Stronger Portfolio, Promising Future Report 2019.pdf · 14 Hotel Business 16 Corporate Governance 8...

Annual R

eport 2019 U

NIZO

Holdings C

ompany, Lim

ited

A vegetable-based ink has beenused, containing less than 1%petroleum-based solvents toprevent atmospheric pollutionby minimizing emissions ofvolatile organic compounds.

UNIZO Holdings Company, Limited

2-10-9, Hatchobori, Chuo-ku, Tokyo 104-0032, Japan https://www.unizo-hd.co.jp/en/

Printed in Japan

Annual Report 2019UNIZO Holdings Company, Limited

Stronger Portfolio, Promising Future


As its corporate philosophy,

the UNIZO Group strives to be a company that

1. creates value and richness together with all stakeholders;

2. earns the trust and meets expectations of customers,

and continues to be a chosen partner; and

3. contributes to society and the environment.

Our Group (the UNIZO Group) will

focus on growth via our two pillars of

the Real Estate Business and the Hotel Business

Cautionary Statement regarding Forward-Looking StatementsThis annual report contains certain forward-looking statements with respect to UNIZO Holdings Company, Limited’s financial position, results of operations, and business. Such statements are based on analyses and determi-nations regarding information available to management at the time this report was prepared and involve risks and uncertainties that may cause actual results to differ materially from forecasts. These risks and uncertainties include, but are not limited to, changes in operating conditions. Information regarding companies and entities other than the Company and the Group is drawn from publicly available data. Accordingly, the Company does not guarantee the accuracy of this information.

Contents

2 Corporate Philosophy, Basic Management Policy, and Vision

4 Financial Summary

6 President’s Message

10 Fourth Medium-Term Management Plan

12 Review of Operations

12 Real Estate Business

14 Hotel Business

16 Corporate Governance

18 CSR Activities

19 Directors, Audit & Supervisory Board Members, and Executive Officers

20 Financial Section

20 Management’s Discussion and Analysis

24 Consolidated Balance Sheet

26 Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

27 Consolidated Statement of Changes in Net Assets

29 Consolidated Statement of Cash Flows

30 Notes to Consolidated Financial Statements

47 Independent Auditor’s Report

48 Corporate Information

49 Investor Information

As the business environment has made it

difficult to expand assets via new investments,

and because for the fiscal year ended March 31,

2019, the UNIZO Group achieved its numerical

target for net income for the last fiscal year of

the Third Medium-Term Management Plan

one year ahead of schedule, the Group formulated

the new three-year Fourth Medium-Term

Management Plan STRONGER FOOTHOLD 2021,

Strengthening the Management Structure.

In the Plan, aiming toward growth and

advancement globally, the UNIZO Group

will strengthen its management structure as

a basic policy. Also, the Group will manage

its portfolio mainly through capital recycling, and

unless there is a change in the business

environment, for the time being, the Group

will not raise capital via new-share issuance

by public offering and assets will be acquired

within the extent of cash inflows from

investing activities.

Fourth Medium-Term Management Plan

STRONGER FOOTHOLD 2021, Strengthening the Management Structure

Annual Report 2019 1

2 Annual Report 2017

Corporate Philosophy

The UNIZO Group strives to be a company that

1 Creates value and richness together

with all stakeholders

2 Earns the trust and meets expectations

of customers, and continues to be a chosen partner

3 Contributes to society and

the environment


1. Build asset portfolio with strong risk

resistance and high profitability

2. Sustainable income improvement

3. NOI yield*1 +1.0% improvement or greater

4. Maintain equity ratio above 20%

Aiming toward Growth and Advancement globally, the UNIZO

Group will strengthen its Management Structure

Portfolio will be managed mainly through capital recycling, and

unless there is a change in the business environment, for the time

being, no capital raising via new-share issuance by public offering

and assets to be acquired within extent of cash inflows from

investing activities

*1 NOI yield = Operating income before depreciation and amortization ÷ Weighted average book value for commercial real estate (calculation basis: rental office buildings and other properties for lease, self-operated hotels, and other assets).

Vision

Basic Policy


Millions of yenThousand of US

dollars*1

2015 2016 2017 2018 2019 2019

For the fiscal year ended March 31

Revenue from operations ¥ 27,841 ¥ 33,163 ¥ 39,586 ¥ 52,462 ¥ 56,053 $ 505,027

Operating income 8,987 11,381 13,802 17,570 17,622 158,771

Ordinary income 7,514 9,276 10,497 11,500 11,796 106,279

Net income attributable to owners of the parent company 4,318 7,015 6,621 8,488 11,903 107,243

Increase in property and equipment, and intangible assets 114,304 82,245 144,149 137,163 18,812 169,492

Depreciation and amortization 4,915 6,866 8,207 10,776 11,714 105,541

EBITDA*2 13,902 18,248 22,009 28,347 29,336 264,312

Cash flows from operating activities 11,175 15,724 5,006 27,238 12,562 113,181

Cash flows from investing activities (113,399) (73,720) (130,651) (127,884) 105,307 948,797

Cash flows from financing activities 103,216 73,671 144,196 108,317 (67,799) (610,856)

At fiscal year-end

Total assets 391,757 467,562 633,866 738,467 693,552 6,248,779

Total net assets 52,883 55,008 76,486 86,903 113,160 1,019,551

Interest-bearing debt 314,964 386,238 530,583 620,880 554,234 4,993,548

Amounts per share (yen, US dollars)

Net income ¥ 244.59 ¥ 353.71 ¥ 292.25 ¥ 313.24 ¥ 356.56 $ 3.21

Net assets 2,654.39 2,762.05 3,208.13 3,039.54 3,306.72 29.79

Dividends 65.00 70.00 75.00 80.00 85.00 0.76

Key indicators

Operating margin (%) 32.3 34.3 34.9 33.5 31.4

Return on assets (ROA)*3 (%) 2.3 2.2 2.0 1.8 1.6

Return on equity (ROE)*4 (%) 10.0 13.0 10.1 10.4 11.9

Equity ratio*5 (%) 13.4 11.7 12.0 11.7 16.3

Net D/E ratio*6 (times) 5.9 6.7 6.4 6.6 3.8

Unrealized gains*7 (Millions of yen, Thousands of US dollars) 82,628 136,119 163,779 177,324 220,907*8 1,990,332*8

Payout ratio (%) 26.6 19.8 25.7 25.5 23.8

Number of employees 238 268 316 366 386

*1 US dollar amounts are the above presented Japanese yen amounts converted at the rate of ¥110.99=US$1.00, the exchange rate prevailing on March 31, 2019*2 EBITDA = Operating income + Depreciation and amortization*3 ROA = (Operating income + Interest and dividend income + Gain on investments in partnerships – Interest expenses) ÷ Average total assets between beginning and end of

the period*4 ROE = Net income ÷ Average total net assets between beginning and end of the period*5 Equity ratio = Total net assets ÷ Total assets*6 Net D/E ratio = (Interest-bearing debt – Cash and deposits) ÷ Total net assets*7 Unrealized gains = Difference between book value and appraised value for commercial real estate as of fiscal year-end (calculation basis: rental office buildings and other

properties for lease, self-operated hotels, and other assets)*8 Values for properties held by the Group as of April 30, 2019, calculated using book values and appraised values as of March 31, 2019

UNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal years ended March 31

In the fiscal year ended March 31, 2018, the UNIZO Group changed revenue recognition standards. Figures for the fiscal year ended March 31, 2017, and for earlier fiscal years, have been retrospectively adjusted and reflect the change in standards.From the fiscal year ended March 31, 2019, deferred tax assets are presented in the investments and other assets section of the balance sheet, and deferred tax liabilities are presented in the non-current liabilities section of the balance sheet. Figures for the fiscal year ended March 31, 2018 have been retrospectively adjusted.

Financial Summary


56,053

0

15,000

30,000

45,000

60,000

15.3 16.3 17.3 18.3 19.3

Revenue from operations

(Millions of yen)

17,622

11,796

0

5,000

10,000

15,000

20,000

15.3 16.3 17.3 18.3 19.3

Operating income Ordinary income

Operating income / Ordinary income

(Millions of yen)

（%）

11,90311.9

0

4.0

8.0

12.0

16.0

0

4,000

8,000

12,000

16,000

15.3 16.3 17.3 18.3 19.3

Net income attributable to owners of the parent company / ROE

(Millions of yen) (%)

Net income attributable to owners of the parent company (left scale) ROE (right scale)

（%）

113,16016.3

0

6.0

12.0

18.0

24.0

0

40,000

80,000

120,000

160,000

15.3 16.3 17.3 18.3 19.3

Total net assets / Equity ratio


Total net assets (left scale) Equity ratio (right scale)

0

220,907

85,995

134,91260,000

120,000

180,000

240,000

15.3 16.3 17.3 18.3 19.4*

Unrealized gains on business-use real estate

(Millions of yen)

Unrealized gains on office buildings for lease Unrealized gains on hotels and other assets

* Values for properties held by the Group as of April 30, 2019, calculated using book values and appraised values as of March 31, 2019

356.56

0

100

200

300

400

15.3 16.3 17.3 18.3 19.3

Net income per share

(Yen) （%）

85

23.8

0

40

60

80

100

0

30.0

20 15.0

45.0

60.0

75.0

15.3 16.3 17.3 18.3 19.3

Dividends per share / Payout ratio

(Yen) (%)

Cash dividends per share (left scale) Payout ratio (right scale)

693,552

0

150,000

300,000

450,000

600,000

750,000

15.3 16.3 17.3 18.3 19.3

Total assets

(Millions of yen)


President’s Message

Aiming toward growth and advancement

globally, the UNIZO Group will

strengthen its management structure

as a basic policy.

Tetsuji KosakiPresident & CEO



Business Environment and PerformanceEven though weakness has appeared in some export sectors, the Japanese

economy continued to recover gradually. For the Japanese economy going

forward, even though weakness has appeared in some export sectors, the

gradual economic recovery is likely to continue. Factors that warrant atten-

tion include effects of trade friction between China and the United States,

increasing uncertainty about the Chinese economy, progress in negotiations

over the British vote to leave the European Union, and effects of negotiations

over the Trade Agreement on Goods (TAG) between the United States and

Japan.

In the United States, economic growth continued centered on consumer

spending and capital expenditure. For the US economy going forward, even if

economic growth centered on consumer spending and capital expenditure

continues, growth may slow. Factors that warrant attention include trends in

short and long-term interest rates, effects of trade friction between China

and the United States, developments in the United Kingdom after leaving the

European Union, and the evolution of the 2020 US Presidential election.

Results for the Fiscal Year Ended March 31, 2019Looking at consolidated earnings, revenue from operations increased 6.8%

year on year, operating income increased 0.3%, ordinary income increased

2.6%, and net income attributable to owners of the parent increased 40.2%.

The increase of 40.2% included gains and losses on sales of property and

equipment, and intangible assets recorded during the period in step with the

Executive SummaryAs the business environment has made it difficult to expand assets via

new investments, and because for the fiscal year ended March 31, 2019,

the UNIZO Group achieved its numerical target for net income for the

last fiscal year of the Third Medium-Term Management Plan one year

ahead of schedule, we formulated the new three-year Fourth Medium-

Term Management Plan STRONGER FOOTHOLD 2021, Strengthening

the Management Structure.

In the Plan, aiming toward growth and advancement globally, we will

strengthen our management structure as a basic policy.

Going forward we will continue to advance in a unified effort to raise

corporate value and be a corporate group that can sustain growth.


sale of sixteen properties in Japan, four properties overseas, and two hotels

as part of capital recycling efforts.

Formulation of the Fourth Medium-Term Management PlanIn the Fourth Medium-Term Management Plan STRONGER FOOTHOLD 2021,

aiming toward growth and advancement globally, we will strengthen our

management structure as a basic policy. Also, we will manage our portfolio

mainly through capital recycling, and unless there is a change in the business

environment, for the time being, we will not raise capital via new-share issu-

ance by public offering and assets will be acquired within the extent of cash

inflows from investing activities.

In the Real Estate Business, in Japan and overseas, we will thoroughly

implement efficiency improvements to lower expenditures and strengthen

the income base through existing tenant sales and new tenant sales. In Japan,

the Business will work together with UNIZO Hotel for general sales, and over-

seas the Business will strengthen leasing and improve property management

abilities.

In the Hotel Business, we will also thoroughly implement efficiency

improvements to lower expenditures. Through the introduction of the new

Hotel Membership Program (launched February 1, 2019) and policies for each

hotel according to its individual characteristics, the Business will improve

profitability. Furthermore, the Business will thoroughly develop and publicize

the three hotel brands—HOTEL UNIZO, UNIZO INN, and UNIZO INN Express—

and offer superior service and the convenience of outstanding locations to a

global customer base. To do so, the Business will make intensive efforts in

ensuring smooth openings for new hotel locations, managing hotels under

management contract appropriately, and developing staff.

Shareholder ReturnsWe aim to enhance corporate and shareholder value while staying focused on

changes in the business climate, earnings performance, and financial condi-

tions with a view to bolstering business development and our operating foun-

dation. Our basic policy on shareholder returns is to consistently provide

stable dividends, while balancing this with robust shareholders’ equity. We


believe this balance will lead to the maximization of returns to our

shareholders.

Based on this policy and on our projected future business development,

cash dividends for the fiscal year ended March 31, 2019 were ¥85 per share

(including an interim dividend of ¥40 per share), constituting a ¥5 increase

year on year.

Furthermore, in the fiscal year ending March 31, 2020, we are planning to

pay ¥85 per share (including an interim dividend of ¥40 per share).

Outlook for the Fiscal Year Ending March 31, 2020We expect revenue and income to decline due to property sales as part of

capital recycling efforts in the fiscal year ending March 31, 2020. However,

through these strategies, we will clearly identify earnings potential and risks

and endeavor to enhance profitability.

For the fiscal year ending March 31, 2020, we forecast consolidated revenue

from operations of ¥45,300 million, a 19.2% decrease from the fiscal year

ended March 31, 2019; consolidated operating income of ¥13,500 million, a

23.4% decrease from the fiscal year ended March 31, 2019; and consolidated

ordinary income of ¥8,800 million, a 25.4% decrease from the fiscal year

ended March 31, 2019. As real estate market conditions have a large impact on

property sales prices, at present extraordinary income (loss) is difficult to

forecast, and forecasts for net income attributable to owners of the parent

company and net income per share are not disclosed. Forecasts will be dis-

closed promptly when making such forecasts becomes possible.

Going forward we will continue unified efforts to raise corporate and share-

holder value, not only to meet but to exceed shareholder expectations. We

look forward to the continued support and encouragement for our efforts

from shareholders.

