................................
¥
165
¥
43
(3) The major components of “Selling, general andadministrative expenses”
Depreciation............................................................................................
220
205
Payroll......................................................................................................
1,408
1,339
Allowance for accrued bonuses............................................................
116
122(4) Impairment loss on fixed assets
The Company recognized impairment losses on fixed assets as follows:
Millions of yen
March 31, 2010
Description
Location
Classification
AmountIdle property
SaitamaLand, building and others¥341
We have no impairment loss for the year ended March 31, 2011
The book values of the above assets were reduced to their recoverable amounts.
5.

Notes to consolidated Statement of comprehensive income
Comprehensive income

Comprehensive income attributable to shareholders of the corporation
Comprehensive income attributable to minority interests
Total
Other comprehensive income

Net unrealized gain (loss) on other securities, net of taxes
Deferred gain (loss) on hedging, net of taxes
Foreign currency translation adjustment
Share of other comprehensive income of associates accounted forusing the equity method
Total
6.

Millions of yen
for the year ended March 31,
2010
¥
1,412
34
¥
1,446
Millions of yen
for the year ended March 31,
2010
¥
147
5
167
68
¥

Notes to the Consolidated Statement of Changes in Net Assets(a) Type and number of outstanding shares
March 31, 2010
Number of shares
Type of shares
Balance atIncrease in shares Decrease in shares
Beginning of year
during the year
during the year
Issued stock
Common stock
78,368,532
—
—
Total
78,368,532——
Treasury stock
Common stockTotal

8,235,067
8,235,067

23,596
23,596

1,737
1,737

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

387

Balance at
end of year
78,368,532
78,368,532
8,256,926
8,256,926
23,596 shares
1,737 shares

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

10

Type of shares

Balance at
Beginning of year

March 31, 2011
Number of shares
Increase in shares
during the year

Decrease in shares
during the year

Balance at
end of year

Issued stock
Common stockTotal

78,368,532
78,368,532

—
—

—
—

78,368,532
78,368,532

Treasury stock
Common stock
Total

8,256,926
8,256,926

1,015,083
1,015,083

131,844
131,844

9,140,165
9,140,165

The summary of the main change reason
Increase by the repurchase of shares less than one unit..........................................................
15,083 sharesby the acquisition of the treasury stock by the board of directors resolution....... 1,000,000 shares
Decrease by the sale of shares less than one unit......................................................................
900 sharesby the sale of parent company stocks that subsidiary have..................................... 130,944 shares(b) Dividends		(1) Dividends paid to shareholders
Date ofapproval

Resolution
ApprovedbyType ofsharesAmount(Thousandsof Yen)Paid fromAmountPer share Shareholder’s(Yen)
cut-off date

Effective
date

June 26,
2009

Annualgeneralmeeting ofshareholders

Commonstock

563,329

Retainedearnings

8

March 31,2009

June 29,2009

June 24,2010

Annualgeneralmeeting ofshareholders

Commonstock

563,155

Retainedearnings

8

March 31,2010

June 25,2010(2)	Dividends with a shareholders’ cut-off date during the current fiscal year but an effective date
subsequent to the current fiscal year
Date ofapproval
June 24,2011

7.

Resolution
ApprovedbyAnnualgeneralmeeting ofshareholders

Type ofsharesCommonstock

Amount(Thousandsof Yen)555,041

Paid from
Retainedearnings

8Notes 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.....................................................................

11

AmountPer 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.

¥¥March 31,2011

Effective
date
June 27,
2011

Millions of yen
March 31,
2010
2011
5,822
¥
5,067
(62)
(205)
5,761
¥
4,862

8.

Fair Value of Financial Instruments(a)	The fair value and book value of financial instruments as of March 31, 2010 and March 31, 2011, otherthan items of which fair value are not practically available, are as follows:
Millions of yen
March 31, 2010
Book value
Fair value
Difference
Cash and deposits..............................................
¥
5,822
¥
5,822
¥
—
Notes and accounts receivable........................
13,687
13,687
—
3,301
3,301
—
Investments in securities..................................
Total..............................................................
¥
22,810¥
22,810¥—
Notes and accounts payable.............................
Short-term bank loans.......................................
Long-term debt...................................................
Total..............................................................
Derivative transactions.....................................

