2014

FINANCIALSTATEMENTS
MARCH 31, 2013-2014

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, 2013 and 2014
Millions of yen
March 31,
2013

2014

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

¥6,625
13,619
6,126
1,746
3,192
55
1,278
697
(78)
33,259¥7,815
15,721
8,256
959
2,496
81
1,164
728
(75)
37,145

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

7,931
529
771
7,305
1
1,752
(5,953)
12,336

10,858
2,504
771
6,786
—
2,717
(9,144)
14,493

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

54

239

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

4,799
2,533
456
1,318
(1,051)
8,055
20,445¥53,704

4,830
26
589
1,390
(33)
6,801
21,533¥58,679

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, 2013 and 2014
Millions of yen
March 31,
2013

2014

¥19,598
—
—
483
3,019
—
240
30
47
256
942
24,615¥ 16,775
1,000
4,097
478
4,952
60
391
36
33
89
1,535
29,447

4,000
501
—
2,897
68
2
225
7,694
32,309

51
—
878
2,762
1,239
—
200
5,130
34,577

LIABILITIESCurrent Liabilities:
Notes and accounts payable..............................................................
Short-term loans payable....................................................................
Current portion of long-term loans payable.....................................
Income taxes payable.........................................................................
Advances received on construction in progress.............................
Advances received on development business.................................
Accrued bonuses to employees.........................................................
Accrued bonuses to directors and statutory auditors....................
Accrued warranty................................................................................
Allowance for losses on construction contracts.............................
Other current liabilities......................................................................
Total current liabilities................................................................
Long-Term Liabilities:
Long-term debt.....................................................................................
Reserve for retirement benefits to employees.................................
Net defined benefit liability................................................................
Membership deposit............................................................................
Deferred income taxes........................................................................
Negative goodwill................................................................................
Other long-term debt...........................................................................
Total long-term liabilities............................................................
Total liabilities..............................................................................
NET ASSETS
Shareholders’ Equity
Common stock.....................................................................................
Authorized — 200,000,000 shares
Issued — 68,368,532 shares as of March 31, 2013 and 2014
Capital surplus.....................................................................................
Retained earnings................................................................................
Treasury stock.....................................................................................
Total shareholders’ equity...........................................................

9,116

9,116

5,066
7,255
(1,264)
20,174

5,066
9,161(1,269)22,075

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

784
8
6
—
797

828
3
6
(296)
542

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

424

1,485

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

21,396¥53,704

24,102¥ 58,679

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

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, 2013 and 2014
Millions of yen
March 31,
2013

2014

¥58,245
3,514
61,759¥ 66,103
4,582
70,685Gross profit..................................................................................

54,954
2,153
57,107
4,652

61,323
3,252
64,575
6,109

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

3,636
1,015

3,808
2,301

160
(117)
93
50
124
1,326

149
(107)
78
16
126
2,563

Special Items:
Gain on sales of fixed assets............................................................
Gain on step acquisitions.................................................................
Gain on bargain purchases...............................................................
Loss on disposal of fixed assets......................................................
Loss on valuation of investment securities....................................
Loss on valuation of shares of subsidiaries and associates
Impairment loss.................................................................................
Income before income taxes and minority interests.............

1
—
—
(7)
(5)
—
(607)
708

3
20
1,171
(12)
(8)
14
—
3,722

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

484
(267)
491
84

690
597
2,435
(32)

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

¥576¥2,403

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

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, 2013 and 2014
Millions of yen
March 31,2013
Income Before Minority Interests............................................................
Other Comprehensive Income:Unrealized gain (loss) on other securities.....................................
Unrealized gain (loss) on hedging derivatives...............................
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..............................................................................