June 2019


12

Build asset portfolio with strong risk resistance and high profitabilityAmount of property sales: about ¥200 billion

(Including over ¥100 billion sold during fiscal year ended March 31, 2019)

Sustainable income improvementRevenue and income expected to decline due to property sales in fiscal year ending March 31,

2020. Plan to achieve revenue and income growth without assuming asset expansion in

two-year period covering fiscal years ending March 31, 2021 - March 31, 2022

• By fiscal year ending March 31, 2022, plan to increase ordinary income by about 20% vs. fiscal

year ending March 31, 2020 through higher revenue and cost efficiency improvements

• Reduce expenditures via efficiency improvements—Efficiency target: Over ¥500 million

reduction by fiscal year ending March 31, 2022

(Billions of yen)

Fiscal year ended

March 31, 2019 Results

Fiscal year endingMarch 31, 2020 Target



Change (%) Change (%) Change (%)Vs. fiscal year ending March 31, 2020 (%)

Revenue from operations 56.0 45.3 (19.2) 45.7 +0.9 47.1 +3.1 +4.0

Operating income 17.6 13.5 (23.4) 14.5 +7.4 15.4 +6.2 +14.1

Ordinary income 11.7 8.8 (25.4) 9.8 +11.4 10.4 +6.1 +18.2

Net income* 11.9

(Assumptions) 1. JPY interest rates : flat over 3 years 2. USD interest rates: flat over 3 years 3. FX: flat at ¥110/$ over 3 years

* As real estate market conditions have a large impact on property sales prices, at present extraordinary income (loss) is difficult to forecast, and numerical targets for net income have not been set

Aiming toward Growth and Advancement globally, the UNIZO Group will strengthen its

Management Structure

Portfolio will be managed mainly through capital recycling, and unless there is a change in the

business environment, for the time being, no capital raising via new-share issuance by public

offering and assets to be acquired within extent of cash inflows from investing activities

Vision & Numerical Targets

Basic Policy

Fourth Medium-Term Management Plan

STRONGER FOOTHOLD 2021Strengthening the Management Structure

Fiscal Years Ending March 31, 2020 – March 31, 2022


3

4

Real Estate BusinessRevenue and income expected to decline over 20% on one-time basis in fiscal year ending March 31, 2020 due to effects of property sales;

expect revenue and income to grow from fiscal year ending March 31, 2021 onward

Japan

Thoroughly implement efficiency improvements to lower

expenditures

Strengthen income base

Overseas


expenditures

Strengthen leasing

Improve property management abilities

(Billions of yen)

Fiscal year ended






Revenue from operations 43.3 33.5 (22.7) 33.4 (0.3) 34.1 +2.1 +1.8

Operating income 16.4 12.6 (23.2) 12.6 0.0 12.8 +1.6 +1.6

Note: Figures for segment revenue from operations and operating income are before intersegment eliminations and adjustments

Hotel BusinessRevenue and income expected to decline about 10% on one-time basis in fiscal year ending March 31, 2020 due to effects of

property sales; expect to achieve over 70% increase in income over 2 years from fiscal year ending March 31, 2021


expenditures

Improve profitability through introduction of new Hotel

Membership Program

Improve profitability for each hotel according to its indi-

vidual characteristics

Manage hotels under management contract appropriately

Publicize three-brand strategy

Develop staff

Ensure smooth openings for new hotel locations

(Billions of yen)

Fiscal year ended






Revenue from operations 12.9 12.0 (7.5) 12.5 +4.2 13.2 +5.6 +10.0

Operating income 1.9 1.7 (14.2) 2.5 +47.1 3.0 +20.0 +76.5

Note: Figures for segment revenue from operations and operating income are before intersegment eliminations and adjustments

NOI yield* +1.0% improvement or greater (fiscal year ended March 31, 2019: 4.7%)Improve yield on asset portfolio via capital recycling

Improve income via higher revenue and cost efficiency improvements

* NOI yield = Operating income before depreciation and amortization ÷ Weighted average book value for commercial real estate (calculation basis: rental office buildings and other properties for lease, self-operated hotels, and other assets)

Maintain equity ratio above 20% (fiscal year ended March 31, 2019: 16.3%)Maintain equity ratio stably above 20%

• Improve portfolio to steadily build more income (including extraordinary income [loss] booked due to

property sales), which will strengthen financial base and raise equity ratio stably above 20%


Real Estate BusinessThe Real Estate Business is the UNIZO Group’s first pillar, accounting for 77% and 89% of

revenue from operations and operating income, respectively. In Japan and overseas, the Group

will thoroughly implement efficiency improvements to lower expenditures and strengthen the

income base through existing tenant sales and new tenant sales. In Japan, the Business will work

together with UNIZO Hotel for general sales, and overseas the Business will strengthen leasing

and improve property management abilities.

77.0%

Share of revenue from operations

Rentable area of UNIZO properties

(Thousand m2)

513

232

280

0

200

400

600

800

17.3 18.316.315.314.313.3 19.4

Average vacancy rate of all UNIZO properties

(%)

5.1

0

2

4

6

8

17.3 18.316.315.314.313.3 19.3

Japan US

* In the fiscal year ended March 31, 2018, the UNIZO Group changed revenue recognition standards. Figures for the fiscal year ended March 31, 2017, and for earlier fiscal years, have been retrospectively adjusted and reflect the change in standards.

0

5,000

10,000

15,000

20,00016,405

17.3 18.316.315.3 19.3

Operating income*

(Millions of yen)

Revenue from operations*

(Millions of yen)

0

15,000

30,000

45,000 43,363

17.3 18.316.315.3 19.3

Review of Operations

Overview of Market Conditions

In the office building market of Japan, the market appears to

be gradually nearing the peak as vacancy rates in Tokyo’s five

central wards have fallen to below the 2% level, and the upward

trend in rents in some areas, including central Tokyo, contin-

ues. In the office building market in the United States, the

market appears to have mostly peaked as vacancy rates con-

tinue to fall in leading cities while rents, however, are flat in

some cities.

Overview of the Fiscal Year Ended March 31, 2019

In the Real Estate Business, in Japan and overseas, even

though properties acquired in the fiscal years ended March 31,

2018 and March 31, 2019 made contributions and intensive

efforts were made in leasing vacant space and increasing rent,

due to property sales as part of capital recycling efforts,

revenue from operations increased 2.1% to ¥43,363 million

from ¥42,458 million in the previous fiscal year, and operating

income decreased 1.0% to ¥16,405 million from ¥16,565 million

in the previous fiscal year, an increase in revenue and decrease

in income.

Strategies and Outlook for the Fiscal Year Ending March 31, 2020

In the Real Estate Business, in Japan and overseas, the

Group will thoroughly implement efficiency improvements

to lower expenditures and strengthen the income base

through existing tenant sales and new tenant sales. In Japan,

the Business will work together with UNIZO Hotel for gen-

eral sales, and overseas the Business will strengthen leasing

and improve property management abilities.


*1 The names of properties above are as of April 30, 2019*2 Rentable area is rounded down to the nearest whole number.

Company-Owned Properties (as of April 30, 2019)

Name*1 LocationRentable

Area (m2)*2

Rentable Area

(sqft)*2

Date of Completion

1 UNIZO Yaesu Building Chuo Ward, Tokyo 22,692 244,254 Oct. 1967

2 UNIZO Yaesu 2-Chome Building Chuo Ward, Tokyo 2,421 26,063 Dec. 1993

3 UNIZO Edobashi Building Chuo Ward, Tokyo 5,695 61,308 Dec. 1986

4 UNIZO Kodemmacho Building Chuo Ward, Tokyo 3,707 39,907 Apr. 1983

5 UNIZO Suitengu Building Chuo Ward, Tokyo 3,374 36,327 Oct. 1992

6 UNIZO Horidome 2-Chome Building

Chuo Ward, Tokyo 9,977 107,395 Nov. 1966

7 UNIZO Kakigaracho 1-Chome Building

Chuo Ward, Tokyo 1,619 17,433 Aug. 1991

8 UNIZO Nihonbashihoncho 1-Chome Building

Chuo Ward, Tokyo 1,562 16,818 Feb. 1999

9 UNIZO Nihonbashi Tomizawacho Building

Chuo Ward, Tokyo 2,303 24,792 Apr. 1988

10 UNIZO Nihonbashihoncho 3-Chome Building


11 UNIZO Hatchobori Building Chuo Ward, Tokyo 4,819 51,881 Mar. 1993

12 UNIZO Kakigaracho Kitajima Building

Chuo Ward, Tokyo 1,837 19,781 Nov. 1992

13 UNIZO Ningyocho 3-Chome Building


14 UNIZO Nihonbashi Tomizawacho Yowa Building

Chuo Ward, Tokyo 1,490 16,044 Mar. 1986

15 UNIZO Ningyocho Forest Building

Chuo Ward, Tokyo 2,395 25,787 Jan. 1989

16 UNIZO Nihonbashi Hisamatsucho Building

Chuo Ward, Tokyo 1,668 17,954 June 1988

17 UNIZO Ningyocho First Building Chuo Ward, Tokyo 3,586 38,602 May 1993

18 UNIZO Higashinihonbashi Building


19 UNIZO Horidomecho 1-Chome Building


20 Daisan Sakurabashi Building Chuo Ward, Tokyo 8,855 95,316 Sept. 1992

21 UNIZO Higashinihonbashi 1-Chome Building

Chuo Ward, Tokyo 2,175 23,413 Sept. 1987

22 UNIZO Shinkawa Eitaidori Building

Chuo Ward, Tokyo 4,031 43,397 Sept. 1987

23 UNIZO Iwamotocho 2-Chome Building

Chiyoda Ward, Tokyo 1,935 20,834 Sept. 1991

24 Resona Kudan Building Chiyoda Ward, Tokyo 3,202 34,467 Aug. 1984

25 UNIZO Iwamotocho 3-Chome Building

Chiyoda Ward, Tokyo 4,037 43,455 Apr. 1983

26 UNIZO Ochanomizu Building Chiyoda Ward, Tokyo 1,878 20,216 Sept. 1988

27 UNIZO Iwamotocho Building Chiyoda Ward, Tokyo 2,877 30,972 Oct. 1986

28 Kojimachi-odori Building Chiyoda Ward, Tokyo 15,015 161,624 Jan. 2012

29 UNIZO Higashikanda 1-Chome Building

Chiyoda Ward, Tokyo 5,474 58,928 Jan. 1994

30 UNIZO Kandaogawamachi 3-Chome Building

Chiyoda Ward, Tokyo 2,023 21,781 Jan. 2010

31 UNIZO Kudankita 1-Chome Building

Chiyoda Ward, Tokyo 1,748 18,816 Feb. 1993

32 UNIZO Kandanishi Fukudacho Building


33 UNIZO Iwamotocho Sakae Building

Chiyoda Ward, Tokyo 577 6,220 Aug. 1992

34 UNIZO Suidobashi Building Chiyoda Ward, Tokyo 1,958 21,084 Aug. 1992

35 UNIZO Kandakajicho 3-Chome Building


36 UNIZO Uchikanda 1-Chome Building


37 UNIZO Iwamotocho 3-Chome Building South Annex

Chiyoda Ward, Tokyo 1,556 16,751 July 1987

38 UNIZO Higashikanda 3-Chome Building

Chiyoda Ward, Tokyo 1,389 14,957 Oct. 1988

Name*1 LocationRentable

Area (m2)*2

Rentable Area

(sqft)*2

Date of Completion

39 UNIZO Kandasudacho 2-Chome Building

Chiyoda Ward, Tokyo 1,154 12,422 Mar. 1993

40 UNIZO Iwamoto-cho 1-Chome Building

Chiyoda Ward, Tokyo 1,728 18,608 Apr. 1983

41 UNIZO Shibadaimon 2-Chome Building

Minato Ward, Tokyo 4,844 52,148 Apr. 1987

42 Resona Shimbashi Building Minato Ward, Tokyo 2,850 30,680 Sept. 1978

43 UNIZO Shiba 4-Chome Building Minato Ward, Tokyo 4,635 49,895 July 1990

44 UNIZO Nishishimbashi 3-Chome Building

Minato Ward, Tokyo 2,696 29,023 Feb. 1986

45 UNIZO Hamamatsucho 1-Chome Building

Minato Ward, Tokyo 857 9,229 July 1986

46 UNIZO Oi 4-Chome Building Shinagawa Ward, Tokyo

1,940 20,882 May 1993

47 UNIZO Takadanobaba Kanzan Building

Shinjuku Ward, Tokyo 3,177 34,205 July 1993

48 UNIZO Takadanobaba 4-Chome Building

Shinjuku Ward, Tokyo 3,026 32,572 Mar. 1988

49 UNIZO Kagurazaka Building Shinjuku Ward, Tokyo 2,366 25,468 Mar. 1992

50 UNIZO Takadanobaba Building Shinjuku Ward, Tokyo 1,144 12,318 Oct. 1991

51 UNIZO ebisu422 Shibuya Ward, Tokyo 1,217 13,109 Mar. 1993

52 Yanase Shibuya Building Shibuya Ward, Tokyo 4,223 45,458 Oct. 1988

53 UNIZO Hatsudai Building Shibuya Ward, Tokyo 1,343 14,465 Feb. 1992

54 UNIZO Hongo 4-Chome Building Bunkyo Ward, Tokyo 2,723 29,310 Oct. 1987

55 UNIZO Koishikawa Building Bunkyo Ward, Tokyo 2,162 23,278 Oct. 1991

56 UNIZO Koishikawa Urban Building

Bunkyo Ward, Tokyo 2,410 25,942 July 1987

57 UNIZO Hongo 1-Chome Building Bunkyo Ward, Tokyo 4,467 48,092 Dec. 1987

58 UNIZO Hongo 2-Chome Building Bunkyo Ward, Tokyo 1,091 11,753 Feb. 1991

59 UNIZO Myogadani Building Bunkyo Ward, Tokyo 7,460 80,303 July 1972/Feb. 1979

60 Ueno Suzunoya Honten Building Taito Ward, Tokyo 6,800 73,197 Mar. 1990

61 UNIZO Ueno 1-Chome Building Taito Ward, Tokyo 2,417 26,018 Aug. 1981

62 UNIZO Suehirocho Building Taito Ward, Tokyo 2,509 27,013 Mar. 1984

63 UNIZO Asakusabashi 4-Chome Building

Taito Ward, Tokyo 2,478 26,673 Sept. 1986

64 UNIZO Kitaueno 2-Chome Building

Taito Ward, Tokyo 3,551 38,229 May 1992

65 UNIZO Nakaokachimachi Building

Taito Ward, Tokyo 1,189 12,799 Dec. 1988

66 UNIZO Kamata 5-Chome Building

Ota Ward, Tokyo 6,642 71,504 May 2010

67 UNIZO Tachikawa Building Tachikawa City, Tokyo 4,879 52,524 Dec. 1992

68 UNIZO Wako Building Wako, Saitama Pref. 2,113 22,745 Oct. 1995

69 40 West 25th Street Manhattan, New York City, USA

12,655 136,226 1913

70 24-28 West 25th Street Manhattan, New York City, USA

12,371 133,170 1911

71 685 Third Avenue Manhattan, New York City, USA

60,478 650,988 1960/1975

72 1201 Connecticut Avenue Washington D.C., USA 17,435 187,678 1940

73 820 First Street Washington D.C., USA 27,103 291,741 1990

74 1100 First Street Washington D.C., USA 32,420 348,967 2009

75 1030 15th Street Washington D.C., USA 30,783 331,348 1964/2008

76 425 Third Street Washington D.C., USA 21,992 236,727 2007

77 1325 G Street Washington D.C., USA 28,351 305,173 1969

78 1341 G Street Washington D.C., USA 12,110 130,352 1903

79 1111 19th Street Washington D.C., USA 25,119 270,381 1979


0

10

20

30

40

0

2,000

4,000

6,000

8,000

8

24

327,884

5,422

17.3 18.316.315.313.3 14.3 19.4

Number of UNIZO hotels and rooms

(Rooms) (Hotels)

Rooms in operation (left scale) Rooms including those in planning and development stage (left scale) Hotels in operation (right scale) Hotels in planning and development stage (right scale)

* In the fiscal year ended March 31, 2018, the UNIZO Group changed revenue recognition standards. Figures for the fiscal year ended March 31, 2017, and for earlier fiscal years, have been retrospectively adjusted and reflect the change in standards.

0

500

1,000

1,500

2,000

2,5001,981

17.3 18.316.315.3 19.3

Operating income*

(Millions of yen)

0

4,000

8,000

12,000

16,00012,974

17.3 18.316.315.3 19.3

Revenue from operations*

(Millions of yen)

23.0%

Hotel BusinessThe Hotel Business is the Group’s second pillar, accounting for 23% and 11% of revenue from

operations and operating income, respectively. The Group will thoroughly implement efficiency

improvements to lower expenditures. Through the introduction of the new Hotel Membership

Program (launched February 1, 2019) and policies for each hotel according to its individual

characteristics, the Business will improve profitability. Furthermore, the Business will thoroughly

develop and publicize the three hotel brands—HOTEL UNIZO, UNIZO INN, and UNIZO INN Express—

and offer superior service and the convenience of outstanding locations to a global customer base.

To do so, the Business will make intensive efforts in ensuring smooth openings for new hotel locations,

managing hotels under management contract appropriately, and developing staff.

Overview of Market Conditions

In the hotel sector in Japan, the pace of growth in number of

hotel guests from abroad has somewhat slowed, and Japanese

guest numbers are on a downward trend. However, new or

expanded hotel capacity continues to come on line at a

high level.

Overview of the Fiscal Year Ended March 31, 2019

In the Hotel Business, even though occupancy rates and

revenue per room at existing hotels weakened slightly, hotels

opened in the fiscal years ended March 31, 2018 and March 31,

2019 made contributions to revenue; revenue from operations

increased 27.0% to ¥12,974 million from ¥10,219 million in the

previous fiscal year. Also, even though preparation costs for

new hotel openings were incurred and hotels opened in the

fiscal year ended March 31, 2019 were not yet profitable, hotels

opened in the fiscal year ended March 31, 2018 made full-year

contributions; operating income increased 8.4% to ¥1,981

million from ¥1,828 million in the previous fiscal year.

