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A N N U A L R E V I E W 2 0 1 5

Fiscal Year Ended December 31, 2015

Tokyo Tatemono Co., Ltd.

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MANAGEMENT REVIEW

Operating EnvironmentIn Japan’s economy in FY2015 some sectors performed weakly in the second half of the year due in part to a sub-stantial swing in stock prices in and after August and a downturn in emerging economies. Nonetheless, Japan’s overall economy for the full year continued a modest trend toward recovery, partly attributable to the government’s economic policies and the Bank of Japan’s monetary easing measures. In the real estate industry, the rental office market con-tinued to move toward recovery, owing in part to a further decline in vacancy rates and a pronounced rise in the level of rent. In the residential housing market, demand remained brisk in central Tokyo. However, signs of market polarization have emerged due in part to a slight weakening of the subur-ban market. Meanwhile, in the real estate investment mar-ket, property transactions still trended at a high level. In central Tokyo, overheated competition to acquire real estate led to an expansion of the investment area in major regional cities.

ResultsAmid this business environment, in the fiscal year under review Tokyo Tatemono attained year-on-year growth in revenues and operating income on a consolidated basis. Owing in part to the completion of construction of large-scale condo projects, the Company posted revenue from operations of ¥260,012 (US$ 2,159,300 thousand) million, a rise of 9.7% from ¥ 237,049 million in the previous year, and operating income of ¥34,439 million (US$ 286,004 thousand), a growth of 12.7% from ¥30,559 million in the previous year. Meanwhile, consolidated recurring income totaled ¥24,796 million (US$ 205,929 thousand), an increase of 43.2% from ¥17,317 million. However, net income was ¥16,359 million (US$ 135,863 thousand), a decrease of 80.3% from ¥82,944 million in the previous year, reflecting the disappearance of the gain on sale of fixed assets posted in the same period a year earlier owing to the partial sale of the Otemachi Tower (Chiyoda Ward, Tokyo). In addition, in the fiscal year under review, Tokyo Tatemono Real Estate Sales Co., Ltd. was converted into a wholly-owned subsidiary and its housing sales business was integrated into the Company. Meanwhile the group’s real estate solution services were integrated into the wholly-owned subsidiary. Consequently, the Company made progress with its cross-organizational restructuring and thereby improved its customer services and enhanced its earnings strength.

OutlookJapan’s economy is expected to gradually expand as Abenomics, the three-pronged reform approach, takes hold. At the same time, however, there is risk of negative impact from lurking concerns that require close monitoring. This includes a slowdown in economies around the world, mainly emerging economies, due to the US rate hike, economic trends in China, the Bank of Japan’s introduction of negative interest rates, and an increase to the consumption tax. Consequently, economic trends remain vulnerable to an unpredictable economic environment. In the real estate industry in Japan, there is anticipation of a full-fledged rise in office rents as the vacancy rate in the rental office market continues to trend downward. Meanwhile, in the residential housing market, although demand is forecast to remain solid in central Tokyo, demand in the suburbs is likely to trend somewhat weakly. In light of this, there is risk of an ongoing polarization of the residential housing market.

FoundationsAmid this business environment, we aim to actively promote various new initiatives. We plan to work as a group to further strengthen our frontline capabilities in the commercial properties segment, contribute to the improvement of customer services by integrating development, sales, and management functions in the residential housing business, and strengthen the Brillia renovation business (including the acquisition and resale of preowned condos). In the other segment, our policy is to aggressively expand operations in the parking lot, leisure, and senior housing and services businesses, based on the improvement of customer services. In the brokerage business, we aim to move forward by further improving asset solution functions that leverage group synergies. FY2016 is the second year of our medium-term business plan. Going forward we plan to continue to contribute to society through urban development and strengthen our services via organic cooperation in a diverse range of businesses. We aim to diligently work toward our goal of becoming a corporate group that continues to be the leading choice of customers by delivering amazing value.

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FINANCIAL REVIEW

Revenue and IncomeCommercial PropertiesIn the Commercial Properties, to ensure the customers experience safety, security and comfort, we improved services and customer satisfaction by strengthening our field capabilities and created earnings opportunities via group synergies based on our motto of HUMAN BUILDING—People are always in the middle. In addition, we steadily promoted projects for new growth, including participating in the project for utilizing the current Toshima ward government offices (Toshima Ward, Tokyo) and starting urban planning procedures for the Urban redevelopment PJ of Yaesu 1-chome East Area in front of Tokyo Station. In the consolidated fiscal year under review, the Company posted solid performance in leasing of buildings and building management services owing in part to new operations at Tokyo Tatemono Nihonbashi Building (Chuo Ward, Tokyo) and FUNDES Suidobashi, a new compact urban commercial facility (Chiyoda Ward, Tokyo). However, the Company posted a decline in revenue and income due in part to negative impact from the sale of real estate for sale at the end of FY2015. Consequently, revenue from operations was ¥96,942 million (US$ 805,073 thousand) (down 11.3% from ¥109,283 million for the previous fiscal year) and operating income was ¥27,222 million (US$ 226,076 thousand) (down 7.5% from ¥29,444 million for the previous fiscal year).

Residential DevelopmentIn Residential Development, the goal was the branding of Brillia as a communication tool total brand communication using Brillia. The Company improved customer services and enhanced its earnings strength by fortifying its system that integrates development, sales and management. In the fiscal year under review, the Company completed construction of several large-scale condominium complexes in central Tokyo. Consequently, it posted sales for “Brillia Tower Ikebukuro” (Toshima Ward, Tokyo), “Brillia Ariake City Tower” (Koto Ward, Tokyo), “SKYZ TOWER & GARDEN” (Koto Ward, Tokyo). Accordingly, revenue and income rose. In light of this, revenue from operations increased by 16.4%, from ¥84,240 million for the previous fiscal year to ¥98,076 million (US$ 814,490 thousand). Operating income increased from ¥3,714 million for the previous fiscal year to ¥10,465 million (US$ 86,911 thousand), up 181.8%.

Other segmentIn the Other Business, in the brokerage business, the Company created a one-stop solutions platform for CRE SALES (propose effective use of real estate used and owned by corporations) by integrating its real estate consulting and solutions functions in Tokyo Tatemono Real Estate Sales. In the parking lot business, measures were carried out to further strengthen earnings power, in part by expanding its operations via M&A. In the leisure business, which includes hotels, golf courses, and spa facilities, group companies were integrated to improve services, and energies were poured into the business using unique knowhow, including hotels where pet owners can bring their dogs. Moreover, in the senior housing and services business, the Company nurtured new sources of profit, including opening Grapes Omori-nishi (Ota Ward, Tokyo), Grapes Felicity Totsuka (Totsuka Ward, Yokohama), and Grapes Kawasaki Shinmachi (Kawasaki Ward, Kawasaki), which are residences for elderly people with services. In the fiscal year under review, there was contribution to revenue growth owing to the conversion of MAOS Co., Ltd. into a consolidated subsidiary in the parking lot business, and sales to a private-placement REIT of real estate for sale in the brokerage business. However, income declined due in part to the posting of valuation losses on real estate for sale in the leisure business. Reflecting the above performance, revenue from operations was ¥64,992 million (US$ 539,737 thousand) (up 49.3% from ¥43,526 million for the previous fiscal year) and operating income was ¥3,024 million (US$ 25,119 thousand) (down 22.9% from ¥3,922 million for the previous fiscal year).

Analysis of ProfitabilityIn the consolidated fiscal year under review, the Company posted operating revenue of ¥260,012 million (US$ 2,159,300 thousand), a rise of ¥22,962 million versus a year earlier, and operating income of ¥34,439 million (US$ 286,004 thousand), a growth of ¥3,879 million, reflecting in part the posting of sales of high-margin large-scale condominium projects and property sales in the real estate solution services business. Meanwhile, ordinary income totaled ¥24,796 (US$ 205,929 thousand) million, an increase of ¥7,479 million, owing in part to a decline in financial costs. Extraordinary income declined sharply year-on-year, attributable in part to the disappearance of gain on the sale of fixed assets due to the partial sale of Otemachi Tower in

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the previous fiscal year. Meanwhile, under extraordinary loss, the Company recorded an asset impairment loss in part reflecting the impairment of a leased building and golf course facilities. Consequently, net income stood at ¥16,359 (US$ 135,863 thousand) million, a decline of ¥66,584 million versus the previous year.

Financial PositionAssetsTotal assets at the end of the fiscal year under review were ¥1,297,112 million (US$ 10,772,016 thousand), a decrease of ¥22,352 million from the end of the previous fiscal year. The major factors were a decline in cash and deposits, a decrease in fixed assets owing to a change in the scope of consolidation, and the acquisition of real estate for sale.

LiabilitiesTotal liabilities at the end of the fiscal year under review were ¥984,581 million (US$ 8,176,569 thousand), down ¥29,075 million from the end of the previous fiscal year. This was primarily attributable to a decline in interest-bearing debt and an increase in investments received for real estate specific joint enterprises. The balance of interest-bearing debt (excluding lease obligations) was ¥707,356 million (US$ 5,874,325 thousand) (a decrease of ¥40, 916 million from the end of the previous fiscal year).

Net assetsNet assets at the end of the fiscal year under review were ¥312,530 million (US$ 2,595,447 thousand), up ¥6,722 million from the end of the previous fiscal year. This is primarily attributable to an increase in net income and revaluation difference on land, and a decrease in minority interests.

Cash FlowConsolidated cash and cash equivalents (hereinafter “cash”) at the end of the fiscal year under review totaled ¥47,217 million (US$ 392,124 thousand), a decrease of ¥39,689 million from the end of the previous fiscal year, reflecting an increase of ¥21,762 million reflecting operating activities, a decrease of ¥21,250 million owing to investment activities, and a decrease of ¥40,177 million owing to finance activities. Cash flows for each category are as follows.

Cash flow from operating activitiesCash provided by operating activities stood at ¥21,762 million (US$ 180,726 thousand) (up ¥26,552 million from the previous fiscal year) at the end of the fiscal year under review. This was mainly attributable to an increase in income before income taxes and minority interests, decrease in depreciation, and corporate tax refunds, although capital decreased due to an increase in inventory assets.

Cash flow from investing activitiesCash used by investing activities amounted to ¥21,250 million (US$ 176,475 thousand) (down ¥279,048 million from the previous fiscal year) at the end of the fiscal year under review. This was mainly attributable to a decrease in cash owing to the acquisition of fixed asset, although there was an increase in cash owing to revenue from the sale of fixed assets.

Cash from financing activitiesCash used in financing activities stood at ¥40,177 million (US$ 333,656 thousand) (up ¥237,610 million from the previous fiscal year). This was mainly attributable to a decrease in interest-bearing debt.

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2

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheets December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars) (Note 1)

Assets Current assets:

Cash and deposits (Notes 17 and 19) ¥ 47,247 ¥ 86,908 $ 392,374Accounts receivable, trade 8,190 5,867 68,015Marketable securities (Notes 19 and 20) – 10 –Inventories (Notes 3, 6 and 7) 153,786 112,839 1,277,133Deferred income taxes (Note 23) 8,527 4,223 70,816Other current assets 20,670 32,986 171,658Allowance for doubtful accounts (206) (204) (1,712)

Total current assets 238,215 242,629 1,978,286

Property and equipment, at cost: Land (Notes 6, 7, 12 and 13) 506,947 512,148 4,210,004Buildings (Notes 6, 7, 12 and 13) 350,513 360,960 2,910,880Construction in progress 4,928 6,330 40,927Other property and equipment (Notes 6, 12 and 13) 23,499 20,581 195,157

Total property and equipment 885,889 900,020 7,356,969Less accumulated depreciation (127,870) (126,036) (1,061,918)Net property and equipment 758,018 773,983 6,295,050

Intangible and other assets (Notes 4, 6, 7 and 12) 112,559 112,582 934,766

Investments: Investment securities (Notes 8, 19 and 20) 111,020 111,079 921,979Investments in unconsolidated subsidiaries and affiliates (Notes 8 and 19) 28,465 30,636 236,391

Investments in silent partnerships (Notes 8, 19 and 20) 10,818 9,223 89,840Long-term loans 49 69 407Deferred income taxes (Note 23) 1,628 2,350 13,527Guarantee deposits paid (Notes 6 and 7) 20,514 21,081 170,366Net defined benefit asset (Note 22) 1,417 1,834 11,768Other investments (Notes 7 and 20) 14,456 14,046 120,057Allowance for doubtful accounts (51) (52) (427)

Total investments 188,318 190,269 1,563,913

Total assets ¥1,297,112 ¥1,319,465 $10,772,016

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3

December 31, 2015 2014 2015 (Millions of yen) (Thousands of


Liabilities and net assets Current liabilities:

Short-term borrowings (Notes 5, 6 and 19) ¥ 96,991 ¥ 151,597 $ 805,476Current portion of bonds payable (Notes 5, 6 and 19) 21,710 33,760 180,294Accounts payable, trade (Note 6) 7,942 6,645 65,956Accrued income taxes 2,470 1,628 20,512Provision for warranties for completed construction 12 9 101Provision for bonuses 674 517 5,598Provision for directors’ bonuses 44 35 367Deposits received under Real Estate Specified Joint Enterprise Law (Note 7) 18,700 1,500 155,296

Other current liabilities (Note 6) 46,838 41,643 388,975Total current liabilities 195,382 237,336 1,622,578Long-term liabilities:

Bonds payable (Notes 5 and 19) 105,761 107,471 878,310Long-term debt (Notes 5, 6 and 19) 476,528 451,926 3,957,388Deferred income taxes (Note 23) 25,863 28,320 214,786Deferred income taxes on land revaluation 28,793 31,734 239,115Provision for directors’ retirement benefits 248 207 2,064Provision for environmental measures 271 291 2,252Guarantee deposits received (Notes 6 and 19) 70,982 68,266 589,485Net defined benefit liability (Note 22) 10,278 9,982 85,356Deposits received under Real Estate Specified Joint Enterprise Law (Note 7) 56,681 66,986 470,713

Other long-term liabilities (Note 6) 13,789 11,133 114,515Total long-term liabilities 789,198 776,320 6,553,990Total liabilities 984,581 1,013,657 8,176,569Commitments and contingent liabilities (Note 9)

Net assets: Shareholders’ equity (Note 16):

Common stock, without par value: Authorized: 400,000,000 shares in 2015 and

800,000,000 shares in 2014 Issued: 216,963,374 shares in 2015 and

433,059,168 shares in 2014 92,451 92,451 767,773Additional paid-in capital 66,479 63,432 552,088Retained earnings 56,172 53,446 466,490Less: Treasury stock, at cost (22) (2,411) (189)

Total shareholders’ equity 215,080 206,918 1,786,163Accumulated other comprehensive income:

Net unrealized gains or losses on available-for-sale securities 51,631 51,034 428,779

Deferred gains or losses on hedges (249) (326) (2,068)Revaluation reserve for land 29,417 20,957 244,299Foreign currency translation adjustments 5,020 6,278 41,694Remeasurements of defined benefit plans 670 960 5,566

Total accumulated other comprehensive income 86,490 78,905 718,271Minority interests 10,959 19,984 91,012

Total net assets 312,530 305,808 2,595,447Total liabilities and net assets ¥1,297,112 ¥1,319,465 $10,772,016

See accompanying notes to the consolidated financial statements.

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4


Consolidated Statements of Income Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of


Revenue from operations ¥260,012 ¥237,049 $2,159,300 Cost of revenue from operations (Note 10) 197,335 180,696 1,638,792

Gross profit 62,677 56,353 520,508

Selling, general and administrative expenses (Note 11) 28,237 25,793 234,504 Operating income 34,439 30,559 286,004

Other income (expenses): Interest income 12 18 106 Dividends income 1,417 1,035 11,773 Interest expenses (8,850) (11,990) (73,504) Gain on sales of property and equipment (Note 12) 1,860 132,762 15,446 Loss on sales of property and equipment (Note 12) (870) (4) (7,233) Loss on disposal of property and equipment (292) (132) (2,430) Loss on change in equity – (754) – Borrowing cost (2,078) (1,984) (17,259) Stock issuance cost (13) (1) (111) Bond issuance cost (134) (71) (1,114) Gain on sales of investments in silent partnerships – 579 – Gain on redemption of investment securities 185 － 1,538 Gain on sales of investment securities 1,424 13 11,826 Gain on sales of investments in capital – 1,846 – Loss on redemption of investment securities (151) (300) (1,256) Write-downs of investment securities – (4,217) – Gain on bargain purchase – 7,092 – Equity in earnings of affiliated companies 842 276 6,998 Impairment loss (Note 13) (5,044) (6,878) (41,895) Dividends paid on real estate specified joint enterprise law (997) (892) (8,280) Compensation income 56 143 468 Expenses for advanced repayment of loans (Note 14) – (5,139) – Other, net 158 368 1,315

(12,476) 111,768 (103,610) Income before income taxes and minority interests 21,962 142,328 182,394

Income taxes (Note 23):

Current 3,932 6,231 32,656 Deferred 1,130 2,733 9,385

5,062 8,965 42,041 Income before minority interests 16,900 133,363 140,352

Minority interests 540 50,419 4,489 Net income ¥ 16,359 ¥ 82,944 $ 135,863


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5


Consolidated Statements of Comprehensive Income Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of


Income before minority interests ¥16,900 ¥133,363 $140,352

Other comprehensive income (Note 15): Net unrealized gains or losses on available-for-sale securities 319 (6,037) 2,650 Deferred gains or losses on hedges 77 (17) 641 Revaluation reserve for land 4,906 (3,363) 40,744 Foreign currency translation adjustments (22) 38 (188) Remeasurements of defined benefit plans (238) － (1,982) Share of other comprehensive income of associates accounted for using the equity method

(1,235)

323

(10,256)

Total other comprehensive income 3,805 (9,057) 31,606 Comprehensive income ¥20,706 ¥124,306 $171,959

Comprehensive income attributable to: Owners of the parent ¥20,391 ¥ 74,366 $169,346 Minority interests 314 49,939 2,613


6


Consolidated Statements of Changes in Net Assets

Shareholders’ equity Accumulated other comprehensive income

Common stock

Additionalpaid-in capital

Retained earnings

Treasury stock, at cost

Total shareholders'

equity

Net unrealized gains or losses on available-

for-sale securities

Deferred gains or losses on hedges

Revaluationreserve for

land

Foreign currency

translation adjustments

Remeasure- ments of defined benefit plans

Total Accumulated

other comprehensive

income Minority interests

Total net assets

(Millions of yen)

Balance at January 1, 2014 ¥92,451 ¥63,432 ¥ 18,590 ¥(2,375) ¥172,098 ¥56,589 ¥ (308) ¥16,161 ¥ 5,919 ¥ – ¥78,362 ¥ 11,815 ¥262,276 Cumulative effects of changes in accounting policies – – – – – – – – – – – – –

Restated balance 92,451 63,432 18,590 (2,375) 172,098 56,589 (308) 16,161 5,919 – 78,362 11,815 262,276 Changes of items during period – – – – – – – – – – – – –

Cash dividends paid – – (3,423) – (3,423) – – – – – – – (3,423)Net income – – 82,944 – 82,944 – – – – – – – 82,944 Transfer to revaluation reserve for land – – (8,159) – (8,159) – – – – – – – (8,159)

Purchases of treasury stock – – – (36) (36) – – – – – – – (36)Disposal of treasury stock – 0 – 0 0 – – – – – – – 0 Change of scope of consolidation – – (36,504) – (36,504) – (458) – – – (458) 37,307 344

Change owing to stock swaps – – – – – – – – – – – – –

Net change in items other than shareholders’ equity

–

–

–

–

–

(5,555)

441

4,795

359

960

1,001 (29,139)

(28,137)

Total changes in items during the period

–

0

34,856

(36)

34,820

(5,555)

(17)

4,795

359

960

542 8,168

43,531

Balance at December 31, 2014

92,451

63,432

53,446

(2,411)

206,918

51,034

(326)

20,957

6,278

960

78,905 19,984

305,808

Balance at January 1, 2015 92,451 63,432 53,446 (2,411) 206,918 51,034 (326) 20,957 6,278 960 78,905 19,984 305,808 Cumulative effects of changes in accounting policies – 2,133 (7,085) – (4,952) – – – – – – – (4,952)

Restated balance 92,451 65,565 46,361 (2,411) 201,966 51,034 (326) 20,957 6,278 960 78,905 19,984 300,855 Changes of items during period – – – – – – – – – – – – –


Purchases of treasury stock – – – (1,084) (1,084) – – – – – – – (1,084)Disposal of treasury stock – 0 – 2 2 – – – – – – – 2 Change of scope of consolidation – – – – – – – – – – – – –

Change owing to stock swaps – 914 – 3,471 4,385 – – – – – – – 4,385


–

–

–

–

–

596

77

8,459

(1,257)

(290)

7,585 (9,024)

(1,439)


–

914

9,811

2,388

13,114

596

77

8,459

(1,257)

(290)

7,585 (9,024)

11,674


¥92,451

¥66,479

¥ 56,172

¥ (22)

¥215,080

¥51,631

¥ (249)

¥29,417

¥ 5,020

¥ 670

¥86,490 ¥ 10,959

¥312,530

(Thousands of U.S. dollars)

Balance at January 1, 2015 $767,773 $526,779 $443,855 $(20,027) $1,718,380 $423,824 $(2,709) $174,043 $ 52,141 $ 7,975 $655,275 $165,961 $2,539,617Cumulative effects of changes in accounting policies – 17,716 (58,841) – (41,125) – – – – – – – (41,125)

Restated balance 767,773 544,495 385,013 (20,027) 1,677,255 423,824 (2,709) 174,043 52,141 7,975 655,275 165,961 2,498,491Changes of items during period – – – – – – – – – – – – –

Cash dividends paid – – (24,874) – (24,874) – – – – – – – (24,874)Net income – – 135,863 – 135,863 – – – – – – – 135,863Transfer to revaluation reserve for land – – (29,512) – (29,512) – – – – – – – (29,512)

Purchases of treasury stock – – – (9,008) (9,008) – – – – – – – (9,008)Disposal of treasury stock – 0 – 19 19 – – – – – – – 19Change of scope of consolidation – – – – – – – – – – – – –

Change owing to stock swaps – 7,593 – 28,827 36,420 – – – – – – – 36,420


– –

–

– –

4,954

641 70,256

(10,447)

(2,409)

62,995 (74,948) (11,953)


– 7,593

81,476

19,838 108,908

4,954

641 70,256

(10,447)

(2,409)

62,995 (74,948) 96,955


$767,773 $552,088

$466,490

$ (189) $1,786,163

$428,779

$(2,068) $244,299

$ 41,694

$ 5,566

$718,271 $ 91,012 $2,595,447


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6


Consolidated Statements of Changes in Net Assets

Shareholders’ equity Accumulated other comprehensive income

Common stock

Additionalpaid-in capital

Retained earnings

Treasury stock, at cost

Total shareholders'

equity

Net unrealized gains or losses on available-

for-sale securities

Deferred gains or losses on hedges

Revaluationreserve for

land

Foreign currency

translation adjustments

Remeasure- ments of defined benefit plans

Total Accumulated

other comprehensive

income Minority interests

Total net assets

(Millions of yen)

Balance at January 1, 2014 ¥92,451 ¥63,432 ¥ 18,590 ¥(2,375) ¥172,098 ¥56,589 ¥ (308) ¥16,161 ¥ 5,919 ¥ – ¥78,362 ¥ 11,815 ¥262,276 Cumulative effects of changes in accounting policies – – – – – – – – – – – – –

Restated balance 92,451 63,432 18,590 (2,375) 172,098 56,589 (308) 16,161 5,919 – 78,362 11,815 262,276 Changes of items during period – – – – – – – – – – – – –


Purchases of treasury stock – – – (36) (36) – – – – – – – (36)Disposal of treasury stock – 0 – 0 0 – – – – – – – 0 Change of scope of consolidation – – (36,504) – (36,504) – (458) – – – (458) 37,307 344

Change owing to stock swaps – – – – – – – – – – – – –


–

–

–

–

–

(5,555)

441

4,795

359

960

1,001 (29,139)

(28,137)


–

0

34,856

(36)

34,820

(5,555)

(17)

4,795

359

960

542 8,168

43,531


92,451

63,432

53,446

(2,411)

206,918

51,034

(326)

20,957

6,278

960

78,905 19,984

305,808

Balance at January 1, 2015 92,451 63,432 53,446 (2,411) 206,918 51,034 (326) 20,957 6,278 960 78,905 19,984 305,808 Cumulative effects of changes in accounting policies – 2,133 (7,085) – (4,952) – – – – – – – (4,952)

Restated balance 92,451 65,565 46,361 (2,411) 201,966 51,034 (326) 20,957 6,278 960 78,905 19,984 300,855 Changes of items during period – – – – – – – – – – – – –


Purchases of treasury stock – – – (1,084) (1,084) – – – – – – – (1,084)Disposal of treasury stock – 0 – 2 2 – – – – – – – 2 Change of scope of consolidation – – – – – – – – – – – – –

Change owing to stock swaps – 914 – 3,471 4,385 – – – – – – – 4,385


–

–

–

–

–

596

77

8,459

(1,257)

(290)

7,585 (9,024)

(1,439)


–

914

9,811

2,388

13,114

596

77

8,459

(1,257)

(290)

7,585 (9,024)

11,674


¥92,451

¥66,479

¥ 56,172

¥ (22)

¥215,080

¥51,631

¥ (249)

¥29,417

¥ 5,020

¥ 670

¥86,490 ¥ 10,959

¥312,530


Balance at January 1, 2015 $767,773 $526,779 $443,855 $(20,027) $1,718,380 $423,824 $(2,709) $174,043 $ 52,141 $ 7,975 $655,275 $165,961 $2,539,617Cumulative effects of changes in accounting policies – 17,716 (58,841) – (41,125) – – – – – – – (41,125)

Restated balance 767,773 544,495 385,013 (20,027) 1,677,255 423,824 (2,709) 174,043 52,141 7,975 655,275 165,961 2,498,491Changes of items during period – – – – – – – – – – – – –

Cash dividends paid – – (24,874) – (24,874) – – – – – – – (24,874)Net income – – 135,863 – 135,863 – – – – – – – 135,863Transfer to revaluation reserve for land – – (29,512) – (29,512) – – – – – – – (29,512)

Purchases of treasury stock – – – (9,008) (9,008) – – – – – – – (9,008)Disposal of treasury stock – 0 – 19 19 – – – – – – – 19Change of scope of consolidation – – – – – – – – – – – – –

Change owing to stock swaps – 7,593 – 28,827 36,420 – – – – – – – 36,420


– –

–

– –

4,954

641 70,256

(10,447)

(2,409)

62,995 (74,948) (11,953)


– 7,593

81,476

19,838 108,908

4,954

641 70,256

(10,447)

(2,409)

62,995 (74,948) 96,955


$767,773 $552,088

$466,490

$ (189) $1,786,163

$428,779

$(2,068) $244,299

$ 41,694

$ 5,566

$718,271 $ 91,012 $2,595,447


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Consolidated Statements of Cash Flows Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of


Operating activities Income before income taxes and minority interests ¥ 21,962 ¥ 142,328 $ 182,394Adjustments to reconcile income before income taxes and minority

interests to net cash provided by (used in) operating activities:

Depreciation and amortization 14,799 14,022 122,906Impairment loss 5,044 6,878 41,895Amortization of goodwill 1,130 1,131 9,387Gain on bargain purchase – (7,092) –Equity in earnings of affiliated companies (842) (276) (6,998)Increase (decrease) in allowance for doubtful accounts 0 (47) 5Increase (decrease) in provision for bonuses 135 31 1,128Increase (decrease) in net defined benefit liability (98) 493 (814)Increase (decrease) in provision for directors’ retirement benefits 25 34 209Interest and dividend income (1,430) (1,054) (11,880)Interest expense 8,850 11,990 73,504Loss (gain) on valuation of investment securities – 4,217 –Loss (gain) on sales of investment securities (1,424) (13) (11,826)Loss (gain) on redemption of investment securities (33) 300 (282)Loss (gain) on sales of investments in silent partnerships – (579) –Loss (gain) on sales of investments in capital – (1,846) –Loss (gain) on change in equity – 754 –Loss (gain) on sales and disposal of property and equipment (696) (132,625) (5,783)Decrease (increase) in notes and accounts receivable-trade (2,413) (1,585) (20,040)Decrease (increase) in inventories (Note 17) (36,970) (7,207) (307,023)Increase (decrease) in lease and guarantee deposits received 1,952 (1,089) 16,215Increase (decrease) in accounts payable, trade 941 (7,851) 7,816Decrease (increase) in lease and guarantee deposits 701 (5,444) 5,825Increase (decrease) in deposits received (2,346) 7,053 (19,483)Other, net 11,944 9,309 99,198

Subtotal 21,235 31,830 176,353Interest and dividends income received 1,826 1,490 15,165Interest expense paid (9,288) (13,951) (77,136)Income taxes paid 7,988 (24,160) 66,343

Net cash provided by operating activities 21,762 (4,790) 180,726Investing activities

Proceeds from redemption of securities 10 – 83Proceeds from sales and redemption of investment securities 7,592 4,950 63,055Purchase of investment securities (6,746) (2,612) (56,026)Proceeds from sales of investments in capital of subsidiaries – 1,483 –Purchase of investments in capital – (8,795) –Purchase of shares of subsidiaries resulting in change in scope of

consolidation (Note 17) (6,117) (1,472) (50,803)Net payment for redemption of equity in subsidiaries resulting in change

in scope of consolidation (Note 17) (936) – (7,777)Proceeds from sales of investments in capital – 16,580 –Payments for investments in silent partnerships (2,000) (2,090) (16,609)Proceeds from withdrawal of investments in silent partnerships 139 851 1,155Proceeds from sales of property and equipment 16,244 291,343 134,905Purchases of property and equipment (34,330) (50,969) (285,101)Payments of loans receivable (22) (19) (189)Collection of loans receivable 51 29 430Increase (decrease) in deposits received under Real Estate Specified

Joint Enterprise Law 6,895 9,486 57,260Other, net (2,029) (967) (16,857)Net cash (used in) provided by investing activities (21,250) 257,798 (176,475)

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Consolidated Statements of Cash Flows (continued) Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of


Financing activities Net increase (decrease) in short-term loans payable ¥ 10,092 ¥ 1,090 $ 83,814Proceeds from long-term loans payable 133,115 286,500 1,105,473Repayment of long-term loans payable (163,066) (477,133) (1,354,204)Payments for long-term accounts payable (722) (811) (6,001)Proceeds from issuance of bonds payable 20,100 15,000 166,922Redemption of bonds payable (33,760) (20,460) (280,365)Proceeds from sales of treasury stock 2 0 19Purchase of treasury stock (35) (36) (296)Cash dividends paid (2,991) (3,418) (24,843)Cash dividends paid to minority shareholders (213) (49,378) (1,770)Repayments to minority shareholders – (22,840) –Other, net (2,697) (6,299) (22,403)

Net cash (used in) provided by financing activities (40,177) (277,787) (333,656)Effect of exchange rate change on cash and cash equivalents (24) 35 (199)Net increase (decrease) in cash and cash equivalents (39,689) (24,744) (329,604)Cash and cash equivalents at beginning of period 86,907 52,271 721,729Increase in cash and cash equivalents resulting from consolidation – 59,379 –Cash and cash equivalents at end of period (Note 17) ¥ 47,217 ¥ 86,907 $ 392,124


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Notes to the Consolidated Financial Statements 1. Basis of Preparation of Financial Statements The accompanying consolidated financial statements of Tokyo Tatemono Co., Ltd. (“the Company”) and consolidated subsidiaries (collectively “the Group”) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. In addition, the notes to the accompanying consolidated financial statements include financial information which is not required under accounting principles generally accepted in Japan but is presented herein as additional information. Certain reclassifications have been made to present the accompanying consolidated financial statements in a format which is familiar to readers outside Japan. As permitted by the Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted. As a result, the totals in yen in the accompanying consolidated financial statements do not necessarily agree with the sums of the individual amounts. The U.S. dollar amounts presented in the accompanying consolidated financial statements are included solely for the convenience of readers outside Japan. The exchange rate of ¥120.415 to U.S.$1.00 prevailing on December 31, 2015 has been used in the translation of yen amounts into U.S. dollar amounts in the accompanying consolidated financial statements. It should not be construed that yen amounts have been or could in the future be converted into U.S. dollar amounts at the above or any other rate. 2. Significant Accounting Policies (a) Basis of consolidation The accompanying consolidated financial statements include the accounts of the Company

and any significant companies which it controls directly or indirectly, as well as the accounts of companies over which the Company exercises significant influence in terms of their operating and financial policies.

Numbers of companies included in the scope of consolidation at December 31, 2015 and

2014 were as follows:

2015 2014

Consolidated subsidiaries 46 48

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2. Significant Accounting Policies (continued) (a) Basis of consolidation (continued) The difference between the cost of an acquisition and the fair value of the net assets of an

acquired subsidiary/affiliated company at the date of acquisition is reported in the consolidated balance sheets under other assets or other liabilities and is amortized by the straight-line method over a period of 5 years.

The equity basis of accounting has been applied to 9 and 8 affiliated companies in

consideration of their material impact on the accompanying consolidated financial statements for the years ended December 31, 2015 and 2014, respectively.

Investments in certain unconsolidated subsidiaries (owned more than 50%) and affiliates

(owned 20% to 50%) are carried at cost rather than being accounted for by the equity method because their aggregate net income and retained earnings were not material to the accompanying consolidated financial statements.

(b) Cash and cash equivalents The Company and its consolidated subsidiaries substantially consider all highly liquid

investments with a maturity of three months or less at the time of purchase to be cash equivalents. Reconciliations between cash reflected in the accompanying consolidated balance sheets and cash and cash equivalents reflected in the accompanying consolidated statements of cash flows at December 31, 2015 and 2014 are presented in Note 17.

(c) Allowance for doubtful accounts The allowance for doubtful accounts, including a specific allowance, is provided at the

amount considered sufficient to cover possible losses on collection. Long-term loans at December 31, 2015 and 2014 were offset against doubtful debts of

¥2,698 million ($22,408 thousand) and ¥2,698 million, respectively. These debts consisted of certain loans and the related interest.

(d) Allowance for losses on investments The allowance for losses on investments is provided at the amount considered sufficient

to cover possible losses on investments in affiliates and others based on their respective financial condition.

(e) Marketable and investment securities Securities are classified and accounted for, depending on management’s intentions, as

follows: i) held-to-maturity debt securities, which are expected to be held to maturity, are reported at amortized cost, and ii) available-for-sale securities, for which market quotations are determinable, are reported at their respective fair value with unrealized gain or loss, net of the applicable taxes, reported as a separate component of net assets. Unrealized gain is not available for distribution in the form of cash dividends.

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2. Significant Accounting Policies (continued) (f) Inventories Inventories are mainly stated at cost, determined by the identified cost method. Net book

value of inventories in the consolidated balance sheet is written down when their net realizable values decline.

(g) Property and equipment, and depreciation Property and equipment are carried at cost, less accumulated depreciation. Depreciation of property and equipment is calculated by the straight-line method, except

in the case of furniture and fixtures on which the declining-balance method at rates determined based on the estimated useful lives of the respective assets is applied. However, depreciation of property and equipment held by the overseas consolidated subsidiaries is determined by the straight-line method over the estimated useful lives of the respective assets.

Under the Land Revaluation Law promulgated and revised on March 31, 1998 and 1999,

respectively, the Company elected for a one-time revaluation of land held for its own use to a value based on real estate appraisals at December 31, 2000. The resulting revaluation reserve for land represents an unrealized appreciation in the value of this land and is stated, net of income taxes, as a separate component of net assets. Revaluation reserve for land is not available for distribution in the form of dividends. There was no related effect on the accompanying consolidated statements of income.

(h) Intangible assets Intangible assets are amortized by the straight-line method over their respective estimated

useful lives. Expenditure relating to computer software developed for internal use is charged to income as incurred, except in cases where it contributes to the generation of income or future cost savings. In these cases, it is capitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years.

(i) Leases Leased property is depreciated over the lease term by the straight-line method with no

residual value. In addition, those finance lease transactions that do not transfer ownership and commenced on or before December 31, 2008, are accounted for based on standards for ordinary rental transactions.

(j) Share and bond issuance costs Costs relating to the issuance of shares and bonds are charged to income when incurred.

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2. Significant Accounting Policies (continued) (k) Derivatives and hedging activities The Company defers unrealized gains or losses resulting from changes in fair value of

derivative financial instruments until the related losses or gains on the hedged items are recognized, if derivative financial instruments meet certain criteria for hedges.

Interest-rate swaps which meet specific matching criteria and qualify for hedge accounting

treatment are not remeasured at market value; however, the differentials paid or received under the respective swap agreements are recognized and included as interest expense or income.

The Company enters into interest-rate swap contracts to manage its exposure to interest-rate

fluctuation with respect to certain of its liabilities. It is the Company’s policy to utilize derivatives only for the purpose of reducing market risk.

(l) Accrued severance indemnities

(i) Attribution method of the estimated amount of retirement benefits

The benefit formula method for attributing the estimated amount of retirement benefits to periods has been applied up to the end of the fiscal year ended December 31, 2015 to calculate the retirement benefit obligation.

(ii) Accounting method for actuarial gain or loss and prior service costs

Prior service costs are amortized as incurred by the straight-line method over a certain period (10 years) within the eligible employees’ average remaining period of service.

Actuarial gain or loss are amortized in the year following the year in which the gain or loss is recognized by the straight-line method over a certain period (10 years) within the eligible employees’ average remaining period of service.

(iii) Adoption of a simplified method for small businesses

Certain consolidated subsidiaries calculate the net defined benefit liability and retirement benefit costs using a simplified method, which assumes retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at the fiscal year end.

(m) Net income per share Computations of basic net income per share are based on the weighted-average number

of shares of common stock outstanding during each year. Diluted net income per share is computed based on the weighted-average number of shares of common stock outstanding during each year after giving effect to the dilutive potential of shares to be issued.

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2. Significant Accounting Policies (continued) (n) Income taxes Deferred income taxes are determined based on the differences between the amounts

determined for financial reporting purposes and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.

(o) Accounting treatment for consumption taxes Consumption taxes are accounted for by the tax exclusion method. However, the tax

inclusion method is used for certain tax-exempt consolidated subsidiaries. (p) Reclassifications Certain reclassifications of the consolidated financial statements for the year ended

December 31, 2014 have been made to conform with the presentation for the year ended December 31, 2015.

(q) Changes in accounting principles

(Adoption of Accounting Standards for Retirement Benefits) Effective the year ended December 31, 2015, the Company adopted Section 35 of Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ) Statement No. 26, May 17, 2012), and the main clause of Section 67 of Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, March 26, 2015). As a result, the methods for calculating the retirement benefit obligation and service costs have been revised in the following respects: the method for attributing projected benefits to each period has been changed from the straight-line method to the benefit formula method, and the method for determining the discount rate has been changed to use a single weighted average discount rate reflecting the expected timing and amount of benefit payments. The cumulative effect of changing the methods for calculating the retirement benefit obligation and service costs was recognized by adjusting retained earnings at the beginning of the year ended December 31, 2015, in accordance with the transitional treatment provided in Section 37 of Accounting Standard for Retirement Benefits. As a result, net defined benefit asset decreased by ¥252 million ($2,094 thousand), net retirement benefit liability increased by ¥131 million ($1,093 thousand), retained earnings decreased by ¥230 million ($1,910 thousand), and minority interests decreased by ¥12 million ($101 thousand) at the beginning of the year ended December 31, 2015. The impact on operating income and income before income taxes and minority interests for the year ended December 31, 2015 was immaterial.

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2. Significant Accounting Policies (continued) (q) Changes in accounting principles (continued)

(Adoption of Accounting Standards for Business Combinations) Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013), Revised Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, September 13, 2013), and Revised Accounting Standard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013) and other standards became applicable from fiscal years beginning on or after April 1, 2014. The Company adopted these standards (with the exception of paragraph 39 of Revised Accounting Standard for Consolidated Financial Statements) effective from the year ended December 31, 2015, and consequently, the difference arising from changes in equity in subsidiaries when the Company retains control is recorded in additional paid-in capital, and business acquisition costs are expensed as incurred. Revised Accounting Standard for Business Combinations and other standards are applied in accordance with transitional treatment set forth in paragraph 58-2(3) of the Revised Accounting Standard for Business Combinations, paragraph 44-5 (3) of the Revised Accounting Standard for Consolidated Financial Statements, and paragraph 57-4 (3) of the Revised Accounting Standard for Business Divestitures. The cumulative effects arising from the retroactive application of these new accounting policies for prior years were reflected in additional paid-in capital and retained earnings at the beginning of the year ended December 31, 2015. Consequently, at the beginning of the year ended December 31, 2015, goodwill decreased by ¥4,722 million ($39,214 thousand) and retained earnings decreased by ¥6,855 million ($56,930 thousand), while additional paid-in capital increased by ¥2,133 million ($17,716 thousand). In addition, operating income, recurring income, and income before income taxes and minority interests each increased by ¥1,229 million ($10,208 thousand). Net assets per share at December 31, 2015 decreased by ¥16.2 ($0.135) and net income per share for the year ended December 31, 2015 increased by ¥5.7 ($0.047).

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2. Significant Accounting Policies (continued) (r) Accounting standards issued but not yet adopted

(Implementation Guidance on Recoverability of Deferred Tax Assets) Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, December 28, 2015) (1) Summary

When responsibility for providing practical guidelines on the accounting and auditing treatment of recoverability of deferred tax assets (limited to the portion related to accounting treatment) was transferred from the Japanese Institute of Certified Public Accountants (JICPA) to the ASBJ, the ASBJ partially revised the requirement criteria for entity categorization and the treatment of net deferred tax assets regarding guidance for the recoverability of deferred tax assets mainly prescribed in JICPA Audit Committee Report No. 66 (Auditing Treatment for Determining the Recoverability of Deferred Tax Assets). The ASBJ has mainly adhered to the basic framework for categorization of entities and for estimating the recoverability of deferred tax assets by category. In addition, implementation guidance is described in this guidance for entities adopting Accounting Standard for Tax Effects (Business Accounting Council (Japan)) and assessing deferred tax assets.

(2) Planned adoption date

The Company will adopt the guidance from the year beginning on January 1, 2017. (3) Impact of adoption

The Company is currently assessing the impact on its consolidated financial statements.

3. Inventories Inventories as of December 31, 2015 and 2014 consisted of the following:


U.S. dollars)

Real estate for sale ¥ 53,349 ¥ 32,702 $ 443,043 Real estate for sale in progress 43,700 45,262 362,919 Real estate for development 56,736 34,873 471,170 ¥153,786 ¥112,839 $1,277,133

In the year ended December 31, 2015, property and equipment in the amount of ¥3,090 million ($25,666 thousand) was transferred to real estate for sale due to a change in holding purpose. In addition, real estate for sale in progress in the amount of ¥1,062 million ($8,825 thousand) was transferred to property and equipment due to a change in holding purpose.

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3. Inventories (continued) In the year ended December 31, 2014, real estate for sale and real estate for sale in progress in the amounts of ¥2,074 million and ¥473 million, respectively, were transferred to property and equipment in the total amount of ¥2,547 million due to a change in holding purpose. 4. Intangible and Other Assets Intangible and other assets as of December 31, 2015 and 2014 consisted of the following: December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Leasehold right ¥106,251 ¥106,229 $882,381 Goodwill 5,410 5,374 44,928 Other 897 978 7,456 ¥112,559 ¥112,582 $934,766 5. Short-term Borrowings and Long-term Debt Short-term borrowings as of December 31, 2015 and 2014 consisted of the following: December 31, 2015 2014 2015 (Millions of

yen) Average interest rate (%)

(Millions of yen)

Average interest rate (%)


Loans, principally from banks ¥ 1,265 0.63 ¥ 2,482 0.76 $ 10,505

Current portion of bonds payable 20,200 1.30 30,200 1.80 167,753

Current portion of bonds payable (non-recourse loans) 1,510 1.25 3,560 1.50 12,541

Current portion of long-term debt 69,769 1.04 71,181 1.20 579,408

Current portion of long-term loans payable (non-recourse loans)

25,956

1.60

77,933

2.33

215,562 Total ¥118,701 ¥185,358 $985,771

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5. Short-term Borrowings and Long-term Debt (continued) Long-term debt as of December 31, 2015 and 2014 consisted of the following: December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

1.92% unsecured straight bonds, due 2015 ¥ – ¥ 20,000 $ – 1.58% unsecured straight bonds, due 2015 – 10,000 – 1.80% unsecured straight bonds, due 2016 10,000 10,000 83,046 1.73% unsecured straight bonds, due 2018 10,000 10,000 83,046 1.44% unsecured straight bonds, due 2017 15,000 15,000 124,569 0.81% unsecured straight bonds, due 2016 10,000 10,000 83,046 0.83% unsecured straight bonds, due 2018 10,000 10,000 83,046 1.30% unsecured straight bonds, due 2020 15,000 15,000 124,569 1.54% unsecured straight bonds, due 2023 15,000 15,000 124,569 0.49% unsecured straight bonds, due 2019 15,000 15,000 124,569 0.66% unsecured straight bonds, due 2022 10,000 – 83,046 0.59% unsecured straight bonds, due 2021 10,000 – 83,046 4.40% unsecured deferrable interest subordinated callable bonds, due 2072 4,000 4,000 33,218

0.60% unsecured straight bonds, due 2017 300 500 2,491 0.92%-1.64% Specified bonds, due 2014-2015 3,171 6,732 26,341 Loans, principally from banks and insurance companies

572,255

601,042

4,752,359

699,727 742,274 5,810,964 Less: Current portion of long-term debt (117,436) (182,875) (975,265) ¥ 582,290 ¥ 559,398 $4,835,699

The aggregate annual maturities of long-term debt subsequent to December 31, 2015 are summarized as follows:

Year ending December 31,

(Millions of yen)


2017 ¥ 70,255 $ 583,444 2018 67,078 557,060 2019 66,178 549,586 2020 217,540 1,806,585 2021 and thereafter 161,238 1,339,020 Total ¥582,290 $4,835,699

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6. Pledged Assets Assets pledged as collateral at December 31, 2015 and 2014 consisted of the following: December 31, 2015 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Inventories ¥ 1,868 ¥ (–) ¥ 5,138 ¥ (–) $ 15,515 $ (–)Buildings 99,116 (84,946) 115,793 (105,372) 823,121 (705,444)Land 86,680 (49,255) 182,109 (148,043) 719,844 (409,048)Other property and

equipment 776 (776) 1,771 (1,771) 6,450 (6,450)Lease rights 90,714 (90,714) 90,734 (90,734) 753,347 (753,347)Other intangible assets 18 (18) 22 (22) 157 (157)Guarantee deposits paid 4,328 (4,328) 4,291 (4,291) 35,945 (35,945)Total ¥283,502 ¥(230,040) ¥399,860 ¥(350,236) $2,354,381 $(1,910,393)

Of the figures above, those in parentheses indicate pledged assets corresponding to non-recourse debt. Secured debt as of December 31, 2015 and 2014 consisted of the following: December 31, 2015 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Short-term borrowings ¥ 26,347 ¥ (25,956) ¥ 77,933 ¥ (77,933) $ 218,807 $ (215,562)Current portion of bonds 1,510 (1,510) 3,560 (3,560) 12,541 (12,541)Accounts payable, trade 801 (–) 700 (–) 6,655 (–)Other current liabilities 16 (–) 16 (–) 137 (–)Bonds payable 1,661 (1,661) 3,171 (3,171) 13,800 (13,800)Long-term debt 204,377 (201,766) 232,759 (227,573) 1,697,279 (1,675,592)Guarantee deposits

received 241 (–) 258 (–) 2,007 (–)Other long-term liabilities 5,548 (–) 2,800 (–) 46,078 (–)Total ¥240,505 ¥(230,895) ¥321,200 ¥(312,239) $1,997,307 $(1,917,496)

Of the figures above, those in parentheses indicate non-recourse debt. Other than the above, the Company pledged ¥1 million ($12 thousand) of cash and deposits (time deposits) and ¥172 million ($1,432 thousand) of investment securities as a security for debt guarantees of borrowings of affiliates and as deposits, etc. for security money for operations under the Building Lots and Buildings Transaction Business Act as of December 31, 2015 and 2014.

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7. Real Estate Held for Specific Partnership Project (under a Silent Partnership Agreement)

Real estate held for a specific partnership project (under a silent partnership agreement) as of December 31, 2015 and 2014 consisted of the following: December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Real estate for sale in progress ¥ 13,032 ¥ 4,662 $ 108,231 Buildings 21,153 19,980 175,670 Land 86,414 84,043 717,641 Leasehold right 3,180 3,180 26,414 Other intangible assets 6 8 56 Guarantee deposits paid 122 720 1,019 Other investments 112 135 933 ¥124,023 ¥112,731 $1,029,968

At December 31, 2015, the portion of current liabilities and long-term liabilities corresponding to the above project were recorded as “Deposits received under Real Estate Specified Joint Enterprise Law.” 8. Investments in Unconsolidated Subsidiaries and Affiliates Investments in unconsolidated subsidiaries and affiliates as of December 31, 2015 and 2014 consisted of the following: December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Investment securities (Stock) ¥ 1,220 ¥ 1,096 $ 10,135 Investment securities (Preferred securities) 3,613 9,242 30,008 Investments in silent partnerships 6,789 6,789 56,381 Investments in unconsolidated subsidiaries and affiliates 23,631 20,297 196,246

9. Commitments and Contingent Liabilities At December 31, 2015, the Company was contingently liable for guarantees on loans to its customers and employees which amounted to approximately ¥10,507 million ($87,262 thousand). The Company has rights to various types of collateral offered as security against the above guarantees these loans.

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10. Write-downs of Inventories Write-downs of inventories held for ordinary sale whose book value was in excess of net realizable value recognized in cost of revenue from operations for the years ended December 31, 2015 and 2014 were as follows: Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Cost of revenue from operations ¥1,731 ¥155 $14,377 11. Selling, General and Administrative Expenses Major components of selling, general and administrative expenses for the years ended December 31, 2015 and 2014 are summarized as follows: Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Advertisement expenses ¥3,005 ¥2,667 $24,958 Salaries 7,799 7,083 64,771 Provision for accrued bonuses 243 146 2,019 Provision for accrued bonuses for directors 44 35 367 Retirement benefit expenses 509 642 4,231 Provision for accrued directors’ retirement benefits 53 45 441

12. Gain and Loss on Sales of Property and Equipment (Gain on sales of property and equipment) Gain on sales of property and equipment for the years ended December 31, 2015 and 2014 is as follows: Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Land ¥ 776 ¥ (841) $ 6,444 Buildings and others 869 36,897 7,218 Leasehold right 214 96,706 1,783 ¥1,860 ¥132,762 $15,446

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12. Gain and Loss on Sales of Property and Equipment (continued) (Loss on sales of property and equipment) Loss on sales of property and equipment for the years ended December 31, 2015 and 2014 is as follows: Year ended December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Buildings and others ¥846 ¥4 $7,031 Leasehold right 24 – 201 ¥870 ¥4 $7,233

Loss on disposal of property and equipment is primarily attributable to the replacement of existing building facilities. 13. Impairment Loss The Company and certain consolidated subsidiaries have recognized impairment losses for the following groups of assets for the year ended December 31, 2015:

Company Major use Asset category Location (Millions of

yen) (Thousands ofU.S. dollars)

Kyobashi Development Special Company Others

Buildings for lease, other

Land, buildings, others

Chuo Ward, Tokyo,other

¥2,748

$22,821

Tokyo Tatemono Resort Co., Ltd., Others

Facilities of golf courses, other

Land, buildings, others

Kato City, Hyogo, other

¥2,296

$19,073 ¥5,044 $41,895

The aggregate impairment loss of ¥5,044 million ($41,895 thousand) consists of ¥2,399 million ($19,925 thousand) on land and ¥2,417 million ($20,077 thousand) on buildings and ¥227 million ($1,892 thousand) on intangible assets. The recoverable amounts of the asset groups were measured at the net selling value. The net selling value is mainly measured based on valuations by real estate appraisers.

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13. Impairment Loss (continued) The Company and certain consolidated subsidiaries have recognized impairment losses for the following groups of assets for the year ended December 31, 2014:

Company Major use Asset category Location (Millions of

yen)


Rental condominiums, others

Land, Buildings and others

Minato Ward, Tokyo, other

¥4,049

Tokyo Tatemono Co., Ltd., Others

Commercial, others

Land, Buildings and others

Fukuoka City, Fukuoka, other

2,829

¥6,878

The aggregate impairment loss of ¥6,878 million consists of ¥5,572 million on land and ¥862 million on buildings and ¥444 million on intangible assets. The recoverable amounts of the asset groups were measured at the net selling value. The net selling value is mainly measured based on the evaluation by real estate appraisers. 14. Expenses for Advanced Repayment of Loans Expenses for prepayment of borrowings are those that were incurred as a result of the early repayment of funds borrowed from financial institutions by the SPCs that were made consolidated subsidiaries in the fiscal year ended December 31, 2015 and consist of settlement money for the repayment of borrowings, settlement money for the cancellation of interest rate swaps and amortization expenses for borrowing fees.

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15. Other Comprehensive Income Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the year ended December 31, 2015 are summarized as follows: Year ended December 31 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars) Net unrealized gains or losses on available-for-sale securities:

Amount arising during the year ¥(3,899) ¥(9,376) $(32,381) Reclassification adjustments for gains and losses included in net income

(344)

(13)

(2,858)

Amount before tax effects (4,243) (9,389) (35,239) Tax effects 4,562 3,352 37,890 Net unrealized gains or losses on available-for-sale securities

319

(6,037)

2,650

Deferred gains or losses on hedges: Amount arising during the year 138 (27) 1,152 Reclassification adjustments for gains and losses included in net income

–

–

–

Amount before tax effects 138 (27) 1,152 Tax effects (61) 9 (511) Deferred gains or losses on hedges 77 (17) 641

Revaluation reserve for land: Tax effects 4,906 (3,363) 40,744

Foreign currency translation adjustments: Amount arising during the year (22) 38 (188) Reclassification adjustments for gains and losses included in net income

–

–

–

Amount before tax effects (22) 38 (188) Tax effects – – – Foreign currency translation adjustments (22) 38 (188)

Remeasurements of defined benefit plans: Amount arising during the year (396) – (3,290) Reclassification adjustments for gains and losses included in net income

(29)

–

(245)

Amount before tax effects (425) – (3,535) Tax effects 186 – 1,552 Remeasurements of defined benefit plans (238) – (1,982)

Share of other comprehensive income of companies accounted for by the equity method:

Amount arising during the year (817) 1,953 (6,787) Reclassification adjustments for gains and losses included in net income

–

(1,629)

–

Amount before tax effects (817) 324 (6,787) Tax effects (417) (1) (3,468) Reclassification adjustments for gains and losses included in net income

(1,235)

323

(10,256)

Total other comprehensive income ¥ 3,805 ¥(9,057) $ 31,606

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16. Shareholders’ Equity The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met. The following distribution of retained earnings applicable to the year ended December 31, 2015 was duly approved at the annual general meeting of the shareholders held on March 29, 2016:

(Millions of yen)

(Thousands ofU.S. dollars)

Cash dividends of ¥12 ($0.099) per share ¥2,603 $21,619 The Company consolidated two shares of its common stock into one effective from July 1, 2015. The following distribution of retained earnings applicable to the first half of the year ended December 31, 2015 was approved by the Board of Directors on August 7, 2015:

(Millions of yen)

(Thousands ofU.S. dollars)

Cash dividends of ¥4 ($0.033) per share ¥1,711 $14,212 The following distribution of retained earnings applicable to the year ended December 31, 2014 was duly approved at the annual general meeting of the shareholders held on March 26, 2015:

(Millions of yen)

Cash dividends of ¥3 per share ¥1,297

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17. Supplemental Cash Flow Information 1. The following table represents reconciliations of cash and deposits reflected in the

accompanying consolidated balance sheets and cash and cash equivalents reflected in the accompanying consolidated statements of cash flows at December 31, 2015 and 2014:


U.S. dollars)

Cash and deposits ¥47,247 ¥86,908 $392,374 Time deposits with a maturity of more than three months (30) (1) (249)

Cash and cash equivalents ¥47,217 ¥86,907 $392,124

2. The decrease (increase) in inventories includes increases and decreases in accounts

payable, trade and advances pertaining to inventories. 3. Information on composition of assets and liabilities of newly consolidated subsidiaries

through share acquisitions The following table represents the breakdown of assets acquired and liabilities assumed as

of the acquisition date of MAOS Co., Ltd. and another company due to share acquisitions during the year ended December 31, 2015, and the reconciliation of the acquisition cost and purchase of shares of subsidiaries resulting in change in the scope of consolidation.

Year ended December 31, 2015 (Millions of

yen) (Thousands of U.S. dollars)

Current assets ¥ 1,025 $ 8,515 Fixed assets 1,113 9,247 Goodwill 6,349 52,732 Current liabilities (518) (4,308) Long-term liabilities (1,269) (10,545) Acquisition cost 6,700 55,640 Cash and cash equivalents (582) (4,837) Purchase of shares of subsidiaries resulting in change in scope of consolidation

¥ 6,117

$ 50,803

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17. Supplemental Cash Flow Information (continued) 4. Information on assets and liabilities of deconsolidated subsidiaries due to a transfer of

equity ownership The following table represents the breakdown of the assets and liabilities of Kyobashi

Kaihatsu Tokutei Mokuteki Kaisha deconsolidated following the redemption of equity during the year ended December 31, 2015, and the reconciliation of the redemption of equity and net payment for redemption of equity in subsidiaries resulting in change in scope of consolidation.

Year ended December 31, 2015 (Millions of


Current assets ¥ 33,639 $ 279,364 Fixed assets 17,224 143,044 Current liabilities (11,882) (98,682) Long-term liabilities (2) (24) Minority interests (6,351) (52,746) Loss on redemption of investment securities (151) (1,256) Redemption of equity in subsidiaries 32,475 269,698 Cash and cash equivalents (33,412) (277,475) Net payment for redemption of equity in subsidiaries resulting in change in scope of consolidation

¥ (936)

$ (7,777)

5. Material non-cash transactions Transactions in connection with the conversion of Tokyo Tatemono Real Estate Sales Co.,

Ltd. into a wholly-owned subsidiary


U.S. dollars)Increase in capital surplus owing to stock swap ¥ 914 ¥ – $ 7,593

Decrease in treasury stocks owing to stock swap 3,471 – 28,827

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18. Lease Transactions (1) Operating leases (Lessee)


U.S. dollars)Future minimum lease payments:

Within one year ¥ 4,365 ¥ 4,926 $ 36,250 Over one year 58,356 83,648 484,629

¥62,721 ¥88,574 $520,879 Operating leases (Lessor)


U.S. dollars)Future minimum lease payments:

Within one year ¥13,871 ¥11,426 $115,199 Over one year 39,928 39,493 331,594

¥53,800 ¥50,919 $446,794

19. Financial Instruments Financial Instruments at December 31, 2015 are summarized as follows: Overview (1) Policy for financial instruments The Company and its consolidated subsidiaries have the policy to limit fund management

to short-term deposits and raises funds mainly through loans from banks and the issuance of corporate bonds. Derivative instruments are used to mitigate risks referred to below, and the Company and its consolidated subsidiaries do not enter into derivative transactions for speculation.

(2) Types of financial instruments and related risk Primary marketable securities and investment securities are preferred capital contribution

certificates of special purpose companies under the Asset Liquidation Act and shares in companies with which the Group has business relationships. The Group is exposed to credit risks of issuers, interest rate risks, and market price fluctuation risks.

Investments in silent partnership are investments in special purpose companies and are

exposed to the credit risks of issuers and interest rate risks. Short-term borrowings are mainly used for funding working capital. Long-term debt and

bonds payable are mainly used for capital expenditures. Debts with floating interest rates are subject to interest-rate risk, however, the Company and its consolidated subsidiaries utilize derivatives (interest rate swaps) as hedging instruments for some long-term debt with floating interest rates to fix the cash flows of interest payments.

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19. Financial Instruments (continued) Overview (continued) (3) Risk management for financial instruments

(a) Monitoring of credit risk

(the risk that customers or counterparties may default)

Each operating department monitors the status of major counterparties and manages the due dates and balances of receivables. The Group seeks to identify, at an early stage, any collectability issues due to the worsening financial conditions of counterparties to mitigate credit risk.

(b) Monitoring of market risks

(the risks arising from fluctuations in foreign exchange rates, interest rates and others)

To minimize the risks arising from fluctuations in interest rates on loans payable, the Group uses interest rate swaps. In relation to marketable securities and investment securities, the Group regularly monitors the fair values and financial situation of the issuers (counterparties). The Group reviews the status of its holdings of financial instruments considering market trends and relationships with counterparties.

(c) Monitoring of liquidity risk

(the risk that the Group may not be able to meet its obligations on scheduled due dates)

Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidity risk.

(4) Supplementary explanation of the estimated fair value of financial instruments The fair value of financial instruments is based on their quoted market price, if available.

When there is no quoted market price available, fair value is reasonably estimated. Since various assumptions and factors are used in estimating the fair value, different assumptions and factors could result in different fair value.

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19. Financial Instruments (continued) Estimated Fair Value of Financial Instruments The carrying value of financial instruments in the consolidated balance sheet, their fair value, and the differences between them as of December 31, 2015 are as follows. (Financial instruments whose fair value is extremely difficult to estimate are not included; please see Note 2 below.)

Carrying

value Estimated fair value Difference

(Millions of yen) Assets (1) Cash and deposits ¥ 47,247 ¥ 47,247 ¥ – (2) Marketable securities and investment

securities

Other securities 105,144 105,144 – Total assets ¥152,392 ¥152,392 ¥ –

Liabilities (1) Short-term borrowings ¥ 1,265 ¥ 1,265 ¥ – (2) Long-term debt (including due within

one year) 572,255 575,417 3,161 (3) Bonds payable (including due within

one year)

127,471

129,993

2,521 Total liabilities ¥700,992 ¥706,675 ¥5,683 Derivatives (*) (367) (367) – (*) The value of assets and liabilities arising from derivative transactions is shown at net

value, and with the amount in parenthesis representing net liability position.

Carrying


(Thousands of U.S. dollars) Assets (1) Cash and deposits $ 392,374 $ 392,374 $ – (2) Marketable securities and investment

securities

Other securities 873,184 873,184 – Total assets $1,265,558 $1,265,558 $ –

Liabilities (1) Short-term borrowings $ 10,505 $ 10,505 $ – (2) Long-term debt (including due within

one year) 4,752,359 4,778,618 26,259 (3) Bonds payable (including due within

one year)

1,058,605

1,079,545

20,940 Total liabilities $5,821,470 $5,868,669 $47,199 Derivatives (*) (3,055) (3,055) – (*) The value of assets and liabilities arising from derivative transactions is shown at net


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19. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) Notes: 1. Methods to determine the estimated fair value of financial instruments and other matters

related to securities and derivative transactions Assets

Cash and deposits

Since these items are settled in a short period of time, their carrying value approximates fair value.

Marketable securities and investment securities

The fair value of stocks is based on quoted market prices. The fair value of debt securities is mainly based on prices provided by the financial institutions making markets in these securities. Liabilities

Short-term borrowings


Long-term debt (including due within one year)

Since variable interest rates of certain long-term debt are determined based on current interest rates in a short period of time, their carrying value approximates fair value. The fair value of long-term debt with fixed interest rates is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new debt were entered into.

Bonds payable (including due within one year)

The fair value of bonds payable is based on the quoted market price. Derivatives The fair value of derivatives is based on prices provided by the financial institution.

The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term debt since amounts in such derivative contracts accounted for short-cut method are handled together with long-term debt as hedged items.

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19. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) 2. Financial instruments for which it is extremely difficult to determine the fair value

(Millions of yen)


(1) Unlisted stocks (*1) ¥ 9,031 $ 75,001 (2) Preferred securities (*1) 3,878 32,209(3) Investments in silent partnerships (*2) 10,818 89,840(4) Guarantee deposits received (*3) 70,982 589,485 (*1) These items are not included in “Assets (2) Marketable securities and investment

securities” since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.

(*2) The fair value of investments in silent partnerships is not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.

(*3) Since market price for lease and guarantee deposit payables is unavailable and calculation of the actual period of duration from lease initiation to termination is difficult, it is extremely difficult to estimate fair value reasonably and therefore the fair value of lease and guarantee deposit payables is not disclosed.

3. Redemption schedule for receivables and marketable securities with maturities at

December 31, 2015

Due in one year or less

Due after one year through

five years

Due after five years through ten years

Due after ten years

(Millions of yen)

Cash and deposits ¥46,837 ¥ – ¥ – ¥ – Marketable securities and investment securities

Other securities with maturities Government bonds – – – – Others – – – –

Total ¥46,837 ¥ – ¥ – ¥ –



five years


Due after ten years


Cash and deposits $388,968 $ – $ – $ – Marketable securities and investment securities

Other securities with maturities Government bonds – – – – Others – – – –

Total $388,968 $ – $ – $ –

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19. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) 4. The redemption schedule for bonds and long-term debt at December 31, 2015



two years

Due after two years through

three years

Due after three years

through four years

Due after four years through

five years Due after five years

(Millions of yen)

Short-term borrowings ¥ 1,265 ¥ – ¥ – ¥ – ¥ – ¥ – Bonds payable 21,710 16,761 20,000 15,000 15,000 39,000 Long-term debt 95,726 53,493 47,078 51,178 202,540 122,238 Total ¥118,701 ¥70,255 ¥67,078 ¥66,178 ¥217,540 ¥161,238



two years


three years


through four years




Short-term borrowings $ 10,505 $ – $ – $ – $ – $ –Bonds payable 180,294 139,199 166,092 124,569 124,569 323,879Long-term debt 794,970 444,245 390,968 425,017 1,682,016 1,015,141Total $985,771 $583,444 $557,060 $549,586 $1,806,585 $1,339,020

Financial Instruments at December 31, 2014 are summarized as follows: The carrying value of financial instruments in the consolidated balance sheet, their fair value, and the differences between them as of December 31, 2013 are as follows. (Financial instruments whose fair value is extremely difficult to estimate are not included; please see Note 2 below.)

Carrying


(Millions of yen) Assets (1) Cash and deposits ¥ 86,908 ¥ 86,908 ¥ – (2) Marketable securities and investment securities

Other securities 105,579 105,579 – Total assets ¥192,487 ¥192,487 ¥ –

Liabilities (1) Short-term borrowings ¥ 2,482 ¥ 2,482 ¥ – (2) Long-term debt (including due within one year) 601,042 604,169 3,127 (3) Bonds payable (including due within one year) 141,232 144,784 3,551 Total liabilities ¥744,756 ¥751,436 ¥6,679

Derivatives (*) (506) (506) – (*) The value of assets and liabilities arising from derivative transactions is shown at net


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19. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) Notes: 1. Methods to determine the estimated fair value of financial instruments and other matters

related to securities and derivative transactions Assets

Cash and deposits


Marketable securities and investment securities

The fair value of stocks is based on quoted market prices. The fair value of debt securities is mainly based on prices provided by the financial institutions making markets in these securities. Liabilities

Short-term borrowings


Long-term debt (including due within one year)

Since variable interest rates of certain long-term debt are determined based on current interest rates in a short period of time, their carrying value approximates fair value. The fair value of long-term debt with fixed interest rates is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new debt were entered into.

Bonds payable (including due within one year)

The fair value of bonds payable is based on the quoted market price. Derivatives

The fair value of derivatives is based on prices provided by the financial institution.

The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term debt since amounts in such derivative contracts accounted for short-cut method are handled together with long-term debt as hedged items.

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19. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) 2. Financial instruments for which it is extremely difficult to determine the fair value

(Millions of yen)

(1) Unlisted stocks (*1) ¥ 6,142 (2) Preferred securities (*1) 9,707 (3) Investments in silent partnerships (*2) 9,223 (4) Guarantee deposits received (*3) 68,266

(*1) These items are not included in “Assets (2) Marketable securities and investment

securities” since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.

(*2) The fair value of investments in silent partnerships is not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.

(*3) Since market price for lease and guarantee deposit payables is unavailable and calculation of the actual period of duration from lease initiation to termination is difficult, it is extremely difficult to estimate fair value reasonably and therefore the fair value of lease and guarantee deposit payables is not disclosed.

3. Redemption schedule for receivables and marketable securities with maturities at

December 31, 2014



five years


Due after ten years

(Millions of yen)

Cash and deposits ¥86,388 ¥ – ¥ – ¥ – Marketable securities and investment securities

Other securities with maturities Government bonds 10 – – – Others 100 – – –

Total ¥86,498 ¥ – ¥ – ¥ –

4. The redemption schedule for bonds and long-term debt at December 31, 2014



two years


three years


through four years



(Millions of yen)

Short-term borrowings ¥ 2,482 ¥ – ¥ – ¥ – ¥ – ¥ – Bonds payable 33,760 21,710 16,761 20,000 15,000 34,000 Long-term debt 149,115 91,582 56,489 30,308 34,324 239,222 Total ¥185,358 ¥113,292 ¥73,250 ¥50,308 ¥49,324 ¥273,222

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20. Marketable Securities and Investment Securities Information regarding marketable securities classified as other securities as of December 31, 2015 and 2014 is summarized as follows: (1) Marketable other securities

December 31, 2015

Carrying

value Acquisition

cost Unrealized gain (loss)

Carrying value

Acquisition cost

Unrealized gain (loss)

(Millions of yen) (Thousands of U.S. dollars) Securities whose carrying

value exceeds their acquisition cost:

Stock ¥ 88,127 ¥18,617 ¥69,510 $ 731,865 $154,609 $577,256Government bonds – – – – – –Other bonds – – – – – –Other 14,502 7,373 7,129 120,438 61,234 59,204

102,630 25,990 76,639 852,304 215,843 636,461Securities whose carrying

value does not exceed their acquisition cost:

Stock 2,514 3,057 (543) 20,879 25,390 (4,510) 2,514 3,057 (543) 20,879 25,390 (4,510)Total ¥105,144 ¥29,048 ¥76,096 $873,184 $241,233 $631,950

December 31, 2014

Carrying

value Acquisition

cost Unrealized gain (loss)

(Millions of yen) Securities whose carrying

value exceeds their acquisition cost:

Stock ¥ 89,578 ¥16,530 ¥73,048 Government bonds 10 9 0 Other bonds 99 93 5 Other 14,605 7,285 7,320

104,294 23,920 80,374 Securities whose carrying

value does not exceed their acquisition cost:

Stock 1,284 1,312 (27) 1,284 1,312 (27)Total ¥105,579 ¥25,232 ¥80,346

The Company recognized impairment losses on unlisted stocks of ¥4,217 million

($35,204 thousand) for the year ended December 31, 2014. Impairment losses on marketable securities or investment securities were not recognized for the year ended December 31, 2015.

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20. Marketable Securities and Investment Securities (continued) (2) Sales of securities classified as other securities and the related aggregate gains and losses

for the years ended December 31, 2015 and 2014 are summarized as follows:


U.S. dollars)

Sales proceeds ¥ – ¥202 $ – Aggregate gains – 13 –

(3) Investments in special purpose companies (SPCs) as of December 31, 2015 and 2014 are

summarized as follows: December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Investment securities ¥ 3,878 ¥ 9,707 $ 32,209 Investments in silent partnerships (included in investments) 10,818 9,223 89,840

Other investments 0 1 7 Subtotal 14,697 18,932 122,058 Total ¥14,697 ¥18,932 $122,058

21. Derivatives and Hedging Activities Hedge accounting was applied to all derivative transactions as of December 31, 2015. The summary of these transactions is as follows: Interest-related transactions

Class of transactions Hedged items Notional amount

Due after one year

Fairvalue

(Millions of yen) Interest rate swap contracts accounted for

by the short-cut method pay/fixed and receive/floating

Debt and bonds payable

¥162,158 ¥110,629 (*1) Interest rate swap contracts Pay/fixed and

receive/floating Debt and

bonds payable

36,000

36,000 (*2)

¥(367) Total ¥198,158 ¥146,629 ¥(367)


Due after one year

Fairvalue

(Thousands of U.S. dollars) Interest rate swap contracts accounted for



$1,346,660 $ 918,732 (*1) Interest rate swap contracts Pay/fixed and


bonds payable 298,966

298,966 (*2)

$(3,055) Total $1,645,626 $1,217,698 $(3,055)

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37

21. Derivatives and Hedging Activities (continued) (*1) The estimated fair value of interest rate swap contracts is included in the estimated fair

value of the debt and bonds payable since amounts of such derivative contracts accounted for by the short-cut method are handled together with debt and bonds payable as hedged items.

(*2) The fair value of derivatives is based on prices provided by the financial institution. Hedge accounting was applied to all derivative transactions as of December 31, 2014. The summary of these transactions is as follows: Interest-related transactions


Due after one year

Fair value

(Millions of yen) Interest rate swap contracts accounted for



¥223,740 ¥102,097 (*1) Interest rate swap contracts Pay/fixed and


bonds payable

36,000

36,000 (*2)

¥(506) Total ¥259,740 ¥138,097 ¥(506)

(*1) The estimated fair value of interest rate swap contracts is included in the estimated fair

value of the debt and bonds payable since amounts of such derivative contracts accounted for by the short-cut method are handled together with debt and bonds payable as hedged items.

(*2) The fair value of derivatives is based on prices provided by the financial institution.

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22. Retirement Benefit Plans 1. Overview of retirement benefit plans The Company has certain defined benefit plans, which consist of a defined benefit

corporate pension plan and a lump-sum severance payment plan. Certain consolidated subsidiaries have a lump-sum benefit plan and other consolidated subsidiaries have the defined contribution pension plans and other plans.

The Company and certain consolidated subsidiaries calculate the net defined benefit

liability and retirement benefit costs using a simplified method. 2. Defined benefit plans

(1) Reconciliation of the beginning balance and the ending balance of retirement benefit obligation (excluding plans to which a simplified method is applied)

December 31 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)Beginning balance of retirement benefit obligation ¥17,236 ¥16,406 $143,142

Cumulative effect of change in accounting policies

383

–

3,186

Restated beginning balance of retirement benefit obligation 17,620 16,406 146,328

Service costs 1,087 943 9,028 Interest costs 101 241 847 Actuarial gain or loss 47 106 396 Retirement benefits paid (749) (461) (6,222) Increase due to change from simplified method to standard method

110

–

918

Ending balance of retirement benefit obligation

¥18,218

¥17,236

$151,296

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39

22. Retirement Benefit Plans (continued)

(2) Reconciliation of the beginning balance and the ending balance of plan assets (excluding plans to which a simplified method is applied)


U.S. dollars)

Beginning balance of plan assets ¥9,554 ¥7,909 $79,343 Expected rate of return on plan assets 143 118 1,190 Actuarial gain or loss (233) 1,223 (1,940) Contributions from the employer 497 494 4,128 Retirement benefits paid (199) (191) (1,657) Ending balance of plan assets ¥9,761 ¥9,554 $81,063

(3) Reconciliation of the beginning balance and the ending balance of the net defined

benefit liability to which a simplified method is applied


U.S. dollars)Beginning balance of net defined benefit liability ¥465 ¥433 $3,864

Retirement benefit costs 91 93 756 Retirement benefits paid (56) (60) (466) Increase in consolidated subsidiaries 1 – 15 Decrease due to change from simplified method to standard method (98) – (818)

Other 0 – 3 Ending balance of net defined benefit liability

¥403

¥465

$3,354

010_0479001372804.indd 41 2016/05/14 5:23:56

40


(4) Reconciliation of the ending balance of the retirement benefit obligation and plan assets and net amount of liabilities and assets presented on the consolidated balance sheet


U.S. dollars)

Retirement benefit obligation of funded plans ¥ 8,344 ¥ 7,719 $ 69,295

Plan assets (9,761) (9,554) (81,063) (1,417) (1,834) (11,768) Retirement benefit obligation of unfunded plans

10,278 9,982

85,356

Net amount of liabilities and assets presented on the consolidated balance sheet

8,861 8,147

73,588

Net defined benefit liability 10,278 9,982 85,356 Net defined benefit asset (1,417) (1,834) (11,768) Net amount of liabilities and assets presented on the consolidated balance sheet

¥ 8,861 ¥ 8,147

$ 73,588

(5) Retirement benefit costs


U.S. dollars)

Service costs ¥1,087 ¥ 943 $ 9,028 Interest costs 101 241 847 Expected return on plan assets (143) (118) (1,190) Amortization of actuarial gain or loss (137) 165 (1,139) Amortization of prior service costs (7) (7) (60) Retirement benefit costs calculated by a simplified method 91 93 756

Adjustment for change from simplified method to standard method

11

–

99 Retirement benefit costs for defined benefit plans

¥1,004

¥1,318

$ 8,341

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41


(6) Remeasurements of defined benefit plans The breakdown of remeasurements of defined benefit plans before tax effects in

other comprehensive income for the years ended December 31, 2015 and 2014 is as follows. Year ended December 31 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Prior service costs ¥ 7 – $ 60 Actuarial gain or loss 418 – 3,474 Total ¥425 – $3,535

(7) Remeasurements of defined benefit plans The breakdown of remeasurements of defined benefit plans before tax effects in

accumulated other comprehensive income as of December 31, 2015 and 2014 is as follows. December 31 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)

Unrecognized prior service costs ¥ (47) ¥ (54) $ (393) Unrecognized actuarial gain or loss

(942)

(1,360)

(7,827) Total ¥(989) ¥(1,415) $(8,220)

(8) Matters relating to plan assets

(i) Major components of pension assets

The ratio of major components to total plan assets is as follows.

December 31 2015 2014

Bonds 32.6 % 29.5 % Stocks 19.9 20.9 General accounts 8.7 8.7 Investment trusts 35.4 37.5 Others 3.4 3.4 Total 100.0 100.0

(ii) Method for determining the expected long-term rate of return on plan assets

The expected long-term rate of return on pension plan assets has been determined taking into consideration historical investment experience and the expected rate of return in the future for each asset constituting pension plan assets.

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(9) Matters relating to actuarial calculation assumptions

The major actuarial assumptions at the end of the fiscal year

December 31 2015 2014

Discount rate 0.3 – 0.6% 0.3 – 1.5% Expected long-term rate of return on plan assets 1.5% 1.5%

Expected rate of salary increase 0.0 – 7.6% 0.0 – 7.7% 3. Defined contribution plans The amount of required contributions to the defined contribution plans of consolidated

subsidiaries is ¥18 million ($153 thousand). 23. Income Taxes Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise tax, which, in the aggregate, resulted in statutory tax rates of approximately 35.6% and 38.0% for the years ended December 31, 2015 and 2014, respectively. Income taxes of the overseas consolidated subsidiaries are based generally on the tax rates applicable in their respective countries of incorporation. The effective tax rate reflected in the accompanying consolidated statement of income for the years ended December 31, 2015 and 2014 differed from the statutory tax rate for the following reasons: Year ended December 31, 2015 2014

Statutory tax rate 35.6% 38.0% Increase (decrease) in income taxes resulting from:

Reversal of valuation allowance for deferred tax assets (10.2) (19.9) Non-deductible expenses 0.6 0.2 Non-taxable income (6.3) (0.4) Inhabitants’ per capita taxes 0.4 0.1 Tax rates on foreign subsidiaries (0.0) (0.0) Tax rates of special reconstruction corporation tax – 0.9 Downward adjustment of deferred tax assets at fiscal year-end due to change in tax rate 2.2 – Reversal of valuation allowance on deferred tax assets on land revaluation – (1.4)

Dividends paid deducted as expenses (0.4) (12.3) Other 1.2 1.1 Effective tax rate 23.1% 6.3%

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23. Income Taxes (continued) The significant components of deferred tax assets and liabilities as of December 31, 2015 and 2014 are as follows: December 31, 2015 2014 2015 (Millions of yen) (Thousands of

U.S. dollars)Deferred tax assets:

Write-downs of investment securities ¥ 706 ¥ 2,459 $ 5,865 Loss on impairment of property and equipment 14,244 19,604 118,295 Net operating loss carry forwards 4,504 6,172 37,412 Accrued severance indemnities in excess of tax-deductible portion 3,210 3,407 26,658

Loss on appraisal of real estate held for sale 1,349 1,893 11,204 Write-downs of stocks of subsidiaries and affiliated companies 1,344 1,352 11,166

Loss on investments 3,635 3,865 30,195 Adjustment due to standardization of accounting policies between the parent company and its subsidiaries, etc. 10,571 13,073 87,796

Other 3,605 3,961 29,942 Gross deferred tax assets 43,173 55,790 358,536 Valuation allowance (24,878) (38,124) (206,605) Total deferred tax assets 18,294 17,666 151,931

Deferred tax liabilities: Reversal of deferred tax liabilities based on revaluation of assets of subsidiaries (2,876) (3,217) (23,890)

Net unrealized gains or losses on available-for-sale securities (26,935) (31,498) (223,692)

Reversal of reserve for deferred capital gain on land (2,489) (2,744) (20,673)

Gain on change in interest in a consolidated subsidiary – (762) –

Other (1,699) (1,190) (14,116) Total deferred tax liabilities (34,001) (39,413) (282,372) Net deferred tax liabilities ¥(15,707) ¥(21,747) $(130,441)

Recalculation of amounts of deferred tax assets and deferred tax liabilities due to change in corporate tax rates Partial Revision of Income Tax Act (Act No. 9 of 2015) and Partial Revision of the Local Tax Act (Act No. 2 of 2015) were enacted on March 31, 2015, and the corporate income tax rate will be reduced from fiscal years beginning on or after April 1, 2015. In accordance with this change, the statutory tax rate used to calculate deferred tax assets and liabilities will be reduced from the current 35.6% to 33.1% for the temporary differences that are expected to be realized or settled in the year beginning on January 1, 2016, and will be reduced to 32.3% for the temporary differences that are expected to be realized or settled in the year beginning on January 1, 2017 and thereafter.

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23. Income Taxes (continued) As a result of this change in the tax rate, deferred tax liabilities (net of deferred tax assets) decreased by ¥1,861 million ($15,461 thousand), while deferred income taxes increased by ¥757 million ($6,293 thousand), net unrealized gains or losses on available-for-sale securities increased by ¥2,507 million ($20,822 thousand), and remeasurements of defined benefit plans increased by ¥32 million ($271 thousand) as of and for the year ended December 31, 2015. In addition, deferred tax liabilities for land revaluation decreased by ¥2,941 million ($24,429 thousand) and revaluation reserve for land increased by the same amount. 24. Business Combinations (Business combination through share acquisition) I. Outline of business combination

1. Name and business of acquired company

Name of acquired company: MAOS Co., Ltd.

Business of acquired company: Parking lot business

2. Primary reason for business combination

In order to further expand the parking lot business, which is positioned to be a core business in the Tokyo Tatemono Group Medium-term Business Plan announced on February 12, 2015.

3. Date of business combination

March 10, 2015

4. Legal form of business combination

Share acquisition using cash

5. Name of entity after business combination

No change

6. Percentage of voting rights acquired

Percentage of voting rights held immediately before the business combination: 0.0%

Percentage of voting rights additionally acquired on the business combination date: 100.0%

Percentage of voting rights held after the acquisition: 100.0%

7. Details of business combination

Tokyo Tatemono acquired 100% of the voting rights of MAOS Co., Ltd. for a cash consideration.

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24. Business Combinations (continued) II. Financial period for which the operating results of acquired company were consolidated

April 1, 2015 through December 31, 2015 III. Acquisition cost of the company

(Millions of yen)


Acquisition cost ¥6,700 $55,640 IV. Primary acquisition-related cost and the amount

Financial due diligence cost: ¥4 million ($33 thousand) V. Amount of goodwill, factors that contributed to the recognition of goodwill, and

amortization method and period

1. Amount of goodwill

¥6,349 million ($52,732 thousand)

2. Factors that contributed to the recognition of goodwill

Goodwill represents excess earning power expected to be realized through future business development.

3. Amortization method and period

Straight-line amortization over a 5 year period VI. Assets acquired and liabilities assumed on the business combination date

(Millions of yen)


Current assets ¥1,025 $ 8,515 Noncurrent assets 1,113 9,247 Total assets ¥2,138 $17,763

(Millions of


Current liabilities ¥ 518 $ 4,308 Noncurrent liabilities 1,269 10,545 Total liabilities ¥1,788 $14,854

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24. Business Combinations (continued) VII. Estimated amount and calculation method of the impact of the business combination on

the consolidated statement of income for the year ended December 31, 2015, on the assumption that the business combination was completed at the beginning of the year.

This information has been omitted because the impact of the estimated amount on the

consolidated statement of income for the year ended December 31, 2015 was immaterial. The estimated amounts of the impact have not been audited by the Company’s independent auditors.

(Share exchange agreement to make Tokyo Tatemono Real Estate Sales Co., Ltd. a wholly-owned subsidiary) I. Summary In accordance with a resolution by the Board of Directors on February 12, 2015, Tokyo

Tatemono and its consolidated subsidiary Tokyo Tatemono Real Estate Sales signed a share exchange agreement the same day. The goal of the share exchange is to achieve further growth by flexibly responding to changes in the business environment and by leveraging the strengths of both companies.

The share exchange will give Tokyo Tatemono full ownership of Tokyo Tatemono Real

Estate Sales. The share exchange was implemented on July 1, 2015 (the effective date). As of the effective date of this transaction, Tokyo Tatemono Real Estate Sales became a wholly-owned subsidiary of Tokyo Tatemono.

1. Name of entity in business combination and business description

Name of entity in business combination: Tokyo Tatemono Real Estate Sales Co., Ltd.

Business description: Real estate brokerage, sales, leasing, and management 2. Date of business combination

July 1, 2015 3. Legal form of business combination

Share exchange 4. Name of entity after business combination

No change II. Summary of accounting standards applied Tokyo Tatemono early adopted Revised Accounting Standard for Business Combinations

(ASBJ Statement No. 21, September 13, 2013) and Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, September 13, 2013). The share exchange is treated as a transaction with minority interests and falls under the category of transactions between entities under common control.

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24. Business Combinations (continued) III. Matters concerning acquisition of additional shares in a subsidiary

1. Breakdown of acquisition cost and type of purchase

(Millions of


Type of purchase

Tokyo Tatemono common stock ¥5,136 $42,657

Acquisition cost ¥5,136 $42,657 2. Share exchange ratio, calculation method, and number of shares exchanged

(1) Share exchange ratio

0.305 of a share of common stock in Tokyo Tatemono was exchanged for one share of common stock in Tokyo Tatemono Real Estate Sales

(2) Share exchange ratio calculation method

Tokyo Tatemono and Tokyo Tatemono Real Estate Sales selected a third party and legal advisor to calculate the share exchange ratio to ensure the fairness of the acquisition cost and other matters for this share exchange. The share exchange ratio in (i) above was determined to be reasonable after careful discussion and examination of the share exchange ratio calculation report received from the third party and after taking into consideration recommendations by the legal advisor.

(3) Number of shares exchanged

3,021,550 shares (of which 2,587,760 shares were treasury stock, and 433,790 shares were newly issued)

IV. Matters concerning changes in Tokyo Tatemono’s equity interest reflecting transactions

with minority interests

(1) Primary reason for change in additional paid-in capital

Acquisition of additional shares of the subsidiary (2) Decrease in additional paid-in capital due to transactions with minority interests:

¥1,513 million ($12,570 thousand)

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25. Investment and Rental Properties The Company and some of its subsidiaries own office buildings for lease, apartment houses for lease, commercial facilities for lease and other properties in Tokyo and other areas. Some office buildings for lease are regarded as real estate including space used as rental properties since they are used by the Company and some of its consolidated subsidiaries. The carrying values of these properties in the consolidated balance sheet, their changes during the year ended December 31, 2015 and their fair value at December 31, 2015 are as follows: Carrying value Fair value

December 31,

2014 Changes December 31,

2015 December 31,

2015 (Millions of yen)

Rental properties ¥721,673 ¥(16,632) ¥705,041 ¥964,045 Real estate including space used as rental properties 131,852 (305) 131,546 146,600

Carrying value Fair Value

December 31,


2015 December 31,

2015 (Thousands of U.S. dollars)

Rental properties $5,993,222 $(138,125) $5,855,096 $8,006,027 Real estate including space used as rental properties 1,094,984 (2,540) 1,092,444 1,217,456

Notes:

* The carrying values in the consolidated balance sheet are the amounts determined by deducting accumulated depreciation from the acquisition costs.

* The changes for the fiscal year ended December 31, 2015 mainly consist of increases due to the acquisition of real estate of ¥33,630 million ($279,285 thousand), and decreases due to depreciation of ¥13,039 million ($108,290 thousand), an impairment loss of ¥1,659 million ($13,783 thousand), sale of real estate of ¥14,775 million ($122,706 thousand) and deconsolidation of ¥17,065 million ($141,724 thousand).

* The fair value is appraised principally by real estate appraisers, and the fair value of other is estimated in accordance with appraisal standards for valuing real estate.

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25. Investment and Rental Properties (continued) The income or loss from rental properties and real estate including space used as rental properties for the year ended December 31, 2015 are as follows: December 31, 2015

Rental income Rental cost

Rental income, net Other, net

(Millions of yen)

Rental properties ¥69,587 ¥43,541 ¥26,045 ¥(2,219) Real estate including space used as rental properties 6,448 4,070 2,377 (28)

December 31, 2015




Rental properties $577,895 $361,594 $216,301 $(18,431) Real estate including space used as rental properties 53,549 33,802 19,747 (239)

Notes:

* Rental income excludes the one from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for providing leasing services and operations management.

* Gain on sales of noncurrent assets, loss on retirement of noncurrent assets and impairment loss are major components of “Other, net.”

The carrying values of these properties in the consolidated balance sheet, their changes during the year ended December 31, 2014 and their fair value at December 31, 2014 are as follows: Carrying value Fair value

December 31,


2014 December 31,

2014 (Millions of yen)

Rental properties ¥310,137 ¥411,535 ¥721,673 ¥959,925 Real estate including space used as rental properties 92,543 39,309 131,852 143,500

Notes:

* The carrying values in the consolidated balance sheet are the amounts determined by deducting accumulated depreciation from the acquisition costs.

* The changes for the fiscal year ended December 31, 2014 mainly consist of increases due to the acquisition of real estate of ¥49,410 million and the real estate of ¥577,550 million associated with making SPCs consolidated subsidiaries, and decreases due to depreciation of ¥12,515 million, impairment loss of ¥6,367 million and the sale of real estate of ¥158,581 million.

* The fair value is appraised principally by real estate appraisers, and the fair value of other is estimated in accordance with appraisal standards for valuing real estate.

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25. Investment and Rental Properties (continued) The income or loss from rental properties and real estate including space used as rental properties for the year ended December 31, 2014 are as follows: December 31, 2014



(Millions of yen)

Rental properties ¥69,030 ¥43,553 ¥25,476 ¥126,284 Real estate including space used as rental properties 6,823 4,012 2,810 (14)

Notes:

* Rental income excludes the one from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for providing leasing services and operations management.

* Gain on sales of noncurrent assets, loss on retirement of noncurrent assets and impairment loss are major components of “Other, net.”

26. Segment Information Business Segments 1. Overview of Reportable Segments

The reportable segments of the Company are the constituent units for which separate financial information is available and for which the Board of Directors conducts regular reviews to determine the allocation of management resources and assess business performance.

The Company conducts business activities by establishing divisions corresponding to their line of business at the head office with the divisions formulating comprehensive strategies for the businesses that they operate.

Therefore, the Company’s business segments are classified based on division and comprise four businesses, which include commercial properties, residential, brokerage, and other as the reportable segments.

In the commercial properties business, the Company leases out and manages office buildings and commercial facilities. In the residential business, the Company sells condominiums and detached houses and leases out and manages condominiums. In the brokerage business, the Company sells and buys real estate and provides brokerage, real estate appraisal and consulting services. In other businesses, the Company operates the leisure business among others.

2. Calculation Methods for the Amounts of Revenue from Operations, Profit and Loss,

Assets and Other Items by Reportable Segment

The accounting methods for the reportable business segments are the same as those stated in the Significant Accounting Policies. Profits in the reportable segments are based on operating income. Intersegment revenue from operations or transfers is based on the current market value.

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26. Segment Information (continued) 3. Information on Revenue from Operations, Profit and Loss, Assets, and Other Items by

Reportable Segments Year ended December 31, 2015

Commercial properties Residential Other Total Adjustments Consolidated

(Millions of yen) (Notes a and b)

Revenue from operations: Customers ¥ 96,942 ¥ 98,076 ¥ 64,992 ¥ 260,012 ¥ – ¥ 260,012Intersegment 855 444 1,663 2,963 (2,963) –

Subtotal 97,798 98,521 66,656 262,975 (2,963) 260,012

Costs and operating expenses

70,575

88,055

63,631 222,262

3,310 225,573

Operating income ¥ 27,222 ¥ 10,465 ¥ 3,024 ¥ 40,713 ¥ (6,273) ¥ 34,439

Assets ¥902,079 ¥131,446 ¥163,762 ¥1,197,288 ¥99,824 ¥1,297,112Other items:

Depreciation ¥ 11,289 ¥ 1,080 ¥ 2,319 ¥ 14,688 ¥ 110 ¥ 14,799Impairment losses on fixed assets 2,332 – 2,711 5,044 – 5,044

Investment in equity method affiliates – 851 21,776 22,627 – 22,627

Increase in property and equipment and intangible assets 27,620 3,233 14,552 45,406 259 45,665

Amortization of goodwill – – 1,130 1,130 – 1,130Balance of goodwill – – 5,410 5,410 – 5,410

Year ended December 31, 2015


(Thousands of U.S. dollars) (Notes a and b)

Revenue from operations: Customers $ 805,073 $ 814,490 $ 539,737 $2,159,300 $ – $ 2,159,300Intersegment 7,105 3,691 13,815 24,612 (24,612) –

Subtotal 812,178 818,182 553,552 2,183,913 (24,612) 2,159,300


586,102 731,270 528,433 1,845,806

27,490 1,873,296

Operating income $ 226,076 $ 86,911 $ 25,119 $ 338,107 $ (52,102) $ 286,004

Assets $7,491,418 $1,091,613 $1,359,983 $9,943,015 $829,001 $10,772,016Other items:

Depreciation $ 93,756 $ 8,970 $ 19,258 $ 121,985 $ 920 $ 122,906Impairment losses on fixed assets 19,373 – 22,521 41,895 – 41,895

Investment in equity method affiliates – 7,068 180,844 187,913 – 187,913

Increase in property and equipment and intangible assets 229,379 26,850 120,852 377,081 2,153 379,235

Amortization of goodwill – – 9,387 9,387 – 9,387Balance of goodwill – – 44,928 44,928 – 44,928

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26. Segment Information (continued) Business Segments (continued) Year ended December 31, 2014


(Millions of yen) (Notes a and b)

Revenue from operations: Customers ¥109,283 ¥ 84,240 ¥ 43,526 ¥ 237,049 ¥ – ¥ 237,049Intersegment 881 589 3,015 4,487 (4,487) –

Subtotal 110,164 84,830 46,541 241,537 (4,487) 237,049


80,720

81,116

42,618 204,455

2,034 206,489

Operating income ¥ 29,444 ¥ 3,714 ¥ 3,922 ¥ 37,081 ¥ (6,521) ¥ 30,559

Assets ¥899,594 ¥140,031 ¥126,444 ¥1,166,071 ¥153,393 ¥1,319,465Other items:

Depreciation ¥ 10,875 ¥ 1,302 ¥ 1,750 ¥ 13,928 ¥ 94 ¥ 14,022Impairment losses on fixed assets 2,204 4,602 71 6,878 – 6,878

Investment in equity method affiliates – 751 20,618 21,370 – 21,370

Increase in property and equipment and intangible assets 623,256 143 6,250 629,650 29 629,679

Amortization of goodwill 988 (2) 145 1,131 – 1,131Balance of goodwill 4,682 – 692 5,374 – 5,374

Note a: Adjustments to segment operating income of ¥(6,273) million ($(52,102) thousand) and

¥(6,521) million consists of ¥(389) million ($(3,233) thousand) and ¥(697) million of inter-segment eliminations and ¥(5,884) million ($(48,869) thousand) and ¥(5,824) million of corporate expenses for the years ended December 31, 2015 and 2014, respectively, which mainly represent the Company’s general and administrative expenses that are not allocable to any of the reportable segments.

Note b: Adjustments to segment assets of ¥99,824 million ($829,001 thousand) and ¥153,393 million consists of ¥(58,297) million ($(484,136) thousand) and ¥(45,092) million of inter-segment eliminations, ¥158,121 million ($1,313,137 thousand) and ¥198,486 million of corporate assets for the years ended December 31, 2015 and 2014, respectively.

4. Matters relating to a change in reported segments, etc. During the year ended December 31, 2015, the leased housing management business

previously operated by Tokyo Tatemono Real Estate Sales Co., Ltd, has been transferred from the “Residential” business segment to the “Other” business segment based on the reorganization of the Tokyo Tatemono Group.

The corresponding amounts for the year ended December 31, 2014 have been reclassified

to conform with these changes.

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27. Amounts Per Share

December 31, 2015 2014 2015 (Yen) (U.S. dollars)For the Years Ended

Net income per share Basic ¥75.91 ¥386.24 $0.630 Diluted – – –

December 31, 2015 2014 2015 (Yen) (U.S. dollars)As of

Net assets per share ¥1,390.07 ¥1,331.02 $11.543 Basic net income per share was computed 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 year. Diluted net income per share as of December 31, 2015 and 2014 are not presented as there are no dilutive potential shares. The Company consolidated two shares of common stock into one effective from July 1, 2015. Net assets per share and net income per share have been calculated assuming that the shares had been consolidated at the beginning of the year ended December 31, 2014. Net assets per share are computed based on the net assets excluding minority interests and the number of shares of common stock outstanding at the year end. The bases for calculation are as follows: 1. Basic net income per share


U.S. dollars)For the Years Ended

Net income ¥ 16,359 ¥ 82,944 $135,863 Net income of common stock ¥ 16,359 ¥ 82,944 $135,863 Weighted average number of shares of common stock (thousands) 215,509 214,748

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27. Amounts Per Share (continued) 2. Net assets per share


U.S. dollars)As of

Total net assets ¥312,530 ¥305,808 $2,595,447 Amount deducted from total net assets: 10,959 19,984 91,012

Minority interests 10,959 19,984 91,012 Net assets attributable to share of common stock ¥301,571 ¥285,823 $2,504,434

The number of shares of common stock used for the calculation of net assets per share (thousands) 216,947 214,741

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REPORT OF INDEPENDENT AUDITORS

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MANAGEMENT

CORPORATE DATA

Representative Director President & Chief Executive OfficerHajime Sakuma

Representative Director Senior Executive Managing OfficerHisao Shibayama

Director Senior Executive Managing OfficerMakio TanehashiHitoshi Nomura

Director Executive Managing OfficerMasami KamoKengo Fukui

External DirectorKyonosuke SasakiNorimasa KurodaTatsuo Ogoshi

Full-time Audit & Supervisory Board MemberMitsuyoshi ToyamaToshiyuki Hanazawa

Audit & Supervisory Board MemberShuichi HattoriTakao Yamaguchi

Managing OfficerYoshiki YanaiTsutomu HanadaTakashi KikuchiFumio InadaMasahiko OkamotoYasushi SuzukiYoshihiro JozakiMasami TashiroKatsuhito OzawaAkira IzumiHisatoshi KatoHideshi Akita

(as at March 29, 2016)

Tokyo Tatemono Co., Ltd.Date of EstablishmentOctober 1, 1896

Capital¥92,451 million

Number of Employees571

Number of Shareholders17,654(as at December 31, 2015)

Head Office1-9-9 Yaesu, Chuo-ku,Tokyo 103-8285 JapanTel. +81-3-3274-0111Fax. +81-3-3274-0256

BranchesYaesu Branch Office1-4-16 Yaesu, Chuo-ku,Tokyo 103-0028 JapanTel. +81-3-3274-0124Fax. +81-3-3274-2820Kansai Branch3-4-8 Honmachi, Chuo-ku,Osaka-shi, Osaka 541-0053 JapanTel. +81-6-7711-0222Fax. +81-6-6264-0250Sapporo Branch1-2-6 Kitananajonishi, Kita-ku,Sapporo-shi, Hokkaido 060-0807 JapanTel. +81-11-717-0111Fax. +81-11-717-5330Kyushu Branch2-8-49 Tenjin, Chuo-ku,Fukuoka-shi, Fukuoka 810-0001 JapanTel. +81-92-761-0110Fax. +81-92-736-6586

Nagoya Branch2-20-8 Nishiki , Naka-ku,Nagoya-shi, Aichi 460-0003 JapanTel. +81-52-202-0301Fax. +81-52-202-0302

Principal SubsidiariesTokyo Tatemono Real Estate Sales Co., Ltd.1-4-16 Yaesu, Chuo-ku, Tokyo 103-0028 JapanTel. +81-3-6837-7700Fax. +81-3-5202-5150Tokyo Fudosan Kanri Co., Ltd.4-1-3 Taihei, Sumida-ku,Tokyo 130-0012 JapanTel. +81-3-5637-2550Fax. +81-3-3625-3428Tokyo Tatemono Amenity Support Co., Ltd.1-2-16 Yaesu, Chuo-ku,Tokyo 103-0028 JapanTel. +81-3-6777-6700Fax. +81-3-6777-6770Tokyo Tatemono Resort Co., Ltd.1-9-9 Yaesu, Chuo-ku,Tokyo 103-0028 JapanTel. +81-3-3274-0865Fax. +81-3-3275-1440Nihon Parking Corporation2-4 Kandajinbocho, Chiyoda-ku,Tokyo 101-0051 JapanTel. +81-3-3222-0015Fax. +81-3-3222-0029

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Printed in Japan

http://www.tatemono.com

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