BUILD A SOLID STRATEGY - keihanshin.co.jp · and non-structural aspects. ... “office...

BUILD A SOLID

STRATEGY

A N N U A L R E P O R T 2 0 1 5For the f isca l year ended March 31, 2015

Office Buildings

31.6%

Datacenter Buildings

36.8%

WINS Buildings

24.3%

Commercial Buildings and Logistics Warehouses

5.4%

Others

1.9%

FY 2014

FY 2001

FY 1987

FY 1975

FY 1956

Office Buildings

(% of net sales by segment)


WINS Buildings


Others

Condominiums

We acquired four office buildings,

and three datacenter buildings /

sold two office buildings, and 14

commercial buildings and logistics

warehouses.

Our first datacenter building, Shinmachi 1

Building, is completed in Osaka City.

We started a business for commercial

buildings and logistics warehouses.

Our first office building, Kawaramachi

Building, is completed in Osaka City.

Breakdown of revenue from operations

History of the Company and

business development

1 At a Glance 2 Our Strengths 4 Consolidated Financial Highlights 5 To Our Stakeholders 6 Message from the President 8 Business Information 9 Major Properties 12 Corporate Governance, Compliance, and Risk Management

14 Relations with Society and People 15 Topics 16 Management’s Discussion and Analysis 18 Consolidated Financial Statements 25 Notes to Consolidated Financial Statements 45 Independent Auditor’s Report46 Corporate/Stock Information47 History

Contents

¥14,852 million ¥4,966 million

FY 2014

Revenue from operations Operating income

Rating Information (as of March 31, 2015)

Rating Agency

Rating and Investment Information, Inc. (R&I)

Long-term Credit Rating

A–

At a Glance

We operate our business in the four mainstay lines:

“office buildings,” “datacenter buildings,” “WINS

buildings (off-track betting parlor),” and

“commercial buildings and logistics warehouses,”

in Osaka, Tokyo and many other cities in Japan.

We put top priority on safety and security of

users starting from the design stage of buildings

and facilities. For example, we actively introduce

the base isolation system for new buildings. We are

committed to always providing buildings and

facilities that are user-oriented both in structural

and non-structural aspects.

We are determined to continue providing high-

quality building management while swiftly meeting

our customers’ needs.

Forward-Looking Statements

Statements made in this annual report with respect to Keihanshin Building’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Keihanshin Building. These statements are based on management’s assumptions and beliefs in light of the information currently available to it and therefore readers should not place undue reliance on them. Keihanshin Building cautions that a number of important factors, such as general economic conditions and exchange rates, could cause actual results to differ materially from those discussed in the forward-looking statements.

Our Business Lines

We offer safe and comfortable office

buildings equipped with advanced

functions in Osaka centering on the top-

rated business quarters, Yodoyabashi and

Honmachi areas. We continue to provide

“office hospitality” with basic features of

“safety,” “comfort,” and “the environment”

while adapting to changes in users’

demands as well as constantly enhancing

the basic functions of the buildings.

Office Buildings

Our urban-type datacenter buildings

feature state-of-the-art specifications

including high resistance to disasters,

reliable power supply with a large

emergency power generator, and

advanced security systems. Our

maintenance service based on our

abundant experience of datacenter

building leasing is highly commended.


We have rented off-track betting parlors,

popularly called WINS, to the Japan

Racing Association for over half a century.

We always come up with ideas to beautify

these facilities and improve their utilities so

that horse racing fans can use them safely,

conveniently and comfortably.

WINS Buildings

We rent commercial buildings to meet the

specific needs of communities or each

locational characteristic to support the

lives of local people. Our logistics

warehouses located in suburban areas of

big cities serve as valuable logistic bases

for our customers.


Profile

We provide safe and comfortable business space under our fine-tuned building management.

1Keihanshin Building Co., Ltd.

WINS BuildingsCommercial Buildings andLogistics Warehouses

Since Keihanshin Building was founded, it has carefully

gathered information on society’s needs and evolved its

business accordingly. Each of our three largest business lines—

office buildings, datacenter buildings, and WINS buildings—

generates about 30% of our revenue. Our portfolio is thus well

balanced for earnings growth and risk diversification.

Our next steps are to invest aggressively in the central Tokyo

area and core regional cities (Nagoya, Fukuoka, Hiroshima), and

to develop a fifth business line as a new pillar of earnings.

To maintain our sound financial balance, we make it a

management goal to keep net interest-bearing debt at

about 10 times EBITDA. Our sound financial administration

and stable earning power have won favorable attention.

Rating & Investment Information, Inc. has given Keihanshin

Building an A– rating for 19 consecutive years.

Our business extends beyond office rental to datacenter

buildings and WINS buildings. With this varied lineup, we

have achieved a lower vacancy rate than the average in the

business districts of Tokyo and Osaka.

In setting the Company’s dividend, we consider earnings,

the business environment, and future prospects. We

maintain a stable dividend for our shareholders while

strengthening our financial position with ample internal

reserves and boosting our overall and long-term

corporate value.

(%)

2

43 Solid financial base and high credit rating

Lower vacancy rate than the industry average

Stable dividend

Construction of a balanced portfolio suited to the times

(Yen)

Revenue by Business Line

Commercial buildings and logistics warehouses

5.4%

WINS buildings

24.3%FY 2014

Others

1.9%

Office buildings

31.6%

Datacenter buildings

36.8%

19th consecutive year

A-

Our Strength in Each Business Line

Annual dividend per share and consolidated dividend payout ratio

Annual dividend per shareConsolidated dividend payout ratio

15 50

12 40

9 30

6 20

3 10

0 0

2013 20142006 20072005 2008 2009 2010 2011 2012

30.4

24.019.3 21.1

35.929.1 30.4 31.0

27.0

14

29.6

15

10 1011

12 12 12 12

14

FY

Osaka business area

Keihanshin Building

14

12

10

8

6

4

2

0

2013 20142006 20072005FY 2008 2009 2010 2011 2012

11.3

6.6

5.0

5.1

8.0

11.0

12.4

10.3

8.6

3.4

2.7 2.9

8.7 9.1 9.0

8.0

0.6

6.5

3.7

6.4

4.9

8.9

Tokyo business area

6.0

3.1

9.5

6.7

4.9

8.7

5.3

3.2

We manage office buildings from a long-term viewpoint, offering business spaces with an emphasis on safety, comfort, and the environment.

We maintain and operate high-quality facilities in conjunction with the Japan Racing Association (JRA) and the local community.

We provide high-value-added facilities that support their communities and promote the flow of goods and services.

Our urban-type datacenter buildings are based on more than 25 years of experience in the leasing market.

Our holdings consist of three office buildings in Tokyo, four in Osaka, and one elsewhere, for a total of eight. All of our office buildings enjoy convenient access to public transportation.

There are about 40 off-track betting parlors (WINS) throughout Japan, where tickets can be purchased for horse races held by the JRA. Since Keihanshin Building was established, it has leased five WINS buildings in the Kyoto-Osaka-Kobe area to the JRA for some 50 years. This has provided a stable revenue source.

We are continually fine-tuning these facilities so that horse race fans can use them safely, conveniently, and comfortably.

We advanced into the commercial building and logistic warehouse leasing business in 1976. By offering a variety of high-value-added commercial facilities that match the needs of their regions and locations, we help to enrich the lives of surrounding communities. Our logistics warehouses in suburban parts of the Kansai area contribute to the regional economy as important distribution centers for the companies that use them.

The Keihanshin Nishishinsaibashi Building, our newest building, employs the most advanced seismic isolation devices based on the most recent earthquake data. It is built to withstand a class 7 earthquake on the Japanese seismic intensity scale and maintain the functions of a datacenter.

Precautions have also been taken against other kinds of damage. For example, the entrances to each datacenter building are outfitted with flood-control panels to protect from the torrential downpours that have become more common in recent years, as well as other water damage.

Safety, comfort, and the environment are keywords in building construction. We refuse to compromise on user-friendliness and always provide secure, pleasant office spaces.

In new buildings, we employ the expertise in seismic isolation devices and emergency generators that we have gained over many years of operating datacenter buildings. In this way, we respond to the rising need for business continuity plans (BCPs).

In principle, each datacenter building is connected to three high-capacity, high-voltage electrical cables. If one is severed, the other two will still provide sufficient power for normal operations.

In the event of a blackout, the combination of an uninterruptible power supply (UPS) device and a large emergency-use generator can maintain the power supply in a datacenter building for up to 48 hours until electricity is restored.

We equip buildings with heat-deflecting glass (Low-E glass) and green spaces on their roofs and walls to lessen their impact on the environment.

The entrances of datacenter buildings are equipped with security gates using contactless smart cards. Security personnel are always on duty, and visitors are received in person.

Specialist technicians are permanently on call in the central monitoring center of each datacenter building, and building interiors are kept under watch 24 hours a day, 365 days a year.

1Office Buildings Datacenter Buildings

Prime locationAdvantage Advanced disaster-prevention featuresAdvantage

High-capacity electrical equipmentAdvantage

Security measuresAdvantage

High-value-added facilitiesAdvantage

High-grade featuresAdvantage

Respect for the environmentAdvantage

Stable revenueAdvantage

(%)

2 Keihanshin Building Co., Ltd. 3Keihanshin Building Co., Ltd.

Our Strengths

ROEROA

Net income per shareDividends per share

15,000

12,500

10,000

7,500

5,000

2.500

0

201320122010 2011

14,03113,133 13,291 13,679

5,000

4,000

2,000

3,000

1,000

0

201320122010 2011

4,4634,997

4,404 4,6343,000

2,500

2,000

1,500

1,000

500

0

201320122010 2011

2,369

1,773 1,740

2,331

120,000

100,000

80,000

60,000

40,000

20,000

0

201320122010 2011

115,015104,441

110,671 114,577

48,250

14,852 4,9662,732

115,243

51,850

37,570 38,792 41,733

8.0

6.0

4.0

2.0

0

201320122010 2011

60.0

40.0

20.0

0

2013

2014 2014 2014

2014 2014 201420122010 2011

Net assetsTotal assets

4.8 4.6

5.85.3

1.7 1.62.1 2.1

5.5

2.4

39.4

51.846.1

12.0 12.0 14.0 14.0

50.6

15.0

38.7

FY

FY

FY

FY

FY

FY

In fiscal 2014 (ended March 31, 2015), the real estate leasing industry was supported by demand

from companies relocating for more space or requesting more space in their current buildings.

Vacancy rates trended downward, and rent levels improved in some cases. Keihanshin Building

carried out planned maintenance to raise the value of its existing properties and actively solicited

tenants while maximizing the effect of new investment by taking geographic allocation into account.

As a result, the Company’s consolidated revenue, ordinary income, and net income all reached

record highs.

Listed companies are public institutions, and the mission of corporate managers is to ensure the

continued existence and growth of their companies into the distant future. With this view, as a

manager I will carry out my duties fairly and strategically. Backed by Keihanshin Building’s

corporate strengths, which include sound finances and trusting relationships with clients cultivated

over many years, we aim to provide the utmost in building management and offer our tenants high-

quality business spaces. We thank our shareholders and investors for their understanding of our

management principles and business strategy, and we hope for their continued firm support.

Kenjiro Nakano, President

(Millions of yen)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Revenue from operations 13,133 13,291 13,679 14,031 14,852

Operating income 4,997 4,404 4,634 4,463 4,966

Ordinary income 4,123 3,448 3,800 3,699 4,457

Net income 1,773 1,740 2,331 2,369 2,732

Capital expenditure 3,571 5,054 751 472 9,572

Depreciation and amortization 2,347 2,438 2,663 2,612 2,738

Interest-bearing debt (A) 57,550 60,940 63,440 56,750 51,286

Shareholders’ equity (B) 40,638 41,838 43,630 50,015 51,992

Net assets (B’) 37,570 38,792 41,733 48,250 51,850

Common stock 7,688 7,688 7,688 9,827 9,827

Total assets (C) 104,441 110,671 114,577 115,015 115,243

Shareholders’ equity / Total assets (B)/(C) (%) 38.9 37.8 38.1 43.5 45.1

Net assets / Total assets (B´)/(C) (%) 36.0 35.1 36.4 42.0 45.0

Dividends per share (Yen) 12.0 12.0 14.0 14.0 15.0

Net income per share (Yen) 39.4 38.7 51.8 46.1 50.6

Shareholders’ equity per share (Yen) 835.4 862.5 927.9 893.9 960.6

Return on equity (ROE) (%) 4.8 4.6 5.8 5.3 5.5

Return on assets (ROA) (%) 1.7 1.6 2.1 2.1 2.4

Cash flows from operating activities (D) 5,862 3,676 6,091 4,607 7,086

Interest-bearing debt / Cash flows from operating activities (A)/(D)

(Times) 9.8 16.6 10.4 12.3 7.2

Number of employees (Persons) 38 36 35 38 39

(Note) The rating for our long-term debt: A– (by Rating and Investment Infomation, Inc. Japan)

Total assets / Net assets ROE / ROA Net income per share / Dividends per share

Net incomeOperating incomeRevenue from operations(Millions of yen)

(Millions of yen)

(Millions of yen)

(%)

(Millions of yen)

(Yen)

Keihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYears ended March 31, 2011, 2012, 2013, 2014 and 2015

We will achieve

continued growth by

investing effectively

for the medium to

long term and

raising the value of

existing properties.