Strategies and Outlook for the Fiscal Year Ending March 31, 2020

In the Hotel Business, the Group will thoroughly implement

efficiency improvements to lower expenditures. Through the

introduction of the new Hotel Membership Program (launched

February 1, 2019) and policies for each hotel according to its

individual characteristics, the Business will improve profit-

ability. Furthermore, the Business will thoroughly develop and

publicize the three hotel brands—HOTEL UNIZO, UNIZO INN,

and UNIZO INN Express—and offer superior service and the

convenience of outstanding locations to a global customer base.

To do so, the Business will make intensive efforts in ensuring

smooth openings for new hotel locations, managing hotels

under management contract appropriately, and developing staff.

Review of Operations

Share of revenue from operations


Nationwide expansion in outstanding locations in the central areas of major cities and regional hub cities(as of April 30, 2019)

UNIZO Group’s Hotels (as of April 30, 2019)

: Planned hotels*1 Opening period and number of rooms subject to change*2 Provisional name*3 ON/OP: Own and operate; OP: Operate*4 No longer operated by UNIZO Group as of check-out on June 25, 2019*5 No longer operated by UNIZO Group as of check-out on June 1, 2019

Brand Name Location Opened Rooms Type*3

1 HOTEL UNIZO Ginza-itchome Chuo Ward, Tokyo Jan. 2015 305 ON/OP

2 HOTEL UNIZO Ginza-nanachome Chuo Ward, Tokyo June 2016 224 ON/OP

3 HOTEL UNIZO Shimbashi Minato Ward, Tokyo Oct. 1978 233 ON/OP

4 HOTEL UNIZO Shibuya Shibuya Ward, Tokyo May 2010 186 ON/OP

5 HOTEL UNIZO Yokohamaeki-West Nishi Ward, Yokohama Nov. 2018 156 ON/OP

6 HOTEL UNIZO Kyoto Shijo Karasuma Shimogyo Ward, Kyoto Oct. 2014 281 ON/OP

7 HOTEL UNIZO Osaka Umeda Kita Ward, Osaka Apr. 2018 220 ON/OP

8 HOTEL UNIZO Osaka Yodoyabashi Chuo Ward, Osaka Apr. 2009 333 ON/OP

9 HOTEL UNIZO Osaka Shinsaibashi Chuo Ward, Osaka Jan. 2018 186 ON/OP

10 HOTEL UNIZO Fukuoka Tenjin Chuo Ward, Fukuoka Oct. 2007 159 ON/OP

11 HOTEL UNIZO Hakataeki Hakataguchi Hakata Ward, Fukuoka Sept. 2018 217 ON/OP

12 HOTEL UNIZO Nagoya Ekimae Nakamura Ward, Nagoya June 2019*1 210*1 ON/OP

13 HOTEL UNIZO Kyoto Karasuma Oike*2 Nakagyo Ward, Kyoto Winter 2020-2021*1 317*1 ON/OP


1 UNIZO INN Sapporo Chuo Ward, Sapporo Jan. 2016 224 ON/OP

2 UNIZO INN Sendai*4 Aoba Ward, Sendai Dec. 1973 250 OP

3 UNIZO INN Asakusa Taito Ward, Tokyo July 1992 121 ON/OP

4 UNIZO INN Kandaeki-West Chiyoda Ward, Tokyo Aug. 2017 219 ON/OP

5 UNIZO INN Hatchobori Chuo Ward, Tokyo July 2003 148 ON/OP

6 UNIZO INN Kanazawa Hyakumangoku Dori Oyamamachi, Kanazawa Nov. 2017 220 ON/OP

7 UNIZO INN Nagoya Sakae Naka Ward, Nagoya May 2014 252 ON/OP

8 UNIZO INN Kyoto Kawaramachi Shijo Nakagyo Ward, Kyoto July 2017 242 ON/OP

9 UNIZO INN Shin-Osaka Yodogawa Ward, Osaka Mar. 2018 225 ON/OP

10 UNIZO INN Kobe Sannomiya Chuo Ward, Kobe Jan. 2018 199 ON/OP

11 UNIZO INN Hiroshima*5 Naka Ward, Hiroshima Sept. 1985 171 ON/OP

12 UNIZO INN Osaka Kitahama Chuo Ward, Osaka July 2019*1 291*1 ON/OP

13 UNIZO INN Hiroshima Ekimae*2 Minami Ward, Hiroshima Spring 2020*1 250*1 ON/OP


1 UNIZO INN Express Morioka Moriokaeki-Nishi Dori, Morioka Apr. 2018 259 ON/OP

2 UNIZO INN Express Kanazawa Ekimae Horikawa Shinmachi, Kanazawa Apr. 2019 392 ON/OP

3 UNIZO INN Express Kagoshima Tenmonkan Higashi Sengokucho, Kagoshima June 2019*1 295*1 ON/OP

4 UNIZO INN Express Hakodate Ekimae Wakamatsucho, Hakodate Winter 2019-2020*1 277*1 ON/OP

5 UNIZO INN Express Utsunomiya*2 Shukugo,Utsunomiya Autumn 2020*1 319*1 ON/OP

6 UNIZO INN Express Osaka Minami Honmachi*2 Chuo Ward, Osaka Spring 2021*1 503*1 ON/OP

*4

*5



Basic StanceThe UNIZO Group is committed to establishing and developing a corporate governance structure and system that garners the trust

of society. Every effort is channeled toward improving the soundness, transparency, and efficiency of management to secure the

confidence of all stakeholders and to enhance corporate value on a sustainable basis.

Overview of Corporate Governance Structure and SystemFor its corporate governance system, the Company has put

in place an Audit & Supervisory Board, appointed five

outside Directors (Independent Officers) and appointed

three outside Audit & Supervisory Board members

(Independent Officers) that have a high level of indepen-

dence. Through mutual collaboration among the Audit &

Supervisory Board, the internal auditing division, and the

accounting auditor, every effort is being made to establish

a framework that is capable of reinforcing the supervisory

function over management. The Company has also put in

place a Nomination Committee and a Compensation

Committee as discretionary advisory bodies to the Board

of Directors.

Board of DirectorsThe Board of Directors comprises fourteen members (includ-

ing five outside directors). Based on its governing rules and

regulations, the Board of Directors meets once a month in

principle. The Board serves as the decision-making body for

important matters relating to the execution of the Company’s

business activities and supervises the status of business exe-

cution by directors.

Audit & Supervisory Board and Board MembersThe Audit & Supervisory Board comprises five members

(including three outside members). Based on its governing rules

and regulations, the Audit & Supervisory Board meets once

a month in principle. As part of their mainstay activities,

Audit & Supervisory Board members attend meetings of the

Board of Directors14 Directors

(incl. 5 outside Directors)

President & CEO

Nomination Committee (discretionary)

Compensation Committee (discretionary)

Divisions / departments

Management Committee

Executive Officers24 Executive Officers

(execution of operations)

Legal counsel

Audit & Supervisory Board5 Members

(incl. 3 outside Members)

Business Audit Department(internal auditing division)

Accounting auditor(auditing firm)

General Meeting of Shareholders

Group Companies

• Management guidance• Oversight

• Prior consultation• After-the-fact reporting• Various consultations

Appointment

Advisory

Advisory

Audit

Audit report

Internal audits

Internal audits

Direction

Oversight Coordination Coordination

Appointment Appointment

Basic Policy

1 Respect the rights of shareholders and secure equality for all shareholders.

2 Work in appropriate cooperation with stakeholders, including shareholders, in consideration of their gain.

3 Secure transparency by the appropriate disclosure of company information.

4 Properly execute the roles and responsibilities of the Board of Directors and the Audit & Supervisory Board.

5 Maintain a constructive dialogue with shareholders.

Advisory

Coordination

Consultations

Accounting audits

Corporate Governance


Board of Directors and put forward their opinions;

exchange opinions with the President & CEO; monitor the

business execution process; peruse important documents,

including internal memos and requests for approval; conduct

site visits of subsid iary companies; and supervise the indepen-

dence of the accounting auditor and audit important mate-

rials, including financial reports, business reports, and

records of key transactions.

Furthermore, the Audit & Supervisory Board members

constantly exchange information with the Business Audit

Department and the accounting auditor and maintain

close mutual coordination with them including receiving

regular audit reports from them.

Executive OfficersThrough an executive officer system, the Company is

working to strengthen its governance system via separa-

tion of management decision-making and supervisory

functions from the execution of business activities while at

the same time clarifying the authority and responsibilities

of executive officers. Executive officers are charged with

executing business in their respective areas in accordance

with the policies and other stipulations determined by the

Board of Directors.

Management CommitteeThe Management Committee has been established as a con-

sultative entity to support the President. The Management

Committee is made up of executive officers, including the

Chairman of the Board and the President, and in principle

meets once a week to deliberate on important matters relating

to the execution of business activities. Reports on operations

and other matters of importance are also presented during

committee meetings.

Internal Auditing DivisionThe Company has put in place internal audit operating

guidelines and established the Business Audit Department

as an entity in charge of internal audits. Within this frame-

work, internal audits are conducted for the Company and

the Group as a whole.

The Business Audit Department undertakes internal

audits in accordance with business audit plans it formu-

lates for each fiscal year. In addition to reporting the

results of each internal audit directly to the President, the

Business Audit Department reports to the Audit &

Supervisory Board and each audited department through

business audit reports. In the event that a business audit

report identifies the need for improvement measures to be

taken, the President issues the necessary instructions to

the related audited department in order to further

upgrade and enhance the internal control system.

Moreover, the Business Audit Department maintains

close coordination with the Audit & Supervisory Board and

the accounting auditor by constantly exchanging informa-

tion with them in order to conduct efficient audits.

Accounting AuditorThe Company has an audit agreement with Ernst & Young

ShinNihon LLC for its accounting audit. In accordance

with annual audit schedules, Ernst & Young ShinNihon

LLC conducts accounting audits pursuant to the provi-

sions stipulated under Japan’s Companies Act and

Financial Instruments and Exchange Act.

Compliance Structure and SystemThe UNIZO Group recognizes the importance of exhibiting

the highest corporate ethics grounded in adhering to stat-

utory and regulatory requirements. With this in mind, the

Group works diligently to bolster its compliance system.

As a part of these endeavors, the UNIZO Group established

the UNIZO Group Individual Code of Conduct to ensure

that directors, officers, and employees observe all statu-

tory and regulatory requirements as well as social norms.

Furthermore, the Group has put in place a set of compli-

ance guidelines as well as related rules and regulations in

order to establish a framework that is capable of ensuring

compliance.

In addition, an executive officer has been appointed to

assume overall responsibility for ensuring compliance

with the aim of further enhancing the efficacy of the

Group’s compliance initiatives. At the same time, the

Compliance Department has been established as a special-

ized department. Complementing this endeavor, the

Business Audit Department, which serves as the Group’s

internal auditing division, conducts audits on the status of

compliance. Through these and other measures, every

effort is made to ensure thorough compliance.

Risk Management Structure and SystemThe Company has put in place a set of internal rules and

regulations in order to address a wide variety of business risks.

For example, the Company has established a personal infor-

mation protection policy and formulated a set of personal

information protection rules and regulations to address the

requirements of Japan’s Personal Information Protection Law.

As a part of efforts to further bolster its business risk manage-

ment structure and system, the Company has also put in place

self-assessment operating guidelines as well as rules and

regulations governing the handling of accidents and claims,

the preparation of external documents, and the operation

and management of computer systems. In this manner, the

Company is taking every step to put in place and fortify a

risk management structure and system.


The UNIZO Group’s Approach to CSRBased on its corporate philosophy, the UNIZO Group aims

to be a corporate group that continues to contribute to

society and all stakeholders through the Real Estate

Business and Hotel Business.

StakeholdersThe UNIZO Group will conduct an ongoing dialogue with

its stakeholders, including shareholders and other inves-

tors, customers, local communities, and employees.

CSR Initiatives

Shareholders and Investors The Group holds business results presentations aimed at

institutional investors and analysts to promote construc-

tive dialogue with all shareholders and investors. For indi-

vidual investors, the Group holds investor presentation

meetings.

CustomersProviding High-Quality, Comfortable Spaces

In the Real Estate Business, the Group will continue

investing in central Tokyo, and overseas expand in the

United States with New York and Washington D.C. as bases.

In doing so the Group will offer high-quality spaces that

meet the diverse needs of clients.

Developing affordable urban hotels that meet the ever

widening diverse needs of global customers

The Group will thoroughly disseminate the three hotel

brands—HOTEL UNIZO, UNIZO INN, and UNIZO INN

Express—and offer superior service and the convenience

of outstanding locations to a global customer base.

Instructing a sense of Japanese hospitality in staff and

transfusing that sense to each hotel

The Group is implementing a training program that emphasizes

hospitality, and is strengthening language training.

Placing AEDs in all hotels

In order for guests to use our hotels with a sense of ease,

the Group is putting in place systems to handle unforeseen

circumstances.

Local CommunitiesThe UNIZO Group contributes to communities where it

engages in business by offering space and facilities for

shelter during disasters to those affected.

Natural EnvironmentThe Group manages its real estate and hotel businesses

while safeguarding the natural environment.

Climate Change Initiatives

At some of the Group’s office buildings and hotels, efforts

are being made to combat climate change, including

adopting LED lighting and introducing heating and cooling

equipment to control the thermal environment in order to

reduce energy usage, and installing rooftop green spaces.

Controlling Waste

At the Group’s hotels, with permission from guests staying

multiple nights, linens and certain amenities are not

changed during room cleaning.

Saving Water

At the Group’s office buildings and hotels, water-saving

fixtures, such as automatic faucets and water-saving

shower heads, are being introduced.

Strengthening the UNIZO Group Management StructureManagement Structure

From a perspective of improving management soundness,

transparency, and efficiency to gain trust from all stake-

holders and continuously raise corporate value, the Group

is working to strengthen and build corporate governance.

In doing so it aims to be a corporate group trusted by

society.

EmployeesDeveloping new graduates

For main career-path employees, the Group offers three

career-path courses—the open course, construction

course, and hotel management and administrative

course—to give a boost to career paths that individuals

desire. The Group runs an on-the-job training program,

matching the characteristics of each course, to support the

development of the employees that will carry the UNIZO

Group in the future.

Also, the Group provides a system to cover the cost of

improving skills and gaining qualifications necessary for the job.

Support system for child and family care

The Group has a system for child and family care leave.

The system enables employees to take leave or work short-

ened hours as needed in step with life changes.

Appointing diverse employees

The Group aims to create a workplace that respects racial and

gender diversity and maximize performance among individuals.

Corporate Philosophy

The UNIZO Group strives to be a company that

1 Creates value and richness together with all stakeholders

2 Earns the trust and meets expectations of customers, and continues to be a chosen partner

3 Contributes to society and the environment

CSR Activities

Shareholders and other investors

Customers

Local communities

Employees

Conduct business management in a manner that meets expectations and disclose information appropriately

Provide high-quality, comfortable spaces and high-quality services

Contribute to society and to preserva-tion of the global environment

Create employee-friendly workplaces and develop personnel


Directors and Audit & Supervisory Board Members

Executive Officers

Chairman and Director

Takao Suzuki

President and Director (Representative Director)

Tetsuji Kosaki

Senior Managing Director

Masato Yamamoto

Senior Managing Director

Yoshinori Yukimoto

Managing Director

Hitoshi Sato

Managing Director

Hiroshi Takimoto

Managing Director

Noriko Kosugi

Director

Yoshio Yamada

Chief Executive Officer

Tetsuji KosakiOverall management of corporate operations

Senior Managing Executive Officer

Masato YamamotoCorporate Planning Division; International Business Development Division; General Manager of Corporate Planning Department and Research Department

Senior Managing Executive Officer

Yoshinori YukimotoHuman Resources Division; Credit Risk Management Division; Business Audit Department; Compliance Department; Administration Department; Information System Department

Managing Executive Officer

Hitoshi SatoFacility Management Division


Hiroshi TakimotoDomestic Business Development Division;International Business Development Division (deputy); General Manager of Domestic Business Development Department


Noriko KosugiFinancial Planning Division


Hideaki KobayashiSpecial Assignment


Masafumi ShinagawaInternational Finance Division; General Manager of International Finance Department

Director

Takeshi Okabe

Outside Director

Motoaki Kitayama*Attorney

Outside Director

Toshiro Yonemura*Outside Director, Seven & i Holdings Co., Ltd.