¥491

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

¥

2,435

544
8
24

45
(5)
120

(31)
544
1,036

(97)
63
2,498

1,120
(84)

2,443
55

The accompanying notes are an integral part of these statements.
52014

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2013 and 2014
Millions of yen
Accumulated other comprehensive income

Shareholder’s equity

Adjustments

Number of

on foreign

shares of

Unrealized Unrealized gain currency Remeasurements

common Common Capital Retained Treasury gain on other on hedging statements
stock surplus earnings stock securities derivatives translation
stock

Minority Total net
benefits plans interests assets
of defined(thousands)
Balance at March 31, 2012...... 67,223

9,116

7,405

7,216

(2,700)

241

—

13

—

510 21,802

Net Gain for the year
ended March 31, 2013....

—

—

—

576

—

—

—

—

—

—

576

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

—

—

—

(537)

—

—

—

—

—

—

(537)

(4,984)

—

—

—

(903)

—

—

—

—

—

(903)

—

—

(0)

—

0

—

—

—

—

—

0

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

——(2,339)

—

2,339

—

—

—

—

—

—

Adjustment for the year....

——(2,339)

39

1,436

543

8

(7)

—

(87)

458

Balance at March 31, 2013...... 62,240

9,116

5,066

7,255

(1,264)

784

8

6

—

424 21,396

Purchase of treasury
stock................................
Disposal of treasury
stock................................
Retirement of treasury

Net Gain for the year
ended March 31, 2014....

—

—

—

2,403

—

—

—

—

—

—

2,403

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

—

—

—

(497)

—

—

—

—

—

—

(497)

(24)

—

—

—

(6)

—

—

—

—

—

(6)

Purchase of treasury
stock................................
Disposal of treasury
stock................................

—

—

(0)

—

0

—

—

—

—

—

0

Adjustment for the year....

—

—

(0)

1,906

(5)

45

(5)

1

(296)

1,061

2,706

Balance at March 31, 2014...... 62,216

9,116

5,066

9,161

(1,269)

828

3

6

(296)

1,485 24,102

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, 2013 and 2014
Millions of yen
2013

2014

¥708

¥3,722

246
607
(10)
(50)
(160)
117
—
(1)
7
(50)
5
(5)

280
—
(2)
(16)
(149)
107
(80)
(3)
12
18
8
7

(43)
9
203
(2)
(6)
—
—
—
(1,090)

—
(13)
(166)
151
(3)
14
(20)
(1,171)(2,034)(1,231)
179
3,894
(577)
(372)
2,384
171
(117)
(73)
2,365

1,483
(2,130)(2,858)
1,933
250
(662)
139
(107)
(697)
(1,326)

(420)
418
(139)
1
(56)
50
(84)
200

(522)
420
(915)
1,320
(15)
—
(33)
38

—
(72)
(102)

1,712
(74)
1,933

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

—
(903)
(539)
(8)
(1,450)(1,000)
(5)
(500)
(11)
484

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

55
868
5,537
¥6,404

(1)
1,089
6,404
¥7,493

Cash flows from operating activities:
Income before income taxes.............................................................................
Adjustments for:
Depreciation........................................................................................................
Impairment loss...................................................................................................
Amortization of negative goodwill....................................................................
Equity in (gains) losses of affiliates..................................................................
Interest and dividend income............................................................................
Interest expenses................................................................................................
Increase (decrease) in net defined benefit liability.........................................
(Gain) loss on sales of fixed assets...................................................................
Loss on disposal of fixed assets........................................................................
Foreign exchange (gains) losses.......................................................................
(Gain) Loss on evaluation of investment securities.......................................
Increase (decrease) in provision for directors’ bonuses................................
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.....................................
Loss on valuation of shares of subsidiaries and associates.................................
Gain on step acquisitions..........................................................................................
Gain on bargain purchases.......................................................................................
(Increase) Decrease in notes and accounts receivable........................................
(Increase) Decrease in cost of construction in progress and cost of
uncompleted development projects.................................................................
(Increase) Decrease in real estate for sale and inventories.................................
Increase (Decrease) in notes and accounts payable.............................................
Increase (Decrease) in advances received on construction in progress............
Other............................................................................................................................
Sub-total.........................................................................................................
Interest and dividend income received...................................................................
Interest expenses paid..............................................................................................
Income taxes paid......................................................................................................
Net cash provided by (used in) operating activities................................
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 repayment of investments in securities........................................
Payments for loans....................................................................................................
Proceeds from recovery of loans.............................................................................
Proceeds from purchase of shares of subsidiaries resulting
in change in scope of consolidation.................................................................
Other............................................................................................................................
Net cash provided by (used in) investing activities.................................