To Our StakeholdersConsolidated Financial Highlights

Interest-bearing debt Net interest-bearing debt / EBITDA RatioD/E ratio

EBITDA: Operationg income + Dapreciation and amortization

D/E ratio: Operating Interest-bearing debt / Equity

80,000 20

60,000 15

40,000 10

20,000 5

0 0

FY 2013FY 2012FY 2010 FY 2011

56,75057,550 60,940 63,440

1.5 1.6 1.5 1.2

7.7 8.2 7.3 6.3

FY 2014

51,286

1.0

6.2

Osaka area

91.0%

Osaka area

70.0%

Tokyo area

6.9%

Tokyo area, etc.

30.0%

Others

2.1%

FY 2014The target for10 years later

Dividends policy

Maintenance of a healthy financial base

Revenue and income reach record highs in fiscal 2014

In fiscal 2014 (ended March 31, 2015), Keihanshin Building’s

business environment was generally solid due to the Japanese

economy’s recovery. Amid favorable conditions, we poured our

efforts into tenant solicitation while carrying out planned

maintenance work on existing properties and allocating

management resources to new investments in the Tokyo

metropolitan area. These initiatives led to improvement in our

vacancy rate, from 4.9% in fiscal 2013 to 3.2% in fiscal 2014.

The acquisition of an office building in Fuchu, Tokyo, increased

our real estate lease income.

As a result, fiscal 2014 consolidated revenue was ¥14,852

million (+5.9%), ordinary income was ¥4,457 million (+20.5%),

and net income was ¥2,732 million (+15.3%). All of these

indicators reached record highs in fiscal 2014. This was a

meaningful year in which policies aimed at raising the Company’s

earning power made a clear and significant difference.

New investment targeting regional allocation achieved geographic diversity in earnings

In May 2014, we acquired the Fuchu Building in the city of

Fuchu, Tokyo, for lease to the NEC Group. Our next acquisition,

in April 2015, was a building in Tokyo’s Shibuya Ward, which we

leased to Issei Miyake. With these two investments, we have

expanded our leasing business in the Tokyo area’s office market

and increased the geographic diversity of our portfolio.

Against the current background of historically low interest

rates, real estate prices are showing signs of rising in the Tokyo

and Kansai areas. For Keihanshin Building, which takes a buy-

and-hold stance in real estate investment and holds assets for

an average of more than 20 years, this is not an ideal

environment for new investment. While keeping geographic

allocation in mind, we intend to secure long-term stable income

by cautiously timing our investments and considering each one

on its merits before proceeding.

Building a strategic business portfolio by deepening our four core businesses and creating a fifth mainstay

Keihanshin Building conducts business in four main lines—office

buildings, datacenter buildings, WINS buildings (off-track betting

parlors), and commercial buildings and logistics warehouses—

a combination that provides resilience in the face of economic

trends and the market environment. In office buildings, we are

looking at possible acquisitions in the Tokyo metropolitan area

and outlying cities, always with an eye to geographic

diversification of our earnings. In datacenter buildings, we are

proceeding with new investment while considering that

advances in information infrastructure might make independent

buildings obsolete, so conversion to other uses might be

advisable. In commercial buildings and logistics warehouses, we

have been disposing of low-revenue roadside commercial

facilities for the past few years. We plan to acquire urban-type

commercial buildings near terminal stations and warehouses

that are built to suit specific tenants.

To construct a fifth mainstay that can stand with our other

four business lines, we are using our advanced information-

gathering capacity to look at opportunities in new fields such as

large hospitals. Such opportunities will support our medium- to

long-term income growth.

Diversity in fund procurement, and reduction of procurement cost

Large amounts of funds are needed to acquire real estate or to

renovate and repair existing properties, so diversifying fund

procurement methods and reducing the procurement cost are

important management issues for Keihanshin Building. Until I

was appointed president in 2010, the Company relied 100% on

indirect financing (bank loans), but in that year we switched to a

policy of procuring one-third of funds through direct financing. In

July 2013, we raised capital through a public offering and

disposed of treasury stock, raising approximately ¥4,800 million

through equity financing. The average interest rate on funds

procured in fiscal 2009 was 1.72%, and this declined each year

to 1.23% in fiscal 2014. With retained earnings at a high

¥32,388 million in fiscal 2014, the Company has adequate

reserves for necessary investment. As we further shore up our

financial soundness, we will continue to seek stable funding at

low interest rates by balancing indirect and direct financing.

Planned maintenance to raise the value of existing properties

Lease properties such as office and datacenter buildings can

quickly deteriorate if they are not properly maintained in

painstaking detail. We conduct planned and effective

maintenance to preserve and raise the value of our properties.

This is one way of reinforcing the trust between us and our client

companies. We have hired numerous highly skilled specialists

with work experience at major construction companies to

improve the quality of our maintenance work, and we enjoy

close cooperative relationships with companies that carry out

specialized work on electricity supply, air conditioning, seismic

isolation, and other systems.

Effective maintenance and superior building management are

a unique strength of Keihanshin Building that cannot be

duplicated by REITs or other funds. This strength gives us the

ability to set ourselves apart from the pack. We will continue our

close dialogue with client companies and maintain the value of

existing properties.

Aiming for a corporate structure that combines profitability and soundness

Continuity is the most important thing in corporate management,

and we believe the most important task of managers is to

construct a management system and business promotion

system that continually generate income. Based on this

concept, we make new investments from a medium- to long-

term viewpoint and structure the Company so that it has a good

balance in terms of both geography and lines of business. In this

way, we reduce and disperse risk. By emphasizing the operating

profit margin and ratio of interest-bearing debt to cash flow in

our management, we aim to establish a corporate structure that

combines both profitability and soundness. Regarding the return

of profits to shareholders and investors, we aim for a stable

dividend payout ratio of around 30%. At the same time, we

keep our eyes on the future and seek to retain sufficient

earnings to sustain growth and thus boost shareholder value.

Keihanshin Building will keep contributing to the economy and

society by providing valuable business spaces while fulfilling its

duties as a corporate citizen through detailed information

disclosure and compliance, as well as a range of CSR activities.

The Company will provide unique value to all types of

stakeholders. As we rise to new challenges, please expect the

best from us.

We will strive to make a dividend payment on a continuing basis with a view to maintaining the dividend payout ratio at 30%. In deciding on the amount of dividend, we will follow the basic policy of paying to our shareholders a dividend in an amount to be determined in keeping with the business results, management environment, and future business prospects. We will pay dividends while strengthening our financial position by building internal reserves and striving to improve the overall and long-term corporate value.

Our target is to keep our net interest-bearing debt within 10 times the EBITDA.

Financial indicators

(Times)(Millions of yen)

From the standpoint of spreading risks, we will invest in office and urban-style commercial buildings sited in areas adjacent to railway and subway stations in the metropolitan area that are heavily used by passengers.

Review of existing facilities

We will continuously review the profitability of roadside-style commercial facilities.

New investment

Revenue from operations (composition by area)

6 Keihanshin Building Co., Ltd.

Message from the President


15,000

12,000

9,000

6,000

3,000

0

14,031

2013

14,852

2014

13,679

2012

13,291

2011

13,133

2010

12,488

2009

13,220

2008

11,919

2007

11,101

2006

10,865

2005FY

Office Buildings Datacenter Buildings WINS Buildings OthersCommercial Buildings and Logistics Warehouses

F

G

Revenue from Operations by Business Line

(Millions of yen)

Office Buildings

¥4,697 million

(UP 20.8% from the previous fiscal year)


¥5,457 million

(UP 4.7% from the previous fiscal year)

WINS Buildings ¥3,613 million

(DOWN 1.0% from the previous fiscal year)


¥803 million

(DOWN 5.8% from the previous fiscal year)

Office Buildings

We offer safe, comfortable, hospitable office buildings in superior locations. To maintain building value over the long term

and further raise tenant satisfaction, we work on everything from development to management, maintenance, and

renovations as a single, comprehensive business.

A

D

B

E

C

Location : Sumiyoshicho, Fuchu-shi, Tokyo

Total Land Area : 18,460 m2 Total Floor Area : 35,907 m2

Structure : 6F Acquired : May 2014

Keihanshin Fuchu BuildingF

Keihanshin Midosuji Building

Location : Chuo-ku, Osaka-shi, Osaka


Structure : B1/14F Completed : Apr. 2007






Structure : B1/11F Completed : Mar. 2001


Total Land Area : 590 m2 Total Floor Area : 3,505 m2


A

Keihanshin Kawaramachi BuildingB

Keihanshin Yodoyabashi BuildingC

Keihanshin Azuchimachi BuildingD

Location : Minato-ku, Tokyo



Keihanshin Onarimon BuildingE

Location : Shibuya-ku, Tokyo


Structure : B1/6F Acquired : Apr. 2015

Keihanshin Yoyogi-koen BuildingG

Business Line Revenue from OperationsAction PlanImplementation of Strategic New Investment

To geographically diversify our portfolio, we will focus our investment on central Tokyo and core regional cities.

We will purchase relatively new buildings with a good balance of location and earnings potential.

Tapping into upstream information, we will propose corporate real estate projects to companies with land holdings.

Our newest datacenter building, the Keihanshin Nishishinsaibashi Building, is almost fully occupied after a smooth tenant solicitation process. In response to consistent demand, we are now considering the construction of another datacenter building in Osaka.

In the interest of stable, long-term operations, we follow a detailed regime to beautify our buildings and improve facilities.

In a tie-up with a major retailer, we will acquire urban-type commercial buildings near terminal stations in the shopping districts of the Tokyo metropolitan area and core regional cities.

Working with a logistics company, we will acquire a built-to-suit warehouse (for specified corporates) with facilities and functions meeting the needs of a specific client.


Major PropertiesBusiness Information

F

G

Datacenter Buildings WINS Buildings


Logistics Warehouses

Datacenter buildings are conveniently located in

urban cores and incorporate advanced disaster-

prevention features, including earthquake-resistant

design, reliable power supply with large emergency

generators, high-speed and high-capacity optic

fiber cables, and advanced security systems. Our

datacenter buildings support business activities in

the IT age, as well as enrichment of people’s lives.

Drawing on our half-century of experience, we work hand-in-hand with the

Japan Racing Association (JRA) to beautify facilities and improve utilities of

our off-track betting parlors, popularly called WINS, so that horserace fans

can use them safely and comfortably. With the cooperation of surrounding

communities, we aim to make WINS even more attractive in the future.

We operate a variety of commercial facilities that match the specific needs of communities and each locational characteristic.

Each one is occupied by influential companies and helps to enrich the surrounding communities. Our logistics warehouses in

the suburban Kansai area are efficient, high-value-added distribution centers for the companies that use them.

A B

E

C

Keihanshin Nishishinsaibashi Building

Location : Nishi-ku, Osaka-shi, Osaka


Structure : B1/10F Completed : Feb. 2012

A

Keihanshin Kitahorie Building



Structure : B1/7F Completed : Jan. 2007

B

Keihanshin Shinmachi 1 Building




C

Keihanshin Shinmachi 2 Building



Structure : B1/7F Completed : Jun. 2002

D

Keihanshin Shin-Esaka Building

Location : Suita-shi, Osaka


Structure : B1/7F Completed : Jun. 1991

E

Keihanshin Toyosaki Building

Location : Kita-ku, Osaka-shi, Osaka


Structure : 6F Completed : Jan. 1999

F

Keihanshin Nakatsu Building



Structure : 8F Completed : Mar. 2000

G

D

Hirakata Warehouse

Location : Hirakata-shi, Osaka Total Land Area : 8,604 m2

Total Floor Area : 11,123 m2 Completed : Mar. 1983

D

Toyahama Warehouse

Location : Hyogo-ku, Kobe-shi, Hyogo Total Land Area : 5,271 m2

Total Floor Area : 9,016 m2 Completed : Jan. 1989

E

Nagano Shopping Facility

Location : Nagano-shi, Nagano Total Land Area : 12,198 m2

Total Floor Area : 34,381 m2 Acquired : Oct. 1998

A

Asahikawa Shopping Facility

Location : Asahikawa-shi, Hokkaido Total Land Area : 10,006 m2

Total Floor Area : 7,162 m2 Completed : Aug. 1994

B

Shijo-Kawaramachi Building

Location : Nakagyo-ku, Kyoto-shi, Kyoto Total Land Area : 751 m2

Total Floor Area : 4,968 m2 Acquired : Apr. 1996

C

WINS Umeda A and B Building

WINS Kyoto Building

WINS Kobe B and C Building

In Namba Parks (for WINS Namba)


Total Land Area : 842 m2 (A), 1,889 m2 (B)

Total Floor Area : 5,037 m2 (A), 8,425 m2 (B)

Structure : B1/7F (A), B1/6F (B)

Completed : May 1982 (A), Mar. 2010 (B) (rebuilt)

Location : Higashiyama-ku, Kyoto-shi, Kyoto

Total Land Area : 1,640 m2

Total Floor Area : 2,517 m2

Structure : B1/3F

Completed : Apr. 1990 (rebuilt)

Location : Chuo-ku, Kobe-shi, Hyogo

Total Land Area : 769 m2


Structure : B3/7F

Completed : Aug. 1991 (rebuilt)


Total Land Area : —


Structure : —

Completed : Aug. 2002 (rebuilt)

A

C

B

D

A B

C D

A

B

C

D E

Commercial Buildings

10 Keihanshin Building Co., Ltd.

Major Properties


Basic Concept

It is crucial for Keihanshin Building to improve soundness and management efficiency by establishing a transparent and fair management

structure, accelerating the decision-making process on important management issues, and strengthening its oversight of business

execution. We are well aware that it is the duty of the Company’s directors and employees to put these ideas into practice, as well as to

comply with the law and maintain discipline, heed the social environment, and conduct our business fairly, openly, and reasonably in an

atmosphere of free competition. In this way, we show shareholders that we value the trust they place in us.