Cash and deposits
Notes and accounts receivable
Investments in securities
Total

¥

¥
¥

16,9934,000
4,000
24,99336

Book value
5,067
12,3052,718¥
20,090

¥

¥

¥
¥

16,9934,000
4,000
24,99336

Millions of yen
March 31, 2011
Fair value¥
5,067
12,3052,718¥
20,090

¥

¥
¥

—
—
—
—
—

Difference
—
—
—
¥
—

¥

Notes and accounts payable¥
13,308¥
13,308¥—
Short-term bank loans
2,500
2,500
—
4,000
4,000
—
Long-term debt
Total¥19,808¥
19,808¥—
Derivative transactions
¥
(11)
¥
(11)
¥
—
(1) Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen
March 31, 2010
March 31, 2011
Book value
Book value
Non-listed shares *......................................................................................... ¥
1,249
¥
1,384
Membership deposit *...................................................................................
3,306
3,174
* It is extremely difficult to determine the fair values thereof because neither market quoted prices areavailable nor future Cash Flows can be estimated.
(2) Redemption schedule for money claims and securities with maturities
Millions of yen
March 31, 2010
Due in 1 year orDue after 1 year
Due after 5 years
lessthrough 5 years
through 10 years
Cash and deposits..............................................
¥
5,805
¥
—
¥
—
Notes and accounts receivable........................
13,632
55—
Investments in securities..................................
Government bonds.....................................
——
50
Corporate bonds.........................................
——
100
Millions of yen
March 31, 2011
Due in 1 year or
less
Cash and deposits..............................................
¥
5,045
Notes and accounts receivable........................
12,275Investments in securities..................................
Government bonds.....................................
—
Corporate bonds.........................................
—

Due after 1 year
through 5 years¥—30

Due after 5 years
through 10 years
¥
—
—

—
—

109
100

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

12

9.

Investments in Securities(a)	The following tables summarize the acquisition cost and book value of available-for-sale securities withmarket value as of March 31, 2010 and 2011:
Millions of yen
March 31, 2010
Book value
Acquisition cost
Difference
Securities with book value exceedingacquisition cost:
Equity securities.......................................................
¥
2,657
¥
1,935
¥
722
102
100
2
Corporate bonds.......................................................
Sub-total................................................................
¥
2,759
¥
2,035
¥
724
Securities with book value notexceeding acquisition cost:
Equity securities.......................................................
Government bonds...................................................
Sub-total................................................................
Total................................................................................

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

¥
¥
¥

498
43
541
3,301

¥
¥
¥

570
44
614
2,649

¥
¥
¥

(72)
(1)
(73)
651

Book value

Millions of yen
March 31, 2011
Acquisition cost

Difference

¥

¥

¥

¥

¥
¥
¥

1,129
146
1,275

1,389
54
1,443
2,718

¥

¥
¥
¥

715
144
859

1,587
55
1,642
2,501

¥

¥
¥
¥

414
2
416

(198)
(1)
(199)
217

Among above tables, non-listed shares are not included in the above because determining their fairvalues is extremely difficult.
(b)	Impairment losses of ¥77 million were recorded to write down book value of investments in securities
for the year ended March 31, 2011.
10. Derivative transactions(a) Derivative transactions for which hedge accounting is not applied			
Not applicable.
(b) Derivative transactions for which hedge accounting is applied.
			Currency-related transaction

Hedging
methodDeferredhedge
method13

Transaction
type
Foreignexchange
forwardcontract
Buy
U.S. dollar

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

Main hedged
item
Forecasted
foreigncurrencytransactions

Contract
amount¥
460

Millions of yen
March 31, 2011
Contract
over 1 year¥—Fair value
¥

(11)