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

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

Notes to Consolidated
Financial Statements
1. Basis of Presenting Consolidated Financial Statements(a) Accounting Principles
The accompanying consolidated financial statements have been prepared based on the accounts maintainedby Kitano Construction Corp.(the “Company”) and its subsidiaries prepared in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan.
(b) Scope of Consolidation
The Company had 4 subsidiaries (majority-owned companies) as at March 31, 2014 (3 for 2013). The
consolidated financial statements in fiscal years ended March 31, 2014 include the accounts of the Company and 4(3 for 2013) 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•Sakura Hanoi Plaza Investment Co., Ltd. ....................................... 56.50% owned•Asahi Agency Inc. .............................................................................. 59.52% 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.
Kitano Lanka (Private) Limited 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.
Kitano Lanka (Private) Limited 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 2 to 50 years forbuildings and structures and from 2 to 17 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.
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.
K I TA N O C O N S T R U C T I O N C O R P.

8

(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) Consumption Tax
Consumption Tax payable or receivable is excluded from each account in the consolidated statements ofincome.
(q) Reclassification of Accounts
Certain prior year amounts have been reclassified to conform with the current year’s presentation.
Changes in accounting policies(Application of the accounting standard, etc. for retirement benefits)
The Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012; hereinafter the“Accounting Standard”) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No.
25, May 17, 2012; hereinafter the “Guidance”) have been applied, effective from the end of the fiscal year, except
for the provisions of Paragraph 35 of the Accounting Standard and Paragraph 67 of the Guidance. According tothis application, an amount obtained by deducting the amount of plan assets from retirement benefit obligations
is recognized as “Net defined benefit liability” (or “Net defined benefit asset” if the amount of plan assets exceeds
the amount of retirement benefit obligations), and unrecognized actuarial differences and unrecognized past
service costs are recognized as “Net defined benefit asset” or “Net defined benefit liability.”
For the application of the Accounting Standard and the Guidance, the transitional treatment provided for in
Paragraph 37 of the Accounting Standard is followed. Accordingly, the effect of this change is reflected in“Remeasurements of defined benefit plans” under “Accumulated other comprehensive income.”
As a result, at the end of the fiscal year, net defined benefit liability of 878 million yen was reported, andthere was a decrease of 296 million yen in accumulated other comprehensive income.
Net assets per share decreased by 4.75 yen.
(Unapplied accounting standards, etc.)
1. Accounting standard, etc. for retirement benefits
The Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012) and the Guidanceon Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012)(1) Outline
Treatment method of unrecognized actuarial differences and unrecognized prior service costs, andcalculation method and disclosure of net defined benefit liability and service costs were amended.
(2) Effective date
The new Accounting Standard and Guidance shall be applied effective from the beginning of the fiscal year
ending March 31, 2015.
As transitional treatments are provided in these new standards, they were not applied retrospectively toconsolidated financial statements in prior years.
(3) Impact of the application of the revised accounting standard and guidance
Amounts of the effect of this application were under evaluation at the time of preparing this report.
(Accounting standard, etc. for business combinations)
Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013)
Revised Accounting Standard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013)9

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

Revised Accounting Standard for Earnings Per Share (ASBJ Statement No. 2, September 13, 2013)
Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No. 10, September 13, 2013)
Revised Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No. 4, September 13,
2013)(1) Outline
The major amendments are as follows:This Accounting Standard was revised mainly with a focus on (i) the treatment of changes to a parent
company’s ownership of a subsidiary if control is maintained in the acquisition of additional shares of thesubsidiary, etc. (ii) the treatment of acquisition-related costs, and (iii) the handling of tentative accounting
treatment.
(2) Scheduled date of application
The revised Accounting Standard is scheduled to be applied from the beginning of the fiscal year ending
March 31, 2016.
The handling of tentative accounting treatment is scheduled to be applied to business combinations carriedout at or after the beginning of the fiscal year ending March 31, 2016.
(3) Effect of the application of the revised accounting standards and guidance
Amounts of the effect of this application were under assessment at the time of preparing this report.
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.