Outline of the Corporate Governance System

1. In principle, the Board of Directors meets monthly to decide on important managerial issues. The Board also receives regular reports

on business execution, which it uses to supervise the situation. Keihanshin Building appoints Directors with extensive experience or a

high degree of specialized knowledge and skill, and this helps the Company to conduct its corporate activities transparently and fairly.

2. Business is executed through Management Meetings, which are held monthly, in principle. Directors and the Chairman of the meeting

indicate who will attend. Based on basic policies passed by the Board of Directors, participants at Management Meetings discuss and

report on business execution policies and plans, the state of their execution, and their results. Items on the Board of Directors agenda

are discussed in advance. Audit & Supervisory Board members attend Management Meetings and may express their opinions.

3. In principle, a Director and Department Head Meeting, attended by directors and department heads, is held weekly to promote

information sharing and various contacts among departments. Audit & Supervisory Board members attend Director and Department

Head Meetings, which provide an opportunity to make requests and express their opinions to each department.

4. An Audit Department has been established to accommodate the Audit & Supervisory Board, accounting auditors, and the Internal

Audit Department.

5. Keihanshin Building has concluded a contract with a legal office, and when necessary, consults the office on relevant business matters.

6. To reinforce its compliance system and risk management system, the Company has established a Compliance Committee and Risk

Management Committee, which regularly report to the Management Meeting. The activities of these committee members are subject

to auditing.

7. In principle, the Audit & Supervisory Board meets monthly. Board members report in detail to external auditors on happenings at the

Management Meeting, the content of proposals made at Board of Directors Meetings, the content of audits implemented by

accounting auditors and the Audit Department, as well as improvements made. These meetings are intended to help the Audit &

Supervisory Board form opinions. The opinions of external auditors are properly heard at various meetings and are reflected in the

Company’s operations.

8. Audit & Supervisory Board members play a central role in exchanging information with accounting auditors and the Audit Department

on a day-to-day basis. The results of internal audits are used in the Board’s audits, making them more efficient and effective.

9. When auditors carry out their duties, the General Affairs Department acts on their instructions.

10. Keihanshin Building has concluded a contract with the audit firm Gravitas Audit Corporation for accounting audits. Keihanshin Building

obeys items in the Financial Instruments and Exchange Act pertaining to internal control and is audited in line with an annual audit plan.

Composition of audit assistants: three certified public accountants.

We rank the observance of legal and other social norms, as well as the observance of our Articles of Incorporation and other in-house

standards, as one of the most important topics in managing Keihanshin Building. Accordingly, we have drafted Compliance Regulations, as

well as a Code of Conduct and Standards of Conduct, which clarify guidelines and standards for directors and employees. Directors

manage the compliance system mainly through the Compliance Committee established within the Company. Directors report activities of

the committee periodically to the President and, when necessary, to the Management Meeting or the Board of Directors. Moreover,

Directors report periodically to the President operations of an in-house reporting system that has been established, so that compliance

infractions can be reported and discussed.

Keihanshin Building responds quickly and accurately to changes in the social environment through compliance seminars attended

by all directors and employees. We are developing a corporate culture that values compliance consciousness in business dealings.

The head of the Audit Department conducts appropriate compliance audits and reports the findings to the President and Compliance

Committee and, if necessary, to the Board of Directors.

Keihanshin Building has drafted Risk Management Regulations and is committed to controlling and preventing the risks that attend

business in each of its departments. To consolidate these risks and control them on a companywide basis, we have established a Risk

Management Committee. Directors make use of the Committee and report periodically to the President on matters under its jurisdiction,

such as (1) identification of risk and comprehensive management of its assessment, (2) drafting and review of risk management policies

and plans, and (3) summarization of the risk management situation. If necessary, these matters are also reported to the Management

Meeting or the Board of Directors.

In preparation for an event or emergency with serious consequences, we have devised a business continuity plan (BCP) to enable a

speedy, appropriate companywide response. We are publicizing the plan throughout the Company.

The head of the Audit Department conducts appropriate risk management audits and reports the findings to the President and Risk

Management Committee and, if necessary, to the Board of Directors.

Compliance System

Risk Management System

Shareholders’ Meeting

President

Audit & Supervisory Board3 Audit & Supervisory Board members

(of whom 2 are outside Audit & Supervisory Board members)

Management meeting(Discussion of important matters)

Full-time executives, etc.

President

Each department, subsidiary

Employees

Employees

Each division, subsidiary

Independent AccountingAuditor

Selection, release

Exchange of opinions

Audit

Oversight

Report

Report

Report

Report

Report, consultation

Plan notification

Education

Investigation, verification

Internal audit

Internal memoReport

Control

Directives

Report

Report

Agreement on auditor candidates

Judgment on reasonableness of audit

Compliance CommitteeAudit Department

Risk Management Committee

General Affairs Department

Control and directives Report Report

Election, dismissalElection, dismissal Election, dismissal

Information dispersal

Education


Internal auditReport Notification

Consultation

Report

Consultation

Report

Consultation

Report

Report

Report

Compliance Committee

Notification

Consultation

Audit DepartmentCompliance Committee members

Board of Directors8 Board members

(of whom 1 is an outside director)

Shareholders’ Meeting

President

Audit & Supervisory Board3 Audit & Supervisory Board members

(of whom 2 are outside Audit & Supervisory Board members)

Management meeting(Discussion of important matters)

Full-time executives, etc.

President

Each department, subsidiary

Employees

Employees

Each division, subsidiary

Independent AccountingAuditor

Selection, release

Exchange of opinions

Audit

Oversight

Report

Report

Report

Report

Report, consultation

Plan notification

Education


Internal audit

Internal memoReport

Control

Directives

Report

Report

Agreement on auditor candidates

Judgment on reasonableness of audit

Compliance CommitteeAudit Department

Risk Management Committee

General Affairs Department

Control and directives Report Report

Election, dismissalElection, dismissal Election, dismissal

Information dispersal

Education


Internal auditReport Notification

Consultation

Report

Consultation

Report

Consultation

Report

Report

Report

Compliance Committee

Notification

Consultation

Audit DepartmentCompliance Committee members

Board of Directors8 Board members

(of whom 1 is an outside director)

Corporate Governance System

Corporate Governance Diagram


Corporate Governance, Compliance, and Risk Management

The safety and security of building and facility users is foremost in our thoughts from the design stage. We strive to make both

the hardware and software aspects of our buildings user friendly by, for example, employing high-performance air-conditioning

and lighting fixtures, and by making rooms and common spaces more inviting.

While taking measures to extend the lifespan of buildings, we also give a high priority to energy efficiency in choosing

equipment. We were an early adopter of heat-deflecting eco-glass and other environmentally friendly products, which we have

steadily adopted in our buildings.

Moreover, to combat the heat-island effect of large cities, we promote the use of green spaces on our building roofs and

walls, enhancing the urban environment.

In May 2014, we acquired the large-scale Fuchu Building in the Tokyo suburb of

Fuchu City to expand our building lease business in the Tokyo metropolitan area and

diversify our regional portfolio.

This property continues to be occupied by the NEC Nakagawahara Technology Center.

In November 2014, renovation work accompanying a

tenant change at our Shijo-Kawaramachi Building was

completed and the building was reopened. The

building contains the Scandinavian fashion retailer

H&M’s first store in Kyoto and one of its largest stores

in Japan. Well located on Kawaramachi Street only

three minutes on foot from Hankyu Kawaramachi

Station, this building has a white exterior, which adds

to the area’s dynamism.

We will continue to make the vicinities of our

buildings safer, more beautiful, and livelier by

constructing facilities that harmonize with their

surroundings and raise neighborhood values.

To expand its operating area and diversify its asset portfolio, Keihanshin Building has

considered making significant new investments centered in the Tokyo metropolitan area.

In July 2014 we opened a Tokyo office, which we will use to strengthen our information-

gathering capacity in the Tokyo metropolitan area and to boost relationships with major

clients in the area.

The real estate leasing business advances in tandem with the local community. Keihanshin Building quickly and accurately

grasps community needs and contributes to community development as a local entity.

The buildings we construct are social capital and constitute the face of their neighborhoods for many years. While

harmonizing with the historical context and cityscape of each neighborhood, our buildings contribute to land values, hence

to the safety, beauty, and liveliness of their surroundings.

In cooperation with our neighbors, we promote the local economy, participate in events to enliven our communities, and

actively take part in local clean-up efforts, tree- and flower-planting, and cultural activities.

Social Contribution

Consideration for the Environment Acquisition of the Fuchu Building, Our Eighth Office Building

Notice of the Shijo-Kawaramachi Building’s Renovation

Opening of the Tokyo Office

Greenery in front of the Onarimon Building

Presentation of a support contribution list for bunraku (Japanese puppet theater)

The outdoor air conditioner units are misted.

The Osaka Classic (in the Midosuji Building’s first-floor lobby)

Outline

Outline

Outline

Location : 5-22-5 Sumiyoshicho, Fuchu-shi,

Tokyo

Total Land Area : 18,460 m2


Structure : S; 6F

Acquisition Date : May 2014

Location : 354 Shimoosakacho, Kawaramachi-

dori Shijo Agaru, Nakagyo-ku, Kyoto

Total Land Area : 751 m2


Structure : S; B1/7F

Opening Day : November 2014

Location : Kyodo Bldg. 8F, 2-2 Kanda Jimbocho,

Chiyoda-ku, Tokyo

Opening Day : July 2014

Tama River

Nakagawara St.

Kam

akur

a-ka

ido

Keio Line

Fuchukeijikai Hospital

Fuchu Building

Kyoto Takashimaya

KAWARAMACHI OPA

Shijo-KawaramachiBuilding

Tokyo Office

Bank of Tokyo-Mitsubishi

UFJ JimbochoBranch

Kyoto MARUI

Kawaramachi St.

Jimbocho St.

Hankyu Kyoto Line

Toei Shinjuku Line

Tokyo Metro Hanzomon Line

Yasukuni Dori

Kam

o R

iver

Gio

n S

hijo

St.

Toei

Mita

Lin

e

Hak

usan

Dor

i

Tama River

Nakagawara St.

Kam

akur

a-ka

ido

Keio Line


Fuchu Building

Kyoto Takashimaya

KAWARAMACHI OPA


Tokyo Office


UFJ JimbochoBranch

Kyoto MARUI

Kawaramachi St.

Jimbocho St.

Hankyu Kyoto Line

Toei Shinjuku Line


Yasukuni Dori

Kam

o R

iver

Gio

n S

hijo

St.

Toei

Mita

Lin

e

Hak

usan

Dor

i

Tama River

Nakagawara St.

Kam

akur

a-ka

ido

Keio Line


Fuchu Building

Kyoto Takashimaya

KAWARAMACHI OPA


Tokyo Office


UFJ JimbochoBranch

Kyoto MARUI

Kawaramachi St.

Jimbocho St.

Hankyu Kyoto Line

Toei Shinjuku Line


Yasukuni Dori

Kam

o R

iver

Gio

n S

hijo

St.

Toei

Mita

Lin

e

Hak

usan

Dor

i


TopicsRelations with Society and People

Ordinary income

5,000

4,000

3,000

2,000

1,000

0

201320122010FY 2011

3,6994,123

3,4483,800

2,369

2014

201320122010FY 2011 2014

201320122010FY 2011 2014

201320122010FY 2011 2014

4,457

2,732

1,773 1,740

2,331

Net income

Interest-bearing debt Interest-bearing debt to total assets

75,000 75

60,000 60

45,000 45

30,000

15,000

30

15

0 0

56,75057,55060,940 63,440

55.1 55.1 55.449.3

51,286

44.5

50

40

30

20

10

0

36.0 35.1 36.4

42.045.0

Cash flows from operating activities

10,000

5,000

0

–5,000

–10,000

128

–5,733

–2,922 –2,644

4,6075,862

3,676

6,091

–2,633

–9,644

7,086

–6,148

–445

2,833 1,961

Cash flows from investing activitiesCash flows from financing activities

Ordinary income

5,000

4,000

3,000

2,000

1,000

0

201320122010FY 2011

3,6994,123

3,4483,800

2,369

2014

201320122010FY 2011 2014

201320122010FY 2011 2014

201320122010FY 2011 2014

4,457

2,732

1,773 1,740

2,331

Net income


75,000 75

60,000 60

45,000 45

30,000

15,000

30

15

0 0

56,75057,55060,940 63,440

55.1 55.1 55.449.3

51,286

44.5

50

40

30

20

10

0

36.0 35.1 36.4

42.045.0


10,000

5,000

0

–5,000

–10,000

128

–5,733

–2,922 –2,644

4,6075,862

3,676

6,091

–2,633

–9,644

7,086

–6,148

–445

2,833 1,961


Ordinary income

5,000

4,000

3,000

2,000

1,000

0

201320122010FY 2011

3,6994,123

3,4483,800

2,369

2014

201320122010FY 2011 2014

201320122010FY 2011 2014

201320122010FY 2011 2014

4,457

2,732

1,773 1,740

2,331

Net income


75,000 75

60,000 60

45,000 45

30,000

15,000

30

15

0 0

56,75057,55060,940 63,440

55.1 55.1 55.449.3

51,286

44.5

50

40

30

20

10

0

36.0 35.1 36.4

42.045.0


10,000

5,000

0

–5,000

–10,000

128

–5,733

–2,922 –2,644

4,6075,862

3,676

6,091

–2,633

–9,644

7,086

–6,148

–445

2,833 1,961


Ordinary income

5,000

4,000

3,000

2,000

1,000

0

201320122010FY 2011

3,6994,123

3,4483,800

2,369

2014

201320122010FY 2011 2014

201320122010FY 2011 2014

201320122010FY 2011 2014

4,457

2,732

1,773 1,740

2,331

Net income


75,000 75

60,000 60

45,000 45

30,000

15,000

30

15

0 0

56,75057,55060,940 63,440

55.1 55.1 55.449.3

51,286

44.5

50

40

30

20

10

0

36.0 35.1 36.4

42.045.0


10,000

5,000

0

–5,000

–10,000

128

–5,733

–2,922 –2,644

4,6075,862

3,676

6,091

–2,633

–9,644

7,086

–6,148

–445

2,833 1,961


Review of Fiscal 2014

In fiscal 2014 (ended March 31, 2015), the Japanese

economy showed signs of recovery as corporate

earnings improved and the Bank of Japan maintained its

loose monetary policy. On the other hand, private

consumption stalled after the consumption tax rate hike

and the international situation was unstable, so the

outlook remained unclear.