Outside Director

Masashi Otake*President, Otake Global Capital LLC

Outside Director

Masato Miki*Representative Director and President,Broadway Capital Management Co., Ltd.

Outside Director

Kenji Hasegawa*


Satoshi KomuraFinance Division


Tetsuya TakagiCorporate Planning Division (deputy)


Yayoi ItoCorporate Planning Division (deputy); Financial Planning Division (deputy)

Executive Officer

Yoshio YamadaArchitecture and Construction Planning Division; Facility Management Division (deputy); General Manager of Architecture and Construction Planning Department

Executive Officer

Takeshi OkabeGeneral Manager of Executive Secretariat

Executive Officer

Shigeo YasunoGeneral Manager of Human Resources Planning Department

Executive Officer

Shigeru SasakiHead of Accounting Unit

Executive Officer

Michiaki KonoInternational Business Development Division (deputy);General Manager of International Business Development Department

Standing Audit & Supervisory Board Member

Mitsugi Izumiyama

Standing Audit & Supervisory Board Member

Hiroyasu Nakamura

Outside Audit & Supervisory Board Member

Tetsuo Ito*AttorneyOutside Corporate Auditor, Takasago ThermalEngineering Co., Ltd.Outside Corporate Auditor, ASAHI KASEICORPORATIONOutside Director, Japan Petroleum ExplorationCo., Ltd.


Atsushi Kato*Certified Public AccountantOutside Director, SUMIDA CORPORATION


Toshio Mizushima*Certified Public AccountantOutside Director, The Joyo Bank, Ltd.

Executive Officer

Minoru KawasakiSpecial Assignment

Executive Officer

Takafumi KayanoGeneral Manager of Investor Relations Department

Executive Officer

Ichiro ShiibaFinance Division (deputy); International Finance Division (deputy); General Manager of Finance Department 1 and Finance Department 2

Executive Officer

Yoshiharu OnoGeneral Manager of Human Resources Department

Executive Officer

Shinichi TsujiGeneral Manager of Credit Risk Management Department

Executive Officer

Ko IokawaGeneral Manager of Administration Department

Executive Officer

Masaharu SakanoGeneral Manager of Information System Department

Executive Officer

Hiroko EndoPublic Relations Division; General Manager of Public Relations Department

As of June 18, 2019

* Independent officer as stipulated by the Tokyo Stock Exchange

Directors, Audit & Supervisory Board Members, and Executive Officers



(Millions of yen)

Operating income / Operating margin(Millions of yen) (%)

Net income attributable to owners of the parent company / Net income per share(Millions of yen) (Yen)

Operating Results Business Environment

Looking back on macroeconomic trends during the fiscal year ended

March 31, 2019 (April 1, 2018 to March 31, 2019), even though weakness

has appeared in some export sectors, the Japanese economy contin-

ued to recover gradually. In the office building market of Japan, the

market appears to be gradually nearing the peak as vacancy rates in

Tokyo’s five central wards have fallen to below the 2% level, and the

upward trend in rents in some areas, including central Tokyo, contin-

ues. In the hotel sector in Japan, the pace of growth in number of hotel

guests from abroad has somewhat slowed, and Japanese guest num-

bers are on a downward trend. However, new or expanded hotel

capacity continues to come on line at a high level. For the Japanese

economy going forward, even though weakness has appeared in some

export sectors, the gradual economic recovery is likely to continue.

Factors that warrant attention include effects of trade friction

between China and the United States, increasing uncertainty about

the Chinese economy, progress in negotiations over the British vote to

leave the European Union, and effects of negotiations over the Trade

Agreement on Goods (TAG) between the United States and Japan.

In the United States, economic growth continued centered on

consumer spending and capital expenditure. In the office building

market in the United States, the market appears to have mostly peaked

as vacancy rates continue to fall in leading cities while rents, however,

are flat in some cities. For the US economy going forward, even if

economic growth centered on consumer spending and capital expen-

diture continues, growth may slow. Factors that warrant attention

include trends in short and long-term interest rates, effects of trade

friction between China and the United States, developments in the

United Kingdom after leaving the European Union, and the evolution of

the 2020 US Presidential election.

Revenue from Operations and Operating Income

Revenue from operations for the fiscal year ended March 31, 2019

totaled ¥56,053 million, an increase of 6.8% from ¥52,462 million in

the previous fiscal year. Operating income totaled ¥17,622 million, an

increase of 0.3% from ¥17,570 million in the previous fiscal year.

[Real Estate Business]

In Japan and overseas, even though properties acquired in the fiscal

years ended March 31, 2018 and March 31, 2019 made contributions

and intensive efforts were made in leasing vacant space and increas-

ing rent, due to property sales as part of capital recycling efforts,

revenue from operations during the fiscal year ended March 31, 2019

increased 2.1% to ¥43,363 million from ¥42,458 million in the

previous fiscal year, and operating income decreased 1.0% to ¥16,405

million from ¥16,565 million in the previous fiscal year, an increase

in revenue and decrease in income.

[Hotel Business]

Even though occupancy rates and revenue per room at existing hotels

weakened slightly, hotels opened in the fiscal years ended March 31,

2018 and March 31, 2019 made contributions to revenue; revenue

from operations during the fiscal year ended March 31, 2019 increased

27.0% to ¥12,974 million from ¥10,219 million in the previous fiscal

year. Also, even though preparation costs for new hotel openings

were incurred and hotels opened in the fiscal year ended March 31,

2019 were not yet profitable, hotels opened in the fiscal year ended

March 31, 2018 made full-year contributions; operating income

increased 8.4% to ¥1,981 million from ¥1,828 million in the previous

fiscal year. This marked an increase in revenue and income.

[Other Income (Expenses)]

Other income mainly comprised interest and dividend income of

¥1,134 million. Principal other expenses included interest expenses

of ¥7,990 million.Millions of yen

Revenue from operations 2019 2018 Increase

(decrease) (%)

Real Estate Business 43,363 42,458 2.1

Hotel Business 12,974 10,219 27.0

Subtotal 56,337 52,677

Adjustments (284) (215)

Consolidated 56,053 52,462 6.8

Operating income (left scale)

Operating margin (right scale)

Net income attributable to owners of

the parent company (left scale) Net income per share (right scale)

56,053

0

15,000

30,000

45,000

60,000

18.3 19.317.316.315.3

17,622

31.4

0

5,000

10,000

15,000

20,000

0

10

20

30

40

18.3 19.317.316.315.3

11,903

356.56

0

4,000

2,000

6,000

8,000

12,000

0

100

200

300

600

400

10,000 500

18.3 19.317.316.315.3

Management’s Discussion and AnalysisIn the fiscal year ended March 31, 2018, the UNIZO Group changed revenue recognition standards. Figures for the fiscal year ended March 31, 2017, and for earlier fiscal years, have been retrospectively adjusted and reflect the change in standards.From the fiscal year ended March 31, 2019, deferred tax assets are presented in the investments and other assets section of the balance sheet, and deferred tax liabilities are presented in the non-current liabilities section of the balance sheet. Figures for the fiscal year ended March 31, 2018 have been retrospectively adjusted.

Financial Section


Depreciation and amortization

(Millions of yen)

Cash flows from operating activities / Interest coverage ratio(Millions of yen) (Times)

ROA / ROE

(%)

Millions of yen

Operating income 2019 2018 Increase (decrease) (%)

Real Estate Business 16,405 16,565 (1.0)

Hotel Business 1,981 1,828 8.4

Subtotal 18,386 18,394

Adjustments (764) (823)

Consolidated 17,622 17,570 0.3

Income Before Income Taxes and Net Income Attributable

to Owners of the Parent Company

Income before income taxes during the fiscal year ended March 31,

2019 increased 34.2% compared with the previous fiscal year to

¥16,863 million. Accounting for income taxes, which increased to

¥4,987 million from ¥4,070 million in the previous fiscal year, net

income attributable to owners of the parent company during the

fiscal year ended March 31, 2019 came to ¥11,903 million, an increase

of 40.2% compared with the previous fiscal year.

Cash Flows Net cash provided by operating activities in the fiscal year ended

March 31, 2019 amounted to ¥12,562 million, a ¥14,675 million

decrease from the previous fiscal year. Major plus factors of operat-

ing cash flow included ¥16,863 million of income before income

taxes and ¥11,714 million of depreciation and amortization, a non-

cash expense. Major minus factors of operating cash flow included

¥4,929 million in gains and losses on sales of property and equip-

ment, and intangible assets as part of capital recycling efforts, a

¥5,846 million decrease in security and guarantee deposits received

from tenants, and ¥5,425 million of income taxes paid.

Net cash provided by investing activities in the fiscal year ended


increase in inflow from the previous fiscal year. Even though out-

flows of ¥19,336 million to purchase property and equipment

occurred, inflows from the sales of property and equipment as part

of capital recycling efforts totaled ¥146,002 million.

Net cash used by financing activities in the fiscal year ended


increase in outflow from the previous fiscal year. While proceeds

from issuance of new shares totaled ¥11,724 million and proceeds

from long-term loans payable were ¥82,905 million, repayment of

long-term loans payable totaled ¥159,855 million.

Financial Position Assets

Total assets as of March 31, 2019 amounted to ¥693,552 million, a

decrease of ¥44,914 million from March 31, 2018. The decrease was

attributable to a ¥117,656 million decrease in property and equip-

ment, which as part of capital recycling efforts included an increase

of ¥16,847 million from new investments, and a decrease of ¥134,191

million from sales of properties. The value of the UNIZO Group's

investment and rental properties (office buildings and other properties

for lease) as of March 31, 2019 was ¥433,981 million on the consoli-

dated balance sheet and their appraised value was ¥570,429 million

as of the same date. The hotel and other assets operated by the

Group were carried on its March 31, 2019 consolidated balance sheet

at a value of ¥104,410 million and had an appraised value of ¥190,406

million as of the same date. Furthermore, the March 31, 2019 value of

the investment and rental properties (office buildings and other

properties for lease) that the Group held as of April 30, 2019 was

¥427,797 million on the consolidated balance sheet and their

appraised value was ¥562,709 million, and the March 31, 2019 value

of the hotel and other assets that the Group held as of April 30, 2019

was ¥104,410 million and had an appraised value of ¥190,406 million.

Liabilities

As of March 31, 2019, total liabilities amounted to ¥580,391 million, a

decrease of ¥71,172 million from March 31, 2018. Interest bearing

debt decreased by ¥66,646 million from March 31, 2018.

Net Assets

Net assets as of March 31, 2019 amounted to ¥113,160 million, an

increase of ¥26,257 million from March 31, 2018. The increase was

the result of a ¥5,899 million increase in capital stock and a ¥5,899

million increase in capital surplus due to a public offering completed

in May 2018, the result of a ¥9,393 million increase in retained

earnings, and other factors.

Cash flows from operating activities (left scale)

Interest coverage ratio (right scale)

ROA ROE

11,714

0

4,000

2,000

6,000

8,000

12,000

10,000

18.3 19.317.316.315.3

12,562

1.6

0

10,000

20,000

30,000

0

3.0

6.0

9.0

18.3 19.317.316.315.3

11.9

1.6

0

5

10

15

18.3 19.317.316.315.3


Management Benchmarks

The operating margin decreased 2.1 percentage points from 33.5%

in the fiscal year ended March 31, 2018 to 31.4% during the fiscal

year ended March 31, 2019. ROA was 1.6%, down 0.2 percentage

points from the previous fiscal year, and ROE was 11.9%, an increase

of 1.5 percentage points.

Basic Policy on Dividends

The UNIZO Group has a basic policy of maintaining consistent and

stable cash dividend payments. The Group continuously strives to

enhance corporate and shareholder value by maintaining a balance

between stable cash dividends and robust shareholders’ equity in

consideration of the need for promoting future business development

and strengthening the business foundation, keeping a firm eye on

trends in the business environment and business results, along with

the financial condition.

The Group’s basic policy on the distribution of income is to pay

two dividends—an interim dividend and year-end dividend—per year.

Based on the above policy and the financial results for the fiscal

year ended March 31, 2019, the Group paid an interim dividend of

¥40 per share and a year-end dividend of ¥45 per share. The annual

dividend was therefore ¥85 per share. For the fiscal year ending

March 31, 2020, consistent with its basic policy and based on the

assumption that financial results will be achieved as forecast, the

Group expects to pay an annual dividend of ¥85 per share, comprising

an interim dividend of ¥40 per share and a year-end dividend of

¥45 per share.

Amounts per Share

Basic net income per share increased 13.8% compared with the previ-

ous fiscal year to ¥356.56 per share. Net assets per share increased

8.8% from the previous fiscal year-end to ¥3,306.72 per share.

Capital Investment (Acquisition of Property and Equipment)

As the business environment has made it difficult to expand assets

via new investments, the Group managed its portfolio mainly

through capital recycling.

As a result, the aggregate total of capital investment, including the

purchase of property and equipment, amounted to ¥18,812 million.

Depreciation and amortization amounted to ¥11,714 million, an

increase of ¥938 million compared with the previous fiscal year.

Business and Other Risks Trends in Economic and Real Estate Market Conditions

The UNIZO Group’s Real Estate Business (office leasing in Japan and

overseas) is susceptible to the effects of economic trends as well as

real estate market conditions. Accordingly, real estate market

trends, including an increase in vacancy rates or a decrease in rents

due to a downturn in the economy or oversupply in the market for

office buildings for lease, a deterioration in real estate prices, and

other factors have the potential to significantly impact the Group’s

financial results and position.

Similarly, the Group’s Hotel Business is susceptible to the

effects of economic trends and personal consumption behavior.

Accordingly, a decrease in demand for business travel by the cor-

porate sector and leisure travel by individuals due to an economic

slump, a decrease in visitors from abroad, a downturn in room rates

and occupancy stemming from an oversupply of rooms due to the

opening of new hotels, and other related factors have the potential

to significantly impact the Group’s financial results and position.

Changes in Statutory and Regulatory Requirements

In addition to general laws and ordinances that affect corporate

management, including the Companies Act, the UNIZO Group’s

business activities in Japan are subject to laws and ordinances

related to its businesses, and to the regulatory requirements of local

government authorities. Likewise, the Group’s overseas business

activities are also subject to statutory and regulatory national and

local requirements related to those business activities. Accordingly,

a future change in these requirements may cause new obligations to

be imposed, the cost burden to increase, and restrictions on busi-

ness and operating rights to occur. These items have the potential to

significantly impact the Group’s financial results and position.

Furthermore, any license or permit the Group has acquired to

conduct its businesses being terminated or revoked; or a change in

real estate-related tax systems that is linked to an increase in costs

associated with the acquisition, maintenance, and disposal of real

Total assets

(Millions of yen)

Total net assets / Equity ratio


Interest-bearing debt / Net D/E ratio(Millions of yen) (Times)

Total net assets (left scale)

Equity ratio (right scale)

Interest-bearing debt (left scale)

Net D/E ratio (right scale)

693,552

0

200,000

400,000

600,000

800,000

18.3 19.317.316.315.3

113,160

16.3

0

40,000

20,000

60,000

80,000

120,000

0

3

6

9

18

100,000 15

12

18.3 19.317.316.315.3

554,234

3.8

0

200,000

100,000

300,000

500,000

700,000

400,000

600,000

0

2

4

6

8

18.3 19.317.316.315.3

Financial Section


estate has the potential to significantly impact the Group’s financial

results and position.

Fluctuations in Interest Rates

Even though the consolidated balance of outstanding interest bear-

ing debt decreased by ¥66,646 million during the fiscal year ended

March 31, 2019, the interest bearing debt to total assets ratio ended

the fiscal year at a high level of 79.9%. The UNIZO Group uses interest

rate swaps to hedge against interest rate rises, but an increase in

financing costs brought about by higher interest rates has the poten-

tial to significantly impact the Group’s financial results and position.

Fluctuations in Exchange Rates

The UNIZO Group’s operations are affected by exchange rate

fluctuations. If the yen appreciates, the yen-equivalent value of the

Group’s transactions denominated in foreign currencies decreases.

Additionally, a portion of the Group’s assets and liabilities are

converted to yen-equivalent values for preparation of the consoli-

dated financial statements. Accordingly, exchange rate movements

have the potential to significantly impact these assets and liabilities’

yen-equivalent values even if their values in local-currency terms

remain unchanged.