314
1,161
4,410

300
1,161
4,380

141

154

Notes to Consolidated Statements of Operations(1) Allowance for loss on construction contract
included in cost of sales of construction contracts.....................
(2) Write-down of inventories included in cost of
sales on real estate development and other.................................
(3) The major components of “Selling, general andadministrative expenses”
Depreciation............................................................................................
Payroll......................................................................................................
Allowance for accrued bonuses............................................................
(4) Impairment loss.......................................................................................
5.

Millions of yen
March 31,
2013
2014
¥19
¥4

Millions of yen
for the year ended March 31,
2013
2014
¥256

¥89

72

102

208
1,313
112
607

238
1,267
173
—

Notes to Consolidated Statement of Comprehensive Income
Reclassification adjustments and tax effects related to other comprehensive income were as follows:
Millions of yen
for the year ended March 31,
Net unrealized gain (loss) on other securities, net of taxes
2013
2014
Gains (losses) arising during the year..............................................
¥839
¥29
2
8
Reclassification adjustments..............................................................
		 Total before tax effect.................................................................
841
37
(298)
8
		 Tax effect......................................................................................
544
45
		 Net unrealized gain (loss) on other securities, net of taxes...
Deferred gain (loss) on hedging, net of taxes
Gains (losses) arising during the year..............................................
		 Tax effect......................................................................................
		 Deferred gain (loss) on hedging, net of taxes..........................

¥13
(5)
8

¥(9)
3
(5)

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

¥24

¥120

Share of other comprehensive income of associates accounted forusing equity method
Gains (losses) arising during the year..............................................

¥(31)¥(97)

		

¥544

¥63

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.

10

6.

Notes to the Consolidated Statement of Changes in Net Assets(a) Type and number of outstanding shares
March 31, 2013
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—
10,000,000
Total
78,368,532—
10,000,000
Treasury stock
Common stockTotal

11,145,202
11,145,202

4,984,639
4,984,639

Balance at
end of year
68,368,532
68,368,532

10,000,962
10,000,962

6,128,879
6,128,879

The summary of the main change reason
Increase by the repurchase of shares less than one unit.......................................................
12,639 sharesby the acquisition of the treasury stock by the board of directors resolution.... 4,972,000 shares
Decrease by the sale of shares less than one unit....................................................................
962 sharesby retirement of treasury stock................................................................................. 10,000,000 shares

Type of shares

Balance at
Beginning of year

March 31, 2014
Number of shares
Increase in shares
during the year

Decrease in shares
during the year

Balance at
end of year

Issued stock
Common stockTotal

68,368,532
68,368,532

—
—

—
—

68,368,532
68,368,532

Treasury stock
Common stock
Total

6,128,879
6,128,879

24,561
24,561774
774

6,152,666
6,152,666

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......................................................................
(b) Dividends		(1) Dividends paid to shareholders
Resolution
AmountDate of
Approved
Type of(Thousands
approvalbysharesof Yen)June 21,2013		Commonstock

499,131

Retainedearnings

Annualgeneralmeeting ofshareholders

Commonstock

561,309

Retainedearnings

Notes to the Consolidated Statements of Cash Flows

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

11

AmountPer share Shareholder’s(Yen)
cut-off date8

March 31,2013

Effective
date
June 24,2013(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 20,2014

7.