In the real estate leasing market, the office vacancy

rate for prime properties in central Tokyo trended

downward owing to corporate demand for more space

through relocation or expansion at current locations.

Rent levels improved for some types of properties.

In this environment, Keihanshin Building’s efforts to

solicit tenants led to a decline in its vacancy rate from

4.9% (end of fiscal 2013) to 3.2%. The Company

acquired the Fuchu Building as a new investment, and

worked to strengthen its earnings and expand its

business area.

Leases with new tenants and the acquisition of the

Fuchu Building helped to raise fiscal 2014 consolidated

revenue from operations to ¥14,852 million, a year-on-

year increase of ¥821 million (5.9%).

Gross profit rose ¥586 million (10.8%) to ¥5,996

million, while operating income climbed ¥503 million

(11.3%) to ¥4,966 million. Ordinary income rose ¥758

million (20.5%) to ¥4,457 million, helped by a decline in

interest payments. Net income rose ¥363 million (15.3%)

to ¥2,732 million.

Earnings by segment (operating income prior to

adjustment for consolidation) were as follows.

Building Lease

Due to higher occupancy rates in existing buildings and

the acquisition of the Fuchu Building, revenue was

¥14,571 million (up ¥970 million, or 7.1%). Operating

income was ¥5,451 million (up ¥557 million, or 11.4%).

Other

Contract construction orders declined, so revenue was

¥280 million (down ¥149 million, or 34.7%). Operating

income was ¥6 million (down ¥29 million, or 82.9%).

Financial Position

Assets, Liabilities and Net Assets

Assets

At the end of fiscal 2014, total assets stood at ¥115,243

million, a year-on-year increase of ¥227 million (0.2%).

Although cash and cash equivalents declined ¥8,706

million due to the acquisition of a new office building,

property, plant and equipment increased ¥6,789 million,

and the rise of stock markets added ¥2,355 million to

the Company’s investment securities.

Liabilities

Total liabilities were ¥63,392 million, a decline of ¥3,372

million (5.1%). Income taxes payable expanded by ¥783

million and deferred tax liabilities by ¥721 million,

but interest-bearing liabilities declined ¥5,463 million

through repayment.

Net Assets

Total net assets amounted to ¥51,850 million, an

increase of ¥3,600 million (7.5%). The main factors were

a ¥1,977 million increase in retained earnings and a

¥1,752 million increase in unrealized gains on securities.

Cash Flows

On a consolidated basis, cash and cash equivalents at

the end of fiscal 2014 decreased ¥8,706 million year on

year, to ¥3,576 million. Major cash flows and the factors

behind them were as follows.

Cash Flows from Operating Activities

Net cash provided by operating activities was ¥7,086

million, up ¥2,478 million. The main factors were an

increase of ¥540 million in income before income taxes

to ¥4,386 million; an increase of ¥617 million in

operating debt, largely owing to lease deposits

from tenants; and a decline of ¥441 million in income

taxes paid.

Cash Flows from Investing Activities

Net cash used in investing activities totaled ¥9,644

million, up ¥9,773 million. The purchase of property,

plant and equipment accounted for expenditures of

¥9,528 million, an increase of ¥8,710 million. Proceeds

from sales of property, plant and equipment declined

¥1,028 million.

Cash Flows from Financing Activities

Net cash used in financing activities amounted to ¥6,148

million, up ¥3,514 million. In the previous fiscal year, the

Company obtained ¥4,754 million through stock

issuance and sales of treasury stock, but in fiscal 2014 it

did not obtain any funds in this way.

Ordinary income / Net income(Millions of yen)

Shareholders’ equity ratio(%)

Interest-bearing debt / Interest-bearing debt to total assets(%)(Millions of yen)

Cash flows(Millions of yen)


Management’s Discussion and Analysis

(Thousands of yen)

Notes Fiscal 2013 Fiscal 2014

Liabilities

Current liabilities

Notes and accounts payable—trade ¥ 168,428 ¥ 11,375

Short-term borrowings 26,937,890 15,384,140

Income taxes payable 371,933 1,155,278

Provision for bonuses 23,801 25,744

Asset retirement obligations 24,700 —

Other current liabilities *3 1,375,198 1,647,518

Total current liabilities 28,901,951 18,224,056

Long-term liabilities

Bonds 22,000,000 22,000,000

Long-term debt 7,431,940 13,606,350

Lease deposits from tenants 6,134,248 6,483,013

Deferred tax liabilities 700,734 1,422,556

Deferred tax liabilities for land revaluation 1,072,791 1,202,109

Provision for directors’ retirement benefits 171,075 182,267

Net defined benefit liability 56,792 60,918

Other Long-term liabilities *4 295,920 211,380

Total long-term liabilities 37,863,500 45,168,594

Total liabilities 66,765,452 63,392,651

Net assets

Shareholders’ equity

Common stock 9,827,611 9,827,611

Capital surplus 9,786,449 9,786,449

Retained earnings 30,411,351 32,388,529

Treasury stock (9,495) (9,592)

Total shareholders’ equity 50,015,916 51,992,998

Accumulated other comprehensive income

Unrealized gains on securities 3,003,579 4,756,143

Land revaluation reserve (4,769,308) (4,898,626)

Total accumulated other comprehensive income (1,765,728) (142,482)

Total net assets 48,250,187 51,850,515

Total liabilities and net assets ¥ 115,015,640 ¥ 115,243,167

See accompanying notes to financial statements.

(Thousands of yen)


Assets

Current assets

Cash and cash equivalents ¥ 12,283,068 ¥ 3,576,600

Notes and accounts receivable—trade 420,061 281,973

Deferred tax assets 43,560 100,357

Other current assets 133,521 139,031

Total current assets 12,880,211 4,097,962

Fixed assets

Property and equipment

Buildings and structures *1 68,359,077 68,921,471

Accumulated depreciation (29,953,479) (31,977,414)

Buildings and structures, net 38,405,597 36,944,057

Land 51,291,266 51,291,266

Buildings in trust — 2,133,426

Accumulated depreciation — (127,567)

Buildings in trust, net — 2,005,858

Land in trust — 6,261,065

Construction in progress — 2,900

Other property and equipment *2 643,342 648,040

Accumulated depreciation (492,341) (516,083)

Other, net 151,001 131,957

Total property and equipment 89,847,865 96,637,105

Intangible assets 69,375 53,517

Investments and other assets

Investment securities 9,450,430 11,806,140

Lease deposits 2,272,727 2,180,077

Deferred tax assets 9,286 9,286

Other Investments and other assets 485,743 459,076

Total investments and other assets 12,218,187 14,454,581

Total fixed assets 102,135,428 111,145,204

Total assets ¥ 115,015,640 ¥ 115,243,167


Consolidated Balance SheetsKeihanshin Building Co., Ltd. and Its Consolidated SubsidiariesAs of March 31, 2014 and 2015


Consolidated Financial Statements

(Thousands of yen)


Income before minority interests ¥ 2,369,458 ¥ 2,732,830

Other comprehensive income

Unrealized gains on securities 1,236,887 1,752,564

Land revaluation reserve (1,106,266) (129,317)

Total other comprehensive income * 130,620 1,623,246

Comprehensive income ¥ 2,500,079 ¥ 4,356,076

Comprehensive income attributable to

Owners of parent 2,500,079 4,356,076

Minority interests — —


Consolidated Statements of Comprehensive IncomeKeihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYears ended March 31, 2014 and 2015

(Thousands of yen)


Revenue from operations ¥ 14,031,098 ¥ 14,852,697

Cost of revenue from operations 8,621,079 8,855,779

Gross profit 5,410,018 5,996,918

Selling, general and administrative expenses *1 946,392 1,030,123

Operating income 4,463,625 4,966,794

Non-operating income

Interest income 3,775 2,282

Dividend income 151,208 176,286

Other non-operating income 17,914 15,949

Total non-operating income 172,898 194,518

Non-operating expenses

Interest expense 610,677 440,774

Interest on corporate bonds 226,235 222,400

Common stock issuance cost 30,686 —

Amortization of long-term prepaid expenses 60,000 30,000

Commission for syndicate loan 2,000 1,000

Other non-operating expenses 7,551 9,202

Total non-operating expenses 937,150 703,377

Ordinary income 3,699,373 4,457,935

Extraordinary income

Gain on sales of fixed assets *2 170,864 4,810

Gain on sales of investment securities 13,118 —

Compensation income *3 2,500 —

Total extraordinary income 186,482 4,810

Extraordinary loss

Loss on sales of fixed assets *4 128 —

Loss related to retirement of fixed assets *5 7,307 76,485

Impairment loss *6 32,356 —

Real estate acquisition tax and registration license tax *7 7 —

Total extraordinary loss 39,799 76,485

Income before income taxes 3,846,056 4,386,260

Income taxes 972,477 1,591,549

Deferred income taxes 504,120 61,880

Total income taxes 1,476,597 1,653,429

Income before minority interests 2,369,458 2,732,830

Net income ¥ 2,369,458 ¥ 2,732,830


Consolidated Statements of IncomeKeihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYears ended March 31, 2014 and 2015



Consolidated Statements of Changes in Net Assets

(Thousands of yen)


Common stock Capital surplusRetained earnings

Treasury stockTotal

shareholders’ equity

Balance at beginning of current period ¥ 9,827,611 ¥ 9,786,449 ¥ 30,411,351 ¥ (9,495) ¥ 50,015,916

Changes of items during period

Dividends of retained earnings (755,651) (755,651)

Net income 2,732,830 2,732,830

Purchase of treasury stock (96) (96)

Net changes of items other than shareholders’ equity

Total changes of items during period — — 1,977,178 (96) 1,977,081

Balance at end of current period ¥ 9,827,611 ¥ 9,786,449 ¥ 32,388,529 ¥ (9,592) ¥ 51,992,998


Total net assetsUnrealized gains

on securitiesLand revaluation

reserve

Total accumulated

other comprehensive

income

Balance at beginning of current period ¥ 3,003,579 ¥ (4,769,308) ¥ (1,765,728) ¥ 48,250,187


Dividends of retained earnings (755,651)

Net income 2,732,830

Purchase of treasury stock (96)

Net changes of items other than shareholders’ equity 1,752,564 (129,317) 1,623,246 1,623,246

Total changes of items during period 1,752,564 (129,317) 1,623,246 3,600,328

Balance at end of current period ¥ 4,756,143 ¥ (4,898,626) ¥ (142,482) ¥ 51,850,515

Keihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYear ended March 31, 2015

(Thousands of yen)


Common stock Capital surplusRetained earnings

Treasury stockTotal

shareholders’ equity

Balance at beginning of current period ¥ 7,688,158 ¥ 7,529,369 ¥ 28,779,526 ¥ (367,035) ¥ 43,630,018


Issuance of new shares 2,139,453 2,139,453 4,278,906

Dividends of retained earnings (737,633) (737,633)

Net income 2,369,458 2,369,458

Purchase of treasury stock (395) (395)

Disposal of treasury stock 117,626 357,935 475,562

Net changes of items other than shareholders’ equity

Total changes of items during period 2,139,453 2,257,079 1,631,825 357,539 6,385,897

Balance at end of current period ¥ 9,827,611 ¥ 9,786,449 ¥ 30,411,351 ¥ (9,495) ¥ 50,015,916


Total net assetsUnrealized gains

on securitiesLand revaluation

reserve

Total accumulated

other comprehensive

income

Balance at beginning of current period ¥ 1,766,691 ¥ (3,663,041) ¥ (1,896,349) ¥ 41,733,668


Issuance of new shares 4,278,906

Dividends of retained earnings (737,633)

Net income 2,369,458

Purchase of treasury stock (395)

Disposal of treasury stock 475,562

Net changes of items other than shareholders’ equity 1,236,887 (1,106,266) 130,620 130,620

Total changes of items during period 1,236,887 (1,106,266) 130,620 6,516,518

Balance at end of current period ¥ 3,003,579 ¥ (4,769,308) ¥ (1,765,728) ¥ 48,250,187

Keihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYear ended March 31, 2014



(Thousands of yen)

Fiscal 2013 Fiscal 2014

Cash flows from operating activitiesIncome before income taxes ¥ 3,846,056 ¥ 4,386,260Depreciation and amortization 2,612,401 2,738,551Impairment loss 32,356 —Increase (decrease) in provision for directors’ retirement benefits (1,194) 11,192 Increase (decrease) in net defined benefit liability 5,257 4,126 Increase (decrease) in provision for bonuses 4,048 1,942 Interest and dividends income (154,984) (178,568)Interest expense 610,677 440,774 Interest on corporate bonds 226,235 222,400 Amortization of long-term prepaid expenses 60,000 30,000 Commission for syndicate loan 2,000 1,000Share issuance cost 30,686 —Loss (gain) on sales of investment securities (13,118) —Loss (gain) on sales of property, plant and equipment (170,736) (4,810)Loss on retirement of property, plant and equipment 7,307 76,485 Compensation income (2,500) —Real estate acquisition tax and registration license tax 7 —Decrease (increase) in operating receivables (81,457) 181,942 Increase (decrease) in operating debt (141,718) 475,997 Increase (decrease) in accrued consumption taxes (303,442) (396)Other, net 4,000 2,750 Sub-total 6,571,883 8,389,647 Interest and dividend income received 154,977 178,568 Interest expenses paid (844,339) (666,403)Income taxes paid (1,274,642) (833,332)Income taxes refund — 17,809Net cash flows from operating activities 4,607,879 7,086,288

Cash flows from investing activitiesPurchase of property, plant and equipment (818,124) (9,528,725)Payments for retirement of property, plant and equipment — (1,300)Proceeds from sales of property, plant and equipment 1,036,454 7,993 Purchase of other intangible assets (30,288) (13,469)Payments for execution of asset retirement obligations — (24,700)Proceeds from sales of investment securities 24,503 —Payments for long-term accounts payable—other (84,540) (84,540)Other, net 300 —Net cash flows from investing activities 128,304 (9,644,741)

Cash flows from financing activitiesNet increase (decrease) in short-term borrowings (200,000) 9,000,000 Proceeds from long-term borrowings — 10,900,000 Repayments of long-term borrowings (6,105,200) (25,279,340)Redemption of corporate bonds (300,000) —Proceeds from issuance of common stock 4,278,906 —Payments for issuance of common stock (30,686) —Payment of construction assistance fund receivables (12,960) (12,920)Purchase of treasury stock (395) (96)Proceeds from sales of treasury stock 475,562 —Cash dividends paid (736,796) (755,658)Amount of payment of commission for syndicate loan (2,000) —Net cash flows from financing activities (2,633,570) (6,148,014)

Effect of exchange rate change on cash and cash equivalents — —Net increase (decrease) in cash and cash equivalents 2,102,613 (8,706,467)Cash and cash equivalents at the beginning of the year 10,180,455 12,283,068Cash and cash equivalents at the end of the year ¥ 12,283,068 ¥ 3,576,600


Consolidated Statements of Cash FlowsKeihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYears ended March 31, 2014 and 2015

Keihanshin Building Co., Ltd. and Its Consolidated SubsidiariesYears ended March 31, 2014 and 2015

Going Concern Assumption

Not applicable

Significant Items for the Preparation of Consolidated Financial Statements

1. Scope of consolidation

All subsidiaries are consolidated.

Number of consolidated subsidiaries

One (1) company

Name of consolidated subsidiary

Keihanshin Building Maintenance Co., Ltd.

2. Application of equity method

Not applicable

3. Accounting period etc. of consolidated subsidiary

The closing date of the accounting period for the consolidated subsidiary is the same as the Group’s consolidated settlement date.

4. Accounting policies

(1) Valuation standards and methods for major assets

Securities

a. Held-to-maturity debt securities

Held-to-maturity debt securities are amortized by the cost method

b. Available-for-sale securities

Securities with fair value

Securities with fair value are valued at the market price as of the end of the fiscal period. (Unrealized gains/losses are booked

directly in net assets. Cost of sales is determined using the moving-average method.)

Securities without fair value

Securities without fair value are valued at cost determined by the moving-average method.

(2) Depreciation methods for major depreciable assets

Property and equipment

Depreciation of property and equipment is calculated by the straight-line method.

Intangible assets

Depreciation of intangible assets is calculated by the straight-line method. However, depreciation of software for internal use is based

on the usable period (five years) in the Company.

Long-term prepaid expenses

Depreciation of long-term prepaid expenses is calculated by the straight-line method.

(3) Basis for posting significant provisions

Allowance for doubtful accounts

To prepare for losses from uncollectible account receivables, allowance for doubtful accounts is provided based on historical loss

ratios for normal receivables, and based on individually assessed amount for doubtful receivables, and bankruptcy reorganization

claims. No allowance is provided in the current period because there are no such doubtful accounts.

Provision for bonuses

To prepare for payment of bonuses to employees, a provision for bonuses is provided in the amount payable during the current fiscal

period calculated based on the amount of bonuses paid in the previous fiscal period.

Provision for directors’ retirement benefits

To prepare for payment of retirement benefits to directors, a provision for directors’ retirement benefits is provided in the amount

payable at the end of the current fiscal period according to the bylaws of the Group.


Notes to Consolidated Financial StatementsConsolidated Financial Statements

(4) Accounting policies for retirement benefits

To calculate liabilities for retirement benefits and retirement benefit expenses, the Group uses the simplified method, which assumes the

retirement benefit obligation to be equal to the benefits payable for voluntary retirement at the fiscal period-end.

(5) Basis for posting significant revenues and expenses

Basis for posting revenues and costs of construction contracts

The percentage-of-completion method has been applied to construction contracts if the outcome of the construction activity is

deemed certain at the end of the current fiscal period (the estimated percentage of completion shall be based on the ratio of the

cost incurred to the estimated total cost). The completed-contract method is applied to other construction contracts.

(6) Significant hedge accounting method

Not applicable

(7) Amortization of goodwill and amortization period

Not applicable

(8) Scope of cash and cash equivalents in the consolidated statements of cash flows

Cash and cash equivalents in the consolidated statements of cash flows are comprised of cash in hand, demand deposits, and short-

term investments with maturities of three months or less from the date of acquisition, that are liquid, readily convertible into cash and are

subject to minimum risk of price fluctuation.

(9) Other significant items as a basis for preparing financial statements

Accounting for consumption taxes

Transactions subject to consumption taxes are recorded as amounts exclusive of consumption taxes. Consumption taxes not

subject to deduction are treated as expenses for the current fiscal period.

Consolidated Balance Sheets

Among *1 and *2, the assets pledged as collateral are as follows.

(Thousands of yen)

Fiscal 2013(As of March 31, 2014)


Buildings and structures ¥ 682,781 ¥ 648,275

Other 0 0

Total ¥ 682,781 ¥ 648,275

Among *3 and *4, secured debts are as follows.

(Thousands of yen)



Long-term accounts payable—other (including payment in less than one year)

¥ 380,460 ¥ 295,920

5. Revaluation of land

The Company revaluated its land held for business use, in accordance with the Act on Revaluation of Land (Act No. 34 of March 31, 1998)

and Partial Revision of the Act on Revaluation of Land (Act No.19 of March 31, 2001) on March 31, 2002.

In accordance with Partial Revision of the Act on Revaluation of Land (Act No.24 of March 31, 1999), the Company recorded the amount

corresponding to taxes on the differences in land revaluation as Deferred tax liabilities for land revaluation in the liabilities segment and

posted the amount minus this as Revaluation reserve for land in the net assets segment.

Method of Revaluation

Revaluation was made by reasonably adjusting fixed asset-tax-assessment values in accordance with the provision of Article 2,

Paragraph 3 of the Ordinance for Enforcement of the Act on Revaluation of Land (Ordinance No.119 of March 31, 1998).

Date of Revaluation

March 31, 2002

(Thousands of yen)



Differences between the fair value of the revalued land at the end of fiscal period and its carrying amount after revaluation ¥ (1,207,249) ¥ (828,424)

(of which differences related to lease properties) (1,207,249) (828,424)

Consolidated Statements of Income

*1. Major items included in the selling, general and administrative expenses segment are as follows:

(Thousands of yen)

Fiscal 2013(April 1, 2013 to March 31, 2014)


Directors’ compensation ¥ 182,040 ¥ 168,190

Employees’ salaries and bonuses 314,567 351,483

Provision for bonuses 23,801 25,744

Entertainment expenses 26,857 31,689

Retirement benefit expenses 9,566 16,506


Business consignment expenses 91,176 90,573

*2. Details of gain on sales of fixed assets

(Thousands of yen)



Building and structures ¥ — ¥ 4,810

Land 170,864 —

Total ¥ 170,864 ¥ 4,810

*3. Compensation income

Fiscal 2013 (April 1, 2013 to March 31, 2014)

Compensation by a customer in relation to the removal of assets for lease in response to the customer’s request

*4. Details of loss on sales of fixed assets

(Thousands of yen)



Other ¥ 128 ¥ —

Total ¥ 128 ¥ —

*5. Details of loss related to retirement of fixed assets

(Thousands of yen)



Building and structures ¥ 6,793 ¥ 76,279

Other 513 206

Total ¥ 7,307 ¥ 76,485


Notes to Consolidated Financial Statements

*6. Impairment loss


In fiscal 2013, the Group recorded an impairment loss for the following assets.

Purpose Type Location

Lease properties BuildingsKoriyama City, Fukushima

Prefecture

The Group categorizes its assets into groups according to the minimum units that generate cash flows, which are by and large

independent from the cash flows of other assets or asset groups.

The Group decided to withdraw business in the abovementioned facilities. Consequently, as the Group was obliged to return the land to

its owner as a vacant lot after demolishing the buildings, etc., on it, it posted an impairment loss of ¥32,356 thousand, the carrying amount

of the said assets, as an extraordinary loss. The amount included ¥24,700 thousand that the Group posted due to a change in accounting

estimate relating to asset retirement obligations.

*7. Details of real estate acquisition tax and registration license tax

(Thousands of yen)



Real estate acquisition tax ¥ 7 ¥ —

Total ¥ 7 ¥ —

Consolidated Statements of Comprehensive Income

*Reclassification adjustments and tax effects relating to other comprehensive income

(Thousands of yen)



Unrealized gains on available-for-sale securities

Unrealized gains arising during the current year ¥ 1,894,032 ¥ 2,355,709

Reclassification adjustments (13,118) —

Before tax effect adjustment 1,880,913 2,355,709

Tax effects (644,026) (603,145)

Unrealized gains on available-for-sale securities 1,236,887 1,752,564

Land revaluation reserve

Tax effects (1,106,266) (129,317)

Total other comprehensive income ¥ 130,620 ¥ 1,623,246

Consolidated Statements of Changes in Shareholders’ Equity


1. Outstanding shares

Type of sharesNumber of shares at

beginning of current periodNumber of shares

increased during periodNumber of shares

decreased during periodNumber of shares at end of current period

Common stock 45,898,798 8,100,000 — 53,998,798

(Summary of Reasons for the Change)

The details of the number of shares increased during the current fiscal period are as follows:

Increase due to the issuance of new shares through public offering 7,200,000 shares

Increase due to the issuance of new shares through a third-party allotment 900,000 shares

2. Treasury stock





Common stock 923,145 710 900,217 23,638



Increase due to the buyback of shares of less than one unit 710 shares

The details of the number of shares decreased during the current fiscal period are as follows:

Decrease due to the disposal of treasury stock 900,000 shares

Decrease due to the sale of shares of less than one unit 217 shares

3. Subscription rights to shares

Not applicable

4. Dividends

(1) Dividend payment

Resolution Type of sharesTotal dividends

(thousands of yen)Dividend per share (yen)

Record date Effective date

Ordinary shareholders’ meeting on June 20, 2013 Common stock ¥ 359,805 ¥ 8.00 March 31, 2013 June 21, 2013

The Board Meeting on October 25, 2013 Common stock ¥ 377,828 ¥ 7.00 September 30, 2013 December 5, 2013

(2) Dividends whose record date is within the current fiscal period but are to be effective in the following fiscal period

ResolutionType of shares

Source of dividends

Total dividends (thousands of yen)

Dividend per share (yen)


Ordinary shareholders’ meeting on June 19, 2014 Common stock Retained earnings ¥ 377,826 ¥ 7.00 March 31, 2014 June 20, 2014


1. Outstanding shares





Common stock 53,998,798 — — 53,998,798

2. Treasury stock





Common stock 23,638 159 — 23,797





Increase due to the buyback of shares of less than one unit 159 shares

3. Subscription rights to shares

Not applicable

4. Dividends

(1) Dividend payment

Resolution Type of sharesTotal dividends

(thousands of yen)Dividend per share (yen)


Ordinary shareholders’ meeting on June 19, 2014 Common stock ¥ 377,826 ¥ 7.00 March 31, 2014 June 20, 2014

The Board Meeting on October 28, 2014 Common stock ¥ 377,825 ¥ 7.00 September 30, 2014 December 5, 2014

(2) Dividends whose record date is within the current fiscal period but are to be effective in the following fiscal period

ResolutionType of shares

Source of dividends

Total dividends (thousands of yen)

Dividend per share (yen)


Ordinary shareholders’ meeting on June 18, 2015 Common stock Retained earnings ¥ 431,800 ¥ 8.00 March 31, 2015 June 19, 2015

Consolidated Statements of Cash Flows

Reconciliation of cash and cash equivalents at the year-end and the accounts reported in the consolidated balance sheets

(Thousands of yen)





Lease Transactions

1. Finance lease transactions that do not transfer ownership

Finance lease transactions that do not transfer ownership and whose start date is March 31, 2008 or earlier are recorded according to the

accounting treatment similar to that used for ordinary lease transactions. However, the description is omitted since their importance is

minimal.

