GROW STRATEGICALLYAS SEASONED PROFESSIONALSANNUAL REVIEW 2006
For the year ended November 30, 2006

PROFILE

Based on its new corporate philosophy, Tosei Corporation (“Tosei” or the “Company”) has embarked
on a fresh start as a company that pursues unlimited growth and opportunities by maintaining its corereal estate operations while expanding into new fields.
As a group of seasoned professionals, the Tosei Group constantly focuses on quality as it works tocontribute to society and increase its corporate value by restoring the value of real estate and otherassets with a view 10 to 20 years in the future.

CONTENTS
Financial Highlights ................................................. 1
To Our Stakeholders................................................ 2

Grow Strategically as
Seasoned Professionals ..............................

5

Expand the Scale of Business .............................. 6

THE TOSEI GROUP’SCORPORATE PHILOSOPHY
MissionTo create new value and inspiration in all aspects of real estate
as a global-minded group of seasoned professionals.

Build the Corporate Brand.................................. 8
Review of Operations.............................................. 10
Revitalization Business ........................................ 11
Development Business ........................................ 12
Rental Business ................................................... 13
Fund Business ..................................................... 13
Property Management Business.......................... 14

Management Principles
Continue developing seasoned,true professionals based on people-centered management.
Face risks with a venturesome spirit andbreak free of convention in order to continuously innovate.

Alternative Investment Business.......................... 14
Corporate Social Responsibility (CSR) ...................... 15
Enhancing Corporate Governance .......................... 16

Optimize investments through portfolio managementthat integrates real estate and finance.

Management’s Discussion and Analysis ofOperations and Finances..................................... 18

Insist on quality construction, seek value with a global perspective,
and continue to expand the scope of collaborative creation.

Consolidated Balance Sheets................................... 22

Maintain fair business practices while pursuingworld-class management quality.

Consolidated Statements of Operations.................. 24
Consolidated Statement of Shareholders’ Equity..... 25
Consolidated Statement of Additional Paid-in
Capital and Retained Earnings ........................... 25

Action Principles

Consolidated Statements of Cash Flow................... 26

Ceaselessly sharpen professional attitudes, knowledge and skills.

Notes to Consolidated Financial Statements............ 27

Conceptualize linkages to create an organization that learns.

Corporate Data ....................................................... 32

Fulfill promises, make clear decisions and act speedily.

Investor Information................................................ 33

Create an enjoyable, positive corporate culture throughmutual respect and teamwork.

Forward-looking Statements
This annual report contains forward-looking statements regarding the Company’s plans, outlook, strategies and results for the future. All forward-looking statements are basedon judgments derived from the information available to the Company at the time of publication. Certain risks and uncertainties could cause the Company’s actual results to differ
materially from any projections presented in this report. These risks and uncertainties include, but are not limited to, the economic circumstances surrounding the Company’sbusinesses; competitive pressures; related laws and regulations; product development programs; and changes in exchange rates.

FINANCIAL HIGHLIGHTS
Tosei Corporation and its Consolidated Subsidiaries
Years ended November 30

Change (%)

Thousands of
U.S. dollars (Note)

2006/2005

2006

Millions of yen

2006

2005

24,741 ¥
5,901
2,737

17,644
3,536
1,593

40.2%
66.9
71.8

$214,115
51,06923,687Retained earnings:
Net income per share ............................................................. ¥ 7,412.80 ¥ 4,664.46
Cash dividends .......................................................................
1,400
450
Book value per share .............................................................. 40,414.50 24,018.05

58.9%
211.1
68.3

$

48.8%
83.6

$520,433
131,805

Operating Results (For the year):

Revenues................................................................................ ¥Operating income...................................................................
Net income ............................................................................
Per Share Data
(In yen and U.S. dollars):

64.15
12.11
349.76

Financial Position (At year-end):

Total assets ............................................................................ ¥Net assets...............................................................................
Number of employees ............................................................

60,136 ¥15,230134

40,407
8,294
107

23.9%
5.4%
23.3%

20.0%
3.9%
19.2%

Financial Indicators:

Operating income ratio (%) ....................................................
Return on total assets (ROA) (%).............................................
Return on equity (ROE) (%).....................................................

Note: U.S. dollar amounts have been translated from yen, solely for the convenience of the reader, at the rate prevailing on November 30,
2006 of ¥115.55 to US$1.

Revenues/Operating Income Ratio

Operating Income/Net Income(¥ million/%)(¥ million)

24,741

25,00050

20,00040

17,64415,00010,00060,0005,000

50,00060,13640,407
3,536

40,000

10.6

2002

12.8

2003

2,737

3,000

20,00015,572

15,230

1,206
10

2004

19,143
1,593

2,000

14.4

Non-consolidated

29,43930,000

2,093

20

20.0
6,114

0

(¥ million)

30
23.9

9,456

5,000

5,901

6,000

4,000

14,514

Total Assets/Net Assets

2005

2006

Consolidated

0

1,000
0

793

647
210

442

2002

2003

2004

Non-consolidated

10,0002005

2006

Consolidated

0

1,572

2,046

2002

2003

■ Operating Income■ Total Assets■ Development Business■ Net Income■ Net Assets■ Fund Business■ Property Management Business■ Alternative Investment Business● Operating Income Ratio (Right scale)Note: The Tosei Group began consolidated financial reporting in the fiscal year ended November 30, 2005.

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ANNUAL REVIEW 2006

2004

2005

Non-consolidated■ Revitalization Business■ Rental Business

6,659

8,294

2006

Consolidated

TO OUR STAKEHOLDERSThe Tosei Group has taken the first step in its next stage based on a
new corporate philosophy aimed at further growth.
The Tosei Group is implementing GROWING UP
2008, a medium-term management plan for theperiod from December 1, 2005 to November 30,
2008 that revolves around doubling the scale ofbusiness and establishing the corporate brand. In
the fiscal year ended November 30, 2006, theGroup significantly exceeded the income targets
for the initial year of the plan.
On October 1, 2006, the Company changed its
name from Tosei Fudosan Co., Ltd. to Tosei
Corporation and adopted a new corporate
philosophy. On November 22, 2006, Tosei
Corporation was listed on the second section of
the Tokyo Stock Exchange (TSE), establishing apresence on two exchanges. The TSE listing is
Tosei’s most significant milestone since its JASDAQ
listing in February 2004. I would like to extend mysincerest thanks to shareholders and others whosekind support has made this possible.
The Tosei Group is committed to broadening its
scope of business beyond core real estate
operations to further increase corporate value
while strengthening the overall corporate brand.
The new corporate philosophy reflects the Group’s
fundamental values, and is an important guide forbetter meeting stakeholder expectations andmaintaining trust.
By creating new value and inspiration in all
aspects of real estate as a global-minded group of
seasoned professionals, we aim to establish a

President and CEO

familiar and indispensable presence in daily living

Seiichiro Yamaguchi

and work venues, and in doing so, achieve
further growth.

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ANNUAL REVIEW 2006

Overview of Results for the Fiscal Year Ended November 30, 2006
The upswing in the Japanese economy surpassed the Izanagi boom as the longest postwar period ofcontinuous economic expansion, with real GDP marking four years of continuous growth. In the real estateindustry, land prices exhibited a notable recovery trend, with the nationwide average assessed value of land inJapan rising for the first time in 14 years. Factors driving the current rise in real estate prices include increased
demand for inner-city office space resulting from the economic recovery, revisions to the Law on Securitization ofSpecified Assets by Special Purpose Companies (SPC Law) and development of the REIT market. Unlike in a bubble
period, rational pricing based on profitability is spreading; therefore, even as differences among property prices
widen, the market is expected to continue expanding.
In this environment, the Tosei Group worked to increase its overall corporate value by increasing synergy
among its six businesses to restore the value of real estate, with a focus on the 23 wards of Tokyo. These include
the four businesses of Tosei Corporation – the revitalization and fund businesses, which are the Company’s
growth areas, the development business, in which it has solid expertise, and the rental business – as well as theGroup company businesses of property management, conducted by Tosei Community Co., Ltd., and alternative
investment, conducted by Tosei Revival Investment Co., Ltd. As a result of these efforts, in the year ended
November 30, 2006, consolidated revenues were ¥24,741 million, an increase of 40.2 percent compared with theprevious fiscal year, operating income was ¥5,901 million, an increase of 66.9 percent, and net income was¥2,737 million, an increase of 71.8 percent.

Progress of the Medium-term Management Plan GROWING UP 2008
The Tosei Group has formulated a medium-term management plan, GROWING UP 2008, and is working tomeet its targets. Under a fundamental policy that enhancing corporate value requires both increased earnings andimprovements in management quality, this plan sets forth two cornerstones for strengthening the Group’s businessbase and building a foundation for further growth: doubling the scale of business and building the corporate brand.
(1) Initiatives to Double the Scale of Business
The real estate market is picking up, with intensifying competition to acquire prime commercial space, used
office buildings, rental condominiums and other properties in the 23 wards of Tokyo, the Tosei Group’s businessarea. Under these conditions, we strengthened purchasing, our growth driver, with the November 2006 start-up of
the VIP Map System, an investment property information system that enhances our traditional purchasing network.
FY ended Nov. 2005 FY ended Nov. 2006 FY ending Nov. 2007
(Actual)(Actual)(Targets)

FY ending Nov. 2008
(Targets)

Revenues¥17.6 billion¥28.4 billion—¥40.5 billion➜¥24.7 billion➜¥51.5 billion➜¥54.0 billion

Ordinary income¥2.9 billion¥4.0 billion—¥6.0 billion➜¥5.3 billion➜¥6.7 billion➜¥7.7 billion

Net worth ratio

20.6%

—

—

30.0%

➜25.3%➜23.3%➜26.3%

Return on equity (ROE)

19.2%

—

—

18.3%

➜23.3%➜21.2%➜21.2%

Return on total assets
(ROA)

3.9%

—

—

5.5%

➜5.4%

➜5.1%

➜5.3%

Fund asset balance¥20.2 billion¥41.3 billion¥85.0 billion¥130.0 billion➜¥41.2 billion➜¥115.8 billion3➜¥165.8 billion3

Notes: 1. Upper figure: original target; lower figure: actual/new target
2. The targets of GROWING UP 2008 were set on the basis of information gathering and analysis believed to be proper when
the plan was established. However, the Group may not be able to gather all necessary information, or may be unable toreach the targets due to changes in the business or various other factors.
3. Fund asset balance includes portion expected from J-REIT (¥39,800 million as of November 30, 2007; ¥59,800 million as ofNovember 30, 2008)

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ANNUAL REVIEW 2006

TO OUR STAKEHOLDERS

In the revitalization business, we have been supplying properties using our enhanced “value-up” capabilities,
including improving design and profitability. Examples include the sale of units of Palms Gotanda, a condominium
complex constructed in 1981 that the Company restored to newly built condition. In the development business,completion of the Toranomon Tosei Building in July 2006 expanded our lineup to offer more diverse properties,
including condominiums, single-family dwellings, and office and retail buildings. We are also developing
distinctive, high-value-added products such as a 108-unit, environment-conscious condominium complex in
Sakura, Setagaya Ward.
In the fund business, the Tosei Group is working to increase opportunities for real estate transactions, including
development, revitalization, holdings management, asset management and property management, by expanding
both on-balance real estate investment on its own account and off-balance investment in funds. Aiming to bolster
our financial structure by increasing the future scale of fund assets, we worked to stabilize our finances by issuing
new shares to European institutional investors in February 2006, generating ¥4,347 million in equity financing.
(2) Initiatives to Build the Corporate Brand
We aim to build an overall corporate brand for the Tosei Group in tandem with doubling the scale ofbusiness. By building a corporate brand that combines “innovation and challenge” with “security and reliability,”
we will deepen our relationship of trust with our stakeholders, which is a vital condition for continuous growth.
To achieve this, enhancing corporate governance is key. We are focusing our efforts in the core areas of instillingawareness of compliance, strengthening risk management and practicing timely disclosure. In addition tocomplying with the Company Law, the Securities and Exchange Law and other laws, we are responding to publicconcerns by working to further enhance our internal control system.
Brand-building initiatives are also progressing. The Group redefined its mission, management principles andaction principles, broadcast its values and management orientation and developed a communication style thatmeshes with the new Company name, logo and philosophy. Furthermore, we are focusing efforts on securing
and training capable personnel to increase the scale of business. In line with this, Tosei has raised its target
workforce size for the year ending November 30, 2008 from 170 to 211.
As a result of these efforts, in the first year of the medium-term management plan results were better than
expected compared with initial targets. Accordingly, the target for consolidated revenues for the year ending
November 30, 2008 has been revised upward from ¥40,500 million to ¥54,078 million, an increase of 33.5
percent, and the target for consolidated ordinary income has been increased 28.3 percent from ¥6,000 million to¥7,700 million.