Fluctuations in Share Prices of Securities

The UNIZO Group invests in the shares of public and non-public

companies to build, maintain, and strengthen trading relationships

and to further improve stability in management. Accordingly, a

substantial and widespread decline in the prices of securities may

cause the Group to be susceptible to an impairment charge or

devaluation loss on its investment securities, which has the potential


Office Building Tenants and Lease Agreements

There are no guarantees that office building tenants will renew lease

agreements at the end of the lease term. In addition, many tenants

are able to cancel lease agreements during the lease term by provid-

ing advance notice. Accordingly, an increase in cancellations may

cause declines in the UNIZO Group’s rental revenue during the

period until new tenants are found, which has the potential to


Natural and Human-Made Disasters and Other Contingencies

The UNIZO Group maintains a substantial real estate portfolio

comprising numerous properties. Accordingly, the Group imple-

ments periodic inspections and maintenance, and maintains an

appropriate level of property and casualty insurance coverage.

Despite this coverage, accidents attributable to unanticipated

events, including natural disasters such as earthquakes, tsunamis,

hurricanes, and wind and flood damage; weather incidents such as

blizzards; human-caused incidents such as accidents and fires;

other factors that can cause damage, degradation, or malfunction in

buildings and equipment; and acts of terror or war have the potential


Furthermore, although the Group pays a high amount of attention

to safety and health in its hotels, an outbreak of food poisoning or

other accidents have the potential to significantly impact the Group’s

financial results and position.

Credit Risk of Trading Partners

The UNIZO Group examines the credit profile of new trading part-

ners with respect to rents, accounts receivable, and other obliga-

tions to the Group, and continuously monitors the profiles of

existing trading partners. Additionally, tenant deposits and other

similar measures provide protection that is factored into the Group’s

management. Despite these efforts, a deterioration of business

results at a major tenant may cause difficulty in receiving the

obligations that tenant has to the Group, which has the potential to


Labor-Related Issues

The UNIZO Group employs many part-time staff in its operations.

Accordingly, a change in labor regulations such as social insurance

or labor requirements may cause staff costs to rise, which has the

potential to significantly impact the Group’s financial results and

position. Furthermore, a change in labor regulations or related laws

for other employees also has the potential to significantly impact the

Group’s financial results and position.

Information Management

The UNIZO Group collects and collates wide-ranging information,

including personal information, in the normal course of its operat-

ing activities. While the maintenance and management of this

information is handled with the utmost care, any leakage of all or a

part of this information due to unauthorized external access or

inappropriate use by employees may cause a significant deteriora-

tion in the reputation and standing of the Group. This has the

potential to significantly impact the Group’s financial results and

position.

Litigation

The UNIZO Group is not involved in any currently ongoing litigation

that has the potential of a material impact on its earnings. In the

conduct of its business activities, however, the Group may become

party to lawsuits initiated for a variety of reasons by parties such as

business partners and customers. This has the potential to signifi-

cantly impact the Group’s financial results and position.

When the Group acquires or constructs real estate, including

office buildings and hotels, it makes every effort to ensure com-

pliance with all relevant statutory and regulatory requirements.

Additionally, the Group consults closely with local residents; selects

professionals highly qualified in construction; and takes steps to

address legal, environmental, and quality concerns. Despite these

efforts, an issue arising, for unforeseen reasons, may cause the

Group to be served with a claim, become subject to litigation, or

become subject to other direct action. Furthermore, the Group may

become subject to damage to its reputation and social standing, or

subject to other indirect action. This has the potential to significantly

impact the Group’s financial results and position.


Millions of yenThousands of

US dollars

2019 2018 2019

Assets

Current assets

Cash and deposits (Notes 14 and 16) ¥122,006 ¥ 46,115 $1,099,252

Notes and accounts receivable - trade (Note 14) 3,983 4,158 35,886

Allowance for doubtful accounts (Note 14) (80) (43) (720)

Inventories (Note 4) 109 36 982

Other (Note 5) 4,717 2,945 42,499

Total current assets 130,737 53,212 1,177,916

Fixed assets

Property and equipment (Notes 5, 18 and 19)

Buildings and structures 178,949 217,799 1,612,298

Buildings and structures in trust 93,463 124,852 842,084

Machinery, equipment, and vehicles 409 403 3,685

Machinery, equipment, and vehicles in trust 512 533 4,613

Land 123,828 151,815 1,115,668

Golf courses 1,489 1,489 13,415

Land in trust 172,492 196,290 1,554,121

Other 10,382 10,039 93,539

581,528 703,223 5,239,463

Less accumulated depreciation (41,237) (45,275) (371,537)

Total property and equipment 540,290 657,947 4,867,916

Intangible assets (Notes 5 and 18) 8,567 10,007 77,187

Investments and other assets

Investment securities (Notes 14 and 15) 11,402 12,981 102,729

Deferred tax assets (Note 7) 129 38 1,162

Other 2,434 4,288 21,929

Allowance for doubtful accounts (8) (8) (72)

Total investments and other assets 13,957 17,300 125,750

Total fixed assets 562,815 685,254 5,070,862

Total assets ¥693,552 ¥738,467 $6,248,779

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheet UNIZO Holdings Company, Limited and its consolidated subsidiariesAs of March 31, 2019 and 2018

Financial Section



US dollars

2019 2018 2019

Liabilities

Current liabilities

Notes and accounts payable - trade ¥ 4 ¥ 3 $ 36

S hort-term loans payable and current portion of long-term loans payable (Notes 5 and 14) 75,476 66,547 680,025

Income taxes payable 4,529 1,485 40,805

Provision for employees’ bonuses 219 197 1,973

Provision for point card certificates 61 39 549

Provision for shareholder benefits 179 270 1,612

Other 6,270 6,981 56,491

Total current liabilities 86,741 75,525 781,520

Non-current liabilities

Corporate bonds (Notes 5 and 14) 104,000 104,000 937,021

Long-term loans payable (Notes 5 and 14) 374,758 450,333 3,376,502

Deferred tax liabilities (Note 7) 2,214 3,228 19,947

P rovision for directors’ and audit & supervisory board members’ retirement benefits 372 378 3,351

Provision for environmental measures 185 185 1,666

Provision for retirement benefits (Note 6) 729 722 6,568

Security and guarantee deposits received from tenants (Note 14) 11,384 17,190 102,567

Other 5 0 45

Total non-current liabilities 493,650 576,039 4,447,697

Total liabilities 580,391 651,564 5,229,218

Net assets

Shareholders’ equity (Note 8)

Capital stock (common stock):

Authorized — 50,000,000 shares at March 31, 2019 and 2018

I ssued — 34,220,700 shares at March 31, 2019 and 28,520,700 shares at March 31, 2018 32,062 26,163 288,872

Capital surplus 31,978 26,078 288,116

Retained earnings 44,588 35,195 401,729

Treasury stock: 405 shares at March 31, 2019 and 301 shares at March 31, 2018 (1) (0) (9)

Total shareholders’ equity 108,629 87,436 978,727

Accumulated other comprehensive income (loss)

Unrealized gains (losses) on investment securities 2,746 3,538 24,740

Deferred gains (losses) on hedges 170 1,182 1,531

Foreign currency translation adjustments 1,610 (5,468) 14,505

Total accumulated other comprehensive income (loss) 4,527 (747) 40,787

Non-controlling interests 4 214 36

Total net assets 113,160 86,903 1,019,551

Total liabilities and net assets ¥693,552 ¥738,467 $6,248,779



US dollars

2019 2018 2019

Revenue from operations ¥ 56,053 ¥52,462 $ 505,027

Cost of revenue from operations 32,039 28,429 288,665

Gross profit 24,014 24,033 216,361

Selling, general, and administrative expenses (Note 12) 6,392 6,462 57,590

Operating income 17,622 17,570 158,771

Other income (expenses)

Interest and dividend income 1,134 929 10,217

Interest expenses (7,990) (6,692) (71,988)

Gain on derivative instruments 1,150 — 10,361

Gain on sales of investment securities (Note 15) 174 578 1,567

Gain on sales of property and equipment, and intangible assets (Note 13) 19,372 560 174,538

Loss on sales of investment securities (Note 15) — (76) —

Loss on sales of property and equipment, and intangible assets (Note 13) (14,442) — (130,119)

Loss on disposal of property and equipment, and intangible assets (Note 13) (36) — (324)

Other, net (Note 13) (121) (306) (1,090)

(758) (5,007) (6,829)

Income before income taxes 16,863 12,563 151,932

Income taxes (Note 7)

Current 5,452 4,233 49,121

Deferred (465) (163) (4,189)

4,987 4,070 44,931

Net income 11,876 8,492 107,000

Net income attributable to non-controlling interests (27) 4 (243)

Net income attributable to owners of the parent company ¥ 11,903 ¥ 8,488 $ 107,243



US dollars

2019 2018 2019

Net income ¥11,876 ¥ 8,492 $107,000

Other comprehensive income (loss) (Note 20)

Change in unrealized gains (losses) on investment securities (791) (237) (7,126)

Change in deferred gains (losses) on hedges (1,012) 1,072 (9,117)

Foreign currency translation adjustments 7,102 (8,086) 63,987

Total other comprehensive income (loss) 5,298 (7,251) 47,734

Comprehensive income ¥17,174 ¥ 1,240 $154,734

Total comprehensive income (loss) attributable to:

Owners of the parent company ¥17,179 ¥ 1,248 $154,779

Non-controlling interests (4) (7) (36)


Consolidated Statement of Comprehensive IncomeUNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal years ended March 31, 2019 and 2018

Consolidated Statement of Income UNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal years ended March 31, 2019 and 2018

Financial Section


Millions of yen

Shareholders’ equity

Capital stock Capital surplus Retained earnings Treasury stockTotal shareholders’

equity

Balance as of April 1, 2017 ¥20,516 ¥20,431 ¥28,430 ¥(0) ¥ 69,378

Changes of items during the period

Issuance of common stock 5,647 5,647 — — 11,294

Dividends paid (Note 8) — — (2,091) — (2,091)

N et income attributable to owners of the parent company — — 8,488 — 8,488

Purchase of treasury stock — — — — —

E ffect of change in accounting periods of consolidated subsidiaries — — 367 — 367

N et changes of items other than shareholders’ equity — — — — —

Total changes of items during the period 5,647 5,647 6,764 — 18,058

Balance as of March 31, 2018 ¥26,163 ¥26,078 ¥35,195 ¥(0) ¥ 87,436





Purchase of treasury stock — — — (0) (0)

E ffect of change in accounting periods of consolidated subsidiaries — — — — —


Total changes of items during the period 5,899 5,899 9,393 (0) 21,192

Balance as of March 31, 2019 ¥32,062 ¥31,978 ¥44,588 ¥(1) ¥108,629

Millions of yen


Unrealized gains (losses) on investment securities

Deferred gains (losses)

on hedges

Foreign currency translation

adjustments

Total accumulated other comprehensive

income (loss)Non-controlling

interests Total net assets

Balance as of April 1, 2017 ¥3,775 ¥ 110 ¥ 2,993 ¥ 6,880 ¥ 228 ¥ 76,486


Issuance of common stock — — — — — 11,294

Dividends paid (Note 8) — — — — — (2,091)

N et income attributable to owners of the parent company — — — — — 8,488

Purchase of treasury stock — — — — — —

E ffect of change in accounting periods of consolidated subsidiaries — — — — — 367

N et changes of items other than shareholders’ equity (237) 1,072 (8,462) (7,628) (14) (7,642)

Total changes of items during the period (237) 1,072 (8,462) (7,628) (14) 10,416

Balance as of March 31, 2018 ¥3,538 ¥ 1,182 ¥(5,468) ¥ (747) ¥ 214 ¥ 86,903





Purchase of treasury stock — — — — — (0)

E ffect of change in accounting periods of consolidated subsidiaries — — — — — —

N et changes of items other than shareholders’ equity (791) (1,012) 7,079 5,275 (209) 5,065

Total changes of items during the period (791) (1,012) 7,079 5,275 (209) 26,257

Balance as of March 31, 2019 ¥2,746 ¥ 170 ¥ 1,610 ¥ 4,527 ¥ 4 ¥113,160


Consolidated Statement of Changes in Net AssetsUNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal years ended March 31, 2019 and 2018


Consolidated Statement of Changes in Net Assets (continued)UNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal year ended March 31, 2019

Thousands of US dollars

Shareholders’ equity

Capital stock Capital surplus Retained earnings Treasury stockTotal shareholders’

equity

Balance as of March 31, 2018 $235,723 $234,958 $317,100 $(0) $787,782





Purchase of treasury stock — — — (0) (0)

E ffect of change in accounting periods of consolidated subsidiaries — — — — —


Total changes of items during the period 53,148 53,148 84,629 (0) 190,936

Balance as of March 31, 2019 $288,872 $288,116 $401,729 $(9) $978,727



Unrealized gains (losses) on investment securities

Deferred gains (losses) on hedges

Foreign currency translation

adjustments

Total accumulated other comprehensive

income (loss)Non-controlling

interests Total net assets

Balance as of March 31, 2018 $31,876 $10,649 $(49,265) $ (6,730) $ 1,928 $ 782,980





Purchase of treasury stock — — — — — (0)

E ffect of change in accounting periods of consolidated subsidiaries — — — — — —

N et changes of items other than shareholders’ equity (7,126) (9,117) 63,780 47,526 (1,883) 45,634

T otal changes of items during the period (7,126) (9,117) 63,780 47,526 (1,883) 236,570

Balance as of March 31, 2019 $24,740 $ 1,531 $ 14,505 $40,787 $ 36 $1,019,551


Financial Section



US dollars

2019 2018 2019

Cash flows from operating activities

Income before income taxes ¥ 16,863 ¥ 12,563 $ 151,932

Depreciation and amortization 11,714 10,776 105,541

Increase (decrease) in provision for employees’ bonuses 22 41 198

Increase (decrease) in provision for retirement benefits 7 65 63

Increase (decrease) in provision for directors’ and audit & supervisory board members’ retirement benefits (6) (83) (54)

Increase (decrease) in allowance for doubtful accounts 59 44 531

Increase (decrease) in provision for environmental measures — 2 —

Increase (decrease) in provision for point card certificates 21 35 189

Increase (decrease) in provision for shareholder benefits (90) 129 (810)

Interest and dividend income (1,134) (929) (10,217)

Interest expenses 7,990 6,692 71,988

(Gain) loss on sales of investment securities (174) (502) (1,567)

(Gain) loss on sales of property and equipment, and intangible assets (4,929) (560) (44,409)

(Increase) decrease in notes and accounts receivable - trade (2,007) (710) (18,082)

(Increase) decrease in inventories (73) (5) (657)

Increase (decrease) in notes and accounts payable - trade 1 0 9

Increase (decrease) in accrued expenses 72 168 648

Increase (decrease) in security and guarantee deposits received from tenants (5,846) 1,140 (52,671)

Other, net 2,368 7,095 21,335

Subtotal 24,858 35,964 223,966

Interest and dividends income received 1,132 940 10,199

Interest expenses paid (8,002) (6,401) (72,096)

Income taxes paid (5,425) (3,266) (48,878)

Net cash provided by operating activities 12,562 27,238 113,181

Cash flows from investing activities

Payments for term deposits (23,304) — (209,964)

Purchase of property and equipment (19,336) (135,746) (174,213)

Proceeds from sales of property and equipment 146,002 5,385 1,315,451

Purchase of intangible assets (67) (36) (603)

Proceeds from sales of intangible assets 1,331 312 11,992

Proceeds from sales of investment securities 670 2,229 6,036

Proceeds from collection of loans receivable 0 1 0

Payments for loans receivable (0) (0) (0)

Other, net 10 (29) 90

Net cash provided by (used in) investing activities 105,307 (127,884) 948,797

Cash flows from financing activities

Net increase (decrease) in short-term loans payable 130 (16,145) 1,171

Proceeds from long-term loans payable 82,905 147,180 746,959

Repayment of long-term loans payable (159,855) (80,594) (1,440,264)

Proceeds from issuance of corporate bonds — 48,747 —

Proceeds from issuance of common stock 11,724 11,224 105,631

Repayments to non-controlling interests (192) — (1,729)

Dividends paid (Note 8) (2,507) (2,090) (22,587)

Dividends paid to non-controlling interests (3) (4) (27)

Purchase of treasury stock (0) — (0)

Other, net — (0) —

Net cash provided by (used in) financing activities (67,799) 108,317 (610,856)

Effect of exchange rate changes on cash and cash equivalents 3,119 (2,121) 28,101

Net increase (decrease) in cash and cash equivalents 53,189 5,550 479,223

Cash and cash equivalents at the beginning of the period 46,115 40,402 415,487

Increase (decrease) in cash and cash equivalents due to change in accounting periods of consolidated subsidiaries — 163 —

Cash and cash equivalents at the end of the period (Note 16) ¥ 99,305 ¥ 46,115 $ 894,720


Consolidated Statement of Cash FlowsUNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal years ended March 31, 2019 and 2018


1 Significant Accounting Policies

Basis of preparation

The accompanying consolidated financial statements of UNIZO

Holdings Company, Limited (the “Company”) and consolidated

subsidiaries (collectively the “Group”) have been prepared in

conformity with accounting principles generally accepted in Japan

(“Japanese GAAP”), which are different in certain respects as to the

application and disclosure requirements of International Financial

Reporting Standards, and in accordance with the provisions

prescribed in the Financial Instruments and Exchange Act of Japan

and its related accounting regulations.