Annualgeneralmeeting ofshareholders

Paid from24,561 shares
774 shares

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

9March 31,2014

June 23,
2014

Millions of yen
March 31,20132014
¥6,625
¥
7,815
(220)
(322)
7,493
¥6,404¥8.

Fair Value of Financial Instruments(a)	‌The fair value and book value of financial instruments as of March 31, 2013 and March 31, 2014, otherthan items of which fair value are not practically available, are as follows:
Millions of yen
March 31, 2013
Book value
Fair value
Difference
Cash and deposits..............................................
¥
6,625
¥
6,625
¥—
Notes and accounts receivable........................
13,61913,619
—
3,740
3,740
—
Investments in securities..................................
Total.............................................................
¥23,984¥
23,984¥—Notes and accounts payable.............................
Long-term debt...................................................
Total.............................................................
Derivative transactions.....................................

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

¥
¥
¥

19,5984,000
23,59813

Book value
7,815
15,7213,784¥
27,320¥¥19,5984,000
23,598
13

¥—
—
¥—
¥—

Millions of yen
March 31, 2014
Fair value¥
7,815
15,7213,784¥
27,320Difference
¥—
—
—
¥—

¥
¥

Notes and accounts payable.............................
¥
16,775¥
16,775
¥—
1,000
¥
1,000
¥—
Short-term debt..................................................
¥
4,148
4,148
—
Long-term debt...................................................
Total.............................................................
¥21,923¥
21,923
¥—
4
¥
4
¥—
Derivative transactions.....................................
¥(1) Financial instruments for which it is extremely difficult to determine the fair value
Millions of yen
March 31, 2013
March 31, 2014
Book value
Book value
Non-listed shares *......................................................................................... ¥1,059
¥
1,046
2,897
2,762
Membership deposit *...................................................................................
* ‌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, 2013
Due in 1 year orDue after 1 year
lessthrough 5 years
6,591
¥
1
Cash and deposits................. ¥
Notes and accounts
13,619—receivable.............................
Investments in securities
Government bonds........
——
Corporate bonds............
——
Millions of yen
March 31, 2014
Due in 1 year orDue after 1 year
lessthrough 5 years
7,770
¥2
Cash and deposits................. ¥
Notes and accounts
receivable.............................
15,721—
Investments in securities
Government bonds........
—
35
Corporate bonds............
——

Due after 5 years
through 10 years¥—

Due after 10
years
¥—

—

—

130
100

15
—

Due after 5 years
through 10 years¥—

Due after 10
years
¥—

—

—

123
100

—
—

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

12

9.

Repayment schedule for long-term debt after the closing date of accounting period.
Millions of yen
March 31, 2013
Due in 1 year or Due after 1 year Due after 2 years Due after 3 years Due after 4 years
lessthrough 2 years through 3 years through 4 years through 5 years
4,000
¥—
Long-term debt... ¥—
¥
¥—
¥—

Due in 1 year or
lessLong-term debt... ¥4,097

Millions of yen
March 31, 2014
Due after 1 year Due after 2 years Due after 3 years Due after 4 years
through 2 years through 3 years through 4 years through 5 years
¥51
¥—
¥—
¥—

10. 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, 2013 and 2014:
Millions of yen
March 31, 2013
Book value
Acquisition cost
Difference
Securities with book value exceedingacquisition cost:
Equity securities.......................................................
¥3,385¥2,170¥1,215
Government bonds...................................................
141
134
7
101
100
1
Corporate bonds.......................................................
¥3,627¥2,404¥1,223
Sub-total................................................................
Securities with book value not exceedingacquisition cost:
Equity securities.......................................................
Sub-total................................................................
Total...............................................................................

¥113
¥113
¥3,740

¥123
¥123
¥2,527¥(10)¥(10)¥1,213Difference

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

Book value

Millions of yen
March 31, 2014
Acquisition cost¥3,501
154
101¥3,757¥2,257148
100¥2,505¥1,24561¥1,252

Securities with book value not exceedingacquisition cost:
Equity securities.......................................................
Sub-total................................................................
Total...............................................................................