11. Reserve for Retirement Benefits to Employees(a)	Employees of the Company and its domestic subsidiaries are covered by a qualified pension plan and aseverance payment plan.
(b)	The reserve for retirement benefits as of March 31, 2010 and 2011 is analyzed as follows:
Millions of yen
March 31,2010
2011
Projected benefit obligations.........................................................
¥(5,023)¥(4,038)3,938
3,035
Plan assets........................................................................................
Unfunded benefit obligations.........................................................
(1,085)(1,003)
Unrecognized actuarial differences...............................................
523
501
—
(68)
Unrecognized prior service cost....................................................
Total...................................................................................................
(562)
(570)
—
—
Prepaid pension costs.....................................................................
¥
(562)
¥
(570)
Reserve for retirement benefits to employees.............................
(c) The net periodic expenses related to retirement benefits for the fiscal year 2010 and 2011 are as follows:
Millions of yen
March 31,2010
2011
Service costs.....................................................................................
¥
188
¥
181
Interest costs....................................................................................
102
99
Expected return on plan assets.....................................................
(77)
(78)
Amortization of actuarial differences...........................................
109
93
—
(8)
Amortization of prior service cost.................................................
Sub-total........................................................................................
¥
322
¥
286
—
39
Loss on revision of retirement benefit system.............................
¥
322
¥
325
Retirement benefits expense(d) Assumptions used in calculation of the above information were as follows:

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

As of March 31,
2010
2011
2.0%
2.0%
2.0%
2.0%
Straight-line
Straight-line
basis
basis
10 years
10 years—
10 years

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

14

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 31,2010
2011
Deferred tax assets:
Write-down of fixed assets.................................................................
¥
1,814
¥
1,790
Allowance for doubtful accounts......................................................
949
952
Write-down of marketable securities................................................
321
324
Intercompany profits...........................................................................
345
318
Loss on valuation of real estate for sale...........................................
842
846
Operating loss carry forwards...........................................................
179
3
Unrealized gain on hedging derivatives............................................
—
5
817
866
Other.....................................................................................................
Total gross deferred tax assets...................................................
5,266
5,103
(3,136)(3,049)Valuation allowance.....................................................................
2,131
2,054
Deferred tax liabilities:
Reserve for advanced depreciation...................................................
(72)
(72)
Unrealized gain on other securities...................................................
(259)
(86)
(15)
—
Unrealized gain on hedging derivatives............................................
Total gross deferred tax liabilities.............................................
(346)
(159)
Net deferred tax assets................................................................

¥

1,785

¥

1,896

(b)	The reconciliation between the statutory tax rate and the effective tax rate as at March 31, 2010 and 2011is presented below:
As of March 31,
2010
Statutory tax rate.........................................................................................................................
40.4%
Permanent differences on expenses not deductible...........................................................
3.5
Permanent differences on income not taxable....................................................................
(2.1)
Accrued bonuses to directors and statutory auditors not deductible..............................
1.0
Inhabitant taxes per capita.....................................................................................................
1.7
Income taxes for prior year....................................................................................................
3.0
Valuation allowance.................................................................................................................
(18.5)(5.3)
Other..........................................................................................................................................
23.7%
Effective tax rate......................................................................................................................
	Corresponding differences for the year ended March 31, 2011 were not disclosed as the differences wereimmaterial.
13. Rental Properties(a)	The Company holds some office buildings and residential units. For the year ended March 31, 2011, net
operating gains from rent business of ¥37 million were recorded as operating gains of Real estatedevelopment and other.
(c)	The book value and fair value of properties for rent were as follows:
Millions of yen
2011Book value
At the end of previous period¥
1,971
Increase (decrease) – net(52)
At the end of current period
1,919
Fair value at the end of current period¥
1,918
The changes during the year primarily consist of real estate depreciation (decrease:¥50 million).