In preparing these consolidated financial statements, certain

reclassifications and rearrangements have been made to the

consolidated financial statements issued domestically in order to

present them in a form that is more familiar to readers outside

Japan. The notes to the consolidated financial statements include

information that may not be required under Japanese GAAP but is

presented herein as additional information.

The consolidated financial statements are stated in Japanese

yen, the currency of the country in which the Company is incorpo-

rated and principally operates.

As permitted by the regulations under the Financial

Instruments and Exchange Act of Japan, amounts of less than one

million yen have been rounded down. As a result, the totals shown in

the accompanying consolidated financial statements in yen do not

necessarily agree with the sums of the individual amounts.

Scope of consolidation

As of and for the fiscal years ended March 31, 2019 and 2018, the consolidated financial statements include the accounts of the Company and the

20 (21 in 2018) subsidiaries over which the Company has control through majority voting rights.

The subsidiaries are as follows

Ownership percentage

Consolidated subsidiaries 2019 2018

UNIZO Real Estate Company, Limited 100.0% 100.0%

UNIZO Holdings U.S., LLC 100.0% 100.0%

UNIZO Real Estate NY One, LLC 100.0% 100.0%

UNIZO Real Estate NY Two, LLC 100.0% 100.0%

UNIZO Real Estate NY Three, LLC 100.0% 100.0%

UNIZO Real Estate NY Four, LLC 100.0% 100.0%

UNIZO Real Estate DC One, LLC 100.0% 100.0%

UNIZO Real Estate DC Two, LLC 100.0% 100.0%

UNIZO Real Estate DC Three, LLC 100.0% 100.0%

UNIZO Real Estate DC Four, LLC 100.0% 100.0%

UNIZO Real Estate DC Five, LLC 100.0% 100.0%

UNIZO Real Estate DC Six, LLC 100.0% 100.0%

UNIZO Real Estate DC Seven, LLC 100.0% 100.0%

UNIZO Real Estate DC Eight, LLC 100.0% 100.0%

UNIZO Real Estate DC Nine, LLC 100.0% 100.0%

UNIZO Real Estate One, LLC 100.0% 100.0%

UNIZO Real Estate Two, LLC — 100.0%

EEJRE 321 W 44 JV, LLC 98.8% 98.8%

EEJRE 321 W 44 Owner, LLC 98.8% 98.8%

UNIZO Facilities Company, Limited 100.0% 100.0%

UNIZO Hotel Company, Limited 100.0% 100.0%

Note: With an effective date of March 1, 2019, UNIZO Real Estate Two, LLC was merged in an absorption-type merger with UNIZO Holdings U.S., LLC as the surviving company, and UNIZO Real Estate Two, LLC as the company being absorbed. UNIZO Real Estate Two, LLC is therefore no longer included in the scope of consolidation.

The fiscal year end of consolidated subsidiaries is March 31.

Notes to Consolidated Financial StatementsUNIZO Holdings Company, Limited and its consolidated subsidiariesFiscal years ended March 31, 2019 and 2018

Financial Section


Use of estimates

The preparation of the consolidated financial statements in confor-

mity with Japanese GAAP requires management to make estimates

and assumptions that affect reported amounts of assets, liabilities,

revenues, expenses and disclosure of contingent liabilities. Actual

results could differ from those estimates.

Cash and cash equivalents

All highly liquid investments that are readily convertible to cash and

with insignificant risk of market value fluctuation, with a maturity of

three months or less at the time of purchase, are treated as cash

equivalents for the purpose of preparing the consolidated statement

of cash flows.

Reconciliation between cash and deposits in the consolidated

balance sheet and cash and cash equivalents in the consolidated

statement of cash flows as of March 31, 2019 and 2018 is presented in

Note 16 “Supplemental Cash Flow Information”.

Investment securities

All securities held by the Company are classified as available-for-

sale securities. Securities with readily determinable market price are

stated at fair value based on the market price on the balance sheet

date. Valuation gains and losses are recorded directly to net assets.

Cost of securities is determined using the moving-average method.

Available-for-sale securities without readily determinable market

price are stated at cost, using the moving-average method.

Inventories

Merchandise and finished goods are primarily stated at cost by the

periodic average method. Raw materials and supplies are stated at

cost by the last purchase price method. All inventories held for sale

in the ordinary course of business are measured at the lower of cost

or net selling value.

Depreciation and amortization

Property and equipment other than leased assets are depreciated by

the declining-balance method. Buildings (excluding building fix-

tures) acquired on or after April 1, 1998 and building fixtures and

structures acquired on or after April 1, 2016 are depreciated using the

straight-line method.

The estimated useful lives are as follows:

Buildings and structures: 2–50 years

Machinery, equipment and vehicles: 2–17 years

Other (tools, furniture and fixtures): 2–20 years

Depreciable assets with an acquisition cost of ¥100,000 or more and

less than ¥200,000 are depreciated by the straight-line method over

three years.

Intangible assets other than leased assets are amortized using

the straight-line method. Software for internal use is amortized

using the straight-line method over the period of expected use by

the Group (five years).

Long-term prepaid expenses are amortized by the straight-line

method.

Provision for employees’ bonuses

A provision for employees’ bonuses is made based on the expected

cost of bonuses at the end of the fiscal year.

Provision for point card certificates

A provision for point card certificates is made at the end of the fiscal

year to cover the amount of estimated future disbursements arising

from usage of accumulated points on cards earned by customers.

Provision for shareholder benefits

A provision for shareholder benefits is made to cover the amount of

estimated future disbursements for the shareholder benefit plan.

Provision for directors’ and audit & supervisory board

members’ retirement benefits

At the General Meeting of Shareholders held on June 17, 2016, it was

resolved to terminate the retirement benefits plan for directors and

audit & supervisory board members. A provision for directors’ and

audit & supervisory board members’ retirement benefits is made

based on the future expected amount of final payments of the

retirement benefits.

Provision for environmental measures

A provision for environmental measures is made to cover the

amount of estimated future disbursements arising from the disposal

of polychlorinated biphenyl (“PCB”) at certain consolidated

subsidiaries.

Allowance for doubtful accounts

An allowance for doubtful accounts is provisioned at an amount

determined based on the historical experience of bad debt with

respect to ordinary receivables and an estimate of uncollectible

amounts determined by reference to specific doubtful receivables

from customers that are experiencing financial difficulties.

Retirement benefits

The Group applies the simplified method for the calculation of

provision for retirement benefits and retirement benefit expenses.

Under the simplified method, the Group provisions the amount that

is required if all employees retire voluntarily at the end of the

consolidated fiscal year as provision for retirement benefits.


Foreign currency translation adjustments

Assets and liabilities of foreign subsidiaries are translated into

Japanese yen based on the spot exchange rate as of the period end

date and on the average exchange rate for the period for revenue

and expenses, and differences in translations are recorded in

foreign currency translation adjustments in net assets.

Income taxes

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax

consequences attributable to differences between the financial

statement carrying amounts of existing assets and liabilities and

their respective tax bases. Deferred tax assets and liabilities are

measured using enacted tax rates that will be in effect when those

temporary differences are expected to be recovered or settled. The

effect on deferred tax assets and liabilities of a change in tax rate is

recognized in income in the period that includes the enacted dates.

Hedge accounting

The Group utilizes derivative transactions and foreign currency-

denominated long-term loans to hedge against market interest rate

fluctuations and foreign currency fluctuations accompanying

foreign currency-denominated transactions. These transactions are

conducted against items subject to hedging and not used for specu-

lative purposes.

The Group utilizes interest rate swaps to hedge the exposure

associated with long-term loans, and foreign exchange contracts

and long-term loans to hedge the exposure associated with invest-

ments in subsidiaries.

The Group adopts deferral hedge accounting for hedge

transactions. For interest rate swaps that meet requirements for

exceptional accounting treatment, exceptional accounting treatment

is applied.

The Group evaluates the effectiveness of its hedging activities by

comparing cumulative amounts of fluctuations in cash flows of

hedged items, or market price fluctuations of these items, and

cumulative amounts of fluctuations in cash flows of hedging instru-

ments, or market price fluctuations of these instruments, on a

semi-annual basis, using fluctuations of these indicators as a basis.

For items to which significant conditions regarding notional

amounts for hedging instruments and hedged items are identical, and

it can be assumed that at the time of hedging and continuing thereaf-

ter that fluctuations in cash flow will be completely offset, the Group

omits assessment of the effectiveness of hedges.

Revenue recognition

Revenue for rents received from tenants is normalized over the

contract period and recognized in this manner. Revenue from sales

of assets and other properties is recognized when the properties are

delivered and accepted by the buyers.

Appropriation of retained earnings

Under the Companies Act of Japan (the “Companies Act”), the

appropriation of retained earnings with respect to a given fiscal

year is made by resolution of the shareholders at the General

Meeting of Shareholders held subsequent to the close of such

fiscal year.

2 Changes in presentation method

Change in presentation method due to adoption of Partial

Amendments to Accounting Standard for Tax Effect Accounting

The Company has adopted the Partial Amendments to Accounting

Standard for Tax Effect Accounting (ASBJ Statement No. 28, issued

on February 16, 2018) from the beginning of the fiscal year ended

March 31, 2019. Deferred tax assets are now being presented in the

investments and other assets section of the balance sheet, deferred

tax liabilities are now being presented in the non-current liabilities

section of the balance sheet, and notes related to tax effect accounting

(Note 7) have been changed.

As a result, on the consolidated balance sheet as of March 31,

2018, ¥19 million from the ¥228 million of Deferred tax assets within

Current assets is being presented as part of the ¥38 million of

Deferred tax assets within Investments and other assets, ¥209

million from the ¥228 million of Deferred tax assets within Current

assets is being presented as part of the ¥3,228 million of Deferred

tax liabilities within Non-current liabilities, and ¥593 million of

Deferred tax liabilities within Current liabilities is being presented

as part of the ¥3,228 million of Deferred tax liabilities within

Non-current liabilities.

Financial Section


3 US Dollar Amounts

The US dollar amounts shown in the accompanying consolidated

financial statements and notes thereto were translated from the

presented Japanese yen amounts into US dollar amounts at

¥110.99=US$1.00, the rate of exchange prevailing on March 31, 2019,

and were then rounded down to the nearest thousand. As a result,

the totals shown in the accompanying consolidated financial

statements (US dollars) do not necessarily agree with the sums of the

individual amounts. The translation of Japanese yen amounts into US

dollars is included solely for the convenience of readers outside

Japan, and such translation should not be construed as a representa-

tion that the Japanese yen amounts have been, or could in the future

be converted into US dollars at that or any other rate.

4 Inventories

As of March 31, 2019 and 2018, inventories are summarized as follows:


US dollars

2019 2018 2019

Merchandise ¥ 15 ¥11 $135

Raw materials and supplies 94 24 846

Total ¥109 ¥36 $982

5 Short-Term Loans Payable, Corporate Bonds and Long-Term Loans Payable

As of March 31, 2019 and 2018, short-term loans payable and current portion of long-term loans payable consist of the following:


US dollars

2019 2018 2019

Short-term loans payable (Average interest rates: 0.5% in 2019 and 0.5% in 2018) ¥ 5,280 ¥ 5,150 $ 47,571

Current portion of long-term loans payable (Average interest rates: 1.1% in 2019 and 0.7% in 2018) 70,196 61,397 632,453

Total ¥75,476 ¥66,547 $680,025

As of March 31, 2019 and 2018, corporate bonds consist of the following:


US dollars

Coupon rate Maturity 2019 2018 2019

UNIZO Series One Unsecured Corporate Bonds 0.84% November 2020 ¥ 5,000 ¥ 5,000 $ 45,049

UNIZO Series Two Unsecured Corporate Bonds 0.51 May 2021 10,000 10,000 90,098

UNIZO Series Three Unsecured Corporate Bonds 0.85 May 2023 10,000 10,000 90,098

UNIZO Series Four Unsecured Corporate Bonds 0.43 November 2021 10,000 10,000 90,098

UNIZO Series Five Unsecured Corporate Bonds 0.80 November 2023 10,000 10,000 90,098

UNIZO Series Six Unsecured Corporate Bonds 0.99 November 2026 10,000 10,000 90,098

UNIZO Series Seven Unsecured Corporate Bonds 0.52 May 2022 10,000 10,000 90,098

UNIZO Series Eight Unsecured Corporate Bonds 0.89 May 2024 10,000 10,000 90,098

UNIZO Series Nine Unsecured Corporate Bonds 1.20 May 2027 10,000 10,000 90,098

UNIZO Series Ten Unsecured Corporate Bonds 0.75 November 2022 8,000 8,000 72,078

UNIZO Series Eleven Unsecured Corporate Bonds 1.10 November 2024 6,000 6,000 54,058

UNIZO Series Twelve Unsecured Corporate Bonds 1.50 November 2027 5,000 5,000 45,049

Total ¥104,000 ¥104,000 $937,021

As of March 31, 2019 and 2018, long-term loans payable, excluding current portion, consists of the following:


US dollars

2019 2018 2019

L ong-term loans payable (Average interest rates: 1.3% in 2019, 1.5% in 2018, Last due in December 2028) ¥374,758 ¥450,333 $3,376,502

Total ¥374,758 ¥450,333 $3,376,502


As of March 31, 2019 and 2018, secured liabilities and the corresponding assets pledged as collateral are as follows:


US dollars

2019 2018 2019

Secured liabilities

Current portion of long-term loans payable ¥ 38,459 ¥ 30,082 $ 346,508

Long-term loans payable 194,587 268,341 1,753,193

Total ¥233,047 ¥298,424 $2,099,711

Assets pledged as collateral

Other current assets ¥ 40 ¥ 62 $360

Buildings and structures 57,429 57,427 517,424

Buildings and structures in trust 58,894 75,203 530,624

Machinery, equipment, and vehicles 22 59 198

Machinery, equipment, and vehicles in trust 97 40 873

Land 33,874 39,183 305,198

Land in trust 143,487 157,060 1,292,792

Other (Tools, furniture, and fixtures) 354 194 3,189

Intangible assets (Leasehold interest in land) 8,224 8,316 74,096

Total ¥302,426 ¥337,547 $2,724,804

Additionally, investments in capital of subsidiaries of the Company, which are eliminated in consolidation, have been pledged as collateral.

The amounts of such investments are ¥14,038 million ($126,479 thousand) and ¥79,497 million as of March 31, 2019 and 2018, respectively.

Repayment schedule of corporate bonds and long-term loans payable (including current portion) subsequent to March 31, 2019 is as follows:

Corporate bonds Long-term loans payable

Fiscal years ending March 31 Millions of yen Thousands of US dollars Millions of yen Thousands of

US dollars

2020 — — ¥ 70,196 $ 632,453

2021 ¥ 5,000 $ 45,049 54,999 495,531

2022 20,000 180,196 121,621 1,095,783

2023 18,000 162,176 73,460 661,861

2024 and thereafter 61,000 549,599 124,677 1,123,317

Total ¥104,000 $937,021 ¥444,954 $4,008,955

6 Provision for Retirement Benefits

The Group has a retirement benefit plan that provides lump-sum payments in accordance with the Group’s guidelines for retirement benefits.

The Group applies the simplified method in calculating the provision for retirement benefits and retirement benefit expenses.