2. Operating lease transactions

Future minimum lease payment relating to non-cancelable operating lease transactions

(Lessor)

(Thousands of yen)



Less than one year ¥ 252,512 ¥ 1,849,418

One year or longer 767,703 8,943,525

Total ¥ 1,020,215 ¥ 10,792,944

Financial Instruments


1. Overview of financial instruments

(1) Policy on the handling of financial instruments

The Group limits its fund management activities to short-term deposits, etc., and raises funds through borrowings from financial

institutions and the issuance of bonds. The Group adheres to a policy under which derivatives are used only to hedge the fluctuation

risk of interest payable for some long-term debt, but not for speculative purposes.

(2) Details of financial instruments and risks and risk management

As trade notes and accounts receivable, which are operating receivables, are exposed to customer credit risks, the Group manages

account due dates by customer. Meanwhile, in the building lease business, its mainstay business, the Group receives the rent for the

following month in advance by the end of the preceding month from most of its customers, due to the nature of the business. It also

receives lease and guarantee deposits equivalent to a few months’ rent from its customers. Trade notes and accounts receivable, which

are operating receivables, are secured to this extent.

Investment securities consist mainly of listed stocks, which are exposed to the risk of market price fluctuation. These are stocks of

companies with which the Group has business relations, and the Board Meeting periodically receives a report on the fair value of

these stocks.

Trade accounts payable, which are operating debt, are all due within one year.

The Group issues bonds to raise funds mainly used for capital expenditure, and their maturity periods are five and seven years.

The Group raises funds through short-term borrowings mainly to use for business transactions and funds through long-term debt

(repayment periods range from five to 15 years) mainly to finance capital expenditure. In principle, the long-term debt has fixed interest

rates. However, as some long-term debt with variable interest rates is exposed to interest rate fluctuation risk, the Group uses a

derivative transaction (interest rate swap transaction) for each contract to hedge the fluctuation risk of interest payable for such long-

term debt. The assessment of the hedge effectiveness is omitted because the interest rate swap contracts fulfill the requirements for

the special accounting method. In using derivative transactions, the Group executes derivative transactions after obtaining approval

from the Board Meeting for each transaction in accordance with the internal approval procedures. In addition, it enters into derivative

contracts only with financial institutions in Japan with high credit ratings to mitigate possible credit risk.

(3) Supplementary explanation about the fair value, etc. of financial instruments

The contract amount, etc., of derivative transactions described in Notes to Derivative Transactions does not refer to market risk relating

to derivative transactions.

2. Fair value, etc., of financial instruments

Carrying amount recorded on the consolidated balance sheets, fair value, and their difference as of March 31, 2014 are as follows.

Financial instruments whose fair value is difficult to assess are not included in the following table. (Refer to Note 2.)

(Thousands of yen)

Carrying amount Fair value Difference

(1) Cash and cash equivalents ¥ 12,283,068 ¥ 12,283,068 ¥ —

(2) Notes and accounts receivable—trade 420,061 420,061 —

(3) Investment securities

Available-for-sale securities 9,207,339 9,207,339 —

Total assets ¥ 21,910,469 ¥ 21,910,469 ¥ —

(4) Accounts payable—trade ¥ 168,428 ¥ 168,428 ¥ —

(5) Short-term borrowings 2,500,000 2,500,000 —

(6) Bonds 22,000,000 22,077,975 77,975

(7) Long-term debt (including the current portion) 31,869,830 31,904,269 34,439

Total liabilities ¥ 56,538,258 ¥ 56,650,672 ¥ 112,414

(8) Derivatives transactions ¥ — ¥ — ¥ —



(Notes)

1. Method for calculating the fair value of financial instruments and information about securities and derivative transactions

(1) Cash and cash equivalents, and (2) Notes and accounts receivable—trade

Cash and cash equivalents and trade notes and accounts receivable are recorded at the carrying amount because the fair value

approximates the carrying amount, since they are settled within a short period.


The relevant market price is used to determine the fair value of these securities, and the share price on the financial instruments

exchange is used to determine the fair value of stocks. Regarding difference between the carrying amount and the acquisition cost of

other securities, please refer to Notes to Consolidated Financial Statements, etc. (Securities).

(4) Accounts payable—trade and (5) Short-term borrowings

Trade accounts payable and short-term borrowings are recorded at the carrying amount because the fair value approximates the

carrying amount, since they are settled within a short period.

(6) Bonds and (7) Long-term debt (including the current portion)

The fair value of bonds and long-term debt is calculated by discounting the sum of principal and interest using the estimated interest

rates payable for a new bond issue and new borrowing, respectively.

The fair value of long-term debt with variable interest rates is calculated by discounting the sum of principal and interest, which are

accounted for together with the interest rate swap, using interest rates reasonably estimated and possibly available for similar

borrowings, since long-term debt with variable interest rates are subject to the special accounting method.

(8) Derivatives transactions

Please refer to Notes to Derivative Transactions.

2. Financial instruments whose fair value is difficult to assess

Unlisted stocks (carrying amount ¥243,091 thousand) are not included in (3) Investment securities because it is difficult to assess their fair

value, since market prices are not available, and it is impossible to estimate the future cash flows.

The Group finds it is difficult to assess the fair value of lease deposits, which are operating receivables (carrying amount ¥2,272,727

thousand), and lease deposits from tenants, which are operating debt (carrying amount ¥6,134,248 thousand), because neither the

collection date nor the repayment date are fixed, and it is impossible to estimate the future cash flows.

3. Scheduled redemption amount of monetary claims after the consolidated settlement date

(Thousands of yen)

Less than one yearOne year to less than

five yearsFive years to less

than 10 years10 years or longer

Cash and cash equivalents ¥ 12,283,068 ¥ — ¥ — ¥ —

Notes and accounts receivable—trade ¥ 420,061 ¥ — ¥ — ¥ —

4. Scheduled repayment amount of bonds, long-term debt and other interest-bearing debt after the consolidated settlement date

(Thousands of yen)

Less than one year

One year to less than two years

Two years to less than three years

Three years to less than four years

Four years to less than five years

Five years or longer

Bonds ¥ — ¥ — ¥ 7,000,000 ¥ 5,000,000 ¥ 5,000,000 ¥ 5,000,000

Long-term debt 24,437,890 2,201,240 1,291,100 945,600 761,500 2,232,500

Other interest-bearing debt

Long-term accounts payable—other 84,540 84,540 84,540 84,540 42,300 —

Total ¥ 24,522,430 ¥ 2,285,780 ¥ 8,375,640 ¥ 6,030,140 ¥ 5,803,800 ¥ 7,232,500


1. Overview of financial instruments

(1) Policy on the handling of financial instruments

The Group limits its fund management activities to short-term deposits, etc., and raises funds through borrowings from financial

institutions and the issuance of bonds. The Group adheres to a policy under which derivatives are used only to hedge the fluctuation

risk of interest payable for some long-term debt, but not for speculative purposes.

(2) Details of financial instruments and risks and risk management

As trade notes and accounts receivable, which are operating receivables, are exposed to customer credit risks, the Group manages

account due dates by customer. Meanwhile, in the building lease business, its mainstay business, the Group receives the rent for the

following month in advance by the end of the preceding month from most of its customers, due to the nature of the business. It also

receives lease and guarantee deposits equivalent to a few months’ rent from its customers. Trade notes and accounts receivable, which

are operating receivables, are secured to this extent.

Investment securities consist mainly of listed stocks, which are exposed to the risk of market price fluctuation. These are stocks of

companies with which the Group has business relations, and the Board Meeting periodically receives a report on the fair value of

these stocks.

Trade accounts payable, which are operating debt, are all due within one year.

The Group issues bonds to raise funds mainly used for capital expenditure, and their maturity periods are five and seven years.

The Group raises funds through short-term borrowings mainly to use for business transactions and funds through long-term debt

(repayment periods range from five to 15 years) mainly to finance capital expenditure. In principle, the long-term debt has fixed

interest rates.

2. Fair value, etc. of financial instruments

Carrying amount recorded on the consolidated balance sheets, fair value, and their difference as of March 31, 2015 are as follows.

Financial instruments whose fair value is difficult to assess are not included in the following table. (Refer to Note 2.)

(Thousands of yen)

Carrying amount Fair value Difference

(1) Cash and cash equivalents ¥ 3,576,600 ¥ 3,576,600 ¥ —

(2) Notes and accounts receivable—trade 281,973 281,973 —


Available-for-sale securities 11,563,048 11,563,048 —

Total assets ¥ 15,421,622 ¥ 15,421,622 ¥ —

(4) Accounts payable—trade ¥ 11,375 ¥ 11,375 ¥ —

(5) Short-term borrowings 11,500,000 11,500,000 —

(6) Bonds 22,000,000 22,302,842 302,842

(7) Long-term debt (including the current portion) 17,490,490 17,596,094 105,604

Total liabilities ¥ 51,001,865 ¥ 51,410,312 ¥ 408,446

(Notes)

1. Method for calculating the fair value of financial instruments and information about securities

(1) Cash and cash equivalents, and (2) Notes and accounts receivable—trade

Cash and cash equivalents and trade notes and accounts receivable are recorded at the carrying amount because the fair value

approximates the carrying amount, since they are settled within a short period.


The relevant market price is used to determine the fair value of these securities, and the share price on the financial instruments

exchange is used to determine the fair value of stocks. Regarding difference between the carrying amount and the acquisition cost of

other securities, please refer to Notes to Consolidated Financial Statements, etc. (Securities).

(4) Accounts payable—trade and (5) Short-term borrowings

Trade accounts payable and short-term borrowings are recorded at the carrying amount because the fair value approximates the

carrying amount, since they are settled within a short period.



(6) Bonds and (7) Long-term debt (including the current portion)

The fair value of bonds and long-term debt is calculated by discounting the sum of principal and interest using estimated interest rates

payable for a new bond issue and new borrowing, respectively.

2. Financial instruments whose fair value is difficult to assess

Unlisted stocks (carrying amount ¥243,091 thousand) are not included in (3) Investment securities because it is difficult to assess their fair

value, since no market prices are available, and it is impossible to estimate the future cash flows.

The Group finds it is difficult to assess the fair value of lease deposits, which are operating receivables (carrying amount ¥2,180,077

thousand), and lease deposits from tenants, which are operating debt (carrying amount ¥6,483,013 thousand), because neither the

collection date nor the repayment date are fixed, and it is impossible to estimate the future cash flows.

3 Scheduled redemption amount of monetary claims after the consolidated settlement date(Thousands of yen)

Less than one yearOne year to less than

five yearsFive years to less

than 10 years10 years or longer

Cash and cash equivalents ¥ 3,576,600 ¥ — ¥ — ¥ —

Notes and accounts receivable—trade ¥ 281,973 ¥ — ¥ — ¥ —

4. Scheduled repayment amount of bonds, long-term debt and other interest-bearing debt after the consolidated settlement date

(Thousands of yen)

Less than one year

One year to less than two years

Two years to less than three years

Three years to less than four years

Four years to less than five years

Five years or longer

Bonds ¥ — ¥ 7,000,000 ¥ 5,000,000 ¥ 5,000,000 ¥ 5,000,000 ¥ —

Long-term debt 3,884,140 3,048,000 2,687,500 2,518,400 1,820,900 3,531,550

Other interest-bearing debt

Long-term accounts payable—other 84,540 84,540 84,540 42,300 — —

Total ¥ 3,968,680 ¥ 10,132,540 ¥ 7,772,040 ¥ 7,560,700 ¥ 6,820,900 ¥ 3,531,550

Securities


1. Securities with fair value

(Thousands of yen)

Available-for-sale securities Carrying amount Acquisition cost Difference

Carrying amount exceed acquisition cost

Equity ¥ 8,626,114 ¥ 3,875,878 ¥ 4,750,236

Subtotal ¥ 8,626,114 ¥ 3,875,878 ¥ 4,750,236

Carrying amount does not exceed acquisition cost

Equity ¥ 581,224 ¥ 707,640 ¥ (126,415)

Subtotal ¥ 581,224 ¥ 707,640 ¥ (126,415)

Total ¥ 9,207,339 ¥ 4,583,518 ¥ 4,623,820

2. Available-for-sale securities sold during fiscal 2013 (April 1, 2013 to March 31, 2014)

(Thousands of yen)

Classification Sale amount Gain on sale Loss on sale

Equity ¥ 24,503 ¥ 13,118 ¥ —

Debenture — — —

Other — — —

Total ¥ 24,503 ¥ 13,118 ¥ —

3. Securities written down during fiscal 2013 (April 1, 2013 to March 31, 2014)

In fiscal 2013, the Group did not write down any securities.

Meanwhile, in accordance with the internal rules, the Group writes down securities when their fair value declines more than 30% below

their acquisition cost. In addition, it writes down securities with no fair value to the extent deemed necessary when their real price declines

more than 30% below their acquisition cost.