15

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

14. Segment Information(1) Business Segments

Millions of Yen
March 31, 2010

Real estate
Construction development

Golf
courses

HotelsAdvertising
agent

Total

¥

¥

428

¥ 1,220¥65,030

Reconciliations Consolidated

1. Net sales and Operating income
Net sales
Customers
Intersegment ortransfer
Total
Operating expense
Operating income(loss)¥62,045¥ 1,056

0

—

1

2

84

62,04661,025

1,056
832

282
288

430
410

¥ 1,020

¥

224

¥

282

(6)

¥

20

¥

¥

—

¥65,030

87

(87)

—

1,304
1,292

65,117
63,848(87)(87)

65,03063,76112¥ 1,270—¥ 1,270¥46,178¥ 9,812¥55,990

296

—

296

341
1,520

—
—

341
1,520

¥

2. Assets, Depreciation and amortization, Impairment loss, and Capital expenditures
Assets¥30,155¥10,490¥ 4,006¥ 515¥ 1,015
Depreciation and
164
60
24
42
6
amortization
Impairment loss
341
—
—
—
—
Capital expenditures
83
1,411
7
20
—
Note: Outline of the businesses•Construction: Construction, civil engineering•Real estate development: Sales, Purchases and rentals of real estate•Golf course: 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, 2010 and2011 is presented below:
		
The Company and its subsidiaries operate principally in the following two industrial segments:		Construction............. Construction, engineering works, development and sale of real estate.
		Other.......................... Management of golf courses, hotels and advertising agent.

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

16

Millions of Yen
March 31, 2010
Construction

Others

Total

Reconciliations

Consolidated¥¥

1. Net sales and Operating income
Net sales
Customers
Intersegment ortransfer
Total
Operating income
2. OtherDepreciation andamortization¥

63,101

¥

1,929

¥

65,030—65,030

0

86

87

(87)

—

63,102

2,016

65,117(87)

65,030

¥

1,244

¥

26

¥

1,270

¥

—

¥

1,270

¥

224

¥

72

¥

296

¥

—

¥

296

Millions of Yen
March 31, 2011
Construction

Others

Total

Reconciliations

Consolidated¥¥

1. Net sales and Operating income
Net sales
Customers
Intersegment ortransfer
Total
Operating income
2. OtherDepreciation andamortization¥

55,205

¥

1,858

¥

57,063—57,063

4

95

98

(98)

—

55,209

1,952

57,161(98)

57,063

¥

910

¥

9

¥

919

¥

—

¥

919

¥

208

¥

68

¥

276

¥

—

¥

276

(Additional information)
Effective from the fiscal year ended March 31, 2011, the Group has adopted new accounting standards, the“Revised Accounting Standard for Disclosures about Segments of an Enterprise and Related information”(ASBJ
Statement No.17, March 27, 2009) and the “Guidance on the Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information”(ASBJ Guidance No.20, March 21, 2008).
15. Per Share Data
Net assets per share and net income per share as of and for the year ended March 31, 2010 and 2011 are as
follows:
Yen
2010
2011
Net assets per share................................................................................
¥308.17¥
305.37
Net income per share – primary............................................................
14.63
8.07

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

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
2010
2011
¥
1,026
¥
561
¥
1,026
¥
561
70,121 thousand
69,563 thousand
sharessharesBOARD OF DIRECTORS, STATUTORY AUDITORSAND EXECUTIVE OFFICERS AS OF MARCH 31, 2011
Board of Directors
Chairman and President, Representative Director
		 Takahiro Kitano
Vice President, Representative Director
		 Kimio Shiozawa
Director
		 Shinsuke Nishida

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

Managing Executive Officer
		 Yoshitada Mikami *		 Toshiro Maki

Outside Director
		 Yoshinori Uda

		 Itsuo Takeuchi
		 Yoshikatsu Yamazaki *		 Zentaro Ozawa *Statutory Auditors

		 Nagayoshi Matsumoto

Permanent Auditor
		 Tadaaki Takamizawa

Executive Officer
		 Toshiaki Yamagishi

Auditor		 Kiyonori Nakashima

		 Toshiyuki Tsukada
		 Akira Koike

		 * : Member of Board of Directors

		 Yoshichika Owa

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

18