(1) Changes in provision for retirement benefits


US dollars

2019 2018 2019

Balance at beginning of period ¥ 722 ¥657 $6,505

Retirement benefit expenses 111 93 1,000

Benefits paid (104) (27) (937)

Balance at end of period ¥ 729 ¥722 $6,568

Financial Section


(2) Reconciliation from retirement benefit obligations to liability (asset) for retirement benefits on the consolidated balance sheet


US dollars

2019 2018 2019

Unfunded retirement benefit obligations ¥729 ¥722 $6,568

Total net liability for retirement benefits at end of period ¥729 ¥722 $6,568

Provision for retirement benefits ¥729 ¥722 $6,568

Total net liability for retirement benefits at end of period ¥729 ¥722 $6,568

Total retirement benefit expenses based on the simplified method are ¥111 million ($1,000 thousand) and ¥93 million for the fiscal years ended

March 31, 2019 and 2018, respectively.

7 Income Taxes

The Company and consolidated subsidiaries are subject to corporate tax, inhabitance tax, and enterprise tax.

The significant components of deferred tax assets and liabilities as of March 31, 2019 and 2018 are as follows:


US dollars

2019 2018 2019

Deferred tax assets

Tax loss carryforwards*1 ¥ 2,192 — $ 19,749

Provision for retirement benefits 231 ¥ 228 2,081

Pr ovision for directors’ and audit & supervisory board members’ retirement benefits 115 117 1,036

Enterprise tax payable 322 122 2,901

Provision for employees’ bonuses 70 63 630

Allowance for doubtful accounts 26 15 234

Loss on valuation of securities of subsidiaries 78 78 702

Unrealized loss on investment securities 155 155 1,396

Provision for point card certificates 21 13 189

Provision for environmental measures 56 56 504

Other 563 689 5,072

Subtotal deferred tax assets 3,833 1,540 34,534

Valuation allowance for total deductible temporary differences (417) (439) (3,757)

Subtotal valuation allowance (417) (439) (3,757)

Total deferred tax assets 3,416 1,101 30,777

Deferred tax liabilities

Unrealized gains on investment securities (1,212) (1,504) (10,919)

Gains on valuation of investment securities (607) (615) (5,468)

Other (3,681) (2,170) (33,165)

Total deferred tax liabilities (5,501) (4,290) (49,563)

Net deferred tax liabilities ¥(2,084) ¥(3,189) $(18,776)

*1 Amounts of tax loss carryforwards and related deferred tax assets by carryforward period

As of March 31, 2019

Millions of yen

2019

Within 1 year

Greater than 1 year, within

2 years

Greater than 2 years, within

3 years


4 years


5 years


10 years

Greater than 10 years or

no period limit Total

Tax loss carryforwards(a) — — — — — ¥4 ¥2,188 ¥2,192

Valuation allowance — — — — — — — —

Deferred tax assets — — — — — ¥4 ¥2,188 ¥2,192(b)



2019

Resolution Within 1 year

Greater than 1 year, within

2 years


3 years


4 years


5 years


10 years

Greater than 10 years or

no period limit Total

Tax loss carryforwards(a) — — — — — $36 $19,713 $19,749

Valuation allowance — — — — — — — —

Deferred tax assets — — — — — $36 $19,713 $19,749(b)

(a) Tax loss carryforwards were calculated using the statutory tax rate.(b) Tax loss carryforwards of ¥2,192 million ($19,749 thousand; calculated using the statutory tax rate) have been booked as deferred tax assets of ¥2,192 million

($19,749 thousand). The tax loss carryforwards that gives rise to the deferred tax assets are determined to be recoverable via future expected income, and as such a valuation allowance has not been recognized.

For the fiscal years ended March 31, 2019 and 2018, reconciliations between the statutory income tax rate and the effective income tax rate as a

percentage of income are as follows:2019 2018

Statutory income tax rate — 30.9 %

Non-deductible expenses for tax purpose such as entertainment expenses — 0.8 %

Non-taxable income — (0.3)%

Per capita inhabitance tax — 0.2 %

Changes in valuation allowances — (0.2)%

Other — 1.0 %

Effective income tax rate — 32.4 %

For the fiscal year ended March 31, 2019, the difference between the statutory income tax rate and effective income tax rate after tax effect

accounting is less than 5/100ths of the statutory income tax rate, and thus the note for this period is omitted.

8 Shareholders’ Equity

Under the Companies Act and its regulations, the entire amount paid

for new shares is required to be designated as capital stock.

However, a company may, by a resolution of the Board of

Directors, designate an amount not exceeding one-half of the

amount paid for the new shares as capital reserve, which is included

in capital surplus.

The Companies Act provides that an amount equal to 10% of the

amount to be disbursed as dividends be transferred to the capital

reserve (which is part of capital surplus) or the legal reserve (which is

part of retained earnings) until the sum of the capital reserve and the

legal reserve equals 25% of the capital stock account. The capital

reserve amounted to ¥31,978 million ($288,116 thousand) and ¥26,078

million and the legal reserve amounted to ¥126 million ($1,135 thousand)

and ¥126 million as of March 31, 2019 and 2018, respectively. Dividend

distributions can be made at any time based on resolution at the

General Meeting of Shareholders, or by the Board of Directors if

certain conditions are met, but neither the capital reserve nor the

legal reserve is available for distribution of dividends.

Changes in the outstanding number of shares of common stock and treasury stock for the fiscal years ended March 31, 2019 and 2018 are as follows:Shares

2019 2018

Common stock - issued

Shares at beginning of period 28,520,700 23,770,700

Increase 5,700,000 4,750,000

Shares at end of period 34,220,700 28,520,700

Treasury stock

Shares at beginning of period 301 301

Increase 104 —

Shares at end of period 405 301

For the fiscal year ended March 31, 2019, the increase in number of shares of common stock was due to issuance of new shares of

4,957,000 shares via a public offering in May 2018 and issuance of new shares of 743,000 shares via a third-party allotment in June 2018.

For the fiscal year ended March 31, 2018, the increase in number of shares of common stock was due to issuance of new shares of

4,140,000 shares via a public offering in July 2017 and issuance of new shares of 610,000 shares via a third-party allotment in July 2017.

Financial Section


For the fiscal year ended March 31, 2019, the increase of 104 shares of treasury stock was due to purchase of less-than-trading-unit shares.

Dividends paid to shareholders were as follows:

During the fiscal year ended March 31, 2019

Resolution Type of sharesAmount

(Millions of yen)

Amount (Thousands of

US dollars)Amount per share (Yen)

Amount per share

(US dollars) Record date Effective date

J une 20, 2018 General Meeting of Shareholders Common stock ¥1,140 $10,271 ¥40 $0.36 March 31,2018 June 21,2018

O ctober 29, 2018 Board of Directors Common stock ¥1,368 $12,325 ¥40 $0.36

September 30, 2018

November 29, 2018

During the fiscal year ended March 31, 2018

Resolution Type of sharesAmount

(Millions of yen)Amount per share (Yen) Record date Effective date

J une 23, 2017 General Meeting of Shareholders Common stock ¥950 ¥40 March 31, 2017 June 26, 2017

O ctober 26, 2017 Board of Directors Common stock ¥1,140 ¥40

September 30, 2017

November 29, 2017

Dividends with a record date during the fiscal year but with an effective date subsequent to the fiscal year were as follows:

For the year ended March 31, 2019

ResolutionType of shares Source

Amount (Millions of yen)

Amount (Thousands of

US dollars)Amount per share (Yen)

Amount per share (US

dollars) Record date Effective date

J une 18, 2019 General Meeting of Shareholders

Common stock

Retained earnings ¥1,539 $13,866 ¥45 $0.40 March 31, 2019 June 19, 2019

9 Amounts per Share

Yen US dollars

2019 2018 2019

Net income per share ¥ 356.56 ¥ 313.24 $ 3.21

Net assets per share 3,306.72 3,039.54 29.79

Under “Accounting Standard for Earnings per Share” (Accounting

Standard Board of Japan [“ASBJ”] Statement No. 2), net income per

share is calculated based on the net income available for distribution

to shareholders of common stock and the weighted average number

of shares of common stock outstanding during the respective years.

For the fiscal years ended March 31, 2019 and 2018, the weighted

average number of shares of common stock was 33,383,887 and

27,098,207, respectively. Diluted net income per share for 2019 and

2018 has not been presented because there were no items with

dilutive effect for those years.

Net assets per share is calculated based on the net assets

available to shareholders of common stock and the number of shares

of common stock outstanding, net of the number of shares of

treasury stock, at the end of the year.

10 Leases

The Group leases office buildings and commercial properties and earns income on these leases. Future minimum lease income subsequent to

March 31, 2018 from non-cancellable operating leases is summarized as follows:


US dollars

Fiscal years ending March 31 2019 2019

2020 ¥16,736 $150,788

2021 and thereafter 73,127 658,861

Total ¥89,864 $809,658


11 Contingent Liabilities

Contingent liabilities as of March 31, 2019 are as follows:


US dollars

2019 2019

Guarantees on employees’ mortgages ¥0 $0

Total ¥0 $0

12 Selling, General, and Administrative Expenses

Major items included in Selling, general, and administrative expenses for the fiscal years ended March 31, 2019 and 2018 are as follows:


US dollars

2019 2018 2019

Sales commission ¥ 7 ¥ 7 $ 63

Advertising expenses 113 94 1,018

Directors’ compensation 700 994 6,306

Salaries and allowances 2,443 1,974 22,010

Provision for bonuses 190 168 1,711

Retirement benefit expenses 91 77 819

Provision for shareholder benefits 119 239 1,072

Commission fee 691 930 6,225

Other 2,034 1,974 18,325

Total ¥6,392 ¥6,462 $57,590

13 Other Income (Expenses)

The components of Gain on sales of property and equipment, and intangible assets for the fiscal years ended March 31, 2019 and 2018 are as follows:


US dollars

2019 2018 2019

Buildings and structures ¥ 4,028 — $ 36,291

Buildings and structures in trust (9,323) ¥238 (83,998)

Land 3,196 — 28,795

Land in trust 20,660 773 186,142

Intangible assets 810 (451) 7,297

Total ¥19,372 ¥560 $174,538

The components of Loss on sales of property and equipment, and intangible assets for the fiscal years ended March 31, 2019 and 2018 are as follows:


US dollars

2019 2018 2019

Buildings and structures ¥ (8,121) — $ (73,168)

Buildings and structures in trust (512) — (4,613)

Land (5,506) — (49,608)

Land in trust (302) — (2,720)

Total ¥(14,442) — $(130,119)

Financial Section


The components of Loss on disposal of property and equipment, and intangible assets for the fiscal years ended March 31, 2019 and 2018 are as

follows:

Millions of yen Thousands of US dollars

2019 2018 2019

Buildings and structures in trust ¥(12) — $(108)

Other (Tools & equipment) (21) — (189)

Disposal fees (2) — (18)

Total ¥(36) — $(324)

The components of Other, net under Other income (expenses) for the fiscal years ended March 31, 2019 and 2018 are as follows:


2019 2018 2019

Other income, net ¥ 49 ¥ 32 $ 441

Other expenses, net (170) (339) (1,531)

Total ¥(121) ¥(306) $(1,090)

14 Financial Instruments

Overview

(1) Management policy on financial instruments

The Group borrows primarily funds and short-term working

capital needed for capital investment in the Real Estate

Business and the Hotel Business from financial institutions. The

Group utilizes derivative instruments to reduce interest rate

fluctuation risk or foreign currency fluctuation risk that is

associated with transactions denominated in foreign curren-

cies, and does not enter into derivatives for speculative

purposes.

(2) Financial instruments and associated risks

Notes and accounts receivable - trade are exposed to the credit

risk of customers. Foreign currency denominated transactions,

which arise from overseas operations, are exposed to market

risk resulting from fluctuations in foreign currency exchange

rates. Investment securities are exposed to the risk of market

price fluctuations.

The Group obtains loans primarily as funds needed for

capital investments. Loans with floating rates of interest are

exposed to the risk of interest rate fluctuations.

For derivative transactions, the Group uses interest rate

swaps to hedge against the interest rate fluctuations.

(3) Risk management systems for financial instruments

(a) Credit risk management (counterparty credit risk)

When starting business with a new customer, the Group

carries out a credit check. The Group also monitors collec-

tions from customers continuously.

(b) Market risk management (fluctuation risk of foreign exchange

rates, interest rates and others)

The fair values of investment securities and the financial

position of the issuers are monitored and reported to the

Board of Directors and related divisions periodically.

The conditions of the derivative instruments for

transactions exposed to interest rate risk and foreign cur-

rency risk are reported to the Board of Directors.

(c) Liquidity risk management related to fund procurement (risk

that payments cannot be made by due dates)

The Group manages liquidity risk by the Finance Department

timely preparing and updating cash management plans

based on reports from each division and consolidated

subsidiaries.

(4) Supplementary explanation of the fair value of financial

instruments

The fair values of financial instruments are based on quoted

market prices, if available, or reasonably estimated values if no

quoted market prices are available. Since certain assumptions

are reflected in estimating the fair values, the fair values may

differ if different assumptions are used.


Fair values of financial instruments

Carrying values and fair values of financial instruments listed on the consolidated balance sheet as of March 31, 2019 and 2018 are as follows:


2019 2019

Carrying value Fair value Difference Carrying value Fair value Difference

(1) Cash and deposits ¥122,006 ¥122,006 — $1,099,252 $1,099,252 —

(2) N otes and accounts receivable - trade 3,983 3,903 — 35,886 35,165 —

A llowance for doubtful accounts*1 (80) — (720) —

(3) I nvestment securities 7,235 7,235 — 65,186 65,186 —

(4) Derivative transactions*2 245 245 — 2,207 2,207 —

Total assets ¥133,391 ¥133,391 — $1,201,828 $1,201,828 —

(5) Short-term loans payable ¥ 5,280 ¥ 5,280 — $ 47,571 $ 47,571 —

(6) Corporate bonds 104,000 103,832 ¥(167) 937,021 935,507 $(1,504)

(7) Long-term loans payable*3

L oans with floating interest rate 173,899 173,899 — 1,566,798 1,566,798 —

Loans with fixed interest rate 271,054 271,025 (28) 2,442,147 2,441,886 (252)

Total liabilities ¥554,234 ¥554,037 ¥(196) $4,993,548 $4,991,774 $(1,765)

*1 The amount represents the allowance for doubtful accounts that was provisioned for the notes and accounts receivable - trade and was netted against such receivables when estimating the fair value.

*2 Net credit and debits stemming from derivative transactions are displayed in net amounts.*3 The amount includes current portion of long-term loans payable.

Millions of yen

2018

Carrying value Fair value Difference

(1) Cash and deposits ¥ 46,115 ¥ 46,115 —

(2) N otes and accounts receivable - trade 4,158 4,115 —

A llowance for doubtful accounts*1 (43)

(3) I nvestment securities 8,704 8,704 —

(4) Derivative transactions*2 1,704 1,704 —

Total assets ¥ 60,640 ¥ 60,640 —

(5) Short-term loans payable ¥ 5,150 ¥ 5,150 —

(6) Corporate bonds 104,000 103,266 ¥ (733)

(7) Long-term loans payable*3

Loans with floating interest rate 250,309 250,309 —

Loans with fixed interest rate 261,421 260,052 (1,369)

Total liabilities ¥620,880 ¥618,778 ¥(2,102)

*1 The amount represents the allowance for doubtful accounts that was provisioned for the notes and accounts receivable - trade and was netted against such receivables when estimating the fair value.

*2 Net credit and debits stemming from derivative transactions are displayed in net amounts.*3 The amount includes current portion of long-term loans payable.

Financial Section


Note 1. Fair value measurement of financial instruments and notes on investment securities and derivative transactions

(1) Cash and deposits, (2) Notes and accounts receivable - trade

Fair value is based on the carrying amount as the carrying amount approximates fair value, and because of the short maturity of these

instruments.

(3) Investment securities

Fair values of investment securities are based on quoted prices on exchanges.

(4) Derivative transactions

Fair value is measured based on prices obtained from financial institutions.

(5) Short-term loans payable

Fair value is based on the carrying amount as the carrying amount approximates fair value, and because of the short maturity of these

instruments.

(6) Corporate bonds

Fair value is measured based on market prices.

(7) Long-term loans payable

Long-term loans payable with floating interest rates, which are renewed periodically, are stated at their carrying values as their carrying

values approximate their fair values. The fair value of long-term loans payable with fixed interest rates are estimated as the present value of

future cash flows discounted using the current interest rate for a similar loan of comparable maturity.

