English translation based on Japanese original

Annual Securities Report

(Report under Article 24, Paragraph 1 of the Financial Instruments and Exchange Act)

Fiscal year (the 27th term) From April 1, 2011 to March 31, 2012

NTT URBAN DEVELOPMENT CORPORATION

4-14-1, Sotokanda, Chiyoda-ku, Tokyo

(E04030)

Contents Page

Cover

Chapter 1. Corporate Information ........................................................................................................................... 1

Section 1. Overview of the Company’s Situation ................................................................................................. 1

1. Changes in major financial data ................................................................................................................... 1

2. Corporate history ........................................................................................................................................ 3

3. Businesses .................................................................................................................................................. 4

4. Situations of affiliates ................................................................................................................................. 6

5. Employees .................................................................................................................................................. 8

Section 2. Business Situation .............................................................................................................................. 9

1. Overview of operating results ...................................................................................................................... 9

2. Operating revenue ..................................................................................................................................... 11 3. Challenges to address ................................................................................................................................ 14

4. Operating risks .......................................................................................................................................... 15

5. Significant management contracts ............................................................................................................. 18

6. Research and development activities ......................................................................................................... 18

7. Analysis of financial position, operating results and cash flows .................................................................. 19

Section 3. Facilities .......................................................................................................................................... 22

1. Overview of capital investment ................................................................................................................. 22

2. Major facilities .......................................................................................................................................... 23

3. Equipment introduction and retirement plans ............................................................................................. 28

Section 4. Situation of Submitting Company ..................................................................................................... 29

1. Shares of the Company ............................................................................................................................. 29

(1) Total number of shares and other information ...................................................................................... 29 (2) Stock acquisition rights ........................................................................................................................ 29

(3) Exercise of bonds with subscription rights to shares with amendments to exercise prices ...................... 29

(4) Features of rights plan ......................................................................................................................... 29

(5) Changes in the number of shares outstanding and capital ...................................................................... 29

(6) Ownership of shares by owner ............................................................................................................. 29

(7) Major shareholders .............................................................................................................................. 30

(8) Voting rights ....................................................................................................................................... 31

(9) Stock option system ............................................................................................................................. 31

2. Acquisition of treasury stock ..................................................................................................................... 31

3. Dividend policy ........................................................................................................................................ 32

4. Trends in stock prices ................................................................................................................................ 32 5. Officers .................................................................................................................................................... 33

6. Corporate governance ............................................................................................................................... 38

(1) Corporate governance .......................................................................................................................... 38

(2) Audit fees ............................................................................................................................................ 48

Section 5. Financial Status ................................................................................................................................ 49

1. Consolidated financial statements, etc. ...................................................................................................... 50

(1) Consolidated financial statements ........................................................................................................ 50

(2) Other ................................................................................................................................................... 85

2. Non-consolidated financial statements, etc. ................................................................................................ 86

(1) Non-consolidated financial statements ................................................................................................. 86

(2) Details of major items in assets and liabilities ..................................................................................... 100

Section 6. Outline of Stock-Related Administration of Submitting Company ................................................... 103 Section 7. Reference Information on Submitting Company .............................................................................. 104

1. Information on the parent company of the submitting company ................................................................ 104

2. Other reference information .................................................................................................................... 104

Chapter 2. Information on the Guarantee Company of the Submitting Company .................................................. 105

Auditor’s Report

Internal Control Report

[Cover]

Document submitted Annual Securities Report

Applicable law clause Article 24, Paragraph 1 of the Financial Instruments and Exchange Act

Destination Director General of the Kanto Finance Bureau

Date of submission June 20, 2012

Fiscal year The 27th term (from April 1, 2011 to March 31, 2012)

Corporate name NTT URBAN DEVELOPMENT CORPORATION

Name and title of representative Masaki Mitsumura, President and Chief Executive Officer

Address of home office 4-14-1, Sotokanda, Chiyoda-ku, Tokyo

Telephone number +81-3-6811-6300 (key number)

Contact person Satoshi Shinoda, Executive Director, Senior Executive Manager, Accounting and Finance Department

Nearest contact point 4-14-1, Sotokanda, Chiyoda-ku, Tokyo

Telephone number +81-3-6811-6424

Contact person Satoshi Shinoda, Executive Director, Senior Executive Manager, Accounting and Finance Department

Place for public inspection Tokyo Stock Exchange, Inc.

(2-1, Kabutocho, Nihonbashi, Chuo-ku, Tokyo)

1

Chapter 1. Corporate Information

Section 1. Overview of the Company’s Situation

1. Changes in major financial data

(i) Consolidated financial data

Fiscal term 23rd term 24th term 25th term 26th term 27th term

Closing month and year March 2008 March 2009 March 2010 March 2011 March 2012

Operating revenue (million yen) 138,206 144,277 149,224 145,693 136,842

Ordinary income (million yen) 26,196 19,504 10,215 18,554 19,229

Net income (million yen) 14,758 15,989 6,116 9,307 15,586

Comprehensive income (million yen) – – – 10,658 18,209

Net assets (million yen) 177,969 183,593 185,537 190,783 203,727

Total assets (million yen) 900,325 936,650 916,725 910,492 928,537

Net assets per share (yen) 41,442.57 45,014.04 45,646.72 47,257.78 50,441.30

Net income per share (yen) 4,484.09 4,858.34 1,858.48 2,827.98 4,735.67

Net income per share (fully diluted) (yen) – – – – –

Ratio of shareholders’ equity to assets (%) 15.1 15.8 16.4 17.1 17.9

Return on equity (%) 11.3 11.2 4.1 6.1 9.7

Price-earnings ratio (times) 31.9 16.2 42.5 24.6 14.2

Net cash provided by (used in) operating activities (million yen) 5,700 (12,091) 35,168 40,417 3,704

Net cash provided by (used in) investing activities (million yen) (77,893) (57,397) 6,695 (28,257) (23,033)

Net cash provided by (used in) financing activities (million yen) 85,038 63,079 (30,028) (14,641) 12,650

Cash and cash equivalents at end of period (million yen) 15,101 8,691 20,508 18,015 10,960

Number of employees [Average number of temporary employees in addition to the above]

608 [209]

619 [225]

673 [256]

723 [256]

734 [267]

(Note) 1. Operating revenue does not include consumption taxes.

2. Since there was no potential dilution, net income per share (fully diluted) is omitted.

3. A consolidated subsidiary was established, a consolidated subsidiary was liquidated, and a consolidated subsidiary was

added in the 23rd term.

Two consolidated subsidiaries were established, and a consolidated subsidiary was excluded from the scope of

consolidated subsidiaries because of the refund of silent partnership contributions in the 24th term.

A consolidated subsidiary was established, a company was made an equity-method affiliate, a consolidated subsidiary

was liquidated, and a consolidated subsidiary was excluded from the scope of consolidated subsidiaries because of the

refund of silent partnership contributions in the 25th term.

A consolidated subsidiary was added, and a consolidated subsidiary was excluded due to liquidation in the 26th term.

A consolidated subsidiary and an equity-method affiliate were established in the 27th term, and two companies were

liquidated and excluded from the scope of consolidated subsidiaries and equity-method affiliates, respectively.

4. The number of employees is the number of people employed by the consolidated companies (excluding workers on loan

transferred out of the consolidated companies and including workers on loan transferred to the consolidated companies).

The figure in parentheses is the annual average number of temporary employees, which is not included in the number of

employees. From the 24th term, contract employees who are aged 60 years or older are excluded from the number of

employees and included in the number of temporary employees. Temporary employees include only those who have an

employment relationship with a consolidated company, and temporary employees dispatched from agencies are excluded

from the 24th term.

2

(ii) Financial data of the submitting company

Fiscal term 23rd term 24th term 25th term 26th term 27th term

Closing month and year March 2008 March 2009 March 2010 March 2011 March 2012

Operating revenue (million yen) 128,751 122,000 128,473 125,639 120,014

Ordinary income (million yen) 25,418 16,562 5,257 15,187 15,595

Net income (million yen) 14,180 14,460 3,081 7,443 8,579

Capital stock (million yen) 48,760 48,760 48,760 48,760 48,760

Number of shares outstanding (shares) 3,291,200 3,291,200 3,291,200 3,291,200 3,291,200

Net assets (million yen) 133,726 143,951 143,020 146,614 151,101

Total assets (million yen) 675,159 725,604 709,972 708,634 727,865

Net assets per share (yen) 40,631.41 43,738.19 43,455.29 44,547.53 45,910.72

Dividends per share [Of which, interim dividends per share] (yen)

1,200 [500]

1,200 [600]

1,200 [600]

1,200 [600]

1,400 [600]

Net income per share (yen) 4,308.57 4,393.67 936.25 2,261.69 2,606.76

Net income per share (fully diluted) (yen) – – – – –

Ratio of shareholders’ equity to assets (%) 19.8 19.8 20.1 20.7 20.8

Return on equity (%) 11.0 10.4 2.1 5.1 5.8

Price-earnings ratio (times) 33.2 17.9 84.4 30.8 25.9

Dividend payout ratio (%) 27.9 27.3 128.2 53.1 53.7

Number of employees [Average number of temporary employees in addition to the above]

366 [55]

400 [13]

434 [15]

450 [18]

446 [19]

(Note) 1. Operating revenue does not include consumption taxes.