¥27
¥27
¥3,784¥29¥29¥2,533

¥(2)
¥(2)
¥1,251(b)	‌Impairment losses of ¥2 million and ¥8 million were recorded to write down book value of investments insecurities for the years ended March 31, 2013 and 2014, respectively.
11. 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¥87Millions of yen
March 31, 2014
Contract
over 1 year¥—Fair value¥412. Reserve for Retirement Benefits to Employees(a)	‌E mployees of the Company is covered by a defined-benefit corporate pension plan and definedcontribution allowance plan. Employees of its domestic subsidiaries are covered by termination
allowance plan or defined-contribution pension plan.
(b)	‌The reserve for retirement benefits as of March 31, 2012 and 2013 is analyzed as follows:
Millions of yen
March 31,2013
Projected benefit obligations.............................................................................................
¥(3,671)
2,598
Plan assets............................................................................................................................
Unfunded benefit obligations.............................................................................................
(1,072)
Unrecognized actuarial differences...................................................................................
624(53)
Unrecognized prior service cost........................................................................................
Total.......................................................................................................................................
(501)—
Prepaid pension costs.........................................................................................................
(501)¥Reserve for retirement benefits to employees.................................................................
(c) The net periodic expenses related to retirement benefits for the fiscal year 2013 are as follows:
Millions of yen
March 31,2013
Service costs.........................................................................................................................
¥
127
74
Interest costs........................................................................................................................
Expected return on plan assets.........................................................................................
(55)
Amortization of actuarial differences...............................................................................
36
Amortization of prior service cost.....................................................................................
(8)
Premium amount of payment to a defined by termination
46
allowance plan or defined-contribution pension plan.............................................
221¥Retirement benefits expense..............................................................................................
(d) Assumptions used in calculation of the above information were as follows:
Method of attributing the projected benefits to periodof services......................................................................................................................
Discount rate........................................................................................................................
Expected rate of return on plan assets.............................................................................
Amortization periods of actuarial differences.................................................................
Amortization periods of prior service costs.....................................................................

As of March 31,
2013
Straight-line
basis
1.1%
2.0%
10 years
10 years

Defined benefit plans(a) Movements in retirement benefit obligations (except (c) below)
Balance at April 1, 2013.......................................................................................................
Service cost.........................................................................................................................
Interest cost........................................................................................................................
Actuarial loss (gain)..........................................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2014..................................................................................................

¥3,590
130
39
(68)
(360)
¥3,331(b) Movements in plan assets (except (c) below)
Balance at April 1, 2013.......................................................................................................
Expected return on plan assets.......................................................................................
Actuarial loss (gain)..........................................................................................................
Contributions paid by the employer................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2014..................................................................................................

¥2,571
51
22
213
(360)
¥2,498(c) Movements in net liability for retirement benefits based on the simplified method
Balance at April 1, 2013.......................................................................................................
Retirement benefit costs...................................................................................................
Benefits paid.......................................................................................................................
Balance at March 31, 2014..................................................................................................

¥54
8
(16)
¥45

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

14

(d) Reconciliation from retirement benefit obligations and plan assets to liability for retirement benefits
Funded retirement benefit obligations.............................................................................
¥3,373(2,525)
Plan assets............................................................................................................................
848
30
Unfunded retirement benefit obligations.........................................................................
Total net liability (asset) for retirement benefits at March 31, 2014.............................
878
Asset for retirement benefits.......................................................................................
Total net liability (asset) for retirement benefits at March 31, 2014......................

878
¥878

(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, 2014................................

¥130
39
(51)
31
(8)
8
¥149

(f ) Breakdown of items recognized in accumulated other comprehensive income
Unrealized past service cost...............................................................................................
Unrecognized actuarial differences...................................................................................
Total................................................................................................................................