Further Increasing Stakeholder Trust
The Tosei Group is committed to achieving the above-mentioned strategic targets through theimplementation of its philosophy, “To create new value and inspiration in all aspects of real estate as a globalminded group of seasoned professionals.” By doing so, we can take advantage of diversifying needs in real estateand fully capitalize on overall Group strengths and synergy to achieve continuous earnings growth.
Stable dividends are a key management priority for Tosei Corporation. The Company’s fundamental policy is
to comprehensively consider operating results, the future operating environment, progress in its business plan andbalancing distributions of earnings and the need for internal capital resources to take advantage of highly
profitable business opportunities that will generate long-term growth in corporate value. Based on this, theCompany is aiming for a payout ratio of 20 percent of non-consolidated net income.
We look forward to your continuing support.
February 24, 2007

Seiichiro Yamaguchi
President and CEO

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ANNUAL REVIEW 2006

GROW STRATEGICALLY AS
SEASONED PROFESSIONALS
Under a fundamental policy that enhancing corporate value requires both increased earnings andimprovements in management quality, our medium-term management plan GROWING UP 2008 sets
forth two cornerstones for strengthening the Group’s business base and building a foundation forfurther growth: doubling the scale of business and establishing the corporate brand. The Tosei Groupaims to make significant strides as a reliable corporate brand that meets stakeholder expectations. To
achieve this, it is working to broaden the scope of operations and upgrade its business modelthrough full-scale integration of real estate and finance.

EXPAND THE
SCALE OF BUSINESSBUILD THECORPORATE BRAND

Aim to double scale ofbusiness in terms ofrevenues andordinary income

Promote brand strategy
while working to enhancelineup of sellers and buyers

Secure capable personnel todouble the scale of business,and promote improvementof personnel skills

Strengthen corporate
governance andcompliance, and makebusiness processes
more efficient

Business growthand finances

Customers andtransactions

Quality and quantityof human resources

Business processes
and organizational
operations

Medium-term Management Plan GROWING UP 2008
Targets vs. Results in the Fiscal Year Ended November 2006 (Target Year: FY ending November 2008)
Revenues

Ordinary income

Fund asset balance

+119%

+45%

+302%

FY2006

FY2008FY2006

FY2008FY2006

FY2008

¥24.7

¥54.0

¥5.3

¥7.7

¥41.2

¥165.8billionbillionbillionbillionbillion➜Increase property
purchasing and enhance“value-up” engineeringofferings➜

Secure stable profits byproviding distinctive, highvalue-added products➜

billionAccelerate the increase ofboth J-REIT and private
fund assets

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ANNUAL REVIEW 2006

Workforce+57%
FY2006134➜

FY2008211

Enhance recruitment withaggressive use of media
linked to brand strategy

EXPAND THE SCALE OF BUSINESS
Having significantly surpassed its plans for the first year of its medium-term management plan, Tosei
revised targets upward to achieve further growth. The Tosei Group will maximize use of “value-up”
engineering, one of its strengths, to achieve these new targets and double the scale of business.

➤ Revision of Targets
In addition to the impact of a booming real estate market, factors supporting the Tosei Group’s excellent
results in the fiscal year ended November 30, 2006 included successful purchasing amid intensifying
competition and stronger development capabilities and “value-up” capabilities such as improving design andprofitability. Although the real estate boom is expected to gradually stabilize, the Tosei Group revised targets
upward because it sees opportunities for further growth given the solid advantages of the Tosei Group’s
know-how and purchasing network for the small and medium-scale properties it handles in the 23 wards ofTokyo. Revised targets for revenues and ordinary income in the final year of the plan are 33.3 percent and28.3 percent higher, respectively, than initial targets.
(Millions of yen)

Year ended November 30, 2006

Year ending November 30, 2007 (Projected)

Year ending November 30, 2008 (Targets)

Revenues

Operating
IncomeOperating
Income Ratio

Revenues

Operating
IncomeOperating
Income Ratio

Revenues

Operating
IncomeOperating
Income Ratio

Revitalization Business

15,650

4,040

25.8%

30,834

5,030

16.3%

30,831

5,579

18.1%

Development Business

3,843

514

13.4%

13,756

1,462

10.6%

14,123

1,812

12.8%

Rental Business

1,839

985

53.6%

2,554

1,438

56.3%

2,787

1,599

57.4%

Fund Business

1,419

1,117

78.7%

1,305

864

66.2%

1,923

1,433

74.5%

Property Management Business

1,904

122

6.4%

2,249

137

6.1%

2,834

148

5.2%

Alternative Investment Business

336

278

82.7%

1,044

544

52.1%

1,786

592

33.1%

Eliminations or Corporate(250)(1,155)—(216)(1,661)—(206)(1,953)—

Total

24,741

5,901

23.9%

51,527

7,817

15.2%

54,078

9,210

17.0%

Note: Includes intersegment revenues.

➤ Framework and Advantages of the Tosei GroupThe Tosei Group enters the market by purchasing newly constructed and used condominiums, single-familydwellings and office buildings, land and real estate-backed non-performing loans, stocks of companies withreal estate holdings and other assets. It then restores value through “value-up” activities and fund structuring
and exits through sales to investors, corporations, end-users, J-REITs and others. The ability to make investment
decisions at the entry stage, to choose the most appropriate exit option at the time of property purchase, is
important because it translates into reliable purchasing that secures profit. “Value-up” engineering is one ofthe value drivers of the Tosei Group. Aiming for further growth, we will fully leverage this advantage in orderto double the scale of business.

6

ANNUAL REVIEW 2006

GROW STRATEGICALLY AS SEASONED PROFESSIONALSThe Tosei Group’s Business Organization and Strengths
Entry
Land

Single-Family Dwellings

Purchase Format
Principal Investor
Off-balance Sheet

Condominiums

Exit

Revitalization Business

Development

Purchase Method

Office Buildings

Sale and Purchase

Commercial Facilities

Auction Bid

Companies with
Real Estate Holdings

Individuals

Business Corporations
REITs

Development Business

Fund Structuring
Rental Business

Investment
M&A

Funds

(Tangible/Intangible)

Alternative Investment Business
Real Estate-Backed
NPL Funds

Legal Entities“Value Up”

End-Users

Equivalent Exchange

Fund Business

Investors(leasehold/proprietary rights)

Value Renovation“Value-up”
Engineering

GeneralConsumers
Business
Corporations

Property Management Business➤ Leveraging a Tosei Group Advantage: “Value-up” Engineering
To set the groundwork for fully leveraging “value-up” engineering, the Tosei Group aims to secure plentiful entry
options by strengthening property purchasing and stabilizing capital procurement.
To strengthen property purchasing, Tosei will increase purchasing flexibility and accuracy by expanding the scopeof use of the VIP Map System, an investment property information system. At the same time, we will expand andcultivate the current list of 200 companies and 500 players that form the core of our traditional purchasing network inorder to build a stronger, more cohesive purchasing information network.
To stabilize capital procurement, Tosei is working to reduce the average cost of capital procurement while
aggressively but stably using interest-bearing debt. Specifically, we are broadening the use of fixed interest rates andemploying commitment line contracts.
The ability to provide products that meet needs is also vital for raising the level of “value-up” engineering. In order toprovide distinctive, high-value-added products, Tosei restructured on December 1, 2006 to create an organization that
can accurately determine optimal use and investment efficiency for each property. Moreover, in addition to establishing
the Value-Up Laboratory in its head office to strengthen product planning, the Company installed a permanent model
residence. The Value-Up Laboratory serves as a venue for conveying “value-up” know-how and conducting research andproduct planning, while helping to strengthen understanding of needs through seminars and workshops.
Enhancing exit opportunities requires expanding off-balance sheet transactions in addition to on-balance sheetbusiness conducted on the Company’s own account. Because the real estate fund market in Japan shows more
growth potential than those in Europe and the United States, the Tosei Group plans to increase its asset balance bylisting a J-REIT in the year ended November 30, 2007 through an investment company it sponsors. Furthermore, theGroup plans to expand its business in areas that integrate real estate and finance by accelerating the growth of theasset balance of the fund business and the alternative investment business. Through these initiatives, Tosei is aiming
to achieve a fund asset balance of ¥165,800 million, including a J-REIT, as of November 30, 2008.

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ANNUAL REVIEW 2006

BUILD THE CORPORATE BRAND
The Tosei Group is committed to achieving social significance by building a corporate brand thatcombines “innovation and challenge” with “security and reliability.” To do this, the entire Group
from top management to employees will unite to promote initiatives such as inculcating thecorporate philosophy, enhancing corporate governance and expanding and training the workforce.

➤ Inculcating the Corporate Philosophy and Building the Brand Strategy
To build the corporate brand, in October 2006

THE TOSEI GROUP LOGO

the Tosei Group formulated a new corporate
philosophy that establishes a shared sense of purpose
and clarifies its common direction. At the same time,
the Company changed its name from Tosei Fudosan

symbolizes unlimited (∞) growth andopportunities

Co., Ltd. to Tosei Corporation and established a new

represents the integration of real estateand finance, and a global business scopelogo. Behind these changes is our aim is to maintainexpresses flexibility

scope of business to further increase corporate value

our core real estate operations while broadening theand strengthen the Tosei brand.

In the year ending November 30, 2007, Tosei believes it must embody its philosophy and brand strategy inits business activities. Accordingly, the Company plans to encourage employee participation in internal
research activities and attendance at external workshops. At the same time, the Tosei Group will disseminate
its expertise and research results by holding workshops and open seminars by lecturers invited from outside
the Company, using its Value-Up Laboratory as a communication space. As a measure to spread the Tosei
brand, the Group has formulated a corporate message, “Putting Heart into the City,” which evokes the appealof urban centers and Tosei’s aim to help build new ones that respect the spirit of city dwellers and theenvironment. Moving forward, we plan to conduct aggressive promotions that incorporate this message.

MEANING OF THE TOSEI CORPORATE MESSAGE“Putting Heart into the City”
As a company that participates in city-building,Tosei aims to increase the appeal of urban centersby bringing new value and inspiration to all aspectsof real estate. To build an appealing city does notmean tearing it all down and starting from scratch.
Rather, a flexible approach is needed that matches
the individuality of each property. To create newvalue and inspiration, we put our heart into
building the city. Hence our message: “Putting
Heart into the City.”

The renovated Value-Up Laboratory, which serves as a venue for conveying
Tosei Corporation’s commitment to quality and “value-up” expertise, openedon the ninth floor of the Company’s head office in January 2007.

8

ANNUAL REVIEW 2006

GROW STRATEGICALLY AS SEASONED PROFESSIONALS

Tosei is working to develop product planning and respond more precisely
to customer needs through initiatives such as adding a 100m2 model
residence to the Value-Up Laboratory.

The approximately 200 samples on display include flooring, tile and natural
marble and granite. The laboratory also functions as a venue for conveying
information through seminars and other activities.

➤ Expanding and Training the Workforce

Progress toward Workforce Target

Securing capable personnel and improving job skills are vital for doubling the scale ofbusiness, one of the goals of GROWING UP 2008. Human resources drive the Tosei Group’s
growth and development. As such, the Company plans to expand the organization by

250

200

■ Sales■ Administrative■ Affiliates

bolstering the workforce and further strengthening training of each employee.
In the fiscal year ended November 30, 2006, Tosei began recruiting university
graduates every year, rather than every other year as in the past. Looking forward, the

211
180

134

150

107
100

Company will enhance aggressive use of the media and further expand the number of50

new graduates and mid-career professionals it hires.
In the area of training, the Tosei Group will clearly define its personnel needs,

0

2005

2006

2007

2008

develop curriculums for each level and expand hierarchical training. As well as
introducing a self-development support program, the Group will work to enhance theemployee benefit system.
Through these initiatives, the Tosei Group plans to increase its workforce from 134
on November 30, 2006 to 211 as of November 30, 2008.

➤ Upgrading Corporate Governance and Internal Control Systems
The Tosei Group is aware that building and spreading the corporate brand must be
done with full disclosure of its position to its stakeholders in all of its business activities.
We have positioned enhancing corporate governance and implementing an internal

Tosei is working to promote better portfolio
management skills while improving
employee satisfaction.

control system as our most important tasks in establishing the corporate brand.
To increase management transparency, our policy will be to enhance the activities and power of the
Corporate Governance Meeting, consisting of directors and full-time corporate auditors, in order to actively
comply with the J-SOX Act (the Japanese version of the Sarbanes-Oxley Act). In particular, we consider it
essential and will place primary focus on enhancing our committee system and developing original in-houseinitiatives to instill awareness of compliance, strengthen risk management and practice timely disclosure.