2. Since there was no potential dilution, net income per share (fully diluted) is omitted.

3 The number of employees is the number of people employed by the Company (excluding workers on loan transferred

from the Company and including workers on loan transferred to the Company). The figure in parentheses is the annual

average number of temporary employees, which is not included in the number of employees. From the 24th term,

contract employees who are aged 60 years or older are excluded from the number of employees and included in the

number of temporary employees. Temporary employees include only those who have an employment relationship with

the submitting company, and temporary employees dispatched from agencies are excluded from the 24th term.

3

2. Corporate history

The Company was established by Nippon Telegraph and Telephone Corporation (“NTT”) in January 1986 as a real estate company

that is intended to use the unused land owned by NTT. When the Company was founded, it received land and buildings that NTT

owned as investments in kind (Note). The Company built new office buildings, commercial facilities, and residential facilities on the

land and leased the properties. NTT established real estate companies across the country for the same purpose and by the same

method. The Company has merged with the real estate companies and expanded its assets. The asset size of the Company reached the

current level when it merged with real estate companies in five cities (Sapporo, Nagoya, Osaka, Hiroshima, and Fukuoka) in April

1999.

(Note) NTT established the Company in the form of subsequent incorporation (so-called irregular investment in kind): NTT

established the Company through money contribution and then handed over properties that it had planned to contribute at

book values. When founded, the Company took over land and buildings that NTT owned at book values.

Month and year Event

January 1986 NTT Urban Development Co. established as a wholly owned subsidiary of NTT for effective use of the properties owned by NTT (capital: 3,043 million yen).

June 1987 Urbannet Kojimachi Building completed as the first property for rent.

September 1988 DHC Tokyo Co., Ltd. established for district heating and cooling services for Granpark Tower.

October 1988 Merger with NTT Building Co.

June 1990 Urbannet Otemachi Building completed.

June 1991 Otemachi First Square Inc. established for the management of Otemachi First Square.

February 1992 Stage I of Otemachi First Square completed.

April 1993 Merger with NTT Actif Co. and NTT Crais Co.

June 1993 NTT Makuhari Building completed.

February 1995 Merger with NTT Estate Co.

February 1995 Acquires the shares of Knox Twenty-One Co., Ltd. held by NTT Estate Co. through the merger with NTT Estate Co.

October 1995 Tokyo Opera City Building Co., Ltd. established for the management of Tokyo Opera City Building.

April 1996 GP Building Management Co., Ltd. established for the management of Granpark Tower.

July 1996 Tokyo Opera City Building (Office Building) completed.

August 1996 Granpark Tower completed.

May 1997 Stage II of Otemachi First Square completed.

April 1999 Merger with NTT Tokai Real Estate Co., NTT Kansai Building Co., NTT Cred Co., NTT Kyushu Real Estate

Co., and NTT Hokkaido Estate Co.

June 2000 NTT Urban Development BuilService Co. established for building and building equipment design, construction, supervision of construction, and management in relation to the Company’s properties.

November 2001 Establishes UDX Tokutei Mokuteki Kaisha with Kajima Corporation as a vehicle for bidding on Akihabara lots 1 and 3

February 2002 Bid on and acquired Akihabara lots 1 and 3 in cooperation with Daibiru Corporation and Kajima Corporation

August 2003 The construction of Akihabara UDX begins (Akihabara lot 3).

October 2004 Urbannet Sapporo Building completed.

November 2004 Company shares listed on the First Section of the Tokyo Stock Exchange.

September 2005 Urbannet Nagoya Building completed.

January 2006 Akihabara UDX completed.

December 2006 Established NTT Urban Development West BS Co.

March 2008 UDX Tokutei Mokuteki Kaisha, which develops and owns Akihabara UDX, becomes a consolidated subsidiary.

April 2009 The Otemachi 1-Chome Urban Area Redevelopment Project Type 1 completed.

May 2010 Acquired the shares of Premier REIT Advisors Co., Ltd. (current consolidated subsidiary)

August 2011 Urbannet Tenjin Building completed.

4

3. Businesses

The NTT Urban Development Group (NTT Urban Development and its affiliates) consists of 11 consolidated subsidiaries and six

equity-method affiliates. The main businesses of the Group are the Leasing Business and the Residential Property Sales Business.

The Group also engages in other businesses, including the management of office buildings, which are categorized as the Other

Business.

NTT Urban Development is a company that engages in the real estate business nationwide in a corporate group whose parent

company is NTT which primarily engages in regional, long–distance, and international communications, mobile communications,

and data communications.

The following is outlines of each business segment of the Group and the positions of NTT Urban Development and its major

affiliates in each segment:

(1) Leasing Business

The Group leases properties, including office buildings, commercial facilities, rental housing and others, that it has developed and

owns. Main business fields are as follows:

a. Office buildings

Leases office buildings that it owns in metropolitan areas including Tokyo, Nagoya, Osaka, Hiroshima, Fukuoka, and Sapporo

b. Commercial facilities

Leases commercial facilities that it owns in metropolitan areas including Tokyo, Nagoya, Osaka, Hiroshima, and Fukuoka

c. Rental housing

Leases rental condominiums, company housing and other rental housing that it owns in metropolitan areas including Tokyo,

Nagoya, Osaka, Fukuoka, and Sapporo

UDX Tokutei Mokuteki Kaisha leases parts of Akihabara UDX Building, which it has developed and owns.

UD EUROPE LIMITED invests in and manages real estate in the United Kingdom.

(2) Residential Property Sales Business

The Company sells residential properties, especially condominiums.

In the sale of condominiums, the Company sells primarily condominiums under the brand name of WELLITH. The Company also

sells building lots and other residential properties in accordance with the locational conditions of the land lots that it acquires.

UD AUSTRALIA PTY LIMITED invests in and manages real estate in Australia.

(3) Other

As other business, the Group designs and constructs buildings, etc, manages building construction work, etc., manages office

buildings, provides heating and cooling services to office buildings, and operates restaurants catering to tenants of office buildings.

NTT Urban Development Builservice Co. remodels rental buildings at the request of tenants in the Tokyo metropolitan area. It also

carries out property management operations including the management and operation of buildings.

NTT Urban Development West BS Co. remodels rental buildings at the request of tenants in western Japan. It also engages in

property management operations including the management and operation of buildings.

NTT Urban Development Hokkaido BS Co. remodels rental buildings, manages and operates buildings, and manages parking lots

in Hokkaido.

Otemachi First Square Inc. manages the premises of Otemachi First Square Building and its land that the Company owns.

Motomachi Parking Access Co., Ltd. maintains underground passages in Hiroshima’s Motomachi area.

Premier REIT Advisors Co., Ltd. engages in the investment management business under the Financial Instruments and Exchange

Act.

DN Food Co., Ltd. and Knox Twenty-One Co., Ltd. manage food and beverage facilities.

5

[Group Organization Chart]

The chart below is an organization chart of the Group showing the businesses of Group companies stated above.

(Note) 1. UDX Tokutei Mokuteki Kaisha is a specified subsidiary.

2. Nagasaki Shintomachi New Town Development Tokutei Mokuteki Kaisha, which had been a consolidated subsidiary,

ceased to be a consolidated subsidiary at the end of the fiscal year ended March 31, 2012 following the completion of

liquidation.

3. Crossfield Management Corporation, which had been an equity-method affiliate, ceased to be an equity-method affiliate

at the end of the fiscal year ended March 31, 2012 following the completion of liquidation.

◎ NTT Urban Development Hokkaido BS Co. Remodeling, property management operations including the management and operation of

buildings owned by NTT Urban Development in

Hokkaido area and management of parking lots

◎ NTT Urban Development Builservice Co. Design, construction, remodeling, property

management operations including the

management and operation of buildings owned by NTT Urban Development in the greater

Tokyo metropolitan area

◎ NTT Urban Development West BS Co. Design, construction, remodeling, property

management operations including the

management and operation of buildings owned

by NTT Urban Development in western Japan area

NTT Urban

Development Co.

NTT Urban Development Group

◎ Otemachi First Square Inc. Management of the premises of

Otemachi First Square

◎ Motomachi Parking Access Co., Ltd.

Maintenance of underground

passages in Hiroshima’s

Motomachi area

□ Tokyo Opera City Building Co., Ltd.