¥503
(45)
¥457

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

23%
21%
48%
8%
100%

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

1.1%
2.0%

(j) Defined contribution plans
Amount of contributions to defined contribution plans by the Company and its subsidiaries was ¥48
million.
13. 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 31,2013
2014
Deferred tax assets:
1,014
¥
1,001
Write-down of fixed assets.................................................................
¥
Allowance for doubtful accounts......................................................
829
820
Write-down of marketable securities................................................
401
190
Intercompany profits...........................................................................
269
268
Loss on valuation of real estate for sale...........................................
857
837
Operating loss carry forwards...........................................................
168
143
851
896
Other.....................................................................................................
Total gross deferred tax assets .................................................
4,389
4,156
(2,227)(2,233)
Valuation allowance.....................................................................
2,163
1,922
Deferred tax liabilities:
Reserve for special depreciation.......................................................
—(195)
Reserve for advanced depreciation...................................................
(63)
(63)
(429)
(422)
Unrealized gain on other securities...................................................
—(727)
Difference from fair value of subsidiaries........................................
Deferred gains or losses on hedges...................................................
(5)(1)
Total gross deferred tax liabilities.............................................
(497)(1,408)Net deferred tax assets................................................................

15

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

¥

1,666

¥

514

(b)	‌The reconciliation between the statutory tax rate and the effective tax rate as at March 31, 2012 and 2013is presented below:
As of March 31,
2013
2014
Statutory tax rate.....................................................................................
37.8%
37.8%
Permanent differences on expenses not deductible.......................
5.1
0.9
Permanent differences on income not taxable................................
(1.9)
(0.4)
Accrued bonuses to directors and statutory
auditors not deductible.....................................................................
1.9
0.3
Inhabitant taxes per capita.................................................................
3.4
0.6
Valuation allowance............................................................................
(13.5)
6.0—
1.8
Influence by effective tariff change...................................................
Influence of future tax rate.................................................................
(1.6)—
Revision due to amortization of negative goodwill.........................
—(11.9)(0.6)(0.5)
Other......................................................................................................
30.6%
34.6%
Effective tax rate..................................................................................
(Notes to business combinations, etc.)(Business combination by means of acquisition)
1. Overview of the business combination(1) Name of acquired company and description of the business acquired
Name of acquired company: Sakura Hanoi Plaza Investment Co., Ltd.
Description of the business acquired: Hotel business(2) Major reason for the business combination
For efficient collection of accounts receivable from the said specified subsidiary.
(3) Date of the business combination
March 31, 2014
(4) Legal form of the business combination
Acquisition of shares(5) Name of the company after the combination
Sakura Hanoi Plaza Investment Co., Ltd.
(6) Ratio of voting rights acquired
Ratio of voting rights prior to business combination: 37.5%
Ratio of voting rights acquired on the date of business combination: 19.0%
Ratio of voting rights after acquisition: 56.5%
2.	‌The period for which results of the acquired company is included in the consolidated financial
statements
As the fiscal year-end (March 31, 2014) was the date of acquisition, profit and loss of the acquired From
March 1, 2014, to March 31, 2014
3. Acquisition costs of the business acquired and the details
Acquisition costs 3,255 million yen (32,550 common stock of MU Credit Guarantee)
4. Amount of negative goodwill generated and reasons thereof(1) Amount of negative goodwill generated: 1,171 million yen(2) Reasons for the generation of negative goodwill
Negative goodwill was generated due to the acquisition price of the shares of Sakura Hanoi Plaza
Investment Co., Ltd. acquired by the Company was below the amount of net assets of the acquired company.
6. Assets received and liabilities undertaken on the date of the business combination and the breakdown(Millions of yen)
Current assets:
1,874 million yen
3,410 million yen
Non-current assets:
Total assets:
5,284 million yen
Current liabilities:
182 million yen
2,731 million yen
Non-current liabilities:
Total liabilities:
2,913 million yen
7.	‌The estimated amounts of the impact of this business combination on the consolidated statement ofincome for the fiscal year on the assumption that the business combination was completed on the
beginning date of the fiscal year, and method of calculation(Millions of yen)
Net income:
1,031 million yen
Operating income:
142 million yen
Ordinary income:
884 million yen
Income before income taxes
and minority interests:
884 million yen
Net income:
833 million yen
Net income per share:
13.39 yen
(Method of calculation of the estimated amounts)
The difference between net sales and income (loss) calculated on the assumption that the businesscombination was completed on the beginning date of the fiscal year and the amounts of the corresponding
accounts in the consolidated statement of income of the acquirer for the fiscal year are regarded as theestimated amounts of the impact of this business combination.
The above note information is not audited.

