Annual Securities Report(Pursuant to Article 24, paragraph 1 of the Financial Instruments and Exchange Act)

(The English translation of the“Yukashoken-Houkokusho” for the 67th term)from December 1, 2015
to November 30, 2016

TOSEI CORPORATION
4-2-3, Toranomon, Minato-ku, Tokyo, Japan(E04021)
This is an English translation prepared for the convenience of non-resident shareholders by translating the Annual
Securities Report (YUKASHOKEN-HOKOKUSHO) submitted to the Director of the Kanto Local Finance Bureauof the Ministry of Finance of Japan on February 27, 2017 pursuant to Article 24, paragraph 1 of the Financial
Instruments and Exchange Act. Should there be any inconsistency between the translation and the official Japanesetext, the latter shall prevail.

Table of Contents
Cover

A. Company Information .......................................................................................................... 1
I.

Overview of the Tosei Group ........................................................................................................ 1
1. Trends in principal management benchmarks .................................................................................................. 1
2. History ............................................................................................................................................................. 4
3. Business description......................................................................................................................................... 5
4. Status of subsidiaries and associates ................................................................................................................ 8
5. Status of employees ......................................................................................................................................... 9II.

Review of operations .................................................................................................................... 10

1. Overview of operating results ........................................................................................................................ 10
2. Status of production, orders received and sales ............................................................................................. 13
3. Issues to be addressed .................................................................................................................................... 14
4. Business and other risks ................................................................................................................................. 17
5. Important operational contracts, etc. .............................................................................................................. 21
6. Research and development activities ............................................................................................................. 21
7. Analysis of financial position, operating results and cash flows.................................................................... 21

III. Facilities ........................................................................................................................................ 24
1. Outline of capital expenditures ...................................................................................................................... 24
2. Main facilities ................................................................................................................................................ 24
3. Plans for new installation and retirement of facilities .................................................................................... 24

IV. Filing company ............................................................................................................................. 25
1. Information on the Company (Tosei)’s shares, etc. ....................................................................................... 25(1) Total number of shares authorized, etc. ..................................................................................................... 25(2) Status of stock acquisition rights ............................................................................................................... 25(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause .......... 28(4) Details of rights plan ................................................................................................................................. 28(5) Trends in total number of shares issued, share capital, etc. ....................................................................... 28(6) Shareholder composition ........................................................................................................................... 29(7) Status of major shareholders ..................................................................................................................... 29(8) Status of voting rights................................................................................................................................ 30(9) Stock acquisition rights ............................................................................................................................. 31
2. Acquisition of treasury shares ........................................................................................................................ 31
3. Dividend policy.............................................................................................................................................. 32
4. Trends in share price ...................................................................................................................................... 32
5. Status of officers ............................................................................................................................................ 33
6. Status of corporate governance, etc. .............................................................................................................. 37

V.

Accounting .................................................................................................................................... 52

1. Consolidated financial statements, etc. .......................................................................................................... 53(1) Consolidated financial statements ............................................................................................................. 53(2) Others ........................................................................................................................................................ 90
2. Non-consolidated financial statements, etc. ................................................................................................... 91(1) Non-consolidated financial statements ...................................................................................................... 91(2) Principal assets and liabilities .................................................................................................................. 106(3) Others ...................................................................................................................................................... 106

VI. Outline of filing company’s business concerning shares ........................................................ 107
VII. Reference information on filing company................................................................................ 108
1. Information on filing company’s parent company ....................................................................................... 108
2. Other reference information ......................................................................................................................... 108

B. Information on Guarantee Companies, etc. of Filing Company .................................. 109[Independent Auditors’ Audit Report and Internal Control Audit Report][Independent Auditors’ Audit Reports][Management’s Report on Internal Control][Cover]Document to be filed:Annual Securities Report

Provisions to base upon:

Article 24, paragraph 1 of the Financial Instruments and Exchange
Act

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

February 27, 2017

Business year:

67th term (from December 1, 2015 to November 30, 2016)

Company name (Japanese):

トーセイ株式会社 (Tosei Kabushiki-Kaisha)Company name (English):TOSEI CORPORATION

Title and name of representative:

Seiichiro Yamaguchi, President and CEO

Location of head office:4-2-3, Toranomon, Minato-ku, Tokyo, Japan

Telephone number:+81-3-3435-2865

Contact person:

Noboru Hirano, Director and CFO

Place of contact:

4-2-3, Toranomon, Minato-ku, Tokyo, Japan

Telephone number:+81-3-3435-2865

Contact person:

Noboru Hirano, Director and CFO

Places where the document to be filed isavailable for public inspection:

Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi-kabutocho, Chuo-ku, Tokyo)

A.
I.

Company Information
Overview of the Tosei Group

1. Trends in principal management benchmarks(1) Management benchmarks (consolidated)
IFRS
Term
63rd term

Accounting period
Revenue(¥ thousand)Profit before tax(¥ thousand)Profit attributable to owners ofparent(¥ thousand)Comprehensive income
attributable to owners of parent(¥ thousand)Total equity(¥ thousand)Total assets(¥ thousand)Equity attributable to owners ofparent per share(¥)
Basic earnings per share(¥)
Diluted earnings per share(¥)
Ratio of equity attributable toowners of parent to total assets(%)
Ratio of return on equity
attributable to owners of parent(%)
Price earnings ratio (PER)(Times)Net cash from (used in)operating activities(¥ thousand)Net cash from (used in) investing
activities(¥ thousand)Net cash from (used in)financing activities(¥ thousand)Cash and cash equivalents at endof period(¥ thousand)Number of employees[Separately, average number of
temporary employees](Person)

64th term

65th term

66th term

67th term

Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended
Nov. 30, 2012
Nov. 30, 2013
Nov. 30, 2014
Nov. 30, 2015
Nov. 30, 201624,195,800

35,070,345

49,981,563

43,006,964

49,818,113

2,218,631

3,222,127

4,663,706

6,040,311

8,450,048

1,465,284

2,006,471

2,874,226

4,135,816

5,547,469

1,464,358

2,011,780

3,021,682

4,081,386

5,509,307

26,543,892

30,092,426

32,727,836

36,228,378

41,010,083

65,363,083

71,283,073

80,858,080

93,196,052

121,276,292

581.03623.24677.82750.32849.35

32.07

43.05

59.53

85.66

114.89

–

–

–

－

－

40.6

42.2

40.5

38.9

33.8

5.7

7.1

9.2

12.0

14.4

11.18

18.05

12.10

8.84

7.23

(325,054)

2,772,614

344,537(4,443,093)(7,472,487)

56,228(940,724)(2,878,766)

481,605(8,193,818)

1,316,359

3,456,677

3,891,894

6,661,097

18,522,496

9,410,622

14,711,997

16,100,795

18,791,081

21,640,866

220
[228]

227
[228]

263
[226]

301
[163]

368
[155]

Notes: 1. Revenue does not include consumption taxes.
2. Diluted earnings per share for the 63rd term to the 65th term is not presented because there were no potential shares.
Diluted earnings per share for the 66th term and 67th term are not presented because there were no potential shares thathave dilutive effects.
3. As from the 64th term, the Company has been preparing its consolidated financial statements in accordance with theInternational Financial Reporting Standard (“IFRS”). In addition, the Company includes benchmarks for the 63rd term
prepared in accordance with the IFRS.
4. The Company split its shares by 100 for 1, effective July 1, 2013. Therefore, equity attributable to owners of parent per
share, and basic earnings per share were calculated on the assumption that the share split was implemented at the-1-

beginning of the 63rd term.
5. The Group has partially changed accounting policies from the 65th term and restated the related principal management
benchmarks for the 64th retrospectively.

Japanese GAAP
Term
63rd term

Accounting period
Net sales(¥ thousand)Ordinary income(¥ thousand)Net income attributable toowners of parent(¥ thousand)Comprehensive income(¥ thousand)Net assets(¥ thousand)Total assets(¥ thousand)Net assets per share(¥)
Net income per share(¥)
Net income per share (diluted)(¥)
Equity ratio(%)
Return on equity(%)
Price earnings ratio (PER)(Times)Net cash from (used in)operating activities(¥ thousand)Net cash from (used in) investing
activities(¥ thousand)Net cash from (used in)financing activities(¥ thousand)Cash and cash equivalents at endof period(¥ thousand)Number of employees[Separately, average number of
temporary employees](Person)