1. Securities with fair value

(Thousands of yen)

Available-for-sale securities Carrying amount Acquisition cost Difference

Carrying amount exceed acquisition cost

Equity ¥ 11,292,708 ¥ 4,271,273 ¥ 7,021,435

Subtotal ¥ 11,292,708 ¥ 4,271,273 ¥ 7,021,435

Carrying amount does not exceed acquisition cost

Equity ¥ 270,340 ¥ 312,245 ¥ (41,905)

Subtotal ¥ 270,340 ¥ 312,245 ¥ (41,905)

Total ¥ 11,563,048 ¥ 4,583,518 ¥ 6,979,529

2. Available-for-sale securities sold during fiscal 2014 (April 1, 2014 to March 31, 2015)

Not applicable

3. Securities written down during fiscal 2014 (April 1, 2014 to March 31, 2015)

In fiscal 2014, the Group did not write down any securities.

Meanwhile, in accordance with the internal rules, the Group writes down securities when their fair value declines more than 30% below

their acquisition cost. In addition, it writes down securities with no fair value to the extent deemed necessary when their real price declines

more than 30% below their acquisition cost.

Derivative Transactions


Hedge accounting is applied to all derivative transactions.

Derivative transactions to which hedge accounting is applied are as follows:

(Thousands of yen)

Method of hedge accounting

Type, etc. of derivative transaction

Main hedged itemsContract amount, etc.

Fair valueOne year or longer

Special accounting of interest rate swap

Interest rate swap transactionsFixed rate of interest payable and variable rate of interest

receivable

Long-term debt ¥ 20,700,000 ¥ — (Note)

(Note) As interest rate swaps subject to the special accounting method are accounted for together with long-term debt, which are hedged

items, their fair value is included in long-term debt.


Not applicable



Retirement Benefits


1. Summary of retirement benefit plan

The Company has adopted a defined benefit corporate pension plan.

Meanwhile, the Company has also prepared a retirement lump-sum payment plan, under which it pays designated retirement allowance

to retired persons and persons with two years or longer of service who retire before the retirement age.

Under the Company’s defined benefit corporate pension plan and retirement lump-sum payment plan, retirement benefit obligations and

retirement benefit expenses are calculated using the simplified method.

2. Defined benefit plan

(1) Reconciliation of net defined benefit liability at the beginning of the current fiscal period and at the end of the current fiscal period under

the system using the simplified method

(Thousands of yen)

Net defined benefit liability at beginning of current period ¥ 51,534

Retirement benefit expenses 9,566

Retirement benefit payment (120)

Contribution to the plan (4,189)

Net defined benefit liability at end of current period ¥ 56,792

(2) Reconciliation of balance of retirement benefit obligations and pension assets at the end of the current period and net defined liability

and net defined benefit asset on the consolidated balance sheets

(Thousands of yen)

Retirement benefit obligation under accumulation plan ¥ 110,314

Pension assets (53,522)

¥ 56,792

Retirement benefit obligation under non-accumulation plan —

Net defined liability (asset) on consolidated balance sheet ¥ 56,792

Net defined benefit liability 56,792


(3) Retirement benefit cost

(Thousands of yen)

Retirement benefit expenses calculated using the simplified method ¥ 9,566


1. Summary of retirement benefit plan

The Company has adopted a defined benefit corporate pension plan.

Meanwhile, the Company has also prepared a retirement lump-sum payment plan, under which it pays designated retirement allowance

to retired persons and persons with two years or longer of service who retire before the retirement age.

Under the Company’s defined benefit corporate pension plan and retirement lump-sum payment plan, retirement benefit obligations and

retirement benefit expenses are calculated using the simplified method.

2. Defined benefit plan

(1) Reconciliation of net defined benefit liability at the beginning of the current fiscal period and at the end of the current fiscal period under

the system using the simplified method

(Thousands of yen)

Net defined benefit liability at beginning of current period ¥ 56,792

Retirement benefit expenses 16,506

Retirement benefit payment (7,831)

Contribution to the plan (4,549)

Net defined benefit liability at end of current period ¥ 60,918

(2) Reconciliation of balance of retirement benefit obligations and pension assets at the end of the current period and net defined liability

and net defined benefit asset on the consolidated balance sheets

(Thousands of yen)

Retirement benefit obligation under accumulation plan ¥ 119,865

Pension assets (58,946)

¥ 60,918

Retirement benefit obligation under non-accumulation plan —


Net defined benefit liability 60,918


(3) Retirement benefit cost

(Thousands of yen)

Retirement benefit expenses calculated using the simplified method ¥ 16,506

Stock Options, etc.

Not applicable



Tax Effect Accounting

1. Details of deferred tax assets and liabilities by major causes

(Thousands of yen)



(Deferred tax assets)

Depreciation ¥ 35,380 ¥ 29,523

Impairment loss (buildings and structures) 254,115 190,262

Impairment loss (long-term prepaid expenses) 613,577 561,110

Net defined benefit liability 20,218 19,615


Loss on valuation of investment securities 29,149 2,186

Enterprise taxes payable 33,172 89,968

Golf club membership 24,633 22,280

Other 20,373 20,446

Subtotal deferred tax assets ¥ 1,091,523 ¥ 994,082

Valuation allowance (53,783) (24,467)

Total deferred tax assets ¥ 1,037,740 ¥ 969,615

(Deferred tax liabilities)

Reserve for advanced depreciation of fixed assets ¥ (65,386) ¥ (59,141)

Unrealized gains on securities (1,620,240) (2,223,385)

Total deferred tax liabilities (1,685,627) (2,282,527)

Net deferred tax liabilities (647,886) (1,312,912)

(Deferred tax assets for land revaluation)

Land revaluation reserve 1,714,045 2,468,325

Valuation allowance (1,373,840) (2,392,387)

Total deferred tax assets for land revaluation ¥ 340,204 ¥ 75,937

(Deferred tax liabilities for land revaluation)

Land revaluation reserve ¥ (1,412,996) ¥ (1,278,047)

Total deferred tax liabilities for land revaluation (1,412,996) (1,278,047)

Net deferred tax liabilities for land revaluation (1,072,791) (1,202,109)

(Note) Net deferred tax assets or net deferred tax liabilities for fiscal 2013 and fiscal 2014 are included in the following items in the

consolidated balance sheets.

(Thousands of yen)



Current assets—Deferred tax assets ¥ 43,560 ¥ 100,357

Fixed assets—Deferred tax assets ¥ 9,286 ¥ 9,286

Long-term liabilities—Deferred tax liabilities ¥ (700,734) ¥ (1,422,556)

2. Details of main items that caused the difference between the statutory effective tax rate and the corporate tax rate after

applying tax effect accounting

(Thousands of yen)



Statutory effective tax rate

(Adjustments) — 35.6%

Entertainment expenses and other items that are permanently non-deductible — 0.3%

Dividends and other items that are permanently non-taxable — (0.6)%

Directors’ bonuses — 0.3%

Per capita inhabitants tax — 0.1%

Reduction of deferred tax assets and deferred tax liabilities at the end of the period due to the tax rate change — 2.1%

Other — (0.1)%

Corporate tax rate after tax effect accounting — 37.7%

(Note) Since the difference between the statutory effective tax rate and the corporate tax rate after applying tax effect accounting was less

than 5/100th of the statutory effective tax rate in fiscal 2013, notes were omitted.

3. Recalculation of deferred tax assets and deferred tax liabilities due to a change in income tax rates

Following the promulgation of the Act for Partial Amendment of the Income Tax Act and Act on Partial Revision of the Local Tax Act on

March 31, 2015, the statutory effective tax rate used to calculate deferred tax assets and deferred tax liabilities for the current consolidated

fiscal period (provided that it is limited to those to be settled in the consolidated fiscal period starting on April 1, 2015) has been changed

from the previous consolidated fiscal period’s rate of 35.6% to 33.0% for those which are anticipated to be collected or paid during the

period between April 1, 2015 to March 31, 2016 and 32.2% for those which are anticipated to be collected or paid on and after April 1,

2016.

Accordingly, deferred tax liabilities (after deducting deferred tax assets) and deferred tax liabilities for land revaluation (after deducting

deferred tax assets for land revaluation) decreased by ¥142,656 thousand and ¥126,930 thousand, respectively, while deferred income

taxes, valuation difference on available-for-sale securities, and revaluation reserve for land increased by ¥92,111 thousand, ¥234,767

thousand, and ¥126,930 thousand, respectively.

Business Combination

Not applicable.

Asset Retirement Obligations

1. Asset retirement obligations recorded on the consolidated balance sheets are as follows:

In fiscal 2013, the Company posted asset retirement obligations of \24,700 thousand in relation to its obligation to restore the business

facilities site in Koriyama City to its original condition due to the cancellation of the real estate rental contract. Since the Company

completed the retirement of the said assets in fiscal 2014, it reversed all asset retirement obligations.

2. Asset retirement obligations for those other than recorded on the consolidated balance sheets

The Group assumes liabilities to restore the site to its original condition at the time of evacuation as provided in the real estate lease

contract for the leased land. However, it is impossible to make a reasonable estimate on asset retirement obligations, since the use period

of the leased assets related to the said liabilities is not clear and the Group does not currently have any plans to evacuate in the future.

Consequently, the Group does not recognize asset retirement obligations to match the said liabilities.



Real Estate for Lease


The Group owns office buildings and datacenter buildings for lease in Osaka and other regions. In fiscal 2013, it earned ¥6,079,483

thousand in the building lease business (rent revenue is recorded as revenue from operations, while rent expenses are recorded as cost of

revenue from operations).

The carrying amount of real estate for lease, major changes during fiscal 2013, fair value on the consolidated settlement date, and the

method for calculating the fair value is as follows:

(Thousands of yen)

Carrying amount Fair value on the consolidated settlement

dateBalance at beginning of

current fiscal periodChanges during period

Balance at end of current fiscal period

¥ 92,791,504 ¥ (3,001,484) ¥ 89,790,020 ¥ 133,333,000

(Notes) 1. The carrying amount represents the amount that is gained after deducting accumulated depreciation from the acquisition cost.

2. Property and equipment relating to the head office of the Company are not included in the above table.

3. Among changes in the carrying amount during fiscal 2013, the main factors for the increase include the acquisition of facilities

(¥439,756 thousand), and the main factors for the decrease include depreciation (¥2,557,870 thousand) and sale of facilities

(¥865,384 thousand).

4. The fair value on the consolidated settlement date is calculated by an external real estate appraiser mainly based on the real

estate appraisal standards.


The Group owns office buildings and datacenter buildings for lease in Osaka and other regions. In fiscal 2014, it earned ¥6,736,695

thousand in the building lease business (rent revenue is recorded as revenue from operations, while rent expenses are recorded as cost of

revenue from operations).

The carrying amount of real estate for lease, major changes during fiscal 2014, fair value on the consolidated settlement date, and the

method for calculating the fair value is as follows:

(Thousands of yen)

Carrying amount Fair value on the consolidated settlement

dateBalance at beginning of

current fiscal periodChanges during period

Balance at end of current fiscal period

¥ 89,790,020 ¥ 6,777,149 ¥ 96,567,169 ¥ 144,269,000

(Notes) 1. The carrying amount represents an amount that is gained after deducting accumulated depreciation from the acquisition cost.

2. Property and equipment relating to the head office of the Company are not included in the above table.

3. Among changes in the carrying amount during fiscal 2014, the main factors for the increase include the acquisition of facilities

(¥9,536,972 thousand), and the main factors for the decrease include depreciation (¥2,685,314 thousand).

4. The fair value on the consolidated settlement date is calculated by an external real estate appraiser mainly based on the real

estate appraisal standards.

Segment Information, etc.

(Segment Information)

1. Summary of reportable segments

Keihanshin Building’s reportable segments are components of the Company for which separate financial information is available. These

segments are subject to regular reviews by the Board of Directors to decide the distribution of managerial resources and evaluate

business results.

Since the Company is mainly engaged in the building lease business, it owns real estate for lease in Osaka Prefecture and other regions.

Therefore, the Company’s reportable segment is the Building Lease Business.

The Building Lease Business primarily consists of leasing of land and buildings, maintenance and management of buildings and

machinery, and janitorial services.

2. Methods to calculate the amount of revenue from operations, profit or loss, assets, liabilities, and other items by reportable segment

Methods of accounting treatment of reported business segments are almost the same as those stated in Significant Items for the

Preparation of Consolidated Financial Statements.

Incomes by reportable segment are calculated based on operating income.

3. Information on the amount of revenue from operations, profit or loss, assets, liabilities, and other items by reportable segment


(Thousands of yen)

Reportable segment Other

(Note 1)Total

Adjustment(Note 2)

Amounts posted in the consolidated

statements of income(Note 3)

Building lease

Revenue from operations

Revenue from operations to outside customers ¥ 13,600,774 ¥ 430,323 ¥ 14,031,098 ¥ — ¥ 14,031,098

Inter-segment sales or transfer — — — — —

Total ¥ 13,600,774 ¥ 430,323 ¥ 14,031,098 ¥ — ¥ 14,031,098

Segment income ¥ 4,893,334 ¥ 35,614 ¥ 4,928,948 ¥ (465,322) ¥ 4,463,625

Segment assets ¥ 92,918,718 ¥ 182,576 ¥ 93,101,295 ¥ 21,914,344 ¥ 115,015,640

Other items

Depreciation and amortization ¥ 2,594,838 ¥ 773 ¥ 2,595,612 ¥ 16,789 ¥ 2,612,401

Impairment loss ¥ 32,356 ¥ — ¥ 32,356 ¥ — ¥ 32,356

Increase in property and equipment and intangible assets ¥ 451,880 ¥ 531 ¥ 452,412 ¥ 19,594 ¥ 472,007

(Notes) 1. The “Other” segment is not included in the reportable segments and includes the Construction Contracting Business.