9

ANNUAL REVIEW 2006

REVIEW OF OPERATIONSBusiness Segment

Percentage of Revenues

Revitalization Business

Description of Activities➜ Conducts “value-up” activities to increase asset value of
properties matched to local characteristics and needs and sells
them as revitalized real estate

63.3%➜ Specializes in small and medium-sized properties, primarily in
inner Tokyo➜ Uses planning and design capabilities of its first-classarchitectural office to offer superior revitalization activities
rooted in quality

Development Business➜ Formulates development plans for purchased land, develops
and sells office buildings, commercial facilities and residential
dwellings for investors, end-users and others

15.5%➜ Develops business largely in the 23 wards of Tokyo, with apriority on convenience➜ Offers “THE Palms Series” condominiums and “Palms Court
Series” single-family dwellings

Rental Business➜ Positioned as a steady source of income in the Tosei Group’s
growth strategy

7.4%

Fund Business➜ As a lessor, further enhances revitalization plans by quickly
and accurately gathering information on tenant needs➜ Receives acquisition, asset management, disposition andincentive fees for managing real estate funds

5.7%

Property Management Business➜ Increases the value of properties purchased by funds andmanages their assets➜ Positioned as an additional stable source of income➜ Conducted by Tosei Community Co., Ltd., which was made asubsidiary in April 2005

6.8%

Alternative Investment Business➜ Provides comprehensive property management, including
security and contracting for renovation and repair, forcondominiums, office buildings and other properties➜ Conducted by Tosei Revival Investment Co., Ltd., a wholly
owned subsidiary established in March 2005

1.4%

➜ Invests in real estate-backed NPL funds and companies withreal estate holdings, structures funds for those investments,and offers advisory and asset management services for each

Note: Excludes intersegment revenues.

10 ANNUAL REVIEW 2006

Revitalization Business

Revenues/Operating Income Ratio(¥ million/%)17,50015,65014,00035➤ The Tosei Group’s restorationplans achieve comprehensive
improvement of real estatevalue, not mere renewal

28
10,40010,500

25.8
21

21.4

7,000

14

3,500

7

0

2005

■ Revenues●(Left scale)

2006

0

Operating Income Ratio(Right scale)➤ Active market due to new
J-REIT listings and aggressive
property purchasing byprivate funds➤ High margins on properties
sold for owner use due totight market for office space
Ebisu Building, Shibuya Ward

Results for the Fiscal Year Ended November 30, 2006

comprised 25 percent of all properties sold, yielded high margins (31.2

The revitalization business entails temporarily acquiring real estate

percent gross profit), reflecting demand for properties for head offices

holdings whose asset value has declined, formulating restoration plansthat match local characteristics and needs, and reselling those properties
mainly to investors once those plans have been implemented. It is thecore business of the Tosei Group, accounting for more than 60 percent
of revenues.

and other owner use caused by the tight market for office space.

Current Initiatives
A variety of projects are underway, including the Ginza Wall
Building, which Tosei is scheduled to acquire as part of the turnaround

Value restoration plans include physical and intangible aspects suchassistance for Tokyo Onsen Co., Ltd., restoration of a photo studio in

as profitability and design improvements that increase the satisfaction of

Takaido, and the provision of consulting services for an office building

owners and end-users. Tosei implements restoration plans that focus ondevelopment in Higashi-Ueno.

cost performance, based on consideration from many perspectives. The

The revitalization business will continue working to increase the value

most distinctive feature of the Tosei Group’s restoration plans is thatof real estate from the point of view of the end-user by creating unique,they achieve comprehensive improvement of real estate value, notdistinctive restored properties with even higher quality.

merely renewal.
Physical restoration plans feature a flexible approach to properties
that takes their inherent diversity into account. This ensures that themost appropriate plan is adopted, enabling Tosei to transform properties

BeforeAfterinto appealing products.
Intangible restoration plans maximize property performance by leasing
vacant space and implementing comprehensive management. The Groupalso provides solutions to restore buildings on leasehold and otherproperties with complicated rights arrangements, a large number ofwhich still exist in inner-city areas, and create real estate with new value.
The real estate trading market remains brisk with not only private
funds but investment corporations aggressively purchasing properties in
conjunction with new J-REIT listings.
Working aggressively in this environment, the revitalization businesssold 27 properties in the 23 wards of Tokyo during the fiscal year ended
November 30, 2006, primarily in the 5 inner-city wards. This included 11
office and commercial buildings, 7 vacant office buildings, 4condominium complexes and 5 others. Vacant office buildings, which

Originally constructed in 1981, Palms Gotanda in Shinagawa Ward wasrestored to newly built condition through complete renovation of allcommon areas, including facades, entrance and exterior.

11 ANNUAL REVIEW 2006

Development Business

Revenues/Operating Income Ratio(¥ million/%)
5,000

20

4,467
3,843

4,000

13.4

16

12.3
3,000

12

2,000

8

1,000

4

0

2005

■ Revenues●(Left scale)2006➤ Develops highly convenientand comfortable properties
primarily in the inner-city and23 wards of Tokyo➤ Favorable sales of properties
to both investors and end-users➤ Will continue to actively
develop office andcommercial buildings0

Operating Income Ratio(Right scale)

Toranomon Tosei Building, Minato Ward

Results for the Fiscal Year Ended November 30, 2006

included 26 single family dwellings of THE Premium Court Ota Chuo,

This business develops “THE Palms Series” condominiums, “Palms

the largest subdivision developed in Ota Ward since 1983 (source: RealCourt Series” single-family dwellings, rental condominium complexes,

Estate Economic Institute Co., Ltd.), in addition to the 17 already sold.

office buildings and commercial facilities. In addition to having a first-

Other sales included 16 of the 25 units offered for sale at THE Palms

class architectural office in house, Tosei Corporation provides customers

Yoga designer’s condominium complex in Nakamachi, Setagaya Ward.

with maximum value and inspiration by enforcing a commitment toquality construction with the Palms Quality Check (PQC) System, theCompany’s own original quality standard.
Realizing that the first and foremost need of recent condominium

Current Initiatives
The development business plans to sell a total of five properties
during the fiscal year ending November 30, 2007. Those scheduled forpurchasers is convenience, the development business limits its selection

sale to end-users include THE Palms Setagaya Sakura, a 108-unitof land for condominium development to inner-city Tokyo and works toenvironment-conscious condominium complex in Sakura, Setagaya

develop high-value-added products that combine convenience andWard and the 35-unit THE Palms Honkomagome in Honkomagome,

comfort while providing a refined, high-quality living environment by

Bunkyo Ward. Properties slated for sale to investors include the 30-unit

incorporating natural materials throughout. For single-family dwellings,

THE Palms Denenchofu. Construction of the 6-story Kanda-

by maintaining the independence of detached homes while offering

Higashimatsushitacho Building Project has been completed, and work isdiverse plans to suit particular locations, the business works to develop

proceeding smoothly on the 9-story Kanda-Ogawamachi 3-chome

products with a primary focus on occupant lifestyle. In addition, theBuilding Project. The Company will continue to aggressively develop

Tosei Group has begun developing rental condominium complexes,

office and commercial buildings such as a commercial building project

office buildings and commercial facilities for sale to real estate funds

currently underway in the vicinity of Kichijoji Station.

and investment companies in order to meet their needs during therecent fund-driven boom in property purchasing.
In 2006, the closing rate for the first month of listing was strong in
the metropolitan Tokyo condominium market. Housing starts were also
at a high level. Anticipating rising prices, however, developers
increasingly opted to slow the pace of sales. As a result, annual sales fell
short of 80,000 units for the first time in 8 years.
In this environment, the Company sold the Shinjuku 4-chome
Building, its first commercial facility development project, to anindividual investor after securing a good tenant by capitalizing on theproperty’s excellent location one minute on foot from the south exit of
Shinjuku Station. It also sold the 36-unit THE Palms Toritsu Daigaku
rental condominium complex to a real estate fund. End-user sales

Tosei develops a broad range of properties,
from single-family dwellings andcondominiums to office and commercial
buildings. (Left: THE Palms Yoga, Setagaya
Ward; Right: The Shinjuku Shogyo Building,
Shinjuku Ward)

12 ANNUAL REVIEW 2006

Rental Business

Revenues/Operating Income Ratio(¥ million/%)
2,000

1,839

75

➤ Positioned as a steady sourceof income in the Group’s
long-term strategy

Fund Business

Revenues/Operating Income Ratio(¥ million/%)
1,500

1,600

60
56.5

53.6

1,200

45

800

30

400

15

0

2005

■ Revenues●(Left scale)

2006

0

Operating Income Ratio(Right scale)➤ Doubled holdings of current
assets with expansion of therevitalization business➤ Rent from subleases at the
Ginza Wall Building, scheduled
for acquisition in March 2007,
contributed to earnings
Note: Revenues for the fiscal year ended November 30, 2006
include ¥2 million from intersegment transactions.

Results for the Fiscal Year Ended November 30, 2006
This business rents its office buildings, condominiums and other

1,419

100

78.7

80

84.2

1,645
1,200

900

60

600

40
349

300

20

0

2005

■ Revenues●(Left scale)

2006

0

Operating Income Ratio(Right scale)➤ High growth rate since its startin 2003, backed by Tosei’s
original “value-up” capabilities➤ Brokerage fees from sales offund properties contributed
significantly to results➤ Revised fund asset balancetarget for the year ending
November 30, 2008 from¥130,000 million to ¥165,800
million due to steady increasein asset balance
Note: Revenues for the fiscal year ended November 30, 2006
include ¥14 million from intersegment transactions.

Results for the Fiscal Year Ended November 30, 2006
The fund business manages funds mainly by soliciting third-party

holdings, mainly in the 23 wards of Tokyo, to end-users. It provides

capital for Tokumei Kumiai (private equity) investments and purchasing

high-quality space using a half-century of experience, purchasing highly

revenue-producing properties. Tosei restores the physical and intangible

profitable small and medium-sized properties with a discerning eye

value of properties purchased by funds and receives acquisition, asset

cultivated through investment in office buildings. As a result, themanagement, disposition and incentive fees for managing their assets.

business is able to maintain higher occupancy rates than neighboring
properties, providing a stable stream of rental income revenues.
The average vacancy rate of rental office buildings in Tokyo’s five

As of November 30, 2006, the asset balance of the Tosei Group’s
fund business was ¥41,251 million. Including property holdings ofconsolidated subsidiary Pegasus Capital, Ltd., which was sold to a

inner-city wards is dropping and the trend toward higher rents for large

private fund in December 2006, the actual total was ¥48,063 million.

office buildings continued, reflecting a lessor’s market. In this environment,

Due to significant contribution from brokerage fees from sales of fundrental income from 57 properties included 36 current asset properties (anproperties, segment revenues rose 307.8 percent compared with theincrease of 8 properties from the previous fiscal year) and 21 quality fixed

previous fiscal year.

asset properties being held as a steady source of income (an increase of 3
properties). Additional rental income came from subleases at the Ginza
Wall Building, which Tosei is scheduled to acquire in March 2007.

Current Initiatives
The Tosei Group will work toward full-scale development of thefund business by revising the fund asset balance target for the fiscal year

Current Initiatives
Tosei continues to develop the rental business as a steady source ofending November 30, 2008 and through the listing of a J-REIT by Tosei’s
wholly owned subsidiary Tosei REIT Advisors, Inc.

income while giving due consideration to the balance of fixed andcurrent assets.
■ Revision of Fund Asset Balance Targets

Ginza Wall Building, Chuo WardFY ended
Nov. 30, 2006

FY endingNov. 30, 2007
(Target)FY endingNov. 30, 2008
(Target)Initial plan

¥41,300 million¥85,000 million¥130,000 million

Revised plan

¥48,063 million(Actual)¥115,800 million(¥39,800 million)¥165,800 million(¥59,800 million)

Figures in ( ) are balance of assets under management in a J-REIT included
in revised plan totals.

13 ANNUAL REVIEW 2006

Property Management Business

Revenues/Operating Income Ratio(¥ million/%)
1,904

2,000

1,600

8
1,320

1,200

10

6.4
6

4.8

800

4

400

2

0

2005

■ Revenues●(Left scale)

2006

0

Operating Income Ratio(Right scale)

Alternative Investment Business➤ Provides comprehensive property
management services for officebuildings, condominiums andother properties

Revenues/Operating Income Ratio(¥ million/%)400➤ Over 80 percent of management
contracts are for non-Group holdings➤ Implementing management
reforms under the medium-term
management plan
Notes: 1. 2005 figures are the sum of the first-half results ofTosei Community Co., Ltd. and the second-half resultsof the property management business. Actual results ofthe property management business were: Revenues¥658 million, Operating income ¥40 million
2. Revenues for the fiscal years ended November 30,
2005 and 2006 include ¥95 million and ¥233 million,
respectively, from intersegment transactions.

Results for the Fiscal Year Ended November 30, 2006

100
89.5

336
82.7

320
220

240

80

60

160

40

80

20

0

2005

■ Revenues●(Left scale)

2006

0

Operating Income Ratio(Right scale)➤ Offers diversified entry
options in real estatepurchasing➤ Fee income from closings ofreal estate-backed
non-performing loan (NPL)
funds and dividends
contributed significantly
to results➤ Aims to expand turnaroundbusiness beyond real estate

Results for the Fiscal Year Ended November 30, 2006

Wholly owned subsidiary Tosei Community Co., Ltd. provides

Handled by wholly owned subsidiary Tosei Revival Investment Co.,

comprehensive property management services, including security andLtd., the alternative investment business invests in real estate-backed NPL

contracting for renovation and repair, for condominiums, office buildings

funds and companies with real estate holdings, structures funds forand other properties. As a partner to building owners, the Tosei Group

those investments, conducts mergers and acquisitions mainly associatedworks from their perspective to provide services that maximize cash flow

with real estate, and offers advisory and asset management services in all

and raise asset value.

these areas.

Although property purchasing by private funds and J-REITs is

Significantly undervalued properties are hard to find since majorpressuring profits, the property management market in the 23 wards offinancial institutions have disposed of their non-performing loans. However,Tokyo is large. Differentiation is progressing through corporate efforts in

the M&A and real estate-backed non-performing loan market is still brisk.

areas such as providing efficient operations and services, developing

The shift of the price of debt to an upward trend has made it important totechnical capabilities, diversifying into related areas and strengthening

possess expertise in adding value.

property management capabilities.
Tosei’s efforts to acquire new management contracts, including one

In this operating environment, segment revenues increased 52.7
percent over the previous fiscal year with significant contributions fromfor a large-scale educational facility, increased the number of properties

asset management fees and incentive fees in conjunction with closings inmanaged by 40 during the fiscal year to 419. This includes 128

the Orpheus Capital real estate-backed NPL fund, as well as dividends fromcondominium complexes and 291 office buildings, over 80 percent ofTokumei Kumiai (private equity) investments.

which are non-Group holdings.

Current Initiatives
Current Initiatives
Reforms to establish a new management system, as per the mediumterm management plan, will include creating a framework for handling a

The alternative investment business’s strategy is to conduct M&As
primarily to acquire real estate holdings. Looking ahead, it is working tobroaden the scope of its activities to include corporate turnarounds.

large supply volume and improving the quality of services to increasecustomer satisfaction.

■ Alternative Investment Business Flow
Financial
institution

Debt
transfer

Special-purpose
company

TurnaroundTosei Revival Investment Co., Ltd.
Activities• Fund structuring and management• Restoring value of real estate holdings• Debtor-in-possession (DIP) financing• Refinancing
and others

14 ANNUAL REVIEW 2006

Revenue Breakdown• NPL management charges• Acquisition fees
• Incentive fees
• Revenues from collection of debt
• Income on sale of debt

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Tosei Group’s mission is to create new value and inspiration in all aspects of real estate as a
global-minded group of seasoned professionals. Based on this, it actively works to fulfill its
corporate social responsibilities with a fundamental awareness that the most important duty is tocontribute to society directly through the operations of each Group company.
Rooftop Greening Initiative
The Tosei Group is fundamentally aware that its most important

additional 10 properties are currently underway for the period fromduty is to contribute to society directly through the operations of each

October 2006 to February 2007. Tosei’s general policy is to continue

Group company. Accordingly, it intends to implement practicalrooftop greening in the future for all the properties it handles, whether

measures for each project and property as part of its CSR efforts. As abuildings are newly constructed or existing.
To date, the Company has worked to implement various

first step, the Group promotes rooftop greening as a general rule for allproperties it constructs, revitalizes or holds.
Rooftop greening refers to the planting of trees, flowers and otherenvironment-conscious plans, including aerial gardens and sky gardens
for new condominium developments. THE Palms Setagaya Sakura, anfoliage on building rooftops.

environment-conscious condominium complex, is currently underIt helps lessen the heat island

construction. By designing the exterior of the complex to blend with theeffect and is effective insurroundings, and proactively planting foliage throughout the site andcleansing the atmospherealong roadways, Tosei is working to maintain the ecosystem and reduceand saving energy.

energy loss. In the event of natural disasters, the property is also

Furthermore, its significant

equipped with emergency toilets and a storeroom containing an

psychological benefits forelectrical generator, food and drinking water to provide occupants withoccupants include improved

peace of mind.

scenery and a relaxing effect.

The Toranomon Tosei Building, which functions as Tosei’s head

The first stage began inoffice and is the Company’s first office building development, wasJune 2006 with the rooftop

designed with various environment- and energy-conscious features ingreening of nine of theaddition to rooftop greenery, including insulated glass, which raises

Company’s fixed asset

heating and cooling efficiency.

properties, which wasUnder its slogan of “Putting Heart into the City,” the Tosei Group

completed by August.

will work to evoke the appeal of urban centers with the aim of building

Greening projects for an

Takanawa Tosei Building, Minato Ward

new ones that respect the human spirit and the environment.

Intellectual Property Strategy➤ The Palms Quality Check (PQC) System
In conjunction with acquiring ISO 9001 (quality management system) certification in
2004, Tosei’s Architect Planning Department introduced the PQC System, an original
14-point quality standard for construction based on the ISO quality manual.
In addition to on-site inspections of the main steps in the construction process,such as building placement, foundation reinforcing bars, upper floor reinforcing bars
and concrete work, the PQC System features a checklist based on its 14-point quality
standard that is used by the Company’s first-class architectural office to verify theinspection reports of the construction foreman at each step.
The PQC System does more than ensure rigorous quality control – it offers
customers total peace of mind by providing photos and other materials showing thelocation of reinforcing bars and other construction processes that are difficult toconfirm once a condominium complex is complete.

15 ANNUAL REVIEW 2006

ENHANCING CORPORATE GOVERNANCE(As of January 12, 2007)

Fundamental Position on Corporate Governance
The Tosei Group considers it an important management issue toearn the trust of its shareholders, employees, customers, business
partners and all other stakeholders by responding promptly andaccurately to changes in the operating environment and maintaining
sound business activities that achieve growth. Accordingly, its
fundamental position on corporate governance is to focus quickly on
identifying and formulating preventative measures for a variety ofoperating risks, proactively and appropriately disclosing information
beyond legal requirements, and promoting enhancement of internal
oversight and highly transparent management, and to build and operate
the necessary organizational framework and associated systems tofacilitate these activities.

Corporate Governance Measures➤ Board of Directors
Consisting of four directors, the Board of Directors of Tosei is the
topmost management decision-making body. In accordance with Boardof Directors regulations, it convenes once a month and on an as-neededbasis to decide management policies and other important matters, andsupervises the execution of directors’ duties.

➤ Corporate Auditors
Tosei has adopted a corporate auditor system. The Board ofAuditors, consisting of two full-time and two part-time corporate
auditors, meets once a month, as a general rule. All corporate
auditors are from outside the Company to ensure highly objective
and effective auditing.

➤ Executive Officer System
Tosei has introduced an executive officer system under which six
executive officers appointed by the Board of Directors executebusiness tasks delegated by the President,
who concurrently holds the positions ofRepresentative Director and Chief Executive
Officer, in accordance with Board decisions.
The President convenes a Management
Meeting twice a month, as a general rule, toOutsideobtain advice in advance of making
professionals
important decisions.

also sought from outside professionals such as lawyers and certified
public accountants.
As subsidiary organizations of the Corporate Governance Meeting,Tosei has established a Compliance Committee, which is focused onenhancing Group awareness of compliance, and a Risk Management
Committee, which studies countermeasures for risks throughout theGroup. Each committee discusses and considers how to resolve mattersidentified by its members, not only in terms of legal compliance, butfrom the perspective of corporate ethics and social contribution as well.

➤ Internal Audits
The Internal Audit Department, under the direct supervision of the
President, conducts Group-wide audits based on fiscal year plans, andmakes recommendations for improvement to divisions where
inadequacies have been found. It implements highly effective audits byenhancing follow-up, such as discussing matters requiring corrections
with concerned divisions and giving specific guidance.

➤ Information Disclosure
In addition to preparing documents required pursuant to theCompany Law, the Securities and Exchange Law and other laws andreleasing information required pursuant to stock exchange regulations,
Tosei Corporation discloses corporate information to shareholders,investors and other stakeholders in a timely and appropriate manner
through IR activities, its website and other media.

➤ Accounting Audits
Pursuant to the Company Law and the Securities and Exchange
Law, the independent auditing firm Ernst & Young ShinNihon conducts
audits of Tosei’s accounts under contract in accordance with an annual
audit plan. In addition to audits at the end of the fiscal year and theinterim period, Ernst & Young ShinNihon performs reviews at the end of
the first and third quarters.

Shareholders’ Meeting

Board of Auditors

Independent auditor

4 corporate auditors(all from outside thecompany)

Board of Directors
4 directors(all from inside thecompany)

President and CEO➤ Corporate Governance Meetings
Corporate Governance Meetings are held
twice a month, as a general rule, to ensureongoing enhancement of corporate
governance. Attended by the four directors
and two full-time corporate auditors, thesemeetings serve as a venue for identifying anddiscussing important matters related togovernance and internal control that affectcorporate value. When necessary, advice is

Corporate Governance Meeting

6 executive officers(execution of businesstasks)

4 directors
2 full-time corporate auditors

Information
Disclosure
Committee

Risk
Management
Committee

Compliance
Committee

Management Meeting
6 executive officers(attended by corporate
officers)

All divisions and Group companies

16 ANNUAL REVIEW 2006

Internal Audit
Department

Management Team
President and CEO

Seiichiro Yamaguchi
Director and COO

Katsuhito Kosuge
Director and CFO;Manager of General Administration Department

Noboru Hirano
Director and Executive Officer of Asset Solution
Department 1, Asset Solution Department 2, Asset
Solution Department 3, Asset Solution Department
4 and Asset Solution Promotion Department;
Manager of Asset Solution Promotion Department

Syunichiro Naito
Corporate Auditors

Yasuhiro Honda (full-time)
Kimio Harada (full-time)
Shigeru Yamagishi (part-time)
Eiji Sakamoto (part-time)
Executive Officer of Architect Planning Department

Minoru Inatsuka
Officer and Manager of Corporate
Planning Department

Ryohei Yasuda(From left) Ryohei Yasuda, Noboru Hirano, Seiichiro Yamaguchi, Katsuhito Kosuge, Syunichiro Naito, Minoru Inatsuka➤ Fundamental Position on Internal Control Systems
At a meeting of the Board of Directors held on May 25, 2006, Tosei
Corporation adopted its “Fundamental Position on Internal Control
Systems.” The salient points are as follows.
(1) With regard to a “framework for ensuring that directors perform their duties
in accordance with relevant laws and the articles of incorporation,” Tosei will
work to enhance directors’ awareness through the Group Compliance Standards
and the Corporate Governance Meeting. At the same time, directors willsupervise each other’s performance and regularly receive advice from outside
professionals.
(2) With regard to a “framework for storage and management of information
pertaining to the directors’ performance of duties,” Tosei will store information
appropriately, reliably and in a readily searchable format to maintain accessibility,
based on internal regulations.
(3) With regard to a “framework for regulations pertaining to the managementof risk of loss,” Tosei has enacted Risk Management Standards to clarify the risk
management structure by specifying responsible divisions for each risk category,
and will regularly check the status of risk management through internal audits.
In the event that a risk materializes, Tosei will coordinate with an external
advisory team to quickly put together a framework that limits the spread ofdamage.
(4) With regard to a “framework for ensuring that directors perform their duties
efficiently,” Tosei will work to achieve efficiency by clarifying business targets foreach director pursuant to the medium-term management plan. The Board of
Directors shall make important Company decisions at its regularly scheduled or
extraordinary meetings; however, executive officers appointed by the Board of
Directors shall make swift decisions on the performance of certain duties inaccordance with Company regulations.
(5) With regard to a “framework for ensuring that employees perform theirduties in accordance with relevant laws and the articles of incorporation,” Tosei(As of November 30, 2006)

will work to instill employee awareness of compliance by formulating acompliance manual and conducting compliance training while using the internalreporting system to enhance the framework for quickly identifying problems.
(6) With regard to a “framework for ensuring that the corporate group
comprising the Company and its subsidiaries engages in fair business practices,”
Tosei will apply its standards to its subsidiaries, including the use of internalreporting desks and attendance at various meetings, and will offer guidance andadvice based on internal audits performed by the Company’s Internal Audit
Department and management surveys performed by the Company’s Office ofCorporate Planning.
(7) With regard to a “framework pertaining to employees whose assistance has
been requested by the corporate auditors,” Tosei will swiftly establish aframework in response to such requests and assign the necessary personnel.
(8) With regard to “matters pertaining to the independence from directors of
employees noted in 7, above,” Tosei shall obtain the consent of the Board ofAuditors before transferring, evaluating, rewarding or punishing such
employees.
(9) With regard to a “framework for reports by directors and employees to theBoard of Auditors” and a “framework for other reports to the Board ofAuditors,” serious losses, breaches of law, improprieties and other reportableacts that occur or threaten to occur shall be promptly reported to the corporate
auditors as well as at meetings attended by the corporate auditors. In addition,
matters submitted via the internal reporting desk shall be promptly conveyed tothe corporate auditors.
(10) With regard to a “framework for ensuring that the Board of Auditors
conducts audits effectively,” Tosei will assist the corporate auditors in
implementing fiscal year audit plans set by the Board of Auditors and will
regularly explain the financial status of the Company and the entire Group. At
the same time, Tosei will proactively implement improvements based on mattersraised by corporate auditors.

17 ANNUAL REVIEW 2006

MANAGEMENT’S DISCUSSION AND ANALYSIS OFOPERATIONS AND FINANCES

Income and Expenses➤ Revenues
The cycle of economic recovery continued as capital investment
increased, employee wages gradually improved and consumer spendingrose amid higher corporate profit levels among domestic corporations.
In the real estate industry, where the Tosei Group operates, factors driving
land prices upward included firm demand for office space and the flow ofinvestment capital into the real estate market. The national averageassessed value of roadside land announced on August 1, 2006 rose forthe first time in 14 years, as the land price recovery trend in large urban
centers began spreading to outlying areas.
Given this environment, during the year ended November 30, 2006,
the Tosei Group focused its collective efforts on steadily implementing
GROWING UP 2008 in its initial year. The objectives of this medium-term
management plan are to increase corporate value by doubling the scale ofbusiness and building the corporate brand. As a result of these efforts,
revenues totaled ¥24,741 million, an increase of 40.2 percent comparedwith the previous fiscal year.

➤ Cost of Revenues, Selling, General and Administrative(SGA) Expenses and Operating Income
In tandem with the increase in revenues, cost of revenues increased
29.7 percent compared with the previous fiscal year to ¥16,584 million.
Gross profit rose 68.0 percent to ¥8,157 million, due in part to higher
selling prices in a strong overall real estate market and the Group’semphasis on improving profit margins. However, selling, general andadministrative (SGA) expenses were ¥2,256 million, an increase of 70.9
percent, owing to aggressive expansion of the workforce for further
growth, which resulted in personnel expenses of ¥1,298 million, an
increase of 63.8 percent, as well as ¥64 million in expenses fromestablishing the new Company name, moving the head office andother factors.
As a result, operating income totaled ¥5,901 million, an increase of
66.9 percent, and the operating margin was 23.9 percent, an increase of
3.9 percentage points.

➤ Segment Information
Revitalization Business
Against the backdrop of a brisk real estate market, the Tosei Groupmade strong progress in aggressively developing the revitalization businessthrough original “value-up” activities that increase the value of real estate.
The Group sold 27 properties during the year ended November 30, 2006.
As a result, segment revenues totaled ¥15,650 million, an increase of 50.5
percent compared with the previous fiscal year. Segment operating income
was ¥4,040 million, an increase of 81.8 percent, due to a number of highmargin properties that improved profitability.

Development BusinessIn the year ended November 30, 2006, the Tosei Group added new
office and commercial buildings to its lineup, and sold two properties toinvestors and two to end-users. However, because the Group smoothly
achieved its fiscal year targets due to favorable gross profit margins in
the revitalization business and other segments, it has delayed selling theToranomon Tosei Building and several other development properties
until the next fiscal year or later. As a result, segment revenues totaled¥3,843 million, a decrease of 14.0 percent compared with the previous
fiscal year, and segment operating income was ¥514 million, a decreaseof 6.2 percent.

Rental Business
The occupancy rate improved at rental properties owned by the Tosei
Group. In addition, inventory of rental properties for use in therevitalization business increased. As a result, rental properties totaled 57,
segment revenues were ¥1,839 million, an increase of 11.8 percent
compared with the previous fiscal year, and segment operating income
was ¥985 million, an increase of 6.0 percent.

Fund Business
Increased acquisitions of new properties resulted in expansion of assets
under management. Acquisition fees and asset management fees also
increased. In addition, incentive fees generated by strong asset
management results and brokerage fees on sales of fund properties
contributed significantly to results. As a result, segment revenues totaled¥1,419 million, an increase of 306.6 percent compared with the previous

Segment Revenues and Operating Income(Millions of yen)

2006

2005

Revenues

Operating Income

Revenues

Operating Income

Revitalization Business

15,6504,040

10,4002,222Development Business

3,843

514

4,467

548

Rental Business

1,839

985

1,645

929

Fund Business

1,419

1,117

349

295

Property Management Business

1,904

122

658

40

Alternative Investment Business

336

278

220

197

Eliminations and Corporate(250)(1,155)

(96)

(695)

24,741

5,901

17,644

3,536

Total

Note: Revenue figures include intersegment transactions and total allocated operating expenses have not been deducted from operating income figures.

18 ANNUAL REVIEW 2006

fiscal year, and segment operating income was ¥1,117 million, an increaseof 278.6 percent. The balance of assets under management totaled¥41,251 million as of November 30, 2006, an increase of 103.8 percent
compared with ¥20,244 million a year earlier. Including properties being
held by consolidated subsidiary Pegasus Capital, Ltd. for incorporation in afund in December 2007, the actual balance of assets under management
was ¥48,063 million.

Property Management Business
The number of managed properties was 419, an increase of 10.6
percent, or 40 properties, compared with the previous fiscal year, as theTosei Group worked to acquire new contracts, including one for a
condominium complex, in order to offset contract cancellations causedby changes in office building ownership. As a result, segment revenues
were ¥1,904 million, an increase of 189.4 percent, and segment
operating income was ¥122 million, an increase of 205.0 percent. The
property management business was included in the scope of
consolidation from May 1, 2005. Accordingly, segment revenue andincome figures for the previous fiscal year are for the six-month period
ended November 30, 2005.

Alternative Investment Business
Segment revenues were ¥336 million, an increase of 52.7 percent
compared with the previous fiscal year, and operating income was ¥278
million, an increase of 41.1 percent, due to an increase in fees received
from the closing of third-party real estate-backed non-performing loan
funds managed by Tosei Corporation and dividend income from Tokumei
Kumiai (private equity) investments.

➤ Other Income (Expenses) and Income before
Income Taxes
Other expenses, net totaled ¥604 million, the major component of
which was interest expense totaling ¥595 million. Other income included
a refund of earnest money at cancellation totaling ¥100 million.
As a result of the above, income before income taxes was ¥5,297
million, an increase of 77.6 percent compared with the previous fiscal
year. The ratio of income before income taxes to revenues was 21.4
percent. Income before income taxes per employee as of November 30,
2006 was ¥39.5 million.

consolidated net income. Accordingly, cash dividends per share for the
fiscal year ended November 30, 2006 totaled ¥1,400, up from ¥450 per
share for the previous fiscal year.

Liquidity and Financial Position➤ Revenues
The Tosei Group aims to secure sufficient capital for its businessactivities, maintain liquidity and achieve a sound financial position. In
particular, because the revitalization, development and alternative
investment businesses require large amounts of capital for real estate,real-estate-backed NPL and other purchases, the Group must use interestbearing debt aggressively but stably, and endeavors to obtain timely
financing by shifting to fixed interest rates, using commitment contracts
and other means that meet particular capital needs. The Group has loan
commitment contracts with financial institutions totaling ¥8,750 million,
but did not use them to secure any loans during the fiscal year ended
November 30, 2006.

➤ Cash Flow
Cash Flow Summary(Millions of yen)
Fiscal Year ended
November 30, 2006

Fiscal Year ended
November 30, 2005

Cash flow fromoperating activities(10,857)(8,839)Cash flow frominvesting activities

472

(607)

Cash flow fromfinancing activities

14,3399,361

Net increase (decrease) incash and cash equivalents

3,954

(85)

Cash Flow from Operating Activities
Net cash used in operating activities was ¥10,857 million, comparedwith ¥8,839 million in the previous fiscal year, primarily due to a ¥14,981
million increase in inventories resulting from the acquisition of new
properties by the revitalization and development businesses, which offset
income before income taxes of ¥5,297 million.

➤ Net Income

Cash Flow from Investing Activities

As a result of the above, net income for the year ended November 30,
2006 was ¥2,737 million, an increase of 71.8 percent. Net income pershare was ¥7,412.80.

Net cash provided by investing activities was ¥472 million, comparedwith ¥607 million used in the previous fiscal year, primarily due to thecollection of investments in securities by the Alternative Investment
Business and real estate funds totaling ¥712 million. Tosei did not generate
free cash flow during the fiscal year ended November 30, 2006. The sumof net cash used in operating activities and net cash provided by investing
activities was net cash of ¥10,385 million used compared with net cash of¥9,446 million used in the previous fiscal year.

Shareholder Returns Policy
Stable dividends are a key management priority for Tosei
Corporation. The Company’s fundamental policy is to comprehensively
consider operating results, the future operating environment andprogress in its business plan in balancing distributions of earnings andthe need for internal capital resources to generate long-term growth incorporate value by taking advantage of highly profitable business
opportunities. The target payout ratio for the medium-term management
plan, which began on December 1, 2005, is 20 percent of non-Cash Flow from Financing Activities
Net cash provided by financing activities was ¥14,339 million,
compared with ¥9,361 million in the previous fiscal year, primarily due toproceeds from a new stock issue overseas totaling ¥4,329 million andfrom increased borrowings to acquire new properties including ¥25,482

19 ANNUAL REVIEW 2006

million in proceeds from long-term debt, while the Company’s
repayment of debt in conjunction with the sale of properties included¥11,645 million in repayments of long-term debt and a net decrease in
short-term borrowings.

1. Business Environment

As a result of the above, cash and cash equivalents as of November
30, 2006 were ¥6,485 million, a net increase of ¥3,954 million from the
beginning of the fiscal year.

purchase properties on their own account, and typically take six months➤ Financial Position

such as trends in land prices, interest rates and fiscal policy, may occur,(a) Revitalization Business and Development Business(i) Effects of Real Estate Market Conditions
The Tosei Group’s core revitalization and development businesses
to two years until they sell the properties after increasing their value ordeveloping them. During that time, changes in the general economy,

Assetsand any resulting deterioration of conditions in the real estate market

Total assets as of November 30, 2006 were ¥60,136 million, an
increase of 48.8 percent from a year earlier, and return on average total
assets (ROA) was 5.4 percent, an increase of 1.5 percentage points.
Current assets totaled ¥51,384 million, an increase of 57.8 percent
compared with the end of the previous fiscal year. The principal
components of current assets were ¥6,644 million in cash, an increase of
148.7 percent, as well as ¥20,778 million in real estate for sale, an increaseof 64.8 percent, and ¥19,263 million in real estate for sale in progress, anincrease of 37.8 percent, both due to acquisition of properties throughexpansion of the revitalization business and other businesses.
Property and equipment totaled ¥8,091 million, an increase of 21.4
percent from the end of the previous fiscal year due to the addition of twobuildings transferred from current assets. Investments and other assets
totaled ¥661 million, a decrease of 43.7 percent.

could have an impact on the Tosei Group’s operating results andLiabilities
Current liabilities totaled ¥18,631 million, an increase of 24.7 percent
compared with the previous fiscal year. Long-term debt due within one
year increased 62.0 percent to ¥12,975 million while short-termborrowings decreased 79.3 percent to ¥910 million. The sum of shortterm borrowings and long-term debt due within one year was ¥13,885
million, an increase of 12.0 percent.
Long-term liabilities totaled ¥26,275 million, an increase of 53.0
percent compared with the previous fiscal year, and consisted mainly of
long-term debt used to acquire properties. Total interest-bearing debt was¥38,547 million, an increase of 35.8 percent.

Net Assets
Total net assets as of November 30, 2006 were ¥15,230 million, an
increase of 83.6 percent compared with the previous fiscal year. The
increase included an additional ¥4,364 million in shareholders’ equity,
consisting of additional paid-in capital from a new stock issue overseas of
30,000 shares and the issuance of 1,980 new shares on exercise of stock
options, as well as net income of ¥2,737 million. The net worth ratio was
25.3 percent, an increase of 4.8 percentage points from the end of theprevious fiscal year, and return on equity (ROE) was 23.3 percent, an
increase of 4.1 percentage points.

Risk Information
Risks that have the potential to affect the performance, stock priceand financial position of the Tosei Group include, but are not limited to,the issues discussed below. For further details, please refer to theSummary of Consolidated Financial Statements for the Fiscal Year Ended
November 30, 2006.

financial position.
(ii) Changes in Business Results due to Timing of Property Transfer
These two businesses book property sales amounts as revenues, andtherefore the amount per transaction is large. In addition, because thetwo businesses book revenues upon transfer of the property, any delay intransferring the property could affect the Tosei Group’s operating results
and financial position.
(iii) Construction Delays and Increased Construction Costs due to
Natural Disasters, Etc.
The Tosei Group makes efforts to draw up a rational yearly budget
using the buildup method based on concrete purchasing and sales plans.
However, construction delays and the accompanying increase inconstruction/renovation costs due to natural disasters or other
unforeseen events have the potential to affect the Tosei Group’s
operating results and financial position.
(b) Rental BusinessIn the rental business, a source of stable revenue for the Tosei
Group, changes in general economic conditions or interest rates, theemergence of competing properties, or the occurrence of declines inrental fees or large amounts of vacancies due to natural disasters orother events have the potential to affect the Tosei Group’s operating
results and financial position.
(c) Fund Business(i) Management Performance of Funds
Even though real estate funds are strictly investment products
predicated on the responsibility of investors, and Tosei makes nowarranty and accepts no liability regarding performance, in the eventthat rental conditions or other aspects of the real estate properties do
not achieve the performance that investors expect, Tosei’s reputation as
an asset management company may decline, which could have an
impact on the Tosei Group’s operating results and financial position.
(ii) Changes in Investor Trends due to Fiscal Policy, Etc.
Real estate funds are one means of investment, and the Tosei
Group’s operating results and financial position could be affected if
investors withdraw from or refrain from investing in real estate funds due
to changes in fiscal policies or the global economy.
(d) Property Management Business(i) Decline of Management Commission Costs
Currently, management commission costs for condominiums andoffice buildings are continuing their downward trend due to increasing

20 ANNUAL REVIEW 2006

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCES

competition with other companies and cost-reduction pressure from
customers. The Tosei Group is making efforts to raise efficiency and cut
costs, but further reductions in unit prices or a surge in contract
cancellations have the potential to affect the Tosei Group’s operating
results and financial position.
(ii) Workplace Accidents, Etc.
The Tosei Group has obtained ISO 9001 certification for its businessexecution and provision of services. Although the Group is striving toenhance its business quality and services, unavoidable accidents, defects
in construction or facilities, problems with services, or other incidents of ascale that could impact society have the potential to affect the Tosei
Group’s operating results and financial position.
(e) Alternative Investment Business
The inability to acquire real estate-backed NPL funds in a shrinking
market for non-performing loans, the failure of mergers and acquisitionsof real estate-owning companies to take place, or the inability to recovercapital invested in acquired loans or companies as planned have thepotential to affect the operating results and financial position of theTosei Group.
2. Reliance on Interest-bearing Debt and Interest Rates
The Tosei Group procures debt financing, primarily from financial
institutions, to fund expenses associated with business activities including
acquisition of land and buildings and construction. Consequently, theratio of interest-bearing debt to total assets is consistently at a certain
level. Increases in interest rates typically increase fund procurement costs,
and therefore have the potential to affect the Tosei Group’s operating
results and financial position.
In procuring funds, unexpected changes in the operating
environment and other factors that might impede access to funding
could delay projects or render them untenable, which could affect theoperating results and financial position of the Tosei Group. Moreover,delays in selling projects or lower-than-anticipated selling prices have thepotential to affect the Tosei Group’s cash flow.
3. Accounting Standards and Tax System(i) Changes in Accounting Standards and the Real Estate Tax System
Changes regarding accounting standards and the real estate tax
system could cause increases in the cost of holding, acquiring and selling
assets, and therefore have the potential to affect the operating results
and financial position of the Tosei Group. In particular, as a result of the“Application Guidelines for Fixed Asset Impairment Accounting,”announced by the Accounting Standards Board of Japan on October 31,
2003, asset impairment accounting is applied for fiscal years beginningon or after April 1, 2005. Consequently, there is a possibility that theTosei Group could incur asset impairment losses.
(ii) Scope of Consolidation of Real Estate Funds
Consolidation or non-consolidation of real estate funds in which
Tosei conducts asset management is determined individually on the basisof Tosei’s Tokumei Kumiai (private equity) investment ratio and theextent of its control over the fund. Accounting rules at affiliatedinstitutions are being discussed, but there is a possibility thatinterpretations of consolidation may differ from prior interpretations, andchanges in accounting methods causing a change in the scope of

consolidation of the Tosei Group have the potential to affect theoperating results and financial position of the Tosei Group.
4. Defect Liability and After-sale Service
The Tosei Group provides customers with an after-sale service
warranty (valid for 1-10 years, depending on the item) according to theGroup’s “After-Sale Service Standards.” However, if for some reason adefect arises in a property supplied by the Tosei Group, and the Group isunable to impose the defect liability on the vendor, or the vendor orcontractor is incapable of fulfilling the warranty, the Tosei Group would
incur additional expenses, which have the potential to affect theoperating results and financial position of the Tosei Group.
5. Human Resources
The inability of the Tosei Group to secure or train the personnel thatit requires, or the departure of management currently in office, has thepotential to affect the operating results and financial position of theTosei Group.
6. Medium-term Management Plan
The medium-term management plan includes fixed numericaltargets, and the Group regularly checks progress while working to reachthese targets, which were set on the basis of information gathering andanalysis believed to be proper when the plan was established. However,the Group may not be able to gather all necessary information, or may
be unable to reach the targets due to changes in the businessenvironment or various other factors.
7. Structural Design Data Falsification Scandal
The Tosei Group has performed surveys on all properties it developedsince May 1999 to determine possible involvement of the Aneha
Architectural Design Office in the structural design data, and has
confirmed that there was no connection. The falsification scandal resulted
in widespread distrust of designated inspection institutions. In addition,
among the Tosei Group’s properties, nine had building certifications frome-Homes, and one was certified by Japan ERI Co., Ltd. Therefore, theTosei Group requested an architectural design firm other than the firmsthat handled the design of the buildings to re-check the structural design
data for all of its condominium complexes that have received architectural
checks since May 1999 by either public or private inspection institutions.
This firm reported that as a result of its examination of structural design
data for all the properties for possible falsification, in its judgment, noserious falsification was done. Any strengthening of related laws andregulations in response to the structural data falsification scandal, or thelengthening of construction schedules, could potentially increase costs,
and therefore has the potential to affect the operating results andfinancial position of the Tosei Group.
8. Other
When purchasing a second-hand property, the Tosei Group surveys
the building’s structure, use of asbestos, soil pollution and otherelements. However, business execution may be temporarily suspended or
prolonged if buildings are demolished because their structural design
data has not been saved or they contain asbestos, or due to soil
improvement or other measures. Such suspension of business has thepotential to affect the operating results and financial position of theTosei Group.

21 ANNUAL REVIEW 2006

CONSOLIDATED BALANCE SHEETS
Tosei Corporation and Consolidated Subsidiaries
As of November 30, 2006 and 2005

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2006

2005

2006

Cash (Note 3).............................................................................................

¥ 6,644¥ 2,671$ 57,499

Notes and accounts receivable.................................................................

266

147

2,302

Current assets:

Marketable securities ...............................................................................

10

10

87

Real estate for sale (Notes 2(c), 3) ...........................................................

20,77812,607

179,818

Real estate for sale in progress (Notes 2(c), 3) ........................................

19,263

13,977

166,707

Purchased receivables (Note 3) ................................................................

1,985

1,723

17,179Supplies .....................................................................................................

1

1

9

Deferred tax assets (Note 7).....................................................................

213

130

1,843

Other .........................................................................................................

2,236

1,307

19,351

Less: allowance for doubtful accounts ....................................................

(12)

(4)

(104)

Total current assets ...............................................................................

51,38432,569444,691

Buildings and structures (Note 3) ............................................................

2,129

1,725

18,425Tools and furniture...................................................................................

56

33

485

Property and equipment (Note 2(c)):

Land ...........................................................................................................

5,906

4,906

51,112

Total property and equipment.............................................................

8,091

6,664

70,022

262

904

2,267

Investments and other assets:
Investments in securities...........................................................................
Loans receivable........................................................................................

3

4

26

Deferred tax assets (Note 7).....................................................................

82

68

710

Bond issue cost..........................................................................................

—

7

—

Software ....................................................................................................

61

30

528

Telephone rights.......................................................................................

2

2

17

Other .........................................................................................................

251

160

2,172

Less: allowance for doubtful accounts ....................................................

(0)

(1)

(0)

Total investments and other assets .....................................................

661

1,174

5,720

Total assets.............................................................................................

¥60,136¥40,407$520,433

The accompanying notes are an integral part of these statements.

22 ANNUAL REVIEW 2006

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

2006

2005

2006

Current liabilities:
Notes and accounts payable ....................................................................

¥ 1,181

Short-term borrowings (Note 3) ..............................................................

910

¥

372

$ 10,221

4,390

7,875

Bonds due within one year (Note 3) .......................................................

24

194

208

Long-term debt due within one year (Note 3) .......................................

12,975

8,008

112,289

Income taxes payable ...............................................................................

1,985

1,081

17,179Advance received......................................................................................

625

383

5,409

Accrued bonuses to employees................................................................

10

10

87

Accrued bonuses to officers .....................................................................

20

—

173

Other .........................................................................................................

901

504

7,797

Total current liabilities .........................................................................

18,631

14,942

161,238

Long-term liabilities:
Bonds (Note 3) ..........................................................................................

298

322

2,579

Long-term debt (Note 3) ..........................................................................

24,34015,471

210,645

Deferred tax liabilities (Note 7) ...............................................................

23

22

199

Accrued severance costs ..........................................................................

35

31

303

Accrued retirement benefits to officers .................................................

191

152

1,653

Consolidation adjustment ........................................................................

4

6

35

Other .........................................................................................................

1,384

1,167

11,977

Total long-term liabilities .....................................................................

26,275

17,171

227,391

Total liabilities .......................................................................................

44,90632,113

388,629

Net Assets:
Shareholders’ equity (Note 6):
Common stock:
Authorized: 1,379,000 shares
376,838 shares in 2006 and 344,858 shares in 2005..........

4,148

1,966

35,898Additional paid-in capital ........................................................................

Issued:

4,232

2,050

36,625Retained earnings.....................................................................................

6,841

4,270

59,204

Total shareholders’ equity ....................................................................

15,221

8,286

131,7279

8

77

Valuation, foreign currency and other adjustments:
Unrealized gain on securities...................................................................
Total valuation, foreign currency and other adjustments..................

9

8

77

Total net assets ......................................................................................

15,2308,294

131,804

Total liabilities and net assets ..................................................................

¥60,136¥40,407$520,433

23 ANNUAL REVIEW 2006

CONSOLIDATED STATEMENTS OF OPERATIONS
Tosei Corporation and Consolidated Subsidiaries
Years ended November 30, 2006 and 2005

Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2006

Revenues.......................................................................................................

¥24,741¥17,644$214,115

Cost of revenues...........................................................................................

16,584

12,788

143,522

Gross profit ............................................................................................

8,157

4,856

70,593

Selling, general and administrative expenses ............................................

2,256

1,320

19,524

Operating income .................................................................................

5,901

3,536

51,069Other income (expenses):
Interest and dividend income .................................................................

1

1

9

Refund of property tax.............................................................................

—

9

—

Refund of earnest money at cancellation ...............................................

100

7

865

Interest expense .......................................................................................

(595)

(534)

(5,149)

Share transfer expense ............................................................................

(34)

—

(294)

Penalty at contract cancellation ..............................................................

—

(17)

—

Commissions paid .....................................................................................

(36)

—

(312)

Other, net..................................................................................................

(40)

(20)

(346)

(604)

(554)

(5,227)

Income before income taxes ....................................................................

5,297

2,982

45,842

Income taxes (Note 7):
Current ......................................................................................................

2,657

1,434

22,994

Deferred ....................................................................................................

(97)

(45)

(839)

2,560

1,389

22,155

Net income ................................................................................................

¥ 2,737¥ 1,593$ 23,687

Yen

U.S. dollars (Note 1)

Per share of common stock:
Net income: Basic ......................................................................................

¥7,412.80¥4,664.46

Diluted ..................................................................................

7,405.87

4,571.59

64.09

Cash dividends applicable to the year.....................................................

1,400.00

450.00

12.12

The accompanying notes are an integral part of these statements.

24 ANNUAL REVIEW 2006

$64.15CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Tosei Corporation and Consolidated Subsidiaries
Year ended November 30, 2006

Millions of yen
Valuation, foreign currency andother adjustments

Shareholders’ equity

Balance at November 30, 2005 ............
Issuance of new shares......................
Dividends from retained earnings ...
Bonuses to officers fromretained earnings...........................
Net income ........................................
Change in items other than shareholders’equity during the year (net)...........
Balance at November 30, 2006 ............

Commonstock

Additional
paid-in
capital¥1,9662,182¥2,0502,182¥4,148¥4,232Retainedearnings¥4,270Total
shareholders’equity(155)¥ 8,286
4,364
(155)

(11)
2,737

(11)
2,737

¥6,841¥15,221

Total valuation,
Unrealized
foreign currency
gain onand othersecurities
adjustments¥8¥8

Total net
assets¥ 8,294
4,364
(155)
(11)
2,737

1
¥9

1
¥9

1
¥15,230

Thousands of U.S. dollars
Valuation, foreign currency andother adjustments

Shareholders’ equity

Balance at November 30, 2005 ............
Issuance of new shares......................
Dividends from retained earnings ...
Bonuses to officers fromretained earnings...........................
Net income ........................................
Change in items other than shareholders’equity during the year (net)...........
Balance at November 30, 2006 ............

Commonstock

Additional
paid-in
capital$17,01418,884$17,741
18,884$35,898$36,625

Retainedearnings

Total
shareholders’equity$36,954$ 71,709
37,767(1,341)(1,341)(95)
23,687(95)
23,687$59,204$131,727

Total valuation,
Unrealized
foreign currency
gain onand othersecurities
adjustments

$69

$69

Total net
assets$ 71,778
37,767(1,341)(95)
23,687

9
$78

9
$78

9
$131,805

CONSOLIDATED STATEMENT OF ADDITIONAL PAID-IN CAPITAL AND
RETAINED EARNINGS
Tosei Corporation and Consolidated Subsidiaries
Year ended November 30, 2005
Millions of yen

2005
Additional paid-in capital:
Additional paid-in capital, beginning of year..............................................................................................
Increase in additional paid-in capital:
Issuance of new shares on exercise of stock options................................................................................
Additional paid-in capital, end of year ........................................................................................................

¥2,01139
2,050

Retained earnings:
Retained earnings, beginning of year ..........................................................................................................
Increase in retained earnings:
Net income..................................................................................................................................................
Decrease in retained earnings:
Cash dividends paid....................................................................................................................................
Decrease from increase in consolidated subsidiaries ..............................................................................

1,593

Retained earnings, end of year.....................................................................................................................

¥4,27025 ANNUAL REVIEW 2006

2,719

41
1

CONSOLIDATED STATEMENTS OF CASH FLOW
Tosei Corporation and Consolidated Subsidiaries
Years ended November 30, 2006 and 2005

Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2006

Cash flow from operating activities:
Income before income taxes ...........................................................................
Depreciation.....................................................................................................
Amortization of consolidation adjustment....................................................
Increase in allowances .....................................................................................
Interest and dividend income .........................................................................
Interest expenses..............................................................................................
Valuation gain on investments in Tokumei Kumiai (private equity)............
Increase in notes and accounts receivable .....................................................
Increase in purchased receivables ...................................................................
Increase in inventories .....................................................................................
Increase in advance payment .........................................................................
Increase (decrease) in notes and accounts payable .......................................
Increase (decrease) in advance received.........................................................
Increase in deposits received...........................................................................
Other.................................................................................................................
Sub-total....................................................................................................
Receipts of interest and dividends..................................................................
Payments of interest .......................................................................................
Payments of income taxes ...............................................................................
Net cash used in operating activities..........................................................

¥ 5,297
207
(1)
71
(1)
595
(87)
(119)
(262)
(14,981)
(475)
810
241
217
(18)
(8,506)23(618)(1,756)(10,857)¥ 2,982
181
(1)
38
(1)
534
(24)
(31)
(1,723)(7,062)(1,095)(1,082)
(453)
26
262
(7,450)
57
(542)
(905)
(8,839)$ 45,842
1,791
(9)
614
(9)
5,149
(753)
(1,030)(2,267)(129,650)(4,111)
7,010
2,086
1,878
(156)
(73,615)
199(5,348)(15,197)(93,959)

Cash flow from investing activities:
Increase (decrease) in time deposits ...............................................................
Purchases of property and equipment ...........................................................
Purchases of intangible assets.........................................................................
Investments in securities..................................................................................
Sales of investments in securities ....................................................................
Collection of investments in securities ...........................................................
Acquisition of equity in newly consolidated subsidiary ................................
Purchases of investments.................................................................................
Other.................................................................................................................
Net cash provided by (used in) investing activities...................................

(19)
(90)
(39)
(6)
5
712
—
(5)
(86)
472

45
(144)
(31)
(3,865)
3,320
77
(7)
(12)
10
(607)

(164)
(779)
(338)
(52)
43
6,162
—
(43)
(744)
4,085

Cash flow from financing activities:
Net increase (decrease) in short-term borrowings.........................................
Proceeds from long-term debt........................................................................
Repayments of long-term debt.......................................................................
Redemption of bonds .....................................................................................
Proceeds from new stock issue........................................................................
Cash dividends paid .........................................................................................
Net cash provided by financing activities ..................................................

(3,480)25,482(11,645)
(194)
4,329
(153)
14,3391,041
14,570(6,262)
(24)
76
(40)
9,361

(30,117)220,528(100,779)(1,679)37,464(1,324)
124,093

3,954

(85)

34,219—2,531¥ 6,485

15
2,601¥ 2,531—
21,904$ 56,123

Net increase (decrease) in cash and cash equivalents ..................................
Cash and cash equivalents of newly consolidated subsidiaries
at beginning of the year..............................................................................
Cash and cash equivalents at beginning of the year....................................
Cash and cash equivalents at end of the year...............................................
The accompanying notes are an integral part of these statements.

26 ANNUAL REVIEW 2006

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tosei Corporation and Consolidated Subsidiaries
Years ended November 30, 2006 and 2005

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have been

consolidated financial statements issued domestically in order toprepared in accordance with the provisions set forth in thepresent them in a form which is more familiar to readers outside

Japanese Securities and Exchange Law and its related accounting

Japan.

regulations, and in conformity with accounting principles and

The consolidated financial statements are stated in Japanesepractices generally accepted in Japan, which are different inyen, the currency of the country in which Tosei Corporation (thecertain respects as to application and disclosure requirements of“Company”) is incorporated and operates. The translations ofInternational Accounting Standards. The consolidated financial

Japanese yen amounts into U.S. dollar amounts are included solely

statements are not intended to present the financial position,

for the convenience of readers outside Japan and have been maderesults of operations and cash flows in accordance withat the rate of ¥115.55 to $1, the approximate rate of exchange ataccounting principles and practices generally accepted in countries

November 30, 2006. Such translations should not be construed as

and jurisdictions other than Japan.

representations that the Japanese yen amounts could be

In preparing these consolidated financial statements, certain

converted into U.S. dollars at that or any other rate.

reclassifications and rearrangements have been made to the

2. Summary of Significant Accounting Policies
a. Consolidation

identification method.

The consolidated financial statements as of November 30, 2006
include the accounts of the Company and its 13 (11 in 2005)
significant subsidiaries (together, the “Companies”).

Supplies are stated at cost determined by the last purchasemethod.
Rental property owned as real estate for sale (buildings: ¥540

The Company has no unconsolidated subsidiaries and no

million (US$4,673 thousand); land: ¥1,103 million (US$9,546

affiliated companies in which investments are accounted for bythousand)) has been transferred to property and equipment, andthe equity method.

rental property owned as property and equipment (buildings:

All assets and liabilities of subsidiaries are marked to fair value¥128 million (US$1,108 thousand); land: ¥103 million (US$891

at the time of acquisition of control. Consolidation adjustment, athousand)) has been transferred to real estate for sale, due to adifference between investment and equity of subsidiary, ischange in the Company’s business policy.

amortized on a straight-line basis over 5 years.

d. Marketable and Investment Securities

b. Cash Equivalents

Available-for-sale securities with market quotations are reported

Cash equivalents are short-term investments that are readily

at fair value, with unrealized gains and losses, net of applicableconvertible into cash and that are exposed to insignificant risk oftaxes, reported in a separate component of net assets. Cost at thechanges in value. Cash and cash equivalents at the end of the year

time of sale is determined by the moving-average method.

in the consolidated statements of cash flows for the year ended
November 30, 2006 and 2005 are reconciled with cash in the
consolidated balance sheets as follows:
Millions of yen

2006

2005

Thousands of
U.S. dollars

2006

Cash...........................................

¥6,644¥2,671$57,499

Time deposits with maturities
of more than three months.....

(159)

(140)

(1,376)

Cash and cash equivalents .......

¥6,485¥2,531$56,123

Available-for-sale securities without market quotations arestated at cost determined by the moving-average method.
e. Property, Plant and Equipment
Property and equipment are stated at cost.
Depreciation of property and equipment of the Companies iscomputed by the declining-balance method at rates based on theestimated useful lives of the assets. However, buildings purchased on
or after April 1, 1998 are depreciated by the straight-line method.
f. Retirement Benefit Plans
The Companies have an unfunded retirement benefit plan forc. Inventories
Real estate for sale, real estate for sale in progress andpurchased receivables are stated at cost determined by the specificemployees. Accrued severance costs are stated at the amountwhich would be required if all employees voluntarily terminatedtheir employment at the balance sheet date.

27 ANNUAL REVIEW 2006

Accrued retirement benefits to officers (directors and corporate

j. Impairment of Property and Equipment

auditors) are stated at the amount which would be required if all

Effective from the fiscal year ended November 30, 2006, thedirectors and corporate auditors retired at the balance sheet date.

Company applies Accounting Standards for Impairment of Fixed
Assets. This change has no effect on the Company’s profit and loss.

g. Leases
All leases are accounted for as operating leases. Under Japanese
accounting standards for leases, finance leases that deem tok. Accounting Standards for Presentation of Net Assets on the
Balance Sheetstransfer ownership of the leased property to the lessee are to be

Effective from the fiscal year ended November 30, 2006, thecapitalized, while other finance leases are permitted to beCompany applies Accounting Standards for Presentation of Net

accounted for as operating lease transactions.

Assets on the Balance Sheet and Application Guidelines for
Accounting Standards for Presentation of Net Assets on theh. Income Taxes
The Companies apply an inter-period allocation of income taxes
based on the asset and liability method. Deferred income taxes
are recorded to reflect the impact of temporary differences
between assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes.

Balance Sheet issued by the Accounting Standards Board of Japanon December 9, 2005.
Following the revision of the rules for consolidated financial
statements, the consolidated balance sheets of the Company forthe year ended November 30, 2006 are prepared in accordancewith those revised rules. The balance sheets for the year ended
November 30, 2005 are restated in conformity with the revision

i. Appropriations of Retained Earnings
Appropriations of retained earnings at each year end arefor comparison.

reflected in the financial statements for the following year uponshareholders’ approval.

3. Short-term Borrowings and Long-term Debt
Short-term borrowings, amounting to ¥910 million (US$7,875
thousand) as of November 30, 2006, were loans from banks with

Bonds as of November 30, 2006 and 2005 consisted of thefollowing:

an average interest rate of 2.14% per year.
Thousands of
U.S. dollars

Millions of yen

IssuedDueInterest (%)

2006

2005

2006

Unsecured bonds

3/31/04

3/31/09

0.19

¥ 250

¥ 250

$ 2,164

Unsecured bonds

6/10/04

6/10/09

0.31

72

96

623

Unsecured bonds

8/10/04

8/10/06

0.46

—

170

—

322

516

2,787

Less: current portion of bonds.......................................................................................

(24)

(194)

(208)

Total ................................................................................................................................

¥ 298

¥ 322

$ 2,579

Annual maturities of bonds as of November 30, 2006 within

Long-term debt, amounting to ¥37,315 million (US$322,934
thousand) as of November 30, 2006, consisted of loans fromfive years were as follows:
Years ending November 30

Millions of yen

Thousands of U.S. dollars

2007

¥ 24

$ 208

2008

24

208

2009

274

2,371

2010

—

—

banks with an average interest rate of 1.70% per year. Annual
maturities of bonds as of November 30, 2006 (except for current
portion of ¥12,975 million (US$122,289 thousand)) within five
years were as follows:
Years ending November 30

Millions of yen

Thousands of U.S. dollars

2008¥19,518$168,913

2009

1,200

10,385

2010

345

2,985

2011

345

2,985

28 ANNUAL REVIEW 2006

The book values of assets pledged as collateral for debt as ofNovember 30, 2006 and 2005 were as follows:
Millions of yen

Cash....................................
Real estate for sale............
Real estate for salein progress .........................
Purchased receivables .......
Other..................................
Buildings and structures ..
Land ..................................
Total ..................................

Debt related to the above pledged assets as of November 30,
2006 and 2005 was as follows:

Thousands of
U.S. dollars

2006

2005

2006

¥
20
18,946¥ 170
11,487$ 173
163,964

16,575
1,985
900
1,902
5,265
¥45,593

13,235
1,092
900
1,397
4,020
¥32,300

143,444
17,1797,789
16,46045,565$394,574

Thousands of
U.S. dollars

Millions of yen

Short-term borrowings .....
Long-term debt due
within one year .................
Long-term debt .................
Total ...................................

2006

2005

2006

¥

910

¥ 4,370$

12,97524,340¥38,225

7,900
15,039¥27,309112,289
210,645$330,809

7,875

4. Contingent Liabilities
As of November 30, 2006 the Company was contingently liable

Corporation, amounting to ¥13 million (US$113 thousand).

for guarantees on six customers’ housing loans from Arca

5. Loan Commitment Agreements
The Company enters into loan commitment agreements withbanks to procure funds efficiently when purchasing properties.
The unexecuted balance of borrowings based on these
agreements as of November 30, 2006 was as follows:

Millions of yen

Total loan commitments ....................................
Less amount currently executed........................
Unexecuted balance...........................................

¥8,750—¥8,7506. Shareholders’ Equity
The Japanese Commercial Code (the “Code”) requires at leastcredited to additional paid-in capital.

50% of the issue price of new shares to be designated as stated

A stock option plan for directors and employees of thecapital as determined by resolution of the Board of Directors.

Company was resolved by the shareholders’ meeting held on April

Proceeds in excess of amounts designated as stated capital are25, 2003. Details of the stock options are as follows:

Type of share:
Number of shares:
Grant price:
Effective period:

Common stock
Equal to or less than 11,100 shares in total¥8,500 per share
June 1, 2005 to May 31, 2008

Two stock option plans, for (1) four directors of the Company,
72 employees of the Company and two directors of subsidiaries ofrespectively, were resolved by the shareholders’ meeting held on
February 27, 2007. Details of the stock options are as follows:

the Company and (2) nine employees of the Company,

Type of share:
Number of shares:
Grant price:
Effective period:

Stock Option Plan (1)Stock Option Plan (2)Common stock
Equal to or less than 3,690 shares in total¥164,685
March 1, 2008 to February 28, 2011

Common stock
Equal to or less than 460 shares in total¥143,564
May 1, 2008 to February 28, 2011

7. Income Taxes
The Companies are subject to Japanese national and local

effective statutory tax rate of approximately 40.7% for theincome taxes which, in the aggregate, resulted in a normal

years ended November 30, 2006 and 2005.

29 ANNUAL REVIEW 2006

Deferred taxes are represented in the consolidated balance

Major components of deferred tax assets as of November 30,
2006 and 2005 were as follows:

sheets as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets (current):
Unpaid enterprise taxes.....
Excess depreciation ............
Other...................................
Valuation allowance ..........
Deferred tax assets(non-current):
Excess accrued
severance costs .................
Excess accrued retirement
benefits to officers ...........
Loss carried forward of
consolidated subsidiaries ...
Other...................................
Valuation allowance ..........
Total deferred tax assets
Deferred tax liabilities(non-current):
Valuation difference on
assets and liabilities
of subsidiaries...................
Unrealized gain
on securities......................
Total deferred
tax liabilities ................
Net deferred tax assets .....

2006

2005

2006

¥133
49
33
(2)
213

¥ 72
40
17
—
130

$1,151
424
285
(17)
1,843

Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

Current assets........................

¥213

¥130

$1,843

Non-current assets ................

82

68

710

Non-current liabilities...........

(23)

(22)

(199)

Total...................................

¥272

¥176

$2,354

Reconciliation between the normal effective statutory tax rate
for the years ended November 30, 2006 and 2005 and the actual
effective tax rate reflected in the accompanying consolidated

14

13

121

78

62

675

54
4
(62)
88
301

9
3
(12)
73
203

467
35
(536)
762
2,605

(23)

(23)

(199)

(6)

(5)

(52)

(29)
¥272

(28)
¥175

(251)
$2,354statement of income was as follows:
2006

2005

Normal effective statutory tax rate ........

40.7%

40.7%

Expenses not deductible for income
tax purposes ..........................................

0.2

0.2

Tax on undistributed income ..................

6.4

5.2

Other - net................................................

1.0

0.5

Actual effective tax rate..........................

48.3%

46.6%

8. Segment Information
Information about industry segments of the Companies for the years ended November 30, 2006 and 2005 is as follows:
Millions of yen

2006

Revitalization Development
Business
Business

RentalBusiness

Fund
Business

Property
Management
Business

Alternative
Investment
Business

Total

Eliminations or
corporate
Consolidated

Sales and
operating income:Revenuefrom operations:
Outside customers
Intersegment
Total revenues
Operating expenses
Operating income¥15,650—
15,65011,610¥ 4,040¥ 3,843
—
3,843
3,329
¥ 514

¥1,836
3
1,839
854
¥ 985

¥1,405
14
1,419
302¥1,117¥1,671
233
1,904
1,782
¥ 122

¥ 336
—
336
58
¥ 278

¥24,741250
24,991
17,935¥ 7,056

¥

—
(250)
(250)
905
¥(1,155)¥24,741—
24,741
18,840¥ 5,901

Assets, depreciationand capital
expenditures:
AssetsDepreciation
Capital expenditures¥24,202——¥17,600——¥8,655
168
122

¥ 532
1
3

¥ 658
—
21

¥2,8390
3¥54,485169149¥ 5,651
39
18¥60,136207
167

30 ANNUAL REVIEW 2006

Millions of yen

2005

Revitalization Development
Business
Business

RentalBusiness

Fund
Business

Property
Management
Business

Alternative
Investment
Business

Total

Eliminations or
corporate
Consolidated

Sales and
operating income:Revenuefrom operations:
Outside customers
Intersegment
Total revenues
Operating expenses
Operating income¥10,400—
10,4008,179¥ 2,222¥ 4,467
—
4,467
3,919
¥ 548

¥1,645
—
1,645
716
¥ 929

¥349
—
349
55
¥295

¥562
96
658
618
¥ 40

¥ 220
—
220
23
¥ 197

¥17,64496
17,74013,509¥ 4,231

¥

—
(96)
(96)
599
¥ (695)¥17,644—
17,644
14,108¥ 3,536

Assets, depreciationand capital
expenditures:
AssetsDepreciation
Capital expenditures¥15,6561
13¥12,300
1
8¥5,227
150
65

¥905
0
4

¥323
0
—

¥2,017——¥36,428152
90¥3,97828
89¥40,407
181
178

Thousands of U.S. dollars

2006

Revitalization Development
Business
Business

RentalBusiness

Fund
Business

Property
Management
Business

Alternative
Investment
Business

Total

Eliminations or
corporate
Consolidated

Sales and
operating income:Revenuefrom operations:
Outside customers
Intersegment
Total revenues
Operating expenses
Operating income$135,439—
135,439
100,476$ 34,963$ 33,258—
33,25828,810$ 4,448$15,889
26
15,915
7,391$ 8,524$12,159
121
12,2802,614$ 9,666$14,461
2,016
16,477
15,421$ 1,056$ 2,908—
2,908
502$ 2,406$214,115
2,164
216,279
155,214$ 61,065$—(2,164)(2,164)
7,832$ (9,996)$214,115—
214,115
163,046$ 51,069

Assets, depreciationand capital
expenditures:
AssetsDepreciation
Capital expenditures$209,450——$152,315——$74,903
1,454
1,056

$ 4,604
925$ 5,695—
182$24,569025$471,527
1,463
1,289

$48,905
338
156$520,433
1,791
1,445

9. Subsequent Event
Resolutions of Shareholders’ Meeting
At the general shareholders’ meeting held on February 27, 2007, the Company’s shareholders approved the following appropriation ofretained earnings for the year ended November 30, 2006.
Millions of yen

Thousands of
U.S. dollars

Year-end cash dividends, ¥1,400 ($12.16) per share ...........................................................................

¥528$4,569

Officers’ bonuses ...................................................................................................................................

240

2,077

31 ANNUAL REVIEW 2006

CORPORATE DATA
(As of November 30, 2006)

Company name

Tosei Corporation

History

President and CEO

Seiichiro Yamaguchi

1950 February

Established as Yukari Kogyo Co., Ltd.
(Head Office: Oita City, Oita Prefecture)

Date of establishment

February 2, 1950

1952 April

Moved Head Office to Kameido, Koto Ward, Tokyo

Address

Toranomon Tosei Building,
4-2-3 Toranomon, Minato-ku, Tokyo

1964 June

Initiated real estate sales, brokerage, rental andproperty management businesses

Capital¥4,148,011,500

1968 May

Employees

83 (Non-consolidated)
134 (Consolidated)

Moved Head Office to Soto-Kanda,
Chiyoda Ward, Tokyo

1969 July

Company name changed to Yukari Co., Ltd.

1983 MarchCompany name changed to Tosei Building Co., Ltd.

1994 June

Seiichiro Yamaguchi appointed as President
and CEO

Fields of business

Licenses, permits andregistrations

Consolidated subsidiaries

Revitalization; Development; Rental;
Property management; Funds;
Alternative investment
Specified Construction Business License,
Real Estate Specific Joint Enterprise
Permit, Real Estate Business License,
First-class Architect’s Office License,
General Real Estate Investment Advisory
Business Registration, Securities
Investment Advisory Business
Registration, Registered Dealer of
Investment Trust Beneficiary Rights
Tosei Community Co., Ltd.
Tosei Revival Investment Co., Ltd.
Tosei REIT Advisors, Inc.
(and 10 others)

Management Team
President and CEO

October

1995 September Kanda Awaji-cho Building Co., Ltd. established1996 March
December

Katsuhito Kosuge

Director and Executive Officer of Asset Solution Department 1,
Asset Solution Department 2, Asset Solution Department 3, Asset
Solution Department 4 and Asset Solution Promotion Department;
Manager of Asset Solution Promotion Department

Syunichiro Naito
Corporate Auditors

Yasuhiro Honda (full-time)
Kimio Harada (full-time)
Shigeru Yamagishi (part-time)
Eiji Sakamoto (part-time)
Executive Officer of Architect Planning Department

Minoru Inatsuka
Officer and Manager of Corporate Planning Department

Ryohei Yasuda

Moved Head Office to Kanda, Awaji-cho,
Chiyoda Ward, Tokyo
Initiated construction contractor operations, including
repair and renovation, as part of the property
management business1999 July

Initiated single-family dwelling home developmentwith Palms Court Series

2001 February

Initiated asset management business

March

Acquired and merged three companies throughleveraged buyouts

April

Acquired First-class Architect’s Office License(License No. Tokyo Governor’s Registration (46219))

November

Building Management Division spun off toTosei Community Co., Ltd.

DecemberFormed Securitization Division aiming to enter realestate securitization businessDirector and CFO;Manager of General Administration Department

Noboru Hirano

Company name changed to Tosei Fudosan Co., Ltd.

1997 December

Seiichiro Yamaguchi
Director and COO

Initiated residential condominium development(THE Palms Series)

2002 August

December
2004 February
December

Structured first private real estate investment trust
fund, the Argo Fund, targeting rental condominiums(commencement of real estate securitization business)
Acquired and merged Kanda Awaji-cho Building
Co., Ltd.
Listed on the JSDA Over-the-Counter Trading
Securities Market
Listed on JASDAQ following closure of the JSDA
Over-the-Counter Trading Securities Market

2005 March

Established the subsidiary Tosei Revival Investment
to conduct corporate and business turnarounds

April

Made Tosei Community a consolidated subsidiary

September Established the subsidiary Tosei REIT Advisors, Inc.
2006 OctoberNovemberCompany name changed to Tosei Corporation; moved
Head Office to Toranomon, Minato Ward, Tokyo
Listed on Second Section of Tokyo Stock Exchange

32 ANNUAL REVIEW 2006

INVESTOR INFORMATION(As of November 30, 2006)

Authorized number of shares

1,379,000

Major Shareholders

Issued number of shares

376,838

Shareholders

Number of shareholders
Shareholder composition

Other companies
16.83%
Individuals/Others
54.33%

Securities companies
0.83%

Financial institutions
14.68%

Ticker code8923

Stock listing

Tokyo Stock Exchange,
Second Section
JASDAQ Securities Exchange

Closing of accounts

November

General shareholders’meeting

Every February

Shareholding
ratio (%)

138,855
60,000

36.84
15.92

31,7208.41

11,507

3.05

7,453

1.97

6,549

1.73

6,100

1.61

5,599

1.48

2,985
2,378

0.79
0.63

Seiichiro Yamaguchi
Zeus Capital Limited
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Morgan Stanley and Company
International Limited
Japan Trustee Service Bank, Ltd.
(Trust Account)
Nomura Trust and Banking Co., Ltd.
(Trust Account)
BNP Paribas Securities Service
Luxembourg JASDAQ Securities
Bank of New York JCM Client
Accounts EISG
Sumitomo Life Insurance Company(Special Account)
Morgan Stanley and Company Inc.

7,233

Foreign companies
13.33%

Number ofshares held

Monthly Closing Price(Yen)
180,000
150,000
120,000
90,00060,00030,0000

2004/ 4
3

5

6

7

8

9

10

11

12 2005/ 2
1

3

4

5

6

7

8

9

10

11

12 2006/ 2
1

3

4

5

6

7

8

9

10

11

8

9

10

11

12 2005/ 2
1

3

4

5

6

7

8

9

10

11

12 2006/ 2
1

3

4

5

6

7

8

9

10

11

Monthly Trading Volume180,000
150,000
120,000
90,00060,00030,0000

2004/ 43

5

6

7

Note: Monthly trading volume for November 2006 is the total for both JASDAQ and the Tokyo Stock Exchange following listing on the Second Section of theTokyo Stock exchange on November 22, 2006.

33 ANNUAL REVIEW 2006

http://www.toseicorp.co.jp/english/

Toranomon Tosei Building, 4-2-3 Toranomon, Minato-ku, Tokyo
Inquiries: Corporate Planning Department Phone: (81) 3-3435-2864 Fax: (81) 3-3435-2866Printed in Japan on recycled paper with soy-based vegetable ink.