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

16

14. Segment Information(1)	‌The segment information of the Company and its subsidiaries for the year ended March 31, 2012 and2013 is presented below:
		
The Company and its subsidiaries operate principally in the following four industrial segments:
		Construction............. Construction, engineering works, development and sale of real estate.
		Golf courses.............. Management of golf courses
Hotels......................... Management of hotels
		Advertising agent..... Management of advertising agent.
(2)	‌The segment information of the Company and its subsidiaries for the year ended March 31, 2013 and2014 is presented below:
Millions of Yen
March 31, 2013
Golf
Advertisingcourses
Hotelsagent
Total
Construction
Reconciliations Consolidated
Ⅰ. Net sales and Operating income
Net sales
Customers¥59,566¥276Intersegment or
02transfer
Total
59,567278
Operating income
¥861
¥34
(loss)
Ⅱ. OtherDepreciation and176
16
amortization

Construction

Golf
coursesⅠ. Net sales and Operating income
Net sales
Customers¥68,295¥243
Intersegment or
196
3transfer
Total
68,491
246
Operating income¥2,191¥9
Ⅱ. OtherDepreciation and190
22
amortization¥515¥1,401¥61,759¥—¥61,759

4

90

96

(96)

—

519

1,491

61,855(96)

61,759¥56¥65¥1,015¥—¥1,015

48

6

246

—

246

Millions of Yen
March 31, 2014
Advertising
Hotels
agent

Total

Reconciliations Consolidated¥674¥1,473¥70,685¥—¥70,685

3

88

290

(290)

—

677
¥67

1,561
¥52

70,974¥2,319(290)¥(17)

70,685¥2,301

62

7

281

(1)

280

15. Per Share Data
Net assets per share and net income per share as of and for the year ended March 31, 2012 and 2013 are as
follows:
Yen
2013
2014
Net assets per share................................................................................
¥336.95¥363.52
9.00
38.62
Net income per share – primary............................................................
1.

Basis of net income per share of common stock

Net income...............................................................................................
Net income 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.......................................................
Minority interests.....................................................................................
Net assets applicable to common stock...............................................
Number of shares of common stock at end of year............................

17

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

Millions of yen
2013
2014
¥576
¥2,403¥576¥2,403
63,947 thousand
62,229 thousand
sharessharesMillions of Yen
2013
2014
¥21,396¥24,102
424
1,485
424
1,485
20,972
22,617
62,240 thousand
62,216 thousand
sharessharesBOARD OF DIRECTORS, STATUTORY AUDITORSAND EXECUTIVE OFFICERS AS OF MARCH 31, 2014
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
		Kimio Shiozawa

Managing Executive Officers
		Itsuo Takeuchi

Outside Director

		Zentaro Ozawa *		Yoshinori Uda
Executive Officers
Statutory Auditors

		Kiyoto Kitagawa

Permanent Auditor

		Shuichi Moriyasu

		Noboru Takizawa

		Yoshito Iwasaki
		Atsushi Gomyo

Outside Auditors

		Tsuneaki Yamada

		Toshiyuki Tsukada

		Hironori Terashima

		Yoshichika Owa

		Masakatsu Kobayashi

		Kazumichi Hanyu

		Fumihiro Akiyama
		Sadao Sugimura
		Kiyonori Nakashima		* : Member of Board of Directors

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

18