2. Adjustments of ¥(465,322) thousand for segment income are corporate expenses that are not allocated to any reportable

segment. Corporate expenses mainly refer to general and administrative expenses that are not attributable to any reportable

segment. Adjustments of ¥21,914,344 thousand for segment assets are corporate assets that are not allocated to any

reportable segment. Corporate assets mainly consist of surplus funds (deposits), long-term investment funds (investment

securities), and assets of the Administration Division.

3. Segment income is adjusted operating income stated in the consolidated statements of income.




(Thousands of yen)

Reportable segment Other

(Note 1)Total

Adjustment(Note 2)

Amounts posted in the consolidated

statements of income(Note 3)

Building lease

Revenue from operations

Revenue from operations to outside customers ¥ 14,571,744 ¥ 280,953 ¥ 14,852,697 ¥ — ¥ 14,852,697

Inter-segment sales or transfer — — — — —

Total ¥ 14,571,744 ¥ 280,953 ¥ 14,852,697 ¥ — ¥ 14,852,697

Segment income ¥ 5,451,228 ¥ 6,084 ¥ 5,457,313 ¥ (490,519) ¥ 4,966,794

Segment assets ¥ 99,644,905 ¥ 12,505 ¥ 99,657,410 ¥ 15,585,756 ¥ 115,243,167

Other items

Depreciation and amortization ¥ 2,721,683 ¥ 688 ¥ 2,722,372 ¥ 16,179 ¥ 2,738,551

Increase in property and equipment and intangible assets ¥ 9,557,020 ¥ 819 ¥ 9,557,839 ¥ 14,717 ¥ 9,572,557

(Notes) 1. The “Other” segment is not included in the reportable segments and includes the Construction Contracting Business.

2. Adjustments of ¥(490,519) thousand for segment income are corporate expenses that are not allocated to any reportable

segment. Corporate expenses mainly refer to general and administrative expenses that are not attributable to any reportable

segment. Adjustments of ¥15,585,756 thousand for segment assets are corporate assets that are not allocated to any

reportable segment. Corporate assets mainly consist of surplus funds (deposits), long-term investment funds (investment

securities), and assets of the Administration Division.

3. Segment income is adjusted operating income stated in the consolidated statements of income.

(Related Information)


1. Information by product and service

The description is omitted since the same information is disclosed as segment information.

2. Information by area

(1) Revenue from operations

There is no applicable information because the Company only has customers and sales in Japan.

(2) Property and equipment

There is no applicable information because the Company only has property and equipment in Japan.

3. Information by major customer

(Thousands of yen)

Name of customerRevenue from

operationsRelated segment

Japan Racing Association ¥ 3,587,197 Building lease business

SoftBank Mobile Corp. ¥ 1,652,029 Building lease business

Kansai Urban Banking Corporation ¥ 1,697,992 Building lease business


1. Information by product and service

The description is omitted since the same information is disclosed as segment information.

2. Information by area

(1) Revenue from operations

There is no applicable information because the Company only has customers and sales in Japan.

(2) Property and equipment

There is no applicable information because the Company only has property and equipment in Japan.

3. Information by major customer

(Thousands of yen)

Name of customerRevenue from

operationsRelated segment

Japan Racing Association ¥ 3,557,094 Building lease business

SoftBank Mobile Corp. ¥ 1,764,919 Building lease business

Kansai Urban Banking Corporation ¥ 1,652,029 Building lease business

(Information on Impairment Loss for Fixed Assets by Reportable Segment)


The description is omitted because the same information is disclosed as segment information.


Not applicable

(Information on Amortization of Goodwill and Balance of Unamortized Goodwill by Reportable Segment)

Not applicable

(Information on Gain on Negative Goodwill by Reportable Segment)

Not applicable

(Information on Related Parties)

Not applicable



Per Share Information

The basis for the calculation of net assets per share and net income per share is as follows. Information on net income per share after full

dilution is omitted because there is no potential common stock.

ItemFiscal 2013

(As of March 31, 2014)Fiscal 2014

(As of March 31, 2015)

(1) Net assets per share (yen) ¥ 893.93 ¥ 960.64

(Basis for calculation)

Total net assets in the consolidated balance sheets (thousands of yen) ¥ 48,250,187 ¥ 51,850,515

Net assets attributable to common stock (thousands of yen) ¥ 48,250,187 ¥ 51,850,515

Number of shares of common stock issued and outstanding (thousand shares) 53,998 53,998

Number of shares of treasury stock 23 23

Number of shares of common stock used to calculate net assets per share (thousand shares) 53,975 53,975

ItemFiscal 2013

(April 1, 2013 to March 31, 2014)Fiscal 2014

(April 1, 2014 to March 31, 2015)

(2) Net income per share (yen) ¥ 46.08 ¥ 50.63

(Basis for calculation)

Net income in the consolidated statements of income (thousands of yen) ¥ 2,369,458 ¥ 2,732,830

Net income attributable to common stock (thousands of yen) ¥ 2,369,458 ¥ 2,732,830

Average number of shares of common stock during the period (thousand shares) 51,416 53,975

Significant Subsequent Events

In accordance with a resolution by the Board of Directors on May 8, 2015, the Company issued an unsecured straight bond as follows.

The 5th unsecured straight bond (10-year bond)

Total amount ¥5,000 million

Coupon rate 0.865% per annum

Paid amount ¥100 per face value of ¥100

Last payment date June 4, 2015

Redemption date June 4, 2025

Method of redemption Bullet redemption at maturity

Coupon date June 4 and December 4, each year

Fund utilization Repayment of loans payable


Independent Auditor’s ReportNotes to Consolidated Financial Statements

Foreign investors(13.9%)

Individuals/Others(18.3%)

Financial institutions(29.1%)

Securities companies(0.9%)

Other institutions(37.8%)

1,000 or more(35.2%)

500 or more(16.1%)

Less than 1(1.5%)

1 or more(5.8%)

100 or more(28.5%)

10 or more(6.3%)

50 or more(3.5%)

5 or more(3.1%)

By Type of Shareholder

By Number of Shares Owned (Thousands)

Company Name Keihanshin Building Co., Ltd.

Address Head Office2-14 Kawaramachi 4-chome, Chuo-ku, Osaka-City 541-0048, JapanTel: +81-6-6202-7331 Fax: +81-6-6202-7329

Tokyo Office2-2 Kanda-Jimbocho, Chiyoda-ku, Tokyo 101-0051, JapanTel: +81-3-5212-8311 Fax: +81-3-3556-6611

URL http://www.keihanshin.co.jp/english/

Founded December 24, 1948

Business Lines •Lease of office buildings, datacenter buildings, commercial buildings and logistics warehouses and off-track betting parlors (WINS).

•Buildingmaintenance•Subcontracting construction work for lease facilities

Capital ¥9,827 million

Number of Employees 39 (as of March 31, 2015)

Directors and Corporate Auditors

ChairmanPresidentSenior Managing DirectorDirectorDirectorDirectorDirectorDirectorAudit & Supervisory Board Member (Standing)Audit & Supervisory Board MemberAudit & Supervisory Board Member

Takeharu NagataKenjiro NakanoYasutaka InoueShinji YamamotoMasumi SaitoMasakazu TaniguchiShigeru NishidaJyunichi YatsuoKenji KounoTomoyuki NishideHiromichi Miyauchi

(as of June 19, 2015)

Corporate Data

Fiscal Year From April 1 to March 31 of the following year

Annual General Meeting of Shareholders

Latter part of June of each year

Record Date for Divident Payment

Year-end dividend: March 31Interim dividend: September 30Other publicly announced date, if any

Trading Unit 100 shares

Stock Transfer Agent Sumitomo Mitsui Trust Bank, Limited4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Agent’s Office Sumitomo Mitsui Trust Bank, Limited. Stock Transfer Agency Dept.5-33, Kitahama 4-chome, Chuo-ku, Osaka

Stock Listing First section of the Tokyo Stock Exchange

Information for Shareholders

Number of common stock authorized to issue 80,000,000 shares

Number of common stock issued and outstanding 53,998,798 shares

Number of shareholders 6,950

Stock Data (as of March 31, 2015) Breakdown of Shareholders (as of March 31, 2015)

NameNumber of shares

owned (thousand)

Stockholdingratio (%)

GINSEN Co., Ltd. 6,440 11.9

Japan Trustee Services Bank, Ltd.(trust account) 3,303 6.1

Sumitomo Mitsui Banking Corporation 2,133 4.0

Daikin Industries, Ltd. 1,568 2.9

Kanehide Yoneyama 1,500 2.8

KINDEN CORPORATION 1,393 2.6

KAJIMA CORPORATION 1,376 2.5

The Mie Bank, Ltd. 1,287 2.4

The Hyakujushi Bank, Ltd. 891 1.7

The Ashikaga Bank, Ltd. 862 1.6

(Note) The Company holds 23,797 shares of treasury stock. The stockholding ratio is calculated by subtracting treasury stock.

Major Shareholders (as of March 31, 2015)

HistoryOur company was founded in 1948, soon after the end of World War II, for the purpose of constructing the Hanshin Racetrack for the development

of horse racing, backed by the strong desire of major horse owners in the Kansai area and the local business community for the revival of a horse

racing track in the Hanshin area, a plan that was also supported by the Ministry of Agriculture and Forestry (now the Ministry of Agriculture, Forestry

and Fisheries). The Company, therefore, was named Keihanshin Horse Racing Co., Ltd. when it was first incorporated. After many difficulties, Hanshin

Racetrack was completed in Nigawa, Takarazuka City, Hyogo Prefecture in 1949. It was first leased to the Ministry of Agriculture and Forestry, but

later was transferred to the newly established Japan Racing Association in 1955.

We took this opportunity to change our corporate name to Keihanshin Real Estate Co., Ltd., and entered the business of general real estate. In

addition to the leasing of off-track betting parlors (WINS), which had been one of our core businesses since our incorporation, we launched the office

building leasing business in 1962 by constructing our first office building, the Kawaramachi Building on Midosuji street in Chuo-ku, Osaka.

Today, we are developing by concentrating management resources on the business of leasing commercial space. Therefore, to clarify our future

direction, changed our corporate name to Keihanshin Building on October 1, 2011.

History of the Company History of business development

1948 Keihanshin Horse Racing Co., Ltd. was founded.

1949 Listed on the Osaka Securities Exchange.

The Hanshin Racetrack (located in Takarazuka City, Hyogo Pref.) completed.

WINS WINS Umeda B Building and WINS Namba completed in Kita and Minami wards in Osaka.

1951 WINS WINS Kyoto Building completed in Kyoto.

1953 WINS WINS Kobe B Building completed in Kobe.

1955 The Hanshin Race Track was sold to the Japan Racing Association (JRA).

1956 The corporate name was changed to Keihanshin Real Estate Co., Ltd.

1962 Office Our first office building, Kawaramachi Building, completed in Osaka.

1964 Office Azuchimachi Building completed in Osaka.

1969 Office Sakasegawa Building completed in Takarazuka City.

1982 WINS WINS Umeda A Building completed in Osaka.

1983 Logistics Hirakata Warehouse completed in Hirakata City.

1988 DC Our first datacenter building, Shinmachi 1 Building, completed in Osaka.

1989 Logistics Toyahama Warehouse completed in Kobe.

1990 WINS WINS Kyoto Building completed (rebuilt) in Kyoto.

1991 DC

WINS

Shin Esaka Building completed in Suita City, Osaka.

WINS Kobe B and C Buildings completed (rebuilt) in Kobe.

1994 Logistics Asahikawa Shopping Facility completed in Asahikawa City, Hokkaido.

1996 Logistics Shijo Kawaramachi Building in Kyoto acquired.

1998 50th anniversary of the Company’s foundation Logistics Nagano Shopping Facility in Nagano City acquired.

1999 DC Toyosaki Building completed in Osaka.

2000 DC Nakatsu Building completed in Osaka.

2001 Office Yodoyabashi Building completed in Osaka.

2002 DC

WINS

Shinmachi 2 Building completed in Osaka.

WINS Namba completed (rebuilt) in Osaka.

2003 Listed on the First Section of the Tokyo Stock Exchange.

2007 DC

Office

Kitahorie Building in Osaka acquired.

Midosuji Building completed in Osaka.

2009 Office Onarimon Building completed in Minato Ward,Tokyo.

2010 WINS WINS Umeda B Building completed (rebuilt) in Osaka.

2011 Corporate name changed to the present one.

2012 DC Keihanshin Nishishinsaibashi Building completed in Osaka.

2014 Establishment of the Tokyo Office. Office Fuchu Building in Fuchu acquired.

2015 Office Keihanshin Yoyogi-koen Building in Shibuya Ward, Tokyo acquired.

Office BuildingsOffice Datacenter BuildingsDC WINS BuildingsWINS Commercial Buildings and Logistics WarehousesLogistics


Corporate/Stock Information

Printed in Japan

2-14 Kawaramachi 4-chome, Chuo-ku, Osaka City 541-0048, JapanTel: +81-6-6202-7331 Fax: +81-6-6202-7329URL: http://www.keihanshin.co.jp/english/

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