Note 2. Carrying values of financial instruments for which determination of fair value is deemed extremely difficult


US dollars

As of March 31 2019 2018 2019

Investment securities - unlisted equity securities ¥ 4,166 ¥ 4,277 $ 37,534

Security and guarantee deposits received from tenants 11,384 17,190 102,567

The fair values of these items are deemed extremely difficult to determine since no quoted market prices are available and their future cash flows

cannot be estimated.

Note 3. Redemption schedule after March 31, 2019 for monetary claims and for securities with terms to maturity


2019 2019

1 year or less Over 1 year 1 year or less Over 1 year

Cash and deposits ¥122,006 — $1,099,252 —

Notes and accounts receivable - trade 3,983 — 35,886 —

Total ¥125,990 — $1,135,147 —


15 Investment Securities

The carrying value, cost, and their difference for available-for-sale securities with readily determinable fair values as of March 31, 2019 and 2018

are summarized in the below tables. Unlisted equity securities and investments in partnerships are not included in the tables below since the fair

values of such investments are deemed extremely difficult to determine.


2019 2019

Carrying value Cost Difference Carrying value Cost Difference

S ecurities whose carrying value exceeds their cost

Equity securities ¥7,235 ¥3,276 ¥3,959 $65,186 $29,516 $35,669

S ecurities whose cost exceeds their carrying value

Equity securities — — — — — —

Total ¥7,235 ¥3,276 ¥3,959 $65,186 $29,516 $35,669

Millions of yen

2018

Carrying value Cost Difference

S ecurities whose carrying value exceeds their cost

Equity securities ¥8,704 ¥3,661 ¥5,042

S ecurities whose cost exceeds their carrying value

Equity securities — — —

Total ¥8,704 ¥3,661 ¥5,042

Available-for-sale securities sold during the fiscal years ended March 31, 2019 and 2018 were as follows:


2019 2019

Sales proceeds Aggregate gain Aggregate loss Sales proceeds Aggregate gain Aggregate loss

Equity securities ¥670 ¥174 — $6,036 $1,567 —

Total ¥670 ¥174 — $6,036 $1,567 —

Millions of yen

2018

Sales proceeds Aggregate gain Aggregate loss

Equity securities ¥2,229 ¥578 ¥(76)

Total ¥2,229 ¥578 ¥(76)

For the years ended March 31, 2019 and 2018, there were no investment securities for which the Company recognized impairment loss.

16 Supplemental Cash Flow Information

The following table represents a reconciliation of cash and deposits in the consolidated balance sheet and cash and cash equivalents in the

consolidated statement of cash flows as of March 31, 2019 and 2018:


US dollars

2019 2018 2019

Cash and deposits ¥122,006 ¥46,115 $1,099,252

Term deposits with maturity greater than three months (22,701) — (204,531)

Cash and cash equivalents ¥ 99,305 ¥46,115 $ 894,720

Financial Section


17 Segment Information

1. Overview of reportable segments

The Group’s reportable segments are components of the Group

about which separate financial information is available and whose

operating results are regularly evaluated by the Board of Directors

to make decisions about how resources are allocated among the

Group and assess its performance.

In the Real Estate Business, the Group owns, leases, and

manages office buildings and other assets.

In the Hotel Business, the Group owns and operates affordable

urban hotels.

2. Calculation method of revenue from operations,

income (loss), assets, liabilities, and other items by

reportable segment

The accounting policies of each reportable segment are consistent

with those disclosed in Note 1 “Significant Accounting Policies”,

except for measurement of inventories.

Inventories in segment information are stated at cost, before

adjusting book values to net selling values where those values have

declined below cost. Segment income is measured on a basis of

operating income. Intersegment sales and transfers are accounted

for based on prevailing market prices.

As noted in Note 2 “Changes in Presentation Method”, the

Company has adopted the Partial Amendments to Accounting

Standard for Tax Effect Accounting (ASBJ Statement No. 28, issued

on February 16, 2018). Segment assets presented for the fiscal year

ended March 31, 2018 reflect these changes.

Information by reportable segment for the years ended March 31, 2019 and 2018 is summarized as follows:

Millions of yen

2019

Reportable segmentTotal Adjustments

(Note 1)Consolidated

(Note 2)Real Estate Business Hotel Business


Revenue from external customers ¥ 43,122 ¥ 12,931 ¥ 56,053 — ¥ 56,053

Intersegment sales and transfers 240 43 284 ¥ (284) —

Total ¥ 43,363 ¥ 12,974 ¥ 56,337 ¥ (284) ¥ 56,053

Segment income ¥ 16,405 ¥ 1,981 ¥ 18,386 ¥ (764) ¥ 17,622

Segment assets ¥545,953 ¥109,879 ¥655,832 ¥37,720 ¥693,552

Other items

Depreciation and amortization ¥ 9,139 ¥ 2,524 ¥ 11,663 ¥ 50 ¥ 11,714

Increase in property and equipment, and intangible assets 4,529 14,217 18,747 65 18,812


2019





Revenue from external customers $ 388,521 $116,505 $ 505,027 $ 505,027

Intersegment sales and transfers 2,162 387 2,558 $ (2,558) —

Total $ 390,692 $116,893 $ 507,586 $ (2,558) $ 505,027

Segment income $ 147,806 $ 17,848 $ 165,654 $ (6,883) $ 158,771

Segment assets $4,918,938 $989,990 $5,908,928 $339,850 $6,248,779

Other items

Depreciation and amortization $ 82,340 $ 22,740 $ 105,081 $ 450 $ 105,541


Notes: 1. Details of “Adjustments” are as follows: (1) Included in the segment income adjustment of ¥(764) million ($[6,883] thousand) is an intersegment elimination of ¥2,344 million ($21,119 thousand) and corporate

expenses of ¥ (3,108) million ($[28,002] thousand) not allocated to each reportable segment. Corporate expenses mainly comprise general administrative expenses not allocated to reportable segments.

(2) Included in the segment assets adjustment of ¥37,720 million ($339,850 thousand) is an elimination of ¥(399,863) million ($[3,602,693] thousand) relating to the parent’s intercompany receivables, an elimination of ¥(10,292) million ($[92,729] thousand) relating to the parent’s investment in capital of subsidiaries, and corporate assets of ¥447,876 million ($4,035,282 thousand) not allocated to each reportable segment.

2. Segment income is reconciled and agrees to the operating income presented on the consolidated financial statements.


Millions of yen

2018





Revenue from external customers ¥ 42,261 ¥ 10,200 ¥ 52,462 — ¥ 52,462

Intersegment sales and transfers 197 18 215 ¥ (215) —

Total ¥ 42,458 ¥ 10,219 ¥ 52,677 ¥ (215) ¥ 52,462

Segment income ¥ 16,565 ¥ 1,828 ¥ 18,394 ¥ (823) ¥ 17,570

Segment assets ¥618,548 ¥100,059 ¥718,608 ¥19,859 ¥738,467

Other items

Depreciation and amortization ¥ 9,059 ¥ 1,650 ¥ 10,709 ¥ 67 ¥ 10,776


Notes: 1. Details of “Adjustments” are as follows: (1) Included in the segment income adjustment of ¥(823) million is an intersegment elimination of ¥2,506 million and corporate expenses of ¥(3,329) million not allocated

to each reportable segment. Corporate expenses mainly comprise general administrative expenses not allocated to reportable segments. (2) Included in the segment assets adjustment of ¥19,859 million is an elimination of ¥(348,582) million relating to the parent’s intercompany receivables, an elimination

of ¥(10,292) million relating to the parent’s investment in capital of subsidiaries, and corporate assets of ¥378,734 million not allocated to each reportable segment. 2. Segment income is reconciled and agrees to the operating income presented on the consolidated financial statements.

Related Information

1. Information by product and service

Information by product and service is omitted, as similar information is disclosed on segment information.

2. Information by geographic locations

(1) Revenue from operations


2019 2019

Japan United States Total Japan United States Total

¥32,443 ¥23,609 ¥56,053 $292,305 $212,712 $505,027

Millions of yen

2018

Japan United States Total

¥30,647 ¥21,814 ¥52,462

(2) Property and equipment


US dollars

2019 2019

Japan United States Total Japan United States Total

¥325,032 ¥215,258 ¥540,290 $2,928,480 $1,939,435 $4,867,916

Millions of yen

2018

Japan United States Total

¥373,076 ¥284,871 ¥657,947

Financial Section


3. Information by primary customers

Not applicable, as there were no customers accounting for more than 10% of the revenue from operations presented in the Consolidated

Statement of Income.

Impairment loss by reportable segments

Not applicable

Amortization amount and unamortized balance of goodwill by reportable segments

Not applicable

Gain from negative goodwill by reportable segments

Not applicable

18 Investment and Rental Properties

Certain subsidiaries of the Company own commercial properties,

including office buildings for rent primarily in the Tokyo metropoli-

tan area.

For the fiscal year ended March 31, 2019, operating income from

investment and rental properties totaled ¥17,162 million ($154,626

thousand; revenue from these investment and rental properties is

included in revenue from operations, and expenses are included in

cost of revenue from operations or selling, general, and administra-

tive expenses). Gain on sales of property and equipment, and

intangible assets from these investment and rental properties, which

is included in other income (expenses), amounted to ¥18,555 million

($167,177 thousand). Loss on sales of property and equipment, and

intangible assets, which is included in other income (expenses),

amounted to ¥(14,442) million ($[130,119] thousand), and loss on

disposal of property and equipment, and intangible assets, which is

included in other income (expenses), amounted to ¥(14) million

($[126] thousand).

For the fiscal year ended March 31, 2018, operating income from

investment and rental properties totaled ¥17,418 million (revenue

from these investment and rental properties is included in revenue

from operations, and expenses are included in cost of revenue from

operations or selling, general, and administrative expenses). Gain on

sales of property and equipment, and intangible assets from these

investment and rental properties, which is included in other income

(expenses), amounted to ¥560 million.

The carrying values, net changes of the carrying values and appraised values of these investment and rental properties for the fiscal years ended

March 31, 2019 and 2018 are as follows:


US dollars

2019 2018 2019

Carrying value

Beginning of the period ¥ 563,490 ¥479,645 $5,076,943

Net changes (129,508) 83,844 (1,166,843)

End of the period ¥ 433,981 ¥563,490 $3,910,090

Appraised value—end of the period ¥ 570,429 ¥677,259 $5,139,463

Notes: 1. The carrying values on the consolidated balance sheet include acquisition costs of investment and rental properties, net of accumulated depreciation, and the balance of leasehold interest in land.

2. For the fiscal years ended March 31, 2019, net changes primarily present sales of office buildings for rent of ¥133,877 million ($1,206,207 thousand). For the fiscal years ended March 31, 2018, net changes primarily present acquisition of office buildings for rent of ¥108,348 million.

3. Appraised values as of March 31, 2019 and 2018 are based on appraisals undertaken for all subject properties by external real estate appraisers (DAIWA REAL ESTATE APPRAISAL CO., LTD., Kudan Urban Appraisal Co., Ltd., TOKYO KANTEI Co., Ltd., The Tanizawa Sogo Appraisal Co., Ltd., Chuo Real Estate Appraisal Co., Ltd., JLL Morii Valuation & Advisory K.K., Rich Appraisal Institute co., Ltd., BBG, Inc., and CBRE, Inc.).


19 Asset Retirement Obligations

Because the Group owns certain asbestos-treated property and

equipment, the Group assumes obligations for asbestos removal

during future demolition work.

Given that a study to measure the expected level of concentration of

asbestos requires a partial dismantlement of properties, it is

impracticable to perform such study for the properties that are

currently leased. In addition, it is difficult to estimate the timing of

settlement of these obligations based on estimates of the physical

useful lives of the assets as they are subject to deterioration, and it is

not possible to estimate the timing of demolition without a detailed

business plan. Therefore, the Group does not recognize asset retire-

ment obligations since it is not possible to reasonably estimate the

amount of the obligations.

20 Other Comprehensive Income

For the years ended March 31, 2019 and 2018, recycling and effect of deferred income tax on other comprehensive income are summarized as

follows:


2019 2018 2019

Change in unrealized gains (losses) on investment securities

Amount increased for the period ¥ (925) ¥ 235 $ (8,334)

Recycling (158) (577) (1,423)

Amount before the effect of deferred income tax (1,083) (341) (9,757)

Effect of deferred income tax 292 103 2,630

Net change in unrealized gains (losses) on investment securities (791) (237) (7,126)

Change in deferred gains (losses) on hedges

Amount increased for the period (309) 1,581 (2,784)

Recycling (1,150) — (10,361)

Amount before the effect of deferred income tax (1,459) 1,581 (13,145)

Effect of deferred income tax 447 (509) 4,027

Net change in deferred gains (losses) on hedges (1,012) 1,072 (9,117)

Foreign currency translation adjustments

Amount increased for the period 7,102 (8,086) 63,987

Net change in total other comprehensive income (loss) ¥ 5,298 ¥(7,251) $ 47,734

21 Subsequent Events

Not applicable

Financial Section


Independent Auditor’s Report



Headquarters

2-10-9, Hatchobori, Chuo-ku, Tokyo 104-0032

Japan

TEL: +81-3-3523-7531

Website

https://www.unizo-hd.co.jp/en/

Established

September 1, 1959

Capital Stock (as of March 31, 2019)

¥32,062 million

Employees (as of March 31, 2019)

386 (Group)

IR Contact

2-10-9, Hatchobori, Chuo-ku, Tokyo 104-0032

Japan

TEL: +81-3-3523-7536

History

Sept. 1959Daisho Fudosan Company, Limited, founded in Chuo-ku, Tokyo

June 1972 Company name changed to Jowa Kosan Co., Ltd.

Mar. 2004Group reorganized and Jowa Holdings Company, Limited launched. Transitioned to holding company structure

June 2009 Listed on 2nd Section, Tokyo Stock Exchange

Feb. 2011 Listed on 1st Section, Tokyo Stock Exchange

July 2015Company name changed to UNIZO Holdings Company, Limited

Corporate Information


Stock Listing

Tokyo Stock Exchange (First Section)

Securities Code

3258

Common Stock (as of March 31, 2019)

Authorized: 50,000,000 shares

Issued: 34,220,700 shares

Number of Shareholders

(as of March 31, 2019)

33,534

Trading Unit

100 shares

Transfer Agent and Registrar

Mizuho Trust & Banking Co., Ltd.

2-1, Yaesu 1-chome, Chuo-ku,

Tokyo 103-8670

Japan

Rating Information ( JCR)

(announced on December 13, 2018)

Long-Term Senior Credit Rating: BBB+

Rating Outlook: Stable

Breakdown of Shareholders (as of March 31, 2019)

Stock Price and Trading Volume (as of March 31, 2019)

(Yen) (1,000 shares)

Major Shareholders (as of March 31, 2019)

Japanese institutions (non-financial) 31.57%

Financial institutions 18.11%

Individuals and others 28.24%

Foreign investors 17.25%

Securities companies 4.80%

Treasury shares 0.00%

17.3 18.3 19.30

10,000

20,000

60,000

70,000

0

1,000

2,000

30,0003,000

4,000

6,000

50,0005,000

7,000

40,000

Name Shares held(1,000 shares)

Ownership percentage

(%)

H.I.S. Co., Ltd. 1,549 4.52

The Kyoritsu Co., Ltd. 1,476 4.31

Nippon Steel Kowa Real Estate Co., Ltd.* 1,383 4.04

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,314 3.84

NITTO BOSEKI CO., LTD. 1,301 3.80

SUGA Co., Ltd. 1,136 3.32

Japan Trustee Services Bank, Ltd. (Trust Account)

913 2.67

IBJ Leasing Company, Limited 883 2.58

TOKO ELECTRICAL CONSTRUCTION CO., LTD. 640 1.87

BARCLAYS BANK PLC A/C CLIENT SEGREGATED A/C PB CAYMAN CLIENTS

591 1.72

* The Japanese name of Nippon Steal Kowa Real Estate Co., Ltd. was changed on April 1, 2019 (English name remains unchanged)

Investor Information


Annual R

eport 2019 U

NIZO

Holdings C

ompany, Lim

ited

A vegetable-based ink has beenused, containing less than 1%petroleum-based solvents toprevent atmospheric pollutionby minimizing emissions ofvolatile organic compounds.


2-10-9, Hatchobori, Chuo-ku, Tokyo 104-0032, Japan https://www.unizo-hd.co.jp/en/

Printed in Japan

Annual Report 2019UNIZO Holdings Company, Limited


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