64th term

Fiscal year ended Fiscal year ended
Nov. 30, 2012
Nov. 30, 201324,195,800

35,070,345

2,323,108

3,105,842

1,466,225

1,890,083

1,465,299

1,894,728

26,569,743

30,122,824

65,352,734

71,265,154

581.60623.87

32.09

40.56

–

–

40.7

42.3

5.6

6.7

11.17

19.16

(325,054)

2,772,614

56,228(940,724)

1,316,359

3,456,677

9,410,622

14,711,997

220
[228]

227
[228]

Notes: 1. Net sales does not include consumption taxes.
2. Net income per share (diluted) is not presented because there were no potential shares.
3. Indicators for the 64th term (Japanese GAAP) have not been audited under the provisions of Article 193-2, paragraph 1of the Financial Instruments and Exchange Act.
4. For the consolidated financial statements based on Japanese GAAP, the accounting policy has been changed in order tomake more appropriate disclosure of profit or loss for the period, starting the 64th term. In line with this, figures
calculated by retrospectively applying the change of the accounting policy are shown in the consolidated financial
statements prepared in accordance with Japanese GAAP for the 63rd term.
5. The Company split its shares by 100 for 1, effective July 1, 2013. Therefore, net assets per share or equity attributableto owners of parent per share, and net income per share or basic earnings per share were calculated on the assumptionthat the share split was implemented at the beginning of the 63rd term.

-2-(2) Filing company’s management benchmarks (non-consolidated)
Term

Accounting period

63rd term

64th term

65th term

66th term

67th term

Fiscal year
Fiscal year
Fiscal year
Fiscal year
Fiscal year
ended Nov. 30, ended Nov. 30, ended Nov. 30, ended Nov. 30, ended Nov. 30,
2012
2013
2014
2015
2016

Net sales

19,431,692
30,044,918
45,361,084
37,242,841
41,965,432(¥ thousand)Ordinary income
2,016,138
2,654,711
4,130,769
5,553,118
7,123,434(¥ thousand)Net income
1,198,413
1,656,236
2,439,091
3,906,732
4,734,766(¥ thousand)Capital stock
5,454,673
6,421,392
6,421,392
6,421,392
6,421,392(¥ thousand)Total number ofshares issued
456,840
48,284,000
48,284,000
48,284,000
48,284,000(Shares)
Net assets
25,699,023
29,015,893
31,131,670
34,478,314
38,455,373(¥ thousand)Total assets
61,460,079
67,207,256
76,218,316
88,071,296
114,085,085(¥ thousand)Net assets per share
562.54600.94644.76714.06795.50(¥)
Dividends per share(¥)
600.00
8.00
12.00
16.00
22.00
[Interim dividends per share]
[–]
[–]
[–]
[–]
[–]
(¥)
Net income per share
26.23
35.54
50.52
80.91
98.06
(¥)
Net income per share
–
–
–
－
－
(diluted)(¥)
Equity ratio
41.8
43.2
40.8
39.1
33.7
(%)
Return on equity (ROE)
4.8
6.1
8.1
11.9
13.0
(%)
Price earnings ratio (PER)
13.67
21.86
14.25
9.36
8.47
(Times)Dividend payout ratio
22.9
22.5
23.8
19.8
22.4
(%)
Number of employees[Separately, average number
116
120
131
140
152
of temporary employees]
[–]
[–]
[–]
[–]
[–]
(Person)Notes: 1. Net sales do not include consumption taxes.
2. Net income per share (diluted) for the 63nd term to the 65th term is not presented because there were no potential
shares. Net income per share (diluted) for the 66th term and the 67th term are not presented because there were no
potential shares that have dilutive effects.
3. The accounting policy has been changed in order to make more appropriate disclosure of profit or loss for the period,
starting the 64th term. In line with this, figures calculated by retrospectively applying the change of the accounting
policy are shown in the financial statements for the 63rd term.
4. The Company split its shares by 100 for 1, effective July 1, 2013. Therefore, net assets per share and net income pershare were calculated on the assumption that the share split was implemented at the beginning of the 63rd term.
However, the total number of shares issued and dividends per share do not take effects of the share split-up into
account.

