Notice of Convocation of the 32Nd Ordinary General Meeting of Shareholders
1 King William Street (London, U.K.) Notice of Convocation of the 32nd Ordinary General
Meeting of Shareholders Table of contents P2 Notice of Convocation Shareholders’ Meeting Information P4 (Reference) Exercising Your Voting Rights ■ Date and Time P5 Reference Materials for the Ordinary General Thursday, June 22, 2017 Meeting of Shareholders
10:00 a.m. 【Attachments to the Notice of Convocation】 P9 Business Report ■ Place P30 Consolidated Financial Statements 4-1, Shibaura 3-chome, Minato-ku, Tokyo P34 Financial Statements (Non-consolidated) Granpark Plaza Bldg. 3F Conference Room P37 Auditors’ Report (Reference)
■ Matters to be resolved P43 【Topics】 First Item Distribution of Surplus as Dividends Second Item Election of Four Directors
NTT Urban Development Corporation (Cord: 8933, First Section of TSE)
May, 2017 To Our Shareholders
Please let me take this opportunity to thank our shareholders for your continued generous support.
We are pleased to send you this notice of convocation of the 32th ordinary general meeting of shareholders to be held on June 22, 2017. This notice describes an overview of our business for the 32nd term (from April 1, 2016 to March 31, 2017) and will be discussed at the shareholders’ meeting.
Looking back on business in the fiscal year under review, the Offices/Retail Business recorded higher revenue and income primarily due to an increase in rent income associated with an improvement in vacancy rates of existing properties and the termination of free rent periods. Leasing at Shinagawa Season Terrace was completed, and we have established a stable revenue base.
In the Residential Business, sales prices in the market remained high. In this environment, we endeavored to operate business steadily. We worked persistently to sell residential units and conducted sales of equity shares in certain properties.
We will aim to achieve steady growth by focusing on the development of mixed-use properties of offices, housing and commercial facilities, while acquiring and adding value to office buildings overseas. We will also continue to operate the hotel and resort business, the serviced senior housing business in cooperation with the NTT Group, and renovations of vintage condominiums.
Sadao Maki President and Chief Executive Officer
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May 30, 2017 To Shareholders
NTT Urban Development Corporation (Code: 8933, First Section of TSE) 14-1, Sotokanda 4-chome, Chiyoda-ku, Tokyo Sadao Maki President and Chief Executive Officer
Notice of Convocation of the 32nd Ordinary General Meeting of Shareholders
You are hereby notified that the 32nd Ordinary General Meeting of Shareholders will be held as stated below. Your attendance is respectfully requested.
In the event you are unable to attend the meeting, it is possible to exercise your voting rights using either of the methods outlined below. You are requested to study the attached Reference Materials for the Ordinary General Meeting of Shareholders and exercise your voting rights by 5:30 p.m. on Wednesday, June 21, 2017 (Japan Standard Time).
[Voting via mail]
Please indicate your approval or disapproval of the resolutions on the enclosed voting right exercise form and return it, so that it arrives before the deadline indicated above.
[Voting via the Internet, etc.]
Please access the designated website “Voting Exercise Website” (http://www.it-soukai.com/) using the voting exercise code and password printed on the enclosed voting right exercise form, and indicate your approval or disapproval of the resolutions by following the instructions on the screen by the deadline indicated above.
If you exercise your voting rights via the Internet, etc., please refer to “Exercising your voting rights via the Internet, etc.” on pages 4.
If you exercise your voting rights both via mail and via the Internet, only the vote placed via the Internet will be treated as valid. If you vote more than once via the Internet, only the last vote placed will be treated as valid.
NTT Urban Development Corporation (the “Company”) utilizes the electronic voting rights exercise platform operated by ICJ, Inc. for institutional investors.
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Particulars
1. Date and Time: 10:00 a.m. on Thursday, June 22, 2017 2. Place: 4-1, Shibaura 3-chome, Minato-ku, Tokyo Granpark Plaza Bldg. 3F Conference Room 3. Purpose of the Meeting: Matters to be reported 1. Report on the business report, consolidated financial statements and audit results of the consolidated financial statements by the independent auditors and the Board of Corporate Auditors for the 32nd fiscal year (from April 1, 2016 to March 31, 2017) 2. Report on the non-consolidated financial statements for the 32nd fiscal year (from April 1, 2016 to March 31, 2017)
Matters to be resolved First Item Distribution of Surplus as Dividends Second Item Election of Four Directors
End
1. When attending the meeting in person, you are kindly requested to submit the enclosed voting right exercise form to the receptionist at the place of the meeting. 2. Since the Company has posted “Mechanisms to ensure appropriate business operations,” “Outline of the management of the mechanisms to ensure appropriate business operations,” and “Basic policy on the control of the Company” of the business report, “Notes to consolidated financial statements” of the consolidated financial statements, and “Notes to non-consolidated financial statements” of the non-consolidated financial statements on its website (http://www.nttud.co.jp/english/) pursuant to the provisions of relevant laws and regulations and Article 15 of its Articles of Incorporation, it has not included this content in the documents attached to the convocation notice for the 32nd Ordinary Shareholders’ Meeting. The business report audited by the Corporate Auditors and the consolidated financial statements and non-consolidated financial statements audited by the accounting auditor and Corporate Auditors are the documents stated in those attached to the convocation notice for the 32nd Ordinary Shareholders’ Meeting, as well as the information described above posted on the Company’s website. 3. Any subsequent revisions to the Reference Materials for the Ordinary General Meeting of Shareholders, the business report, the consolidated financial statements and the non-consolidated financial statements will be posted on our website on the Internet.
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(Reference) Exercising your voting rights via the Internet, etc. 1. Exercising your voting rights via the Internet (1) Instead of exercising your voting rights in writing, you can exercise your rights via the designated website, Voting Exercise Website, (see the URL below). If you prefer to exercise your voting rights via the website, you can log in, entering your voting exercise code and password, which are provided on the right side of the enclosed voting right exercise form, and enter the necessary information, following the instructions on the screen. For security reasons, you will need to change the password when you log in for the first time.
http://www.it-soukai.com/
(2) The deadline for exercising your voting rights is 5:30 p.m., Wednesday, June 21, 2017, and you are requested to complete your entry by that time. We ask you to exercise your rights early. (3) If you exercise your voting rights both via mail and via the Internet, only the vote placed via the Internet will be treated as valid. If you exercise your voting rights more than once, only the last vote placed will be valid. (4) Your passwords (including the one with which you will replace the initial password) will only be valid for the upcoming general meeting of shareholders. A new password will be issued for the next general meeting of shareholders. (5) Internet connection costs are payable by the shareholder.
(Note) ・The password is provided as a means to confirm the identification of the voter. The Company will never ask you for your password. ・If you enter the wrong password more than a certain times, the screen will be locked. If the screen is locked, please follow the on-screen instructions. ・We have confirmed the operation capabilities of the Voting Exercise Website, using devices widely used to connect to the Internet. However, you may not be able to use the website depending on the device you use.
2. Inquiries If you have any questions, please contact the Stock Transfer Agency Department of Mizuho Trust & Banking, the shareholder register administrator, at the telephone numbers below.
(1) Inquiries about the operation of the Voting Exercise Website: 0120-768-524 (toll free; 9:00 a.m. to 9:00 p.m. on weekdays) (2) Inquiries about other administrative stock-related matters: 0120-288-324 (toll free; 9:00 a.m. to 5:00 p.m. on weekdays)
(For reference) Institutional investors will be able to use the electronic voting rights exercise platform operated by ICJ, Inc. End
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Reference Materials for the Ordinary General Meeting of Shareholders
Resolutions and matters for reference
First Item Distribution of Surplus as Dividends In addition to increasing corporate value over the medium- and long-term, the Company has identified the return of profits to shareholders as an important management goal. In determining the level of dividends, the company, while giving consideration to stability and sustainability, takes into account a full range of factors, including business performance, financial standing and dividend payout ratio. Under the policy, the Company proposes to distribute year-end dividends as stated below.
1. Type of asset to be distributed: Cash 2. Matters relating to allotment of dividends and total amount of dividends to be distributed: Per one share of common stock: 9 yen Total amount of dividends: 2,962,079,307 yen In addition to the interim dividend of ¥9 per share, an annual dividend will be ¥18 per share. 3. Date on which the dividend becomes effective: June 23, 2017
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Second Item Election of Four Directors General Meeting of Shareholders. Accordingly, the Company is seeking approval for the election of four Directors to fill the vacancy. The candidates for Directors are as follows:
Candi- Name Number of Resume and major concurrent posts shares date No. (Date of birth) held Apr. 1986 Joined Nippon Telegraph and Telephone Corporation Takeshi Ogiwara Apr. 2002 Director, Global Professional Service Division, NTT Communications (August 23,1960) Corporation Aug. 2006 Director, Manufacturing Sales Department of the First Sales Division of Enterprise Business Division, NTT Communications Corporation Aug. 2008 Senior Manager, Internal Control, General Affairs, Nippon Telegraph and 426 Telephone Corporation Jun. 2010 Corporate Auditor, NTT Urban Development (resigned on June 2013) Jul. 2013 Senior Manager, General Affairs (seconded to NTT Urban Development 1 Builservice Corporation)
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Candi- Name Number of Resume and major concurrent posts shares date No. (Date of birth) held Apr. 1980 Joined Nomura Research Institute Inc. Apr. 2002 Senior Managing Director, Division Manager of Consulting Division Ⅱ, Shiro Tanikawa Joined Nomura Research Institute Inc. (November Apr. 2006 Senior Corporate Managing Director, Division Manager of Consulting 23,1956) Division, Nomura Research Institute Inc. Apr. 2008 Senior Corporate Managing Director, Supervising Consulting business,Division Manager of System Consulting Division, Nomura Research Institute Inc. 3 Jun. 2010 Senior Corporate Managing Director, Member of the Board, Supervising 0 Consulting business, Division Manager of System Consulting Division, Nomura Research Institute Inc. Apr. 2012 Senior Executive Managing Director, Member of the Board, Supervising < Reappointed > Consulting business, Director of the Center for Strategic Management &
(Reason for the Selection of Director Candidates) He has extensive and broad-based knowledge in overall corporate planning and corporate strategies through his many years of work experience at NTT Group companies. Anticipating that he will actively give the Company useful advice about business and corporate strategies based on his expertise, experience, and achievements, the Company made him a candidate for Director.
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(Note 1) Nippon Telegraph and Telephone Corporation is the parent company of the Company, and NTT Communication Corporation is a subsidiary of Nippon Telegraph and Telephone Corporation. (Note 2) The Company does not have any special interests with the candidates. (Note 3) Mr. Shiro Tanikawa satisfies the independence criteria set out by Tokyo Stock Exchange, Inc., on which the Company is listed, and the independence criteria for Independent Officers* set out by the Company, and the Company plans to designate him as an Independent Officer under the rules of the Tokyo Stock Exchange and notify the Tokyo Stock Exchange of the designation. The Company commissions Nomura Research Institute, Ltd., where Mr. Tanikawa is Chief Counselor, to provide consulting for the Company. However, the value of the transaction between the Company and its subsidiaries and Nomura Research Institute in each fiscal year of the three most recent fiscal years is less than 1% of the consolidated operating revenue, and Mr. Tanikawa does not have any kind of relationship with the Company that may present a risk of a conflict of interest with shareholders, including personal relationship, capital relationship, business relationship or any other interests. (Note 4) The Company plans to conclude a liability limitation agreement with Mr. Shiro Tanikawa and Mr. Takashi Taniyama within the limits prescribed by law under the provision of Article 427, Paragraph 1 of the Companies Act. If the three persons are reappointed, the Company will continue the contract with them. An outline of the contract is as follows: If the Outside Director is without knowledge and is not grossly negligent in performing his duties, he will be liable for up to the minimum liability amount stipulated in Article 425, Paragraph 1 of the Companies Act in relation to the liability specified in Article 423, Paragraph 1 of the Companies Act.
*(For reference) Independence criteria for Independent Officers set out by the Company The Independence Officer shall not be any kind of person described in the following items: 1 (1) A person with executive authority of a business partner that exceeds the limit set by the Company* (2) A person with executive authority of a lender that exceeds the limit set by the Company*2 (3) A person who provides a professional service, such as a consultant, an accountant, or a legal expert, and who derives pecuniary gains or property benefits worth 10 million yen or more excluding officers’ remuneration directly from the Company or its subsidiaries in any fiscal year of the three most recent fiscal years (4) A person with executive authority of an organization that receives donations exceeding the limit set by the Company*3
If the Company determines any persons falling under either of the items (1) through (4) are effectively independent and designates them as Independent Officers, the Company will disclose the reason of the designation at the time of designation.
*1 A business partner that exceeds the limit set by the Company is a business partner the value of whose transaction with the Company and its subsidiaries in any fiscal year of the three most recent fiscal years is 2% or more of the Company’s consolidated operating revenue in the same fiscal year. *2 A lender that exceeds the limit set by the Company is a lender that lends an amount of 2% or more of the Company’s consolidated total assets in any fiscal year of the three most recent fiscal year on a consolidated basis. *3 An organization that receives donations exceeding the limit set by the Company is an organization that receives donations of 10 million yen or 2% of the organization’s annual revenue, whichever is larger, or more from the Company and its subsidiaries in any fiscal year of the three most recent fiscal years.
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(Attached Materials) Business Report (from April 1, 2016 to March 31, 2017)
1. Matters concerning the current state of the NTT Urban Development Group (1) Business development and results In the fiscal year under review, the office leasing market saw a continuous improvement in vacancy rate and rises in market rents in some areas. In the condominium sales market, demand remained firm for condominiums in central areas of Tokyo, although sales prices continued to increase due to rising land prices and the hovering of construction costs at a high level. In the suburbs, however, there were some condominiums for which sales were prolonged. In this environment, the Company and its subsidiaries (collectively "the Group ") operated their businesses steadily, aiming for sustainable growth based on the Group’s Medium-Term Vision 2018 – For Further Growth. In the Offices/Retail Business, revenue and income increased, mainly due to a rise in rent income associated with the improved vacancy rate of existing buildings and the sales of buildings. In the meantime, in the Residential Business, the number of condominium units delivered decreased, and the average sales price per unit declined. As a consequence, operating revenue amounted to ¥188,633 million (up ¥5,617 million, or 3.1% year on year). Operating income was ¥31,393 million (down ¥6,378 million, or 16.9% year on year) and ordinary income was ¥28,710 million (down ¥5,121 million, or 15.1% year on year). Profit attributable to owners of parent was ¥16,682 million (up ¥124 million, or 0.8 % year on year).
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(2) Status of each segment Operating revenue by business Percentage of Business segment Amount Year-on-year operating revenue Offices/Retail 113,613 million yen Up 8,243 million yen, or 7.8% 58.3% Residential 59,607 million yen Down 4,854 million yen, or 7.5% 30.6% Other 21,534 million yen Up 1,934 million yen, or 9.9% 11.1% Eliminations (6,122 million yen) – – Total 188,633 million yen Up 5,617 million yen, or 3.1% – (Note 1) The business segments have changed. The results by segment in the previous fiscal year have been replaced in accordance with the segments for this fiscal year for year-on-year comparison. (Note 2) “Eliminations” refers to intra-group revenues and transfers of funds duplicated in more than one segment.
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Offices/Retail Business In the Offices/Retail Business, the Group strived to generate earnings in the fiscal year under review from the contribution of property newly completed and acquired in the previous fiscal year, such as Two Oliver Street (Boston, United States), Urbannet Nihonbashi 2-Chome Building (Chuo-ku, Tokyo) and Urbannet Ginza 1-Chome Building (Chuo-ku, Tokyo), among others, and the existing properties that were reasonably filled by leasing activities, such as Shinagawa Season Terrace (Minato-ku, Tokyo). Operating revenue increased ¥8,243 million to ¥113,613 million (up 7.8 % year on year) due to a rise in rent income associated with the improved vacancy rates of existing buildings and the termination of free rent periods, and from sales of properties. Operating income rose ¥3,813 million to ¥33,801 million (up 12.7 % year on year), mainly reflecting an improvement in revenue and expenditure of existing buildings. Development projects currently underway include Otemachi 2-Chome Area 1st Class Urban Redevelopment Project Building A (Chiyoda-ku, Tokyo), Shimbashi 1-Chome Project (Minato-ku, Tokyo), etc. For the hotel business, the Group enhanced initiatives for the Universal City Station Project (Osaka-shi, Osaka), Shinpukan Redevelopment Project (Kyoto-shi, Kyoto), etc.
Percentage of Operating Revenue of the Company
(Note) The operating revenue and operating income in the 30th term (FY 2014) are results based on the business segments before they changed.
Development property
＊ For new buildings, the leased floors counted on contract base. Otemachi 2-1 Project Universal City Station Project
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Residential Business In the Residential Business, the number of residential units delivered amounted to 861 units, centered on newly completed properties in the fiscal year under review. The average sales price per unit was ¥39 million because the delivery was carried out mainly in suburban areas. In addition, the Group conducted sales of equity shares in certain properties. Operating revenue amounted to ¥59,607 million (down ¥4,854 million, or 7.5% year on year) in the fiscal year under review. Operating income stood at ¥3,068 million (down ¥8,740 million, or 74.0%).
Percentage of Operating Revenue of the Company
(Note) The operating revenue and operating income in the 30th term (FY 2014) are results based on the business segments before they changed
Other Business Operating revenue in other business (interior construction management for tenants, property management of existing buildings, etc.) in the fiscal year under review increased ¥1,934 million, or 9.9% year on year, to ¥21,534 million, while operating income declined ¥383 million, or 17.4%, to ¥1,816 million, mainly due to a temporary decrease in property management fees.
Percentage of Operating Revenue of the Company
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(3) Status of capital investments Capital investment was ¥ 36,058 million for the fiscal year under review. The main investments were ¥13,798 million for Otemachi 2-Chome Area 1st Class Urban Redevelopment Project Building A, ¥3,915 million for Universal City Station Project and ¥7,112 million for building renovations. The Company also acquired investment securities of ¥2,636 million mainly associated with the acquisition of overseas properties. The amount of investments including investment securities, etc. was ¥38,695 million.
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(4) Status of financing The Company raised funds of ¥42.0 billion by Long-term loans payable for the repayment of loans, and capital investment.
(5) Issues Facing the Group In line with its corporate slogan of “Integrity and Innovation,” the Group aims to enhance its corporate value by providing customers with valuable real estate services and increasing stakeholder satisfaction. The Group will fully adopt a customer- and market-centered orientation, pursue innovation based on the Medium-Term Vision 2018 – For Further Growth – and strive to improve and strengthen its management system in light of the corporate governance code.
(i) Strengthening the revenue base in the Offices/Retail business In the office business, the Group will work to secure profitability by reinforcing its relationships with existing tenancies and enhancing customer satisfaction in order to deal with the vacancy risks associated with the expected supply of a large volume of offices in central Tokyo. In addition, the Group will promote the efficiency and enhancement of building services using ICT and robots and strengthen cost competitiveness by implementing strategic renewal in order to address the risk of a decline in the office leasing market caused by an increase in vacancies. Furthermore, by being attentive and responsive to changes in the social environment, the Group will seek to create new business domains, including shared offices.
(ii) Further expanding the Retail business In the retail business, the Group will implement initiatives to reflect the increase in the number of foreign visitors and changes in consumer behavior. In the hotel/resort business, the Group will regard the business as a growth area and reinforce its efforts to meet the anticipated expansion of the market, while developing the business in locations with universal value in order to respond to future changes in the business environment. In addition, the Group will focus on creating new value through development initiatives that utilize existing buildings and combine historical and cultural sights. With respect to the operation of commercial facilities, the Group will aim to create attractive facilities that satisfy customers by implementing facility renewal in light of changes in consumer behavior, from “goods” to “events.”
(iii) Expansion of business domains in the Residential Business In the Residential Business, the Group will review the existing business model in light of changes in lifestyles and dynamics of population in order to expand new business domains. In the condominiums sales business, the Group will focus on product planning to reflect changes in customer needs with an eye on the increased tendency to return to the city center. In addition, it will continue working to expand business with high added value through the renovation and conversion (change of usage) of used houses. Moreover, in addition to the property sales business, the Group will enter into business
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for senior citizens, such as serviced senior housing as represented by the Tsunagu (Connecting) Town Project in cooperation with the NTT Group and business for leased residences in its efforts to expand business domains in the Residential Business.
(iv) Promotion of mixed-use development In real estate development going forward, the Group will promote high added value development by positively implementing mixed-use development combining offices, commercial facilities, residences, etc., by paying tribute to the history of towns and by striving toward mutually beneficial relationships with local communities. Specifically, the Group will steadily promote the projects that have already been launched, implement the fully-fledged development of the properties held and used temporarily by the Group, participate in regional redevelopment projects, and submit Corporate Real Estate (CRE) proposals to the NTT Group in its initiatives for creating business opportunities.
(v) Promoting the global business In the global business, the Group has worked to expand its revenue sources through initiatives in collaboration with optimal partners depending on the project type, mainly in the highly transparent US and European markets, for the purpose of diversifying its asset portfolio and providing feedback on development/management know-how to its business in Japan. Going forward, the Group will continue to acquire office buildings in the United States and enhance their value through renovations, etc. and promote the residential business in Australia. It will also modify its portfolio in accordance with the circumstances by taking political and economic risks into account. In addition, the Group will implement initiatives for creating business opportunities in Southeast Asia where future growth looks promising, while assessing country and project risks.
(vi) Enforcing comprehensive financial control To secure funds for future growth, the Group will strengthen its financial base by strategically implementing asset replacement, including the sale of assets to the real estate investment trust (REIT) in which the Company is involved, and by keeping tight control on interest-bearing debt. The Group will also make efforts to contain financial expenses by means such as flexible financing while actively monitoring developments in the financial markets.
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(6) Financial position and results of operations in recent years 32nd term (term 29th term 30th term 31st term Section under review) (FY2013) (FY2014) (FY2015) (FY2016) Operating revenue (million yen) 189,186 152,052 183,016 188,633 Ordinary income (million yen) 24,865 20,395 33,832 28,710 Profit attributable to owners of 11,343 16,235 16,557 16,682 parent (million yen) Net income per share (yen) 34.46 49.33 50.31 50.69 Total assets (million yen) 985,507 1,033,220 1,033,557 1,005,898 Net assets (million yen) 228,591 245,641 251,905 258,556 Net assets per share (yen) 563.98 610.45 626.02 646.18
(Note 1) The Company implemented the 100-for-one stock split for its common shares with October 1, 2013. Net income per share and Net assets per share are calculated as if the stock split had been implemented at the beginning of the 29th term (FY2013). (Note 2) Net income per share and net assets per share are calculated based on the average number of issued and outstanding shares during the period excluding treasury shares and the number of issued and outstanding shares at the end of the period excluding treasury shares. (Note 3) The Company has applied the Accounting Standards for Business Combinations (ASBJ Statement No. 21, September 13, 2013), and the term “Profit attributable to owners of parent” is used instead of “Net income” from the previous fiscal year.
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(7) Status of material parent company and subsidiaries (i) Relationship with the parent company The Company’s parent company is Nippon Telegraph and Telephone Corporation (“NTT”), which holds 221,481,500 shares in the Company (representing an ownership interest of 67.3%). The Company has business relationships including building lease agreements with NTT.
(ii) Relationship with material subsidiaries Ownership Company name Capital Principal business percentage UDX Tokutei 14,100 million yen 61.0% Owing Akihabara UDX Mokuteki Kaisha
(iii) Other The Company has 23 consolidated subsidiaries and 17 equity method affiliates. In the fiscal year under review, the Company established a company affiliated with UD USA Inc. and made it a consolidated subsidiary. The Company invested in three companies affiliated with UD USA Inc. and made them equity-method affiliates.
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(8) Principal businesses The table below shows the principal businesses of the Group Classification Principal businesses (1) Acquisition, disposal and management of real estate (2) Leasing, brokerage and appraisal of real estate (3) Building design, construction and supervision of construction, and contracted business The Company (4) Sale and leasing of office equipment, communication equipment, and other furniture and fixtures, and interior equipment for buildings and houses (5) Construction and sale of residential properties (1) Building and building equipment design, construction NTT Urban Development and supervision of construction Building Service Co. (2) Consulting relating to the management of buildings and building equipment (1) Building and building equipment design, construction NTT Urban Development and supervision of construction Hokkaido Co. (2) Consulting relating to the management of buildings and building equipment Management of the Otemachi First Square building and its Otemachi First Square Inc. site DAY･NITE Co., Ltd. Operation of restaurants, halls and conferences, etc. Knox Twenty-One Co., Ltd. Operation of the NTT Group’s convention facilities Subsidiaries Motomachi Parking Access Maintenance of underground passages in the Motomachi Co., Ltd. area of Hiroshima-shi Premier REIT Advisors Co., Investment management business under the Financial Ltd. Instruments and Exchange Act Shinagawa Season Terrace Building Management Management of Shinagawa Season Terrace and its land Corporation NTT Urban Development Investment management business under the Financial Asset Management Corporation Instruments and Exchange Act UD EUROPE LIMITED Investment in and management of real estate in the UK UD AUSTRALIA PTY Investment in and management of real estate in Australia LIMITED UD USA Inc. Investment in and management of real estate in the USA
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(9) Principal offices Head Office Chiyoda-ku, Tokyo Kansai Branch Osaka-shi, Osaka Tokai Branch Nagoya-shi, Aichi The Company Kyoto Branch Kyoto-shi, Kyoto Chugoku Branch Hiroshima-shi, Hiroshima Kyushu Branch Fukuoka-shi, Fukuoka NTT Urban Development Building Service Co. Chiyoda-ku, Tokyo NTT Urban Development Hokkaido Co. Sapporo-shi, Hokkaido Otemachi First Square Inc. Chiyoda-ku, Tokyo DAY･NITE Co., Ltd. Chiyoda-ku, Tokyo Knox Twenty-One Co., Ltd. Minato-ku, Tokyo Motomachi Parking Access Co., Ltd. Hiroshima-shi, Hiroshima Premier REIT Advisors Co., Ltd. Minato-ku, Tokyo Subsidiaries Shinagawa Season Terrace Building Minato-ku, Tokyo Management Corporation NTT Urban Development Asset Management Chiyoda-ku, Tokyo Corporation UD EUROPE LIMITED London, UK UD AUSTRALIA PTY LIMITED Melbourne, Australia UD USA Inc. New York City, USA
(10) Status of employees (i) Group Employees Change from end of Number of employees previous consolidated fiscal year 818 (315) Up 18 (Up 50) (Note) The number of employees is the number of people employed by the Group. The number of temporary employees is shown in parentheses. (ii) Company Employees Change from end of Average length of Number of employees Average age previous fiscal year service 403 (8) Up 1 (Down 1) 43.0 years old 16.2 years (Note 1) The number of employees is the number of people employed by the Group. The number of temporary employees is shown in parentheses. (Note 2) Workers seconded from other companies to the Company (12 workers) are included in the number of employees, while workers seconded from the Company (180 workers) are excluded. (Note 3) Length of service at NTT or any other company in the NTT Group is added to the length of service of the employees who worked for these companies when calculating the average length of service. Workers seconded from other companies (12 workers) are excluded from the calculation.
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(11) Principal lenders Lenders Amount borrowed NTT FINANCE CORPORATION 104,748 million yen Syndicated loan 71,300 million yen Sumitomo Mitsui Trust Bank, Limited 41,200 million yen Mizuho Bank, Ltd. 29,193 million yen NIPPON LIFE INSURANCE COMPANY 19,000 million yen THE NISHI-NIPPON CITY BANK, LTD. 15,000 million yen The Bank of Tokyo-Mitsubishi UFJ, Ltd. 15,000 million yen Mitsubishi UFJ Trust and Banking Corporation 15,000 million yen Meiji Yasuda Life Insurance Company 14,000 million yen (Note) The syndicated loan is a loan syndication led by Mizuho Bank, Ltd., The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Sumitomo Mitsui Banking Corporation.
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2. Matters concerning shares of the Company
(1) Total number of shares authorized to be issued by the Company: 1,050,000,000
(2) Number of issued and outstanding shares: 329,120,000 (Including treasury shares 77) (3) Number of shareholders: 12,143 (Of the above, less than one unit shareholders 99)
(4) Status of top ten shareholders Number of Shareholding Shareholder shares held ratio (%) Nippon Telegraph and Telephone Corporation 221,481,500 67.30
Japan Trustee Services Bank, Ltd. (Trust Account) 8,781,700 2.67
GOLDMAN,SACHS& CO.REG 5,871,974 1.78 NORTHERN TRUST CO.(AVFC) RE U.S. TAX EXEMPTED 4,036,200 1.23 PENSION FUNDS The Master Trust Bank of Japan, Ltd. (Trust Account) 3,600,300 1.09
STATE STREET BANK AND TRUST COMPANY 505001 3,145,962 0.96
GOLDMAN SACHS INTERNATIONAL 2,980,515 0.91
THE BANK OF NEW YORK MELLON 140044 2,547,500 0.77
Japan Trustee Services Bank, Ltd. (Trust Account5) 2,252,300 0.68
THE BANK OF NEW YORK 133522 1,971,709 0.60 (Note) The shareholding ratio is calculated by excluding treasury shares (77 shares).
(5) Other material matters concerning shares Not applicable.
3. Matters concerning stock acquisition rights of the Company
Not applicable.
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4. Matters concerning officers of the Company
(1) Directors and Corporate Auditors Title Name Responsibility Major concurrent posts President and Chief Sadao Maki Executive Officer Senior Executive Hiroshi Nakagawa Vice President Commercial Business Executive Vice Masayuki Kusumoto Headquarters President CDO (Chief Design Officer) Executive Vice Residential Business Akiyoshi Kitamura President Headquarters Kansai Regional Business Executive Vice Kanya Shiokawa (General Manager of Kansai President Branch) Corporate Strategy and Senior Vice Planning Department Shigehito Katsuki President IT Innovation Accounting and Finance Senior Vice Yoshihito Kichijo General Affairs President Senior Vice Hideyuki Yamasawa Global Business President Representative Director, Harumi 4-chome City Planning Design Co. Senior Vice Project Management Representative Director, Hirotoshi Shinohara President Aoyama Development Otemachi Town Planning Co., Ltd. (assumed office on June 23, 2016) Senior Vice Office Building Business Nobuyuki Fukui President Headquarters Residential Business Senior Vice Tomoyuki Sakaue Headquarters President Design Management office Professor Emeritus, Hitotsubashi University Professor, Department of Business Administration, Senior Vice Faculty of Economics, Akira Komatsu President Musashino University Professor, Graduate School of Political Science and Economics, Musashino University Corporate Advisor,Adviser Senior Vice Toshio Koujitani Principal Architect,CM Plus President Corporation
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Title Name Responsibility Major concurrent posts Vice President of Business Senior Vice Koichi Takami Planning, Nippon Telegraph President and Telephone Corporation Corporate Auditor Mitsuhiro Watanabe (full-time) Corporate Auditor Shunichi Okazaki (full-time) Representative , Kato Accounting Office Corporate Auditor Hisako Kato Outside Corporate Auditor, JSR Corporation Senior Manager, Finance and Accounting Department, Corporate Auditor Harunobu Takeda Nippon Telegraph and Telephone Corporation (Note 1) Mr. Hiroshi Nakagawa, Mr. Nobuyuki Fukui, and Mr. Tomoyuki SakaueHirotoshi were newly elected as Directors at the Ordinary General Meeting of Shareholders for the 31st term held on June 21, 2016, and assumed office. (Note 2) Of the Directors, Mr. Akira Komatsu, Mr. Toshio Koujitani are Outside Directors. (Note 3) Of the Corporate Auditor, Mr. Mitsuhiro Watanabe, Mr. Shunichi Okazaki and Ms. Hisako Kato are Outside Directors. (Note 4) Corporate Auditor (full-time) Mr. Mitsuhiro Watanabe worked for the accounting division of Nippon Telegraph and Telephone Corporation, and has substantial knowledge about finance and accounting. (Note 5) Corporate Auditor Ms. Hisako Kato has worked as a certified public accountant and a certified tax accountant, and has considerable knowledge about finance and accounting. (Note 6) Corporate Auditor Mr. Harunobu Takeda worked for the finance division of Nippon Telegraph and Telephone Corporation, and has substantial knowledge about finance and accounting. (Note 7) The Company has notified Tokyo Stock Exchange, Inc. of Mr. Akira Komatsu and Mr. Toshio Koujitani, Senior Vice Presidents, and Mr. Shunichi Okazaki and Ms. Hisako Kato, Outside Corporate Auditors, as Independent Officers set out in the provision of Tokyo Stock Exchange, Inc. The four persons satisfy the independence criteria set out by Tokyo Stock Exchange and the independence criteria set out by the Company. The Company does not have any personal, capital, or business relationships, or other interests with the four persons that could cause any conflict of interest with general shareholders. (Note 8) The Company has concluded an agreement to limit liability specified in Article 423, Paragraph 1 of the Companies Act under Article 427, Paragraph 1 with Akira Komatsu, Toshio Koujitani, and Koichi Takami, Directors, and each Corporate Auditor. The liability limit under the agreement is the minimum liability amount specified in Article 425, Paragraph 1 of the Companies Act for both the Directors and Corporate Auditors.
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(Note 9) The table below shows changes in titles and the roles of Directors during the fiscal year under review. Name After change Before change Date of change Executive Vice President Commercial Business Executive Vice President Headquarters Masayuki Commercial Business Hotel and Resort Business June 21, 2016 Kusumoto Headquarters Design Management Office CDO (Chief Design Officer) (CDO) Global Business Executive Vice President Senior Vice President Akiyoshi Residential Business Residential Business June 21, 2016 Kitamura Headquarters Headquarters Executive Vice President Senior Vice President Kansai Regional Business Kansai Regional Business Kanya Shiokawa June 21, 2016 (General Manager of Kansai (General Manager of Kansai Branch) Branch) Senior Vice President Corporate Strategy and Planning Senior Vice President Shigehito Department Accounting and Finance June 21, 2016 Katsuki IT Innovation Department Accounting and Finance
(Note 10) The table below shows Directors and a Corporate Auditor who retired during the fiscal year under review. Title at the time of resignation Name Date of retirement Senior Executive Vice President Yoshiharu Nishimura June 21, 2016 (term of office expired) Executive Vice President Satoshi Shinoda June 21, 2016 (term of office expired) Executive Vice President Kazuhiro Hasegawa June 21, 2016 (term of office expired)
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(2) Policies concerning remuneration of Directors and Corporate Auditors, and the amount (i) Policies The matters concerning remuneration for Directors are decided at the meeting of the Board of Directors. The remuneration for Directors (except Outside Directors) consists of monthly compensation and bonuses. The monthly compensation is provided based on the extent of roles and the scope of responsibilities for each position. The bonuses are provided by taking into account the Company’s performance and other matters during the fiscal year under review. In addition, from the perspective of reflecting the medium-to long-term performance of the Company, Directors purchase the Company shares through the Directors’ stock accumulation plan by contributing over the certain amount of the monthly compensation, and hold all of the purchased shares during the term of office. For Outside Directors, from the perspective of ensuring a high independency, only the monthly compensation is provided without gearing the amount to the Company’s performance. The remuneration for Corporate Auditors is decided upon discussion by the Corporate Auditors, and from the perspective of ensuring a high independency, only the monthly compensation is provided without gearing the amount for the Company’s performance.
(ii) Remuneration of Directors and Corporate Auditors Number of people receiving Title Amount of remuneration remuneration Director 16 303 million yen Corporate Auditors 3 48 million yen Total 19 352 million yen (Note 1) The Ordinary General Meeting of Shareholders for the 22nd term held on June 21, 2007 resolved that annual remuneration for Directors shall not exceed ¥480 million and annual remuneration for Corporate Auditors shall not exceed ¥80 million. (Note 2) The numbers for Directors and Corporate Auditors include three Directors who retired as at the conclusion of the Ordinary General Meeting of Shareholders for the 31st term held on June 21, 2016. (Note 3) The amount of Directors’ remuneration includes bonuses of ¥41 million for the fiscal year under review. (Note 4) Other than the above, executive bonuses in the amount of ¥22 million were paid to Directors who also hold executive management positions.
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(3) Matters concerning outside officers (i) Major partner companies for concurrent posts and their relationship with the Company
Title Name Partner company Concurrent post Relationship with the Company Senior Vice Akira Komatsu Hitotsubashi Professor Emeritus There is no special President University relationship with the Company Musashino University Professor, There is no special Department of relationship with the Business Company Administration, Faculty of Economics Professor, Graduate School of Political Science and Economics Senior Vice Toshio CM Plus Corporation Corporate Advisor, There is no special President Koujitani Adviser Principal relationship with the Architect Company Corporate Hisako Kato Kato Accounting Representative There is no special Auditor Office relationship with the Company JSR Corporation Outside Corporate There is no special Auditor relationship with the Company
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(ii) Main activities in the fiscal year under review a. Attendance at meetings of the Board of Directors and Board of Corporate Auditors Board of Board of Directors Corporate Auditors Title Name Meetings Meetings Attendance rate Attendance rate attended attended Senior Vice Akira Komatsu 16／16 100.0％ － － President Senior Vice Toshio Koujitani 16／16 100.0％ － － President Corporate Auditor Mitsuhiro 16／16 100.0％ 19／19 100.0％ (full-time) Watanabe Corporate Auditor Shunichi Okazaki 16／16 100.0％ 19／19 100.0％ (full-time) Corporate Auditor Hisako Kato 15／16 93.8％ 18／19 94.7％
b. Statements at Board of Directors and Board of Corporate Auditors meetings (a) Director, Mr. Akira Komatsu made suggestions and proposals to ensure the adequacy and fairness of decisions made by the Board of Directors, and expressed opinions about agenda items and the deliberations relating thereto, from the objective viewpoint of an Independent Officer, which is independent of management, making the most of his extensive knowledge and experience as a university professor of business administration. (b) Director Toshio Koujitani has profound knowledge of software and hardware in the field of architecture and extensive expertise and experience in planning and designing in the field of architecture through participation in a number of project both in Japan and overseas mainly as principal architect at JGC CORPORATION. Using his expertise and experience, he made suggestions and proposals to ensure the adequacy and fairness of decisions made by the Board of Directors, and expressed opinions about agenda items and the deliberations relating thereto from the objective viewpoint of an Independent Officer, which is independent of management of the company management. (c) Corporate Auditor (full-time), Mr. Mitsuhiro Watanabe made statements from the perspective of an experienced business manager, to ensure the adequacy and fairness of decisions made by the Board of Directors and establishment of a high quality corporate governance system that will enable the sound and sustainable growth of the Company. (d) Corporate Auditor (full-time), Mr. Shunichi Okazaki made statements from the perspective of an Independent Officer, making the most of the broad insight that he developed mainly through his extensive experience in government administration, to ensure the adequacy and fairness of decisions made by the Board of Directors and for the establishment of a high quality corporate governance system that will enable the sound and sustainable growth of the Company. (e) Corporate Auditor, Ms. Hisako Kato made statements necessary from the perspective of an
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Independent Officer, with viewpoints of a certified public accountant and a certified tax accountant, to ensure the adequacy and fairness of decisions made by the Board of Directors and for the establishment of a high quality corporate governance system that will enable the sound and sustainable growth of the Company.
(iii) Remuneration of outside officers Number of people receiving Amount of remuneration remuneration Remuneration of outside officers 5 66 million yen (Note) The amount of remuneration of outside officers is included in “Remuneration of Directors and Corporate Auditors” on page 25.
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5. Status of accounting auditors
(1) Name of the accounting auditor KPMG AZSA LLC
(2) Remuneration payable to accounting auditor in the fiscal year under review ¥ 98 million (Note1) The audit contract between the accounting auditor and the Company does not distinguish between remuneration for audits under the Companies Act and remuneration for audits under the Financial Instruments and Exchange Act, as it is not practically possible to distinguish between the two types of remuneration. The amount above therefore is the sum of the amounts of the two types of remuneration. (Note 2) In light of the Practical Guidelines for Cooperation with Accounting Auditors published by the Japan Audit & Supervisory Board Members Association, the Board of Corporate Auditors of the Company examined the adequacy of the audit time, the staffing plan and the amount of remuneration in the audit plan for the fiscal year under review by comparing the audit results in the previous fiscal year and the audit plan for the fiscal year under review. As a result, the Board of Corporate Auditors has determined that remuneration payable to the accounting auditor, etc. is appropriate and agreed with it.
(3) Total amount of cash and other income payable by the Company and subsidiaries ¥ 172 million
(4) Content of non-audit services The Company compensates the accounting auditor for the advisory service related to the International Financial Reporting Standards (IFRS) in addition to the services stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Act.
(5) Policy concerning decisions to dismiss or change the accounting auditor If it is determined that any of the conditions set out in items of Article 340, Paragraph 1 of the Companies Act applies to the accounting auditor, the Board of Corporate Auditors shall dismiss the accounting auditor upon unanimous consent of its members. In other cases when it is deemed that the accounting auditor is no longer able to perform its duties in a fair manner, the Board of Corporate Auditors shall determine a proposal to dismiss or change the accounting auditor to be submitted to the general meeting of shareholders.
______Amounts of money and volumes of sales in the Business Report are rounded down to the nearest unit. Ratios and other figures are rounded to the nearest unit.
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Consolidated Balance Sheet (As of March 31, 2017) (Unit: million yen) Account item Amount Account item Amount Assets Liabilities Current assets Current liabilities Cash and deposits 16,945 Notes and operating accounts payable–trade 6,002 Notes and operating accounts receivable 9,026 Lease obligations 32 Real estate for sale 25,156 Short-term loans payable 6,611 Real estate for sale in process 68,204 Current portion of long-term loans payable 27,364 Costs on uncompleted construction contracts 423 Current portion of bonds 19,998 Raw materials and supplies 81 Income taxes payable 6,748 Lease investment assets 2,074 Deferred tax liabilities 4 Deposits paid 7,208 Other 46,030 Deferred tax assets 572 Total current liabilities 112,792 Other 8,123 Non-current liabilities Allowance for doubtful accounts (0) Bonds payable 90,982 Total current assets 137,816 Long-term loans payable 377,125 Non-current assets Lease obligations 49 Property, plant and equipment Lease and guarantee deposits received 75,024 Buildings and structures 284,536 Negative goodwill 21,037 Machinery, equipment and vehicles 1,292 Deferred tax liabilities 59,367 Land 501,023 Provision for directors' retirement benefits 34 Lease assets 63 Net defined benefit liability 7,731 Construction in progress 7,998 Asset retirement obligations 2,803 Other property, plant and equipment 2,642 Other 392 Total property, plant and equipment 797,557 Total non-current liabilities 634,548 Intangible assets 25,228 Total liabilities 747,341 Investments and other assets Net assets Investment securities 22,518 Shareholders’ equity Long-term prepaid expenses 14,571 Capital stock 48,760 Net defined benefit asset 276 Capital surplus 31,648 Deferred tax assets 440 Retained earnings 129,195 Other 8,292 Treasury shares (0) Allowance for doubtful accounts (802) Total shareholders’ equity 209,604 Total investments and other assets 45,296 Accumulated other comprehensive income Valuation difference on available-for-sale Total non-current assets 868,081 2,590 securities Deferred gains or losses on hedges 1 Foreign currency translation adjustment 1,100 Remeasurements of defined benefit plans (625) Total accumulated other comprehensive 3,067 income Non-controlling interests 45,884 Total net assets 258,556 Total assets 1,005,898 Total liabilities and net assets 1,005,898 (Note) All amounts have been rounded down to the nearest million yen.
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Consolidated Statement of Income
(From April 1, 2016 to March 31, 2017) (Unit: million yen) Account item Amount Operating revenue 188,633 Operating cost 137,084 Operating gross profit 51,548 Selling, general and administrative expenses 20,155 Operating income 31,393 Non-operating income Interest income 6 Dividends income 122 Contributions 66 Gain on donation of non-current assets 7 Amortization of negative goodwill 1,926 Equity in earnings of affiliates 1,072 Other 208 3,410 Non-operating expenses Interest expenses 4,894 Provision of allowance for doubtful accounts 802 Other 396 6,093 Ordinary income 28,710 Extraordinary income Gain on sales of non-current assets 25 25 Extraordinary losses Loss on retirement of non-current assets 2,150 Impairment loss 49 Loss on valuation of investment securities 95 2,296 Income before income taxes and minority interests 26,440 Income taxes-current 7,559 Income taxes-deferred 340 7,899 Profit 18,540 Profit attributable to non-controlling interests 1,858 Profit attributable to owners of parent 16,682 (Note) All amounts have been rounded down to the nearest million yen.
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Consolidated Statement of Changes in Net Assets
(From April 1, 2016 to March 31, 2017) (Unit: million yen)
Shareholders’ equity Total shareholders’ Capital stock Capital surplus Retained earnings Treasury shares equity Balance as of April 1, 48,760 31,648 118,437 (0) 198,846 2016 Total changes of items during the year
Dividends from surplus (2,962) (2,962)
Interim dividends (2,962) (2,962)
Profit attributable to 16,682 16,682 owners of parent Net changes of items other than shareholders’ equity Total changes of items ― ― 10,758 ― 10,758 during the year Balance as of March 31, 48,760 31,648 129,195 (0) 209,604 2017
Accumulated other comprehensive income Deferred Total Valuation Foreign Remeasure gains or accumulated Non-controllin Total net difference on currency ments of losses on other g interests assets available-for- translation defined hedges comprehensi sale securities adjustment benefit plans ve income Balance as of April 1, 3,003 (9) 5,261 (1,066) 7,187 45,871 251,905 2016 Total changes of items during the year Dividends from surplus (2,962)
Interim dividends (2,962) Profit attributable to 16,682 owners of paren Net changes of items other than (412) 11 (4,160) 440 (4,120) 13 (4,106) shareholders’ equity Total changes of items (412) 11 (4,160) 440 (4,120) 13 6,651 during the year Balance as of March 31, 2,590 1 1,100 (625) 3,067 45,884 258,556 2017 (Note) All amounts have been rounded down to the nearest million yen.
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(Reference)
Consolidated Statements of Cash Flows
(From April 1, 2016 to March 31, 2017) (Unit: million yen)
Account item Amount
Net cash provided by (used in) operating activities 71,910
Net cash provided by (used in) investing activities (36,710)
Net cash provided by (used in) financing activities (27,345)
Effect of exchange rate change on cash and cash equivalents (6)
Net increase (decrease) in cash and cash equivalents 7,847
Cash and cash equivalents at beginning of period 16,106
Cash and cash equivalents at end of period 23,954
(Note) All amounts have been rounded down to the nearest million yen.
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Balance Sheet (Non-Consolidated)
(As of March 31, 2017) (Unit: million yen) Account item Amount Account item Amount Assets Liabilities Current assets Current liabilities Cash and deposits 56 Operating accounts payable 4,274 Operating accounts receivable 6,832 Lease obligations 12 Real estate for sale 25,156 Current portion of long-term loans payable 25,000 Real estate for sale in process 64,863 Current portion of bonds 19,998 Costs on uncompleted construction contracts 334 Accounts payable-other 28,792 Raw materials and supplies 36 Accrued expenses 970 Prepaid expenses 690 Income taxes payable 6,222 Lease investment assets 2,010 Advances received 7,046 Deferred tax assets 701 Deposits received 11,192 Deposits paid 4,854 Other 808 Other 7,448 Total current liabilities 104,318 Total current assets 112,986 Non-current liabilities Non-current assets Bonds payable 89,982 Property, plant and equipment Long-term loans payable 302,300 Buildings 213,222 Lease obligations 20 Structures 3,475 Lease and guarantee deposits received 72,947 Machinery and equipment 1,268 Deferred tax liabilities 14,925 Tools, furniture and fixtures 2,412 Provision for retirement benefits 5,991 Land 315,171 Assets retirements obligations 2,691 Lease assets 24 Other 98 Construction in progress 7,831 Total non-current liabilities 488,958 Total property, plant and equipment 543,406 Total liabilities 593,277 Intangible assets Net assets Leasehold right 20,104 Shareholders’ equity Software 2,266 Capital stock 48,760 Software in progress 68 Capital surplus Other 118 Legal capital surplus 34,109 Total intangible assets 22,558 Total capital surplus 34,109 Investments and other assets Retained earnings Investment securities 15,319 Legal retained earnings 3,437 Stocks of subsidiaries and affiliates 22,774 Other retained earnings 92,927 Investments in other securities of 30,668 Voluntary retained earnings 45,968 subsidiaries and affiliates Retained earnings brought forward 46,959 Investments in capital 0 Total retained earnings 96,365 Long-term prepaid expenses 14,303 Treasury shares (0) Prepaid pension cost 373 Total shareholders’ equity 179,234 Lease and guarantee deposits paid 10,963 Valuation and translation adjustments Other 2,551 Valuation difference on available-for-sale 2,590 Allowance for doubtful accounts (802) securities Total investments and other assets 96,151 Total valuation and translation 2,590 Total non-current assets 662,116 adjustments Total net assets 181,825 Total assets 775,102 Total liabilities and net assets 775,102 (Note) All amounts have been rounded down to the nearest million yen.
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Statements of Income (Non-Consolidated)
(From April 1, 2016 to March 31, 2017) (Unit: million yen) Account item Amount Operating revenue Operating revenues from offices/retail business 103,640 Operating revenues from residential business 57,462 Operating revenues from other businesses 865 161,968 Operating cost Operating cost for offices/retail business 67,600 Operating cost for residential business 48,294 Operating cost for other businesses 538 116,433 Operating gross profit 45,534 Selling, general and administrative expenses 18,982 Operating income 26,552 Non-operating income Interest income 2 Dividends income 453 Contributions 66 Gain on donation of non-current assets 4 Other 233 761 Non-operating expenses Interest expenses 2,697 Interest on bonds 1,446 Provision of allowance for doubtful accounts 802 Other 388 5,334 Ordinary income 21,978 Extraordinary income Gain on sales of non-current assets 25 25 Extraordinary loss Loss on retirement of non-current assets 911 Impairment loss 49 Loss on valuation of investment securities 95 1,057 Income before income taxes 20,947 Income taxes-current 6,584 Income taxes-deferred 345 6,929 Profit 14,018 (Note) All amounts have been rounded down to the nearest million yen.
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Statement of Changes in Net Assets (Non-Consolidated)
(From April 1, 2016 to March 31, 2017) (Unit: million yen) Valuation and Shareholders’ equity translation adjustments Capital Total net Retained earnings surplus Total Valuation assets Capital Other retained earnings Treasury sharehold difference on Legal Legal stock Voluntary Retained shares ers’ available-for-s capital retained equity ale securities surplus earnings retained earnings earnings brought forward Balance as of April 1, 48,760 34,109 3,437 45,815 39,018 (0) 171,140 3,003 174,143 2016 Changes of items during the year
Dividends from surplus (2,962) (2,962) (2,962)
Interim dividends (2,962) (2,962) (2,962) Provision of reserve for advanced depreciation 125 (125) － － of non-current assets Reversal of reserve for advanced depreciation (129) 129 － － of non-current assets Provision of reserve for special account for 32 (32) － － advanced depreciation of non-curreut assets Reversal of reserve for special account for (0) 0 － － advanced depreciation of non-current assets Provision of reserve for 292 (292) － － special depreciation Reversal of reserve for (168) 168 － － special depreciation
Profit 14,018 14,018 14,018
Net changes of items other than shareholders' (412) (412) equity Total changes of items ― ― ― 152 7,941 ― 8,094 (412) 7,681 during the year Balance as of March 31, 48,760 34,109 3,437 45,968 46,959 (0) 179,234 2,590 181,825 2017 (Note) All amounts have been rounded down to the nearest million yen.
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Independent Auditor’s Report
May 9, 2017
The Board of Directors NTT Urban Development Corporation
KPMG AZSA LLC
Masashi Oki (Seal) Designated Limited Liability Partner Engagement Partner Certified Public Accountant
Koji Fukai (Seal) Designated Limited Liability Partner Engagement Partner Certified Public Accountant
Yutaka Terada (Seal) Designated Limited Liability Partner Engagement Partner Certified Public Accountant
We have audited the consolidated financial statements, comprising the consolidated balance sheet, the consolidated statement of income, the consolidated statement of changes in net assets and the related notes of NTT Urban Development Corporation as at March 31,2017 and for the year from April 1, 2016 to March 31, 2017 in accordance with Article 444-4 of the Companies Act.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
37 also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position and the results of operations of NTT Urban Development Corporation and its consolidated subsidiaries for the period, for which the consolidated financial statements were prepared, in accordance with accounting principles generally accepted in Japan.
Solid matters
As described in the note to consolidated financial statements about changes in accounting policies, the Company and its domestic consolidated subsidiaries changed the depreciation method for property, plant and equipment and reviewed the useful lives. The change or the review does not have any impacts on the opinion of the audit corporation.
Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.
Notes to the Reader of Independent Auditor’s Report: The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the Companies Act.
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Independent Auditor’s Report
May 9, 2017
The Board of Directors NTT Urban Development Corporation
KPMG AZSA LLC
Masashi Oki (Seal) Designated Limited Liability Partner Engagement Partner Certified Public Accountant
Koji Fukai (Seal) Designated Limited Liability Partner Engagement Partner Certified Public Accountant
Yutaka Terada (Seal) Designated Limited Liability Partner Engagement Partner Certified Public Accountant
We have audited the financial statements, comprising the balance sheet, the statement of income, the statement of changes in net assets and the related notes, and the supplementary schedules of NTT Urban Development Corporation as at March 31, 2017 and for the 32nd business year from April 1, 2016 to March 31, 2017 in accordance with Article 436-2-1 of the Companies Act.
Management’s Responsibility for the Financial Statements and Others
Management is responsible for the preparation and fair presentation of the financial statements and the supplementary schedules in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of financial statements and the supplementary schedules that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements and the supplementary schedules based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the supplementary schedules are free from material misstatement.
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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the supplementary schedules. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements and the supplementary schedules, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements and the supplementary schedules in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements and the supplementary schedules referred to above present fairly, in all material respects, the financial position and the results of operations of NTT Urban Development Corporation for the period, for which the financial statements and the supplementary schedules were prepared, in accordance with accounting principles generally accepted in Japan.
Solid matters
As described in the note to non-consolidated financial statements about changes in accounting policies, the Company changed the depreciation method for property, plant and equipment and reviewed the useful lives.
Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.
Notes to the Reader of Independent Auditor’s Report: The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the Companies Act.
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BOARD OF CORPORATE AUDITORS’ REPORT (English Translation)
Based on reports from each Corporate Auditor, and following discussion at meetings, the Board of Corporate Auditors has prepared this report regarding the execution of the duties of the Board of Directors in the 32nd fiscal year from April 1, 2016, to March 31, 2017.
The Board of Corporate Auditors reports as follows:
1. Outline of Audit Methodology (1) The Board of Corporate Auditors established auditing policies, assignment of duties, etc., and received reports from each Corporate Auditor on the status of the implementation of audits and the results thereof, as well as reports from the Board of Directors and the Independent Auditors regarding the execution status of their duties, and requested explanations as necessary. (2) On the basis of the Board of Corporate Auditors Rules, etc. established by the Board of Corporate Auditors, and in accordance with its auditing policies, assignment of duties and other relevant matters, the Corporate Auditors sought mutual understanding with the Directors, employees of the internal auditing department and other departments, and other persons in their efforts to collect information and achieve an environment conductive to audits, and carried out audits by the following methods. i. Attended meetings of the Board of Directors and other important meetings, received reports from Directors and employees regarding performance of their duties, requested explanations as necessary, perused important statements regarding decisions and approvals made and investigated the status of operations and assets at the head office and other principal business locations. Regarding the subsidiaries, the Board of Corporate Auditors sought to achieve a mutual understanding and exchange of information with directors and corporate auditors and other persons of the subsidiaries, and where necessary received business reports from the subsidiaries. ii. As for the particulars of Board of Directors resolutions relating to the establishment, as set forth in Article 100, Paragraphs 1 and 3 of the Ordinance for Enforcement of the Companies Act, of structures stated in the business report as necessary to ensure that the Directors’ performance of their duties is in conformity with laws and regulations and their company’s Articles of Incorporation and to otherwise ensure the appropriateness of the business of a kabushiki kaisha and a corporate group consisting of a kabushiki kaisha and its subsidiaries, as well as the structures established pursuant to such resolutions (internal control system), the Board of Corporate Auditors regularly received reports from Directors, employees and other persons, requested explanations from them as necessary and expressed opinions. iii. The Board of Corporate Auditors audited and verified whether the Independent Auditor maintained its independence and carried out its audits appropriately, received reports from the Independent Auditor regarding the execution of its duties and, where necessary, requested explanations. Also, the Board of Corporate Auditors received notification from the Independent Auditors to the effect that a “structure to ensure that duties are executed appropriately” (the matters listed in Article 131 of the
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Accounting Principles for Enterprises) had been established in accordance with “Quality Control Standards for Auditing” (Business Accounting Council, October 28, 2005), and where necessary requested explanations.
Based on the above methodology, the Board of Corporate Auditors audited the non-consolidated financial statements related to the fiscal year under review (the Balance Sheet, Income Statement, Statement of Changes in Net Assets, and the individual notes thereto), related supplementary statements, as well as the consolidated financial statements (Consolidated Balance Sheet, Consolidated Income Statement, Consolidated Statement of Changes in Net Assets and the consolidated notes thereto).
2. Audit Results (1) Results of the audit of the Business Report i. We find that the Business Report and its supplementary statements accurately reflect the conditions of the Company in accordance with law and the Articles of Incorporation. ii. No inappropriate conduct concerning the execution of duties by Directors or material facts in violation of law or the Articles of Incorporation were found. iii. We find that the particulars of Board of Directors’ resolutions concerning the internal control system are appropriate. Further, no matters worthy of note were found with respect to Directors’ execution of duties and status of this Business Report in regards to the internal control system. (2) Results of the audit of the financial statements and supplementary statements We find that the methodology and results of the audit by the Independent Auditor, KPMG AZSA LLC are appropriate. (3) Results of the audit of the consolidated financial statements We find that the methodology and results of the audit by the Independent Auditor, KPMG AZSA LLC are appropriate.
May 11, 2017
NTT Urban Development Corporation Board of Corporate Auditors Corporate Auditor (full-time) Mitsuhiro Watanabe Corporate Auditor (full-time) Shunichi Okazaki Corporate Auditor Hisako Kato Corporate Auditor Harunobu Takeda
Note: Of the Corporate Auditors, three Corporate Auditors, Mitsuhiro Watanabe, Shunichi Okazaki, and Hisako Kato, are Outside Corporate Auditors as prescribed in the Companies Act. END
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(Reference)
Topics
Global Business Completion of renewal works Since we acquired our first overseas property in 2009, we have been developing our global business actively, mainly in the U.K. and the United States. In our 32nd fiscal year, the renewal works for two properties were completed in London, U.K. and New York, United States. Going forward, we will continue to work on diversifying our portfolio and increasing profitability by purchasing office buildings and enhancing their value.
◆ 1 King William Street (London) A renewal was undertaken to turn the property into a building featuring leading-edge functions and environmental performance under the concept of “Contemporary Classic.”.
Location; London, U.K.
Total floor space; Approx. 100,000sqf
(Approx. 9,300 m2)
Building scale; 8 stories above ground and 2 below
Completion due of redevelopment; November 2016
Entrance Hall
◆ 125 West 25th Street(New York) A building that was once used as a sewing factory was renovated into an office building. The building was sold at the end of December 2016.
Location; New York, U.S.
Total floor space; Approx. 138,000sqf
(Approx. 12,800 m2)
Building scale; 11 stories above ground and 1 below
Completion due of redevelopment; December 2016
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Development of an office and hotel complex with Kyushu Railway Company We will commence the construction of an office and hotel complex (Shimbashi 1-chome Project) in around July 2017. The project is being undertaken together with Kyushu Railway Company in the Shimbashi 1-chome area. The development concept is “Bridge Over Boundaries.” The complex will integrate traditional towns, new buildings and parks with greenery, generate synergies of three facilities, namely offices, hotel accommodations and a piloti space, and create a new future in this historical area by offering the most advanced functions.
Exterior image
The Akihabara UDX received a designation in the BOMA 360 Performance Program The Akihhabara UDX received a designation in the BOMA 360 Performance Program (BOMA 360) implemented by Building Owners and Managers Association International. The Akihabara UDX was the Japan’s first designated building among buildings with a total floor area of more than 600,000 square feet (55,742 square meters). BOMA 360 is a certification system under which property management operations (PM operations) of applicable buildings are evaluated comprehensively. By utilizing our expertise on the PM operations of the
Akihabara UDX, we will continue to create values and *1 contribute to the communities in which everyone can spend their time comfortably going forward.
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Initiatives for the sale of renovated condominiums We are working on a new business of selling renovated condominiums. We renovate the common areas of existing good quality buildings after inspections and examinations by third party organizations. The buildings will be sold after being renovated into condominiums whose exclusively owned areas can be designed flexibly to meet customer requests in terms of floor plans and fixture colors. We will seek to create values of residences in which people continue to live from one generation to another while maintaining the asset value of their housing units.
◆ IKSIKS Azabu-Juban Location; Minami Azabu Minato-ku, Tokyo Closest station; Azabu-juban Sta. Site area; 673.06 m2 Building scale; 6 stories above ground and 1 below Building date; November 1989 Total units; 13 Units Upper: Entrance Owned area; Average 120 m2 Left: Concept room
◆ Woodville Azabu respectively
Location; Nishi Azabu Minato-ku, Tokyo Closest station; Hiroo Sta., Roppongi Sta. Site area; 3,106.62 m2 Building scale; 8 stories above ground and 1 below Building date; August 1988 Total units; 28 Units Owned area; Average 210 m2
Concept room
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Major financial indicators (Consolidated) 32nd term (term 29th term 20th term 31st term Section under review) (FY2013) (FY2014) (FY2015) (FY2016) Return on assets (ROA) (%) 3.4 2.6 3.9 3.4 Return on equity (ROE) (%) 6.3 8.4 8.2 8.0
(Note 2) Full-year dividend per share(yen) 16.00 16.00 17.00 18.00
(Note 2) Dividend payout ratio (%) 46.4 32.4 33.8 35.5 Net interest-bearing debt / 8.9 10.9 8.6 9.9 EBITDA (X) Net D/E ratio (X) 2.14 2.15 2.10 1.93
(Note1) On October 1, 2013, we conducted a 100-for-1 common stock split and have calculated the annual dividend per share as if the stock split had been conducted at the beginning of the 29th term (FY2013). (Note2) The full-year dividend per share and dividend payout ratio for the 32nd term (term under review / FY2016) are stated on the assumption that First Item (Distribution of Surplus as Dividends) of the ordinary general meeting of shareholder is approved. We have already distributed a dividend per share of 9 yen of which the record date is September 30, 2016. ・Return on assets (ROA) ＝ (Operating income + Equity in earnings of affiliates + Amortization of negative goodwill) / { (Total assets at the beginning of the fiscal year under review + Total assets at the end of the fiscal year under review) / 2 ｝ ×100 ・Return on equity (ROE) ＝ Profit attributable to owners of parent / { (Shareholders' equity at the beginning of the fiscal year under review ＋ Shareholders' equity at the end of the fiscal year under review) / 2 } ×100 ・Dividend payout ratio ＝ Full-year dividend per share / Net income per share ・Net interest-bearing debt = Interest-bearing debt - Cash and deposits - Short-term (less than 3 months) investments included in other current assets ・EBITDA ＝ Operating income ＋ Depreciation and amortization ・Net D/E ratio ＝ Net interest-bearing debt / Net assets
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Corporate Slogan
Integrity and Innovation
－connecting cities and people
Corporate Philosophy（UD-Statement）
We will contribute to sustainable urban development through our real estate services. What we value most is seeing the satisfaction of our customers and members of the wider public, and bringing smiles to their faces.
For this, we will pay close attention to the changing needs of our customers and society, and thoroughly understand our customers’ perspectives.
We make it a promise to continue our challenge of generating innovative services, where all of our management and employees will act with integrity and without fearing failure.
This challenge is fueled by a corporate culture conducive to all of our management and employees freely and proactively voicing opinions, where all of us may respect and value one another, and go about our jobs with a smile.
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[Photo] *1 Forward Stroke：P44
NTT Urban Development Corporation Akihabara UDX, 14-1, Sotokanda 4-chome, Chiyoda-ku, Tokyo 101-0021 http://www.nttud.co.jp/english/