Management of Tokyo Opera City

Building

◎ Knox Twenty-One Co., Ltd. Operation of NTT Group’s

convention facilities

◎ DN Food Co., Ltd. Operation of restaurants catering

to tenants of buildings owned by

NTT Urban Development

◎ UDX Tokutei Mokuteki Kaisha Development and ownership of

Akihabara UDX

□ DHC Tokyo Co., Ltd. District heating and cooling

services for Granpark Tower

□ Tokyo Opera City District Heating & Cooling Co., Ltd.

District heating and cooling

services for Tokyo Opera City and

other buildings

◎: Consolidated subsidiaries

□: Equity-method affiliates

* Other Group companies

One equity-method affiliate

◎ UD EUROPE LIMITED Investment in and management of real

estate in the UK

◎ UD AUSTRALIA PTY LIMITED Investment in and management of real

estate in Australia

□ MOUNT STREET ADVISERS LIMITED Advice on the management of real

estate holdings

□ 335 GRICES ROAD PTY LTD Development and sales of residential

land

◎ Premier REIT Advisors Co., Ltd. Investment management business

under the Financial Instruments

and Exchange Act

6

4. Situations of affiliates

Name Address Capital

(million yen) Major business

Voting rights

ownership percentage

Relations

Parent Company

Nippon Telegraph and Telephone Corporation

Chiyoda, Tokyo

937,950

Basic research and development, the management of the Group

(Owned) 67.3

Transactions relating to the management of the Group and

the leasing of properties NTT Urban Development owns Concurrent officers: -

Consolidated Subsidiaries (Owning)

NTT Urban Development Hokkaido BS Co.

Chuo, Sapporo-shi

50 Leasing Business Other

100.0

Remodeling, property management operations including the management and operation of buildings owned by NTT Urban Development in Hokkaido area and management of parking lots Concurrent officers: 3

Otemachi First Square Inc.

Chiyoda, Tokyo

50 Other 56.5 Management of Otemachi First Square and its site Concurrent officers: 2

NTT Urban Development Builservice Co.

Chiyoda, Tokyo

300 Other 100.0

Design, construction, remodeling, property management operations including the management and operation of buildings owned by NTT Urban Development in the

greater Tokyo metropolitan area Concurrent officers: 3

Knox Twenty-One Co., Ltd.

Minato, Tokyo

24 Other 100.0 Operation of NTT Group’s convention facilities Concurrent officers: 3

DN Food Co., Ltd. Chiyoda, Tokyo

40 Other 100.0

Operation of restaurants catering to tenants of buildings owned by NTT Urban Development Concurrent officers: 3

NTT Urban Development West BS Co.

Nishi, Osaka-shi

100 Other 100.0

Design, construction, remodeling, property management operations including the management and operation of buildings owned by

NTT Urban Development in Western Japan area Concurrent officers: 2

Motomachi Parking Access Co., Ltd.

Naka, Hiroshima-shi

60 Other 58.3

Maintenance of underground passages in Hiroshima’s Motomachi area Concurrent officers: 3

UDX Tokutei Mokuteki

Kaisha Chuo, Tokyo 14,100 Leasing Business 66.0

Development and ownership of Akihabara UDX Concurrent officers: -

UD EUROPE LIMITED London, UK (Sterling

pounds)

200 Leasing Business 100.0

Investment in and management of real estate in the UK Concurrent officers: 2

Premier REIT Advisors Co., Ltd.

Minato, Tokyo

300 Other 53.1

Investment management business under the Financial Instruments and Exchange Act Concurrent officers: 4

UD AUSTRALIA PTY LIMITED

Melbourne, Australia

(Australian

Dollar) 17,000,000

Residential Property Sales

Business

100.0 Investment in and management of real estate in Australia

Concurrent officers: 3

7

Name Address Capital

(million yen) Major business

Voting rights ownership

percentage

Relations

Equity-Method Affiliates (Owning)

Tokyo Opera City Building Co., Ltd.

Shinjuku, Tokyo

20 Other 23.7 Management of Tokyo Opera City Building Concurrent officers: 1

DHC Tokyo Co., Ltd. Minato, Tokyo

200 Other 50.0 District heating and cooling services for Granpark Tower

Concurrent officers: 3

Tokyo Opera City District Heating & Cooling Co., Ltd.

Shinjuku,

Tokyo 980 Other 36.2

District heating and cooling services for Tokyo Opera City

and other buildings Concurrent officers: 1

Harumi Yonchome City Planning Design Co.

Chuo, Tokyo 50 Other 36.0

Investigation and planning relating to the development of the Harumi 4-chome area Concurrent officers: 1

MOUNT STREET ADVISERS LIMITED

London, UK (Sterling

pounds)

1,000 Other 30.0

Advice on the management of real estate holdings Concurrent officers: 1

335 GRICES ROAD

PTY LTD

Melbourne,

Australia

AUD

1

Residential Property Sales Business

50.0 Development and sales of residential land Concurrent officers: 3

(Note) 1. In the major business column for the consolidated subsidiaries and equity-method affiliates, the names of business

segments are provided.

2. NTT submits annual securities reports.

3. UDX Tokutei Mokuteki Kaisha is a specified subsidiary.

4. Nagasaki Shintomachi New Town Development Tokutei Mokuteki Kaisha, which had been a consolidated subsidiary,

ceased to be a consolidated subsidiary at the end of the fiscal year ended March 31, 2012 following the completion of

liquidation.

5. Crossfield Management Corporation, which had been an equity-method affiliate, ceased to be an equity-method affiliate

at the end of the fiscal year ended March 31, 2012 following the completion of liquidation.

8

5. Employees

(1) Group employees

As of March 31, 2012

Business segment Number of employees

Leasing Business 196 ( 13)

Residential Property Sales Business 72 ( 1)

Total reported segments 268 ( 14)

Other 300 (250)

Company-wide (common) 166 ( 3)

Total 734 (267)

(Note) 1. The number of employees is the number of people employed by the consolidated companies (excluding workers on loan

transferred out of the consolidated companies and including workers on loan transferred to the consolidated companies).

The figure in parentheses is the annual average number of temporary employees, which is not included in the number of

employees.

2. The employees classified into Company-wide (common) belong to administration departments that cannot be classified

into any specific segment.

(2) Employees of the submitting company

As of March 31, 2012

Number of employees Average age Average service years Average annual salary (yen)

446 (19) 42.6 17.5 8,187,013

Business segment Number of employees

Leasing Business 196 ( 13)

Residential Property Sales Business 72 ( 1)

Total reported segments 268 ( 14)

Other 12 ( 2)

Company-wide (common) 166 ( 3)

Total 446 ( 19)

(Note) 1. The number of employees is the number of people employed by the Companies (excluding workers on loan transferred

from the Company and including workers on loan transferred to the Company). The figure in parentheses is the annual

average number of temporary employees, which is not included in the number of employees.

2. The average age and average annual salary are those of the employees of the submitting company.

The average annual salary includes bonuses and surplus wages.

3. In calculating the average length of service, the length of service at NTT or any other companies in the NTT Group was

added to the length of service of the employees who have been transferred from these companies. The workers on loan

transferred from other companies (33 workers) were excluded from the calculation.

4. The employees classified into Company-wide (common) belong to administration departments that cannot be classified

into any specific segment.

(3) Labor union

Almost all employees in the Group who can be union members are members of the NTT labor union. The labor-management

relations are stable.

9

Section 2. Business Situation

1. Overview of operating results

(1) Operating results

In the fiscal year under review, the Japanese economy continued to face a challenging situation given the effects of the Great East

Japan Earthquake but showed some signs of a moderate recovery. However, there is a risk of downward pressure being placed on the

economy by declining overseas economies and other factors.

In the office leasing market, the vacancy rate remained high, despite signs of improvement, and market rents continued to be weak.

In the condominium sales market, in spite of the temporary decline of condominium sales after the earthquake, the buying motivation

of consumers continued to rebound, supported by tax benefits and low interest rates.

According to the official announcement of land prices as of January 1, 2012, land prices continued to decline nationwide, albeit more

modestly.

In this environment, the Company and its subsidiaries (collectively, the “Group”) proceeded steadily with operations, with a target of

achieving sustainable growth while striving to bolster profitability. In international operations, the Company developed operations in

new fields, acquiring a new office building in London, United Kingdom and commencing a residential land sales business in the

suburbs of Melbourne, Australia.

As a consequence, operating revenue amounted to ¥136,842 million (down ¥8,851 million, or 6.1% year on year), operating income

was ¥25,365 million (up ¥1,040 million, or 4.3%), and ordinary income was ¥19,229 million (up ¥674 million, or 3.6%). Net income

was ¥15,586 million (up ¥6,278 million, or 67.5%). The introduction of a law relating to a revision to corporate tax rates on

December 2, 2011 raised net income ¥5,945 million.

Operating revenue by business segment in the fiscal year ended March 31, 2012 is as follows. Operating revenue in each segment in

the text include inter-segment internal revenues and transfers.

1) Leasing Business

In the leasing business, although rent income from pre-existing properties and other income declined, the Company did generate

income, especially rent income from properties completed in the fiscal year ended in March 2011, including Urbannet

Shijo-Karasuma Building (Kyoto-shi, Kyoto), and new properties completed in the fiscal year under review.

As the vacancy rate for office buildings in the market remained high, the vacancy rate for office buildings owned by the Group in

the five wards of central Tokyo was 2.0%, and the rate nationwide was 5.4% at the end of March 2012.

In the new building development business, projects in progress include Umekita (Osaka Station North District) Phase 1

Development Area Project [Grand Front Osaka] (Osaka-shi, Osaka), Otemachi 1-Chome No. 2 Urban Area Redevelopment

Project Type 1 Building A [Otemachi Financial City North Tower] (Chiyoda-ku, Tokyo), Urbannet Kanda Building (Chiyoda-ku,

Tokyo), and Upper-Level Section Redevelopment Project associated with the reconstruction of the Shibaura Water Reclamation

Center (Minato-ku, Tokyo).

In the fiscal year under review, an office building Urbannet Uchihonmachi Building (Osaka-shi, Osaka), a commercial and office

building Urbannet Tenjin Building (Fukuoka-shi, Fukuoka), UD Nakasu Building (Fukuoka-shi, Fukuoka) operated by a hotel

operator, and other properties were completed.

As a result of these activities, the leasing business recorded operating revenue of ¥91,069 million (down ¥1,538 million, or 1.7%

year on year), operating expenses of ¥63,586 million (up ¥205 million, or 0.3%), and operating income of ¥27,482 million (down

¥1,743 million, or 6.0%).

2) Residential Property Sales Business

In the residential property sales business, the Company focused on the sale of condominiums, aiming to create high-quality

residences that complete residents’ lives and maintain asset values.

A total of 458 condominiums were delivered, including WELLITH Tokiwadai (Itabashi-ku, Tokyo) and WELLITH Kyoto

Shugakuin (Kyoto-shi, Kyoto). In the fiscal year under review, new sales of condominiums such as WELLITH Omiya

(Saitama-shi, Saitama) and WELLITH Sakurayama (Nagoya-shi, Aichi) commenced. With respect to building lot and detached

house sales, WELLITH Park Minami-Nagasaki (Nagasaki-shi, Nagasaki) and other properties were delivered.

10

As a result, the Company posted operating revenue of ¥28,484 million (down ¥13,240 million, or 31.7% year on year), reflecting a

decline in the number of condominiums delivered and other factors, operating expenses of ¥27,109 million (down ¥14,082 million,

or 34.2%), and operating income of ¥1,374 million (up ¥841 million, or 158.0%).

3) Other

Operating revenue in other business in the fiscal year under review were ¥23,223 million (up ¥6,840 million, or 41.8% year on

year), primarily reflecting the posting of sales from Otemachi 1-Chome No. 2 Urban Area Redevelopment Project Type 1

Building A [Otemachi Financial City North Tower], to which the percentage of completion method is applied. Operating expenses

stood at ¥20,132 million (up ¥4,962 million, or 32.7%), and operating income was ¥3,090 million (up ¥1,877 million, or 154.9%).

(2) Consolidated cash flows

Cash and cash equivalents (hereinafter “cash”) at the end of March 2012 decreased ¥7,054 million from the end of March 2011, to

¥10,960 million. Free cash flows at the end of March 2012 were down ¥31,488 million from the end of March 2011, to ¥19,329

million minus.

(Note) The calculating formula of the free cash flow is as follows:

Free cash flow = Cash flow from operating activities + Cash flow from investing activities

The following is the situation and factors for each category of cash flow for the fiscal year ended March 31, 2012.

(Net cash provided by operating activities)

Cash provided by operating activities was ¥3,704 million, with inflow decreasing ¥36,713 million year on year. This is primarily

attributable to an increase in cash due to income before income taxes and minority interests of ¥16,425 million and depreciation and

amortization of ¥24,765 million and a decrease in cash mainly due to an increase in inventories of ¥14,306 million and notes and

operating accounts receivable of ¥9,032 million.

(Net cash used in investing activities)

Cash used in investing activities was ¥23,033 million, with inflow increasing ¥5,224 million year on year, This is primarily

attributable to a decrease in cash due to purchase of property, plant and equipment of ¥24,305 million and an increase in cash mainly

due to proceeds from repayment of investment securities of ¥1,052 million.

(Net cash provided by (used in) financing activities)

Cash provided by financing activities was ¥12,650 million, with inflow increasing ¥27,292 million year on year. Major factors

included an increase in cash due to proceeds from long-term loans payable of ¥72,000 million and proceeds from issuance of bonds

of ¥14,993 million and a decrease in cash mainly due to repayments of long-term loans payable of ¥67,360 million and cash

dividends paid of ¥3,949 million.

11

2. Operating revenue

The table below shows operating revenue by business segment in the fiscal year ended March 31, 2012.

Business segment Current consolidated fiscal year

(from April 1, 2011 to March 31, 2012) (million yen)

Year on year (%)

Leasing Business 91,069 98.3

Residential Property Sales Business 28,484 68.3

Total operating revenue in reported segments 119,554 89.0

Other 23,223 141.8

Eliminations (5,934) –

Total 136,842 93.9

(Note) 1. The numbers do not include consumption tax. Operating revenue of each segment include inter-segment internal

revenues and transfers.

2. “Eliminations” refers to internal revenues and transfers duplicated in more than one segment.

The following shows breakdowns of revenue in the leasing business and residential property sales business, major businesses of the

Group:

(1) Leasing Business

The table below shows operating revenue etc. by use of property in the leasing business. All figures are consolidated results.

Classification Previous consolidated fiscal year Current consolidated fiscal year

Office/ Commercial Revenue (million yen) 85,807 84,713

Rentable area 1,149,628 m2

(Of the above, sub-leases: 16,326 m2)

1,168,526 m2 (Of the above, sub-leases: 16,326 m

2)

Residential/Other Revenue (million yen) 6,800 6,356

Total operating revenue (million yen) 92,608 91,069

(Note) 1. “Rentable area” figures are as of the end of March.

2. The rentable area of sub-leases does not include the area of sub-leases that have been agreed upon between the Company

and its consolidated subsidiaries.

The table below shows the quarterly vacancy rate by area.

Classification March 2011 June 2011 September 2011 December 2011 March 2012

Central Tokyo (Tokyo 5 wards) 3.6% 3.7% 2.7% 2.0% 2.0%

Nationwide 5.7% 6.0% 5.7% 5.7% 5.4%

(Note) 1. The numbers above are vacancy rates as of the end of each month.

2. Tokyo 5 wards are Chiyoda-ku, Chuo-ku, Minato-ku, Shibuya-ku, and Shinjuku-ku.

The Group emphasizes net operating income, or NOI (see Note), as an indicator for judging the value of properties for the leasing

business.

The nationwide NOI for the fiscal year ended March 31, 2012 was ¥54,318 million (down ¥2,404 million, or 4.2% year on year). In

central Tokyo, Tokyo (excluding central Tokyo) and in the urban areas surrounding Tokyo, NOI declined to ¥34,061 million (down

¥1,533 million, or 4.3%) mainly attributable to a decrease in mainly sales from the existing buildings. NOI also fell in regional urban

areas to ¥20,257 million (down ¥871 million, or 4.1%) with a decline mainly in sales from the existing buildings more than offset

positive effects due to the completion including Urbannet Uchihonmachi Building (Osaka-shi, Osaka) and Urbannet Tenjin Building

(Fukuoka-shi, Fukuoka).

12

NOI for the Group’s principal property holdings is as follows.

(Note) The formula for calculating NOI (net operating income) is as follows:

(NOI = Property rental income – Property rental costs + Depreciation expenses (including prepaid long-term expenses))

1) NOI on principal buildings (Million yen)

Building Location Primary Use Previous

consolidated fiscal year

Current consolidated fiscal year

Urbannet Otemachi Building Chiyoda, Tokyo Office 5,371 5,053

Otemachi First Square Chiyoda, Tokyo Office 3,972 3,977

NTT Makuhari Building Mihama, Chiba Office 1,979 1,799

Granpark Tower Minato, Tokyo Office 4,521 4,285

Seavans N Building Minato, Tokyo Office 2,465 2,233

Tokyo Opera City Shinjuku, Tokyo Office 1,512 1,345

Akihabara UDX Chiyoda, Tokyo Office 7,530 7,272

JA Building, Keidanren Kaikan Chiyoda, Tokyo Office 1,989 1,893

Urbannet Oroshimachi Building Wakabayashi, Sendai Office 216 220

Urbannet Itsutsubashi Building Aoba, Sendai Office 217 199

Urbannet CS Building Naka, Nagoya Office 343 357

Urbannet Shizuoka Building Aoi, Shizuoka Office 307 283

Urbannet Shizuoka Otemachi Building Aoi, Shizuoka Office 359 363

Urbannet Kaminagoya Building Nishi, Nagoya Office 106 85

Urbannet Fushimi Building Naka, Nagoya Office 439 424

Urbannet Nagoya Building Higashi, Nagoya Office 2,131 2,192

Sumitomo Corporation Nagoya Building Higashi, Nagoya Office 287 237

NTT Osaka Chuo Building Chuo, Osaka Office 373 373

Urban Ace Kitahama Building Chuo, Osaka Office 413 394

Urban Ace Higobashi Building Nishi, Osaka Office 328 336

Urban Ace Sannomiya Building Chuo, Kobe Office 441 409

Urban Ace Awaza Building Nishi, Osaka Office 330 330

Urbannet Honmachi Building Chuo, Osaka Office 362 349

Tradepia Yodoyabashi Chuo, Osaka Office 742 503

NTT Cred Motomachi Building Naka, Hiroshima Commercial 3,269 3,069

NTT Cred Hakushima Building Naka, Hiroshima Office 775 760

NTT Cred Okayama Building Kita, Okayama Office 309 478

NTT–T Building Chuo, Fukuoka Commercial 2,068 2,001

NTT–KF Building Chuo, Fukuoka Office 234 279

Urbannet Hakata Building Hakata, Fukuoka Office 248 165

Emuzu Odori Building Chuo, Sapporo Office 365 351

Emuzu Minami 22-jo Building Chuo, Sapporo Office 116 121

Urbannet Sapporo Building Chuo, Sapporo Office 767 780

Other properties, subtotal 11,820 11,384

Total 56,722 54,318

(Note) 1. Akihabara UDX (Chiyoda, Tokyo) is a property owned by a consolidated subsidiary of the Company.

2. Sumitomo Corporation Nagoya Building (Higashi, Nagoya) was acquired in April 2010.

13

2) NOI by area and use (Million yen)

Area

Previous consolidated fiscal year Current consolidated fiscal year

Total

Total

Office/ Commercial

Residential/ Other

Office/ Commercial

Residential/ Other

Central Tokyo

35,594

30,207

1,634 34,061

28,745

1,938 Other area of Tokyo and urban areas surrounding Tokyo

3,752 3,376

Regional urban areas 21,128 17,852 3,275 20,257 17,579 2,677

Total 56,722 51,812 4,909 54,318 49,702 4,615

(Note) Area classifications are defined as follows:

- Central Tokyo means five wards of Tokyo: Chiyoda, Chuo, Minato, Shibuya, and Shinjuku.

- The other area of Tokyo and urban areas surrounding Tokyo are Tokyo, Kanagawa, Chiba, Saitama, Ibaraki, Gunma, and

Tochigi prefectures excluding central Tokyo.

- Regional urban areas are urban areas excluding the areas above.

(2) Residential Property Sales Business

The table below shows operating revenue etc. in the residential property sales business by operation type and area.

Classification

Previous consolidated fiscal year Current consolidated fiscal year

Units/Lots Revenue

(million yen) Units/Lots

Revenue (million yen)

Condominiums

Units delivered

Tokyo region 463 22,948 351 16,330

Other regions 253 8,678 107 6,062

Completed in inventory 91 – 99 –

Building Lots

Lots delivered

Tokyo region 20 1,957 6 281

Other regions 306 5,828 42 3,817

Completed in inventory 27 – 14 –

Residential (Condominiums/Building lots)

Units/Lots delivered

Tokyo region 483 24,906 357 16,611

Other regions 559 14,507 149 9,879

Completed in inventory 118 – 113 –

Other

Units/Lots delivered

Tokyo region – – – –

Other regions 1 2,312 1 1,993

Completed in inventory – – – –

Grand total (Revenue) – 41,725 – 28,484

(Note) 1. For joint projects, the number of units, corresponding to the Company’s share in the project, is rounded down to the

nearest unit.

2. “Completed in inventories” figures are as of the end of each fiscal year. The condominiums completed in inventories for

the fiscal year ended in March 2011 and the fiscal year ended in March 2012 include 16 units and 12 units, respectively,

for which a contract has been completed but ownership has not yet been transferred. The building lots completed in

inventories for the fiscal year ended in March 2011 and the fiscal year ended in March 2012 include 10 lots and 2 lots,

respectively, for which a contract has been completed but ownership has not yet been transferred.

3. 112 lots (worth ¥4,119 million) of building lots delivered for the fiscal year ended March 2011 and 6 lots (worth ¥2,764

million) of building lots delivered for the fiscal year ended March 2012 were delivered through a sale of land.

4. “Other” in the fiscal year ended March 2011 and the fiscal year ended March 2012 are the sale of a condominium

(apartment building) and others.

5. The Tokyo region includes Tokyo, Kanagawa, Chiba, Saitama, Ibaraki, Gunma and Tochigi prefectures.

14

3. Challenges to address

(1) Basic management policy

Since it was established in January 1986, the NTT Urban Development Group, the core company in the real estate development

business of the NTT Group, has focused on urban development in cities in Japan, especially in the Otemachi area of Tokyo. This

focus has enabled consistent growth. The ultimate goal of the Group is to continue to create relaxing environments that effectively

balance people, living spaces, and the environment, under its corporate slogan, “We create harmony.” In other words, we believe that

we can create environments that offer comfortable living over the long term, through a harmony among creative people, stimulating,

energizing living environments, and comfortable, fulfilling lifestyles. We also believe that we can achieve harmony by combining the

high-quality structures and advanced technologies of the Group, and through our unshakeable commitment to functionality,

convenience, and safety as the key components of comfortable living. Consistently offering comfortable living environments creates

customer trust and, as a result, improves our corporate value.

(2) Medium- to long-term management strategies, financial targets, and challenges to address

The economy is continuing to face a challenging situation in the wake of the Great East Japan Earthquake but is expected to continue

to recover moderately thanks to the effects of a range of policies. However, there is a risk of downward pressure being placed on the

economy by declines in overseas economies and other factors. The outlook for the real estate market is uncertain given the

continuation of challenging circumstances, including high vacancy rates in office buildings and continuing decline in rents.

The Group is taking steps to restructure its business base and pursue growth in consideration of financial soundness as described

below, with the aim of nurturing buds for future growth, while securing stable profits even in this difficult operating environment,

operating under the NTT Urban Development Group Medium-Term Management Plan 2012 formulated in May 2010.

i) Restructuring the business base

In the leasing business, the Group is striving to fill vacancies in its existing buildings and to accelerate the leasing of new

buildings by further strengthening the sales system, as the supply of new office buildings is expected to increase in the Tokyo

metropolitan area in 2012. Meanwhile, the Group continues to promote development projects in central Tokyo and in the major

urban centers of Kansai and Kyushu. We will improve the profitability of existing properties and promote investments using our

development expertise to build a strong revenue base in the difficult real estate market.

In the residential property sales business, overall market, in spite of the temporary decline of condominium sales after the

earthquake, the market is recovering gradually as the number of condominium sales remained unchanged from the previous year.

However, it has not yet to recover across all regions and price ranges. Given this operating environment, the Company is working

to establish the WELLITH brand by providing quality housings that help maintain a high asset value permanently and it is

enhancing profitability by promoting carefully selected site acquisition for condominiums and others mainly in large urban areas

such as Tokyo and Osaka, with the aim of generating stable profits.

In response to rising awareness of disaster-proof offices and housing reflecting the Great East Japan Earthquake, we will make

efforts to provide more secure and safer high quality properties.

ii) Pursuing growth in consideration of financial soundness

The Group acquired an office building in London, United Kingdom, 1 King William Street, through the Company’s U.K.

subsidiary in June 2011. The Company also established an Australian subsidiary and commenced a residential land sales business

in the suburbs of Melbourne in Australia in September 2011. In the Tenjin area in Fukuoka-shi, Fukuoka, the Group opened in

September 2011 the RESOLA Tenjin commercial facilities on the intermediate and lower floors of Urbannet Tenjin Building,

which the Group has developed after leasing the site owned by the NTT Group for a fixed term. We will continue to apply the

expertise developed in our core businesses to new fields such as the development and sale of the property business, real estate

fund business, commercial business, international business, and the solutions business.

We also aim to practice shareholder-oriented management, enhance corporate governance, promote corporate social responsibility

(CSR), and bolster our management resources to establish a business foundation that supports growth.

15

* Forward-looking statements included in this section are judgments by the Group at the end of fiscal year under review. Actual

results may be different depending of changes in the business environment and other factors.

(3) Basic policy on the control of the Stock Company

Since the parent company holds more than 50% of the voting rights, the Company has not established any basic policy relating to the

Stock Company and has not introduced any takeover defense.

4. Operating risks

The following principal categories of business risks and other risks affecting the NTT Urban Development Group’s businesses may

have a material impact on investment decisions. Although the risks below are those currently recognized by the NTT Urban

Development Group, it is not necessarily an exhaustive list of risks. These risk categories are presented in the interests of information

disclosure to investors and should be given due importance in investment decisions or when construing the Company’s business

activities. The Group manages the operating risks under its risk management regulations. The forward-looking statements included in

the following reflect judgments by the Group as of the date of submission of this document.

Risks concerning the businesses of the Group

(1) General risk

i) Leasing Business risk

In the fiscal year ended March 31, 2012, the leasing business accounted for 63.8% of consolidated operating revenue. The leasing

business tends to be susceptible to changes in the operating environment, and the Company is considering action against falls in

rents and an increase in vacancies, assuming business trends over the medium and long terms. However, a worsening

supply-demand situation in the real estate market could cause vacancies to increase and the leasing rate to decline, which could

substantially affect the operating performance of the NTT Urban Development Group. Moreover, changes in the financial status

of the Group’s major tenants, the departure of a major tenant, or changes in the conditions of property use could have repercussion

for the overall occupancy rate of Group properties and consequently could significantly affect business real estate revenues.

ii) Residential Property Sales Business risk

The deterioration of the condominium market because of intensifying competition among sellers, rising interest rates for housing

loans, and a downturn in consumer sentiment caused by elevating sales prices accompanying soaring land prices could cause

decreases in sales in relation to a prolonged selling process in the residential property sales business and increases in inventories,

which could affect the Group’s business performance. The process of work could be delayed given the shortage of construction

materials, equipment, and other materials due to the effect of large-scale disasters.

iii) Asset devaluation risk

In fiscal 2005, the Company adopted impairment loss accounting for business real estate based on the “Opinion Regarding

Accounting Standard for Impairment of Fixed Assets” issued by the Corporate Accounting Standards Committee on August 9,

2002. In fiscal 2008, the Company applied the “Accounting Standards for Measurement of Inventories” (ASBJ Statement No. 9

on July 5, 2006). A substantial deterioration of the real estate market could necessitate the recording of impairment losses of the

properties for the leasing business and the revaluation of the inventory assets maintained for the residential property sales business,

and this in turn could impact the Group’s business performance.

The Group holds investment securities and other non-current assets and depreciation in the value of these assets from changes in

economic conditions could produce a revaluation loss that might impact the Group’s business performance.

16

iv) Effects of interest-bearing debt

As of March 31, 2012, consolidated interest-bearing debt totaled ¥505,805 million, all of which was procured at fixed rates of

interest. A significant rise in the market interest rates could, therefore, affect the business development of the Group.

In addition, the Group’s capital procurement activities could be hampered by instability in capital markets, credit limits extended

by financial institutions, business failures (including payoffs) of such institutions, or downgrades in the Company’s debt ratings

and other factors.

Item Previous consolidated fiscal year Current consolidated fiscal year

Total assets (Million yen) 910,492 928,537

Interest-bearing debt (Million yen) 487,780 505,805

Interest-bearing debt / Total assets (%) 53.6 54.5

Operating revenue (Million yen) 145,693 136,842

Interest expense (Million yen) 7,928 7,938

Interest expense / Operating revenue (%) 5.4 5.8

v) Risks in cash flows from operating activities

Net cash provided by (used in) operating activities are subject to fluctuations associated with purchases of land in the residential

property sales business.

In the year ended March 31, 2012, net cash provided by operating activities was ¥3,704 million, a fall of ¥36,713 million from the

previous fiscal year. The increase in inventory assets and other factors create the potential for an outflow of cash flows from

operating activities.

vi) Risks concerning establishment of and revisions to real estate-related and other laws and regulations

The Group is subject to laws and regulations related to real estate, and revisions to these laws and the establishment of new laws

could impact the Group’s business performance.

vii) Risks concerning selection and credit of business partner

The Company makes every effort to verify the credit standing of its business partners before entering into business relations.

However, if unforeseen events lower a business partner’s credit and the Company is unable to collect debts owed to the Company,

an economic loss could result that could impact the Group’s business performance.

Depending on the selection of contractors for construction work, scandals, trouble, and financial difficulties, among other factors,

in contractors performing their operations could cause economic losses for the Group or the erosion of the Group’s credibility,

which in turn could affect the Group’s performance. To prevent and avoid the risks, the Company has set up an internal commit tee

to choose contractors that investigates the creditworthiness of contractors and their ability to complete construction and has

established termination criteria should contractors fail to meet standard quality or delivery periods or cause incidents or accidents.

(2) Business risk

i) Risks concerning development project investment decisions

The Company invests in quality properties for future development with the objective of further raising corporate value. Every

effort is made to ensure the decisions to invest in new development projects which do not produce an economic loss or

compromise society’s trust in the Company. Relevant laws, rights, site conditions, market studies, and other subjects are

thoroughly researched and verified. Construction plans and business revenue and expenditure plans are drawn up, and internal

meetings are held to determine business viability. The final decisions to invest are made by the Board of Directors and other

relevant groups. Despite careful preparation and consideration, fluctuations in demand arising from changes in the business

climate or in the real estate market can reduce the profitability of investments and could impact the Group’s business performance.

17

ii) Risks concerning sales transaction and construction contracts

Inadequate contract documents, flawed contract stipulations, or other deficiencies in sales transaction and construction contracts

could produce an economic loss or liability for damages, or compromise society’s trust in the Company in a way that could impact

the Company’s business performance. The Group seeks to prevent and avoid risks by checking contracts in advance, using

contract check sheets.

iii) Risks concerning damage to and deterioration of buildings in building management operations

The Group regularly inspects and maintains the buildings that it holds for leasing. However, damage to or deterioration in the

buildings, or accidents resulting from the deterioration or failures of the buildings could lead to increases in the financial burden in

association with complaints about damage to or the deterioration of the buildings and accidents caused by them, liability for

damage, the erosion of society’s trust in the Group, renovations, and rebuilding and could impact the Group’s business

performance.

iv) Risks concerning the handling of large-scale disasters in building management operations

Risks including major earthquakes, floods or other natural disasters, or fires, accidents, or terrorist attacks could cause damage to,

the loss of, or the deterioration of buildings the Group holds for leasing, which in turn could affect the Group’s business

performance. The Group has developed a business continuity plan (BCP) designed to protect against the spread of damage from

possible large-scale disasters such as the above and to minimize any economic loss from them, identifying types of disasters and

considering the effects of the disasters on tenants and the management of buildings, emergency communication systems, and

emergency action in accordance with each type of disaster.

Relationships with NTT and its group companies

(1) Position of NTT Urban Development in NTT-centered corporate group (NTT Group)

NTT Urban Development is the only comprehensive real estate company in the NTT Group and manages its businesses

independently, taking responsibility for the management. The Company consults the parent company NTT about important issues

and reports to NTT. However, NTT does not prevent the Company from making its own decisions or does not bind the Company’s

decision making.

NTT owns 67.3% of the stock of the Company as of March 31, 2012 and holds rights as the majority shareholder of the Company

under the Companies Act.

(2) Business relations with NTT Group

The Company and NTT have concluded an agreement relating to the management of the NTT Group to respect each other’s

independence and autonomy and to maximize the profits of each NTT Group company by maximizing the profits of the overall NTT

Group. Based on this agreement, the Company pays the Group operating and managing expenses. In exchange for this payment, NTT

provides the Company with comprehensive services and benefits, including advice on a range of issues, the use of the NTT brand,

and Group publicity. In particular, we believe using the NTT brand as a member of the NTT Group enhances the creditworthiness

and reliability of the Company and gives the Company advantages in the execution of operations.

The Company has concluded a building lease agreement with the NTT Group and receives rent income from the Group. The

Company determines rental prices for the NTT Group through mutual consultation, based on essentially the same conditions as those

for general customers, considering market prices and prices for neighboring properties. The Company acquires land, primarily land

for the property sales business, from the NTT Group. Both parties determine acquisition prices through consultation, taking

profitability into consideration, as in the acquisition of land from the general market.

The table below shows the status of transactions between the Company and the NTT Group in the Leasing Business.

18

Transactions with the NTT Group in the Leasing Business (non-consolidated)

Item Previous fiscal year Current fiscal year

Operating revenue in Leasing Business (Million yen) 84,996 82,603

Operating revenue from NTT Group (Million yen) 28,236 26,600

Operating revenue from NTT Group / Operating revenue in Leasing Business (%)

33.2 32.2

(3) Personnel relationships with NTT Group

The Company accepts employees from other NTT Group companies not as employees on loan but as employees who have been

transferred. The Company had an outside director and an outside Corporate Auditor from NTT as of the date of submission of this

document. They have taken up their appointments at the request of the Company, and the Company makes management judgments

independently.

(Concurrent officers) As of June 20, 2012

Title Name Title in parent company or its group companies Reason for appointment

Senior director Toyosei Sugimura Senior Manager, General Affairs Department of Nippon Telegraph and Telephone Corporation The Company appointed Mr.

Sugimura and Mr. Ogiwara to gain access to broad management perspectives.

Corporate Auditor

Takeshi Ogiwara Senior Manager, Internal Control Office, General Affairs Department of Nippon Telegraph and Telephone Corporation

(Note) Of the 14 directors and four Corporate Auditors, only the two above hold a concurrent position at the parent company.

(4) Independence from NTT Group

As a company engaging in a nationwide real estate business as part of the NTT Group, the Company manages its businesses

independently, taking responsibility for management. As stated in (1), (2) and (3), we believe that the Company has a considerable

degree of independence from the parent company.

5. Significant management contracts

Not applicable.

6. Research and development activities

There were no special activities to describe.

19

7. Analysis of financial position, operating results and cash flows

Forward-looking statements included in this section are judgments by the Group at the end of the fiscal year under review.

(1) Significant accounting policies and estimates

The consolidated financial statements of the Group are prepared under the generally accepted accounting principles in Japan.

Estimates that affect the reported values of assets and liabilities at the closing date and the reported values of revenues and expenses

during the reporting period in the preparation of the consolidated financial statements are primarily net sale values and corporate

taxes relating to the valuation of deferred tax assets, allowance for doubtful receivables, accrued employees’ retirement benefits, a

recoverable amount relating to the impairment of fixed asset groups, and inventories. The operating revenue values and corporate

taxes are continuously valuated reasonably.

Estimates, judgments, and valuations are made based on factors considered to be reasonable in accordance with past results and

current situations. However, actual results may be different because of uncertainty inherent in estimates.

(2) Analysis of financial position

i) Consolidated balance sheet (Million yen)

End of previous consolidated fiscal year

End of current consolidated fiscal year

Change

Assets 910,492 928,537 18,044

Liabilities 719,709 724,810 5,100

Net assets 190,783 203,727 12,944

(Restated) Minority interests 35,248 37,714 2,466

Assets, liabilities and net assets at the end of the fiscal year ended March 31, 2012 rose from the end of the previous fiscal year.

(Assets)

Total assets were ¥928,537 million (up ¥18,044 million year on year).

Current assets were ¥129,941 million (up ¥16,179 million), primarily reflecting a rise of ¥13,593 million in inventories, an

increase of ¥9,022 million in notes and operating accounts receivable, and a decline of ¥6,671 million in deposits paid.

Non-current assets were ¥798,595 million (up ¥1,865 million). Principal factors included an increase of ¥7,785 million in

construction in progress, a decrease of ¥5,189 million in buildings and structures (net), and a fall of ¥673 million in long-term

prepaid expenses.

(Liabilities)

Total liabilities were ¥724,810 million (up ¥5,100 million year on year).

Current liabilities were ¥88,727 million (down ¥16,095 million). Major factors included a decrease of ¥18,648 million in current

portion of long-term loans payable.

Non-current liabilities were ¥636,082 million (up ¥21,196 million). The main factors included a rise of ¥23,287 million in

long-term loans payable, a climb of ¥13,386 million in bonds payable, a decline of ¥8,338 million in deferred tax liabilities, and a

fall of ¥5,643 million in lease and guarantee deposits received.

Interest-bearing debt at the end of the fiscal year under review was ¥505,805 million (up ¥18,025 million year on year).

(Net assets)

Net assets were ¥203,727 million (up ¥12,944 million year on year), primarily reflecting net income of ¥15,586 million and

dividend payments of ¥3,949 million.

20

ii) Consolidated cash flows (Million yen)

Previous consolidated

fiscal year

Current consolidated

fiscal year Change

Net cash provided by operating activities 40,417 3,704 (36,713)

Net cash used in investing activities (28,257) (23,033) 5,224

Net cash provided by (used in) financing activities (14,641) 12,650 27,292

Net increase (decrease) in cash and cash equivalents (2,493) (7,054) (4,560)

Cash and cash equivalents at the end of the term 18,015 10,960 (7,054)

Cash and cash equivalents (hereinafter “cash”) at the end of March 2012 decreased ¥7,054 million from the end of March 2011, to

¥10,960 million.

For the situation of each category of cash flows at the end of the fiscal year under review, refer to 1. Overview of operating results,

(2) Consolidated cash flows.

The commercial paper (short-term bond) and bond (long-term bond) of the Company are rated by Rating and Investment

Information, Inc. as shown in the table below. (As of March 31, 2012)

Item Rating and Investment Information, Inc.

Commercial paper a-1

Bond A+

(3) Analysis of operating results

i) Operating revenue

Operating revenue in the fiscal year under review amounted to ¥136,842 million (down ¥8,851 million, or 6.1% year on year),

primarily reflecting a fall in rent income from existing properties in the leasing business and a decline in the number of

condominiums delivered in the residential property sales business.

ii) Operating gross profit

Operating cost stood at ¥96,433 million (down ¥8,008 million, or 7.7%), attributable primarily to a fall in the number of

condominiums delivered in the residential property sales business, offsetting an increase in operating cost related to Otemachi

1–Chome No. 2 Urban Area Redevelopment Project Type 1 Building A (Otemachi Financial City North Tower) to which the

percentage of completion method is applied in other business.

As a result, operating gross profit was ¥40,409 million (down ¥842 million, or 2.0%).

iii) Operating income

Selling, general, and administrative expenses were ¥15,043 million (down ¥1,883 million, or 11.1%), primarily as a result of a fall

in selling expenses due to a decline in the number of condominiums delivered.

As a consequence, operating income was ¥25,365 million (up ¥1,040 million, or 4.3%).

iv) Ordinary income

Ordinary income was ¥19,229 million (up ¥674 million, or 3.6%), mainly reflecting an increase in operating income of ¥1,040

million.

v) Income before income taxes and minority interests

Extraordinary income was ¥60 million (down ¥160 million, or 72.8%), attributable primarily to the posting of a gain on the sale of

non-current assets of ¥212 million in the previous fiscal year.

Extraordinary losses were ¥2,863 million (up ¥211 million, or 8.0%), mainly as a result of an increase of ¥1,266 million in loss on

retirement of non-current assets in the fiscal year under review, despite the posting of a ¥1,001 million loss on adjustment for

changes of accounting standard for asset retirement obligations in the previous fiscal year.

Consequently, income before income taxes and minority interests amounted to ¥16,425 million (up ¥302 million, or 1.9%).

21

vi) Net income

Net income was ¥15,586 million (up ¥6,278 million, or 67.5%) attributable mainly to an increase of ¥5,945 million in net income

because of the effect of the introduction of a law relating to a revision to corporate tax rates on December 2, 2011.

For the details of operating results by business segment in the fiscal year under review, refer to 1. Overview of operating results,

(1) Operating results.

(4) Factors significantly affecting operating results

For factors significantly affecting operating results, refer to 4. Operating Risks.

(5) Current status of and outlook for business strategy

The Group will step up its efforts to achieve the objectives included in NTT Urban Development Group Medium-Term Management

Plan 2012 (developed in May 2010): 1) Restructuring the business base, and 2) Pursuing growth in consideration of financial

soundness.

The following is the specific action for each business segment in the fiscal year ending March 2013.

i) Leasing Business

The outlook for the rental office market is uncertain, given high vacancy ratios in office buildings, although there are signs of

improvement, and continued low rents.

As supply of new office buildings is expected to expand in the Tokyo metropolitan area in 2012, the Company will seek to bolster

its sales force by enhancing its leasing system and stepping up activities for improving relations with tenants. Meanwhile, the

Company will develop initiatives for enhancing asset management for improving the value of the assets that it owns and for

increasing customer satisfaction.

The Company aims to consistently expand operations by developing assets steadily that it has already acquired, using its

development expertise.

ii) Residential Property Sales Business

The condominium sales market is recovering gradually thanks to the effect of economic policies but has yet to recover across all

regions and price ranges.

The Company will continue aiming to improve profitability and to achieve early paybacks, while striving to establish the

WELLITH brand as the preferred choice of customers by providing superior housing.

iii) Other

The Group will seek to expand businesses, particularly the operations of consolidated subsidiaries, including the remodeling of

offices at the request of tenants in relation to the leasing business.

(6) Analysis of financial resources and liquidity of funds

During the fiscal year under review, the Company raised funds primarily through borrowings from financial institutions and the

issuing of bonds, among other sources, in response to such as capital needs as capital expenditures, investments, and the acquisition

of inventory assets.

For the analysis of financial resources and the liquidity of funds, refer to 1. Overview of operating results, (2) Consolidated cash

flows and 7. Analysis of financial position, operating results and cash flows, (2) Analysis of financial position.

22

Section 3. Facilities

1. Overview of capital investment

The NTT Urban Development Group, consisting of the Company and its consolidated subsidiaries, invests in new construction sites

to increase the level of contribution to earnings provided by the leasing business while acquiring commercial land to expand its

overall business activities.

Capital investment was distributed as follows in the fiscal year ended March 31, 2012.

Business segment Current consolidated fiscal year

(million yen) Year on year (%)

Leasing Business 28,325 120.4

Residential Property Sales Business 5 600.1

Other 40 105.1

Total 28,371 120.4

Corporate 421 19.9

Total 28,793 112.1

(Note) The figures include the amount of property, plant and equipment, intangible assets and others.

The main investments in the leasing business were ¥7,284 million for Umekita (Osaka Station North District) Phase 1 Development

Area Project [Grand Front Osaka] (Osaka-shi, Osaka), ¥2,657 million for Urbannet Tenjin Building (Fukuoka-shi, Fukuoka), ¥1,913

million for UD Nakasu Building (Fukuoka-shi, Fukuoka), ¥1,458 million for the Urbannet Kanda Building (Chiyoda-ku, Tokyo),

¥1,448 million for Otemachi 1-Chome No. 2 Urban Area Redevelopment Project Type 1 Building A [Otemachi Financial City North

Tower] (Chiyoda-ku, Tokyo), and ¥9,613 million for building renovations.

Significant changes in the Group’s major facilities during the consolidated fiscal year under review are as follows.

The following facilities have been completed during the consolidated fiscal year under review.

Name

(Location)

Business

segment Primary use Structure

Area (m2) Acquisition prices (million yen)

Completed Building Land

Building,

etc. Land Other Total

Nakasu Project

(tentative name)

[UD Nakasu Building]

(Fukuoka-shi, Fukuoka )

Leasing

Business Commercial

Reinforced

concrete

structure; 14

floors above

ground

9,515 1,738 2,217 138 105 2,461 September

2011

23

2. Major facilities

The Group’s major facilities are summarized as follows.

(1) Submitting company As of March 31, 2012

Name (Location)

Business segment

Primary use Structure

Area (m2) Book value (million yen)

Completed Building Land

Building,

etc. Land

Lease

assets Other Total

Urbannet Otemachi

Building

(Chiyoda, Tokyo)

Leasing

Business Office

Steel structure; 22 floors

above ground and 5 below 117,618 9,361 14,785 173 0 338 15,298 June 1990

Otemachi First

Square (Note 1)

(Chiyoda, Tokyo)

Leasing

Business Office

Steel structure; West Tower: 23 floors

above ground and 5 below

East Tower: 23 floors

above ground and 4 below

54,284 6,236 13,040 265 – 149 13,454

First phase: February

1992;

Second

phase: May

1997

JA Building,

Keidanren Kaikan

(Chiyoda, Tokyo)

(Notes 1, 2 and 3)

Leasing

Business Office

Steel structure; Partially

reinforced concrete

structure; 37 floors above

ground and 4 below

26,517 1,506 6,027 20,647 – 82 26,757 April 2009

Seavans N Building

(Note 4)

(Minato, Tokyo)

Leasing

Business Office

Steel structure; 24 floors

above ground and 2 below 78,488 13,144 8,029 2,157 – 111 10,298

January

1991

Granpark (Note 1)

(Minato, Tokyo)

Leasing

Business Office

Steel structure; Partially

reinforced concrete

structure; 34 floors above

ground and 4 below 138,423 14,227

26,524

6,091

15 448

36,618

August 1996

Granpark Heights

(Note 1)

(Minato, Tokyo)

Leasing

Business Housing

Reinforced concrete

structure; 28 floors above

ground and 4 below

3,397 – 141 October

1996

Urbannet

Minamiazabu

Building

(Minato, Tokyo)

Leasing

Business Office

Reinforced concrete

structure; 3 floors above

ground and 1 below

742 380 140 346 – 0 487 November

1998

Garden Court

Motoazabu (Note 1)

(Minato, Tokyo)

Leasing

Business Housing

Reinforced concrete

structure; 4 floors above

ground and 1 below

2,499 1,026 425 873 – 2 1,300 August 2003

Placeo Aoyama

Building

(Minato, Tokyo)

Leasing

Business Commercial

Steel-reinforced concrete

structure; 11 floors above

ground and 3 below

18,674 2,952 2,368 112 – 11 2,492 April 1992

Festa Azabu (Minato, Tokyo)

Leasing Business

Commercial

Steel-reinforced concrete

structure; 6 floors above ground and 2 below

3,214 667 882 5 – 102 991 May 1990

Urban Court

Motoazabu

(Minato, Tokyo)

Leasing

Business Housing

Reinforced concrete

structure; 3 floors above

ground and 1 partial floor

below

2,805 1,675 408 22 – 2 433

September

2003

(Note 5)

Park Court

Azabu-Juban The Tower (Note 1)

(Minato, Tokyo)

Leasing Business

Office

Reinforced concrete

structure; Partially steel-reinforced concrete

structure; 36 floors above

ground and 1 below

989 179 112 167 – 1 281 May 2010

Tokyo Opera City

(Note 1)

(Shinjuku, Tokyo)

Leasing

Business Office

Steel structure; 54 floors

above ground and 4 below 33,086 3,831 9,321 1,094 – 86 10,501 August 1996

Nihonbashi Asahi

Seimei Building (Chuo, Tokyo)

Leasing

Business Office

Steel-reinforced concrete

structure; 12 floors above ground and 3 below

13,532 1,469 237 9,524 – 4 9,766 June 1962

Urbannet Kayaba

Kabuto Building

(Note 6)

(Chuo, Tokyo)

Leasing

Business Office

Steel structure; 9 floors

above ground and 1 below 9,599

–

[1,380] 2,164 – – 5 2,170 June 2003

Urbannet Irifune

Building

(Chuo, Tokyo)

Leasing

Business Office

Steel-reinforced concrete

structure; 8 floors above

ground and 1 below

6,058 830 994 143 – 4 1,142 August 1990

Urbannet Nihonbashi

Building (Note 6)

(Chuo, Tokyo)

Leasing

Business Office

Steel structure; 8 floors

above ground 3,413

–

[944] 528 – – 1 529 July 2001

Urbannet Tsukiji

Building

(Chuo, Tokyo)

Leasing

Business Office

Steel structure; 8 floors

above ground 2,490 364 255 68 – 3 327 July 1990

Urbannet Tsukiji 2

(Chuo, Tokyo)

Leasing

Business Office

Steel structure; 7 floors

above ground 2,423 443 333 1,450 – 1 1,785

October

1998

24

Name

(Location)

Business

segment Primary use Structure

Area (m2) Book value (million yen)

Completed Building Land

Building,

etc. Land

Lease

assets Other Total

Harajuku Quest

(Shibuya, Tokyo)

Leasing

Business Commercial

Reinforced concrete

structure; 4 floors above

ground and 2 below

5,367 1,872 700 38 0 38 777 March 1988

Urbannet Gotanda

NN Building

(Shinagawa, Tokyo)

Leasing

Business Office

Steel-reinforced concrete

structure; 8 floors above

ground and 1 below

9,446 1,825 1,059 586 0 2 1,647 August 1989

Hongo Center

Building (Note 1)

(Bunkyo, Tokyo)

Leasing

Business Office

Steel-reinforced concrete

structure; 7 floors above

ground and 2 below

3,233 701 503 8 – 2 514 October

1990

Urbannet Nakano

Building

(Nakano, Tokyo)

Leasing

Business Office

Reinforced concrete

structure; 6 floors above

ground

9,269 3,091 1,122 575 – 17 1,715 October

1988

Ariake Center

Building (Note 1)

(Koto, Tokyo)

Leasing

Business Office

Steel-reinforced concrete

structure; 7 floors above

ground and 2 below

7,322 2,348 1,768 871 – 11 2,650 April 1996

Urban Court

Minami-karasuyama

(Setagaya, Tokyo)

Leasing

Business Housing

Reinforced concrete

structure; 6 floors above

ground

3,012 2,019 380 79 – 7 467 October

2000

Machida NT

Building (Note 1)

(Machida, Tokyo)

Leasing

Business Commercial

Steel-reinforced concrete

structure