-3-

2. History
Date

Details of change

February

1950

April
June
May
July
March

1952
1964
1968
1969
1973

March
April
October
September
March
April
December
December

1983
1986
1994
1995
1996
1996
1996
1997

July
February

1999
2001

March

2001

April
2001
November 2001

December 2001
August2002

DecemberFebruary
September
December

2002
2004
2004
2004

March

2005

April

2005

September
OctoberNovember
September

2005
2006
2006
2007

September
September
January
December
March

2009
2011
2012
2012
2013

November 2014

Established as Yukari Kogyo Co., Ltd. with purpose of engaging in restaurant business at location of 514
Oaza Oita, Oita-shi, Oita Prefecture, Japan (Capital: ¥500,000)
Moved head office to Kameido, Koto-ku, Tokyo
Added real estate trading, brokerage, rental and management businesses to scope of business purpose
Moved head office to Sotokanda, Chiyoda-ku, Tokyo
Changed trade name to Yukari Co., Ltd.
Obtained license of building lots and buildings transaction business (License Number: Governor ofTokyo (1) No. 24043)
Changed trade name to Tosei Building Co., Ltd.
Moved head office to Iwamoto-cho, Chiyoda-ku, Tokyo
Started sales of condominiums of “THE Palms” series
Established Kanda Awaji-cho Building Co., Ltd.
Changed trade name to Tosei Fudosan Co., Ltd.
Launched revitalization businessMoved head office to Kanda Awaji-cho, Chiyoda-ku, Tokyo
Launched contract work, including repair and restoration, incidental to building management businessupon obtaining license of specified construction business (License Number: Governor of Tokyo (Special9) No. 107905)
Started sales of detached houses of “ Palms Court” series
Launched asset management business upon registering general real estate investment advisory business(Registration Number: Minister of Land, Infrastructure, Transport and Tourism No. 127)
Merged with Kabushiki Kaisha. Konmasa Shoten, Nihon Kogyo Jutaku Kabushiki Kaisha. and Hidaka
Kogyo Kabushiki Kaisha. by absorption-type merger using LBO (leveraged buyout) technique
Registered first-class architectural firm (Registration Number: Governor of Tokyo No. 46219)
Span off Building Management Division engaged in building management services and transferred it toTosei Community Co., Ltd. (currently consolidated subsidiary Tosei Community Co., Ltd., Japanesename of which has changed with English name unchanged)
Established Securitization Business Division to realize full-scale entry into real estate securitization
business
Structured “Argo Fund,” a private placement fund investing in trust beneficiary rights in rental
condominiums, as our first real estate investment fund
Merged with our subsidiary Kanda Awaji-cho Building Co., Ltd. by absorption-type merger
Registered shares as over-the-counter securities at Japan Securities Dealers Association
Obtained license of real estate specified joint enterprise (License Number: Governor of Tokyo No. 58)
Cancelled registration as over-the-counter securities at Japan Securities Dealers Association and listed
shares on Jasdaq Securities Exchange (later delisted shares in January 2008)
Established Tosei Revival Investment Co., Ltd. (currently consolidated subsidiary Tosei Revival
Investment Co., Ltd., Japanese name of which has changed with English name unchanged)
Made Tosei Community Co., Ltd. (currently consolidated subsidiary Tosei Community Co., Ltd.,
Japanese name of which has changed with English name unchanged) a consolidated subsidiary byacquiring its shares
Established Tosei REIT Advisors, Inc. (currently consolidated subsidiary Tosei Asset Advisors, Inc.)
Changed trade name to Tosei Corporation and moved head office to Toranomon, Minato-ku, Tokyo
Listed shares on Second Section of Tokyo Stock Exchange
Registered type II financial instruments business and investment advisory and agency business(Registration Number: Director-General of Kanto Local Finance Bureau (Kinsho) No. 898)
Launched “Restyling business” as a new business model of revitalization business
Listed shares on First Section of Tokyo Stock Exchange
Established Tosei Singapore Pte. Ltd.
Established NAI TOSEI Japan, Inc. (Liquidation completed on August 2016)
Listed shares on Main Board of Singapore Exchange
Tosei Reit Investment Corporation, which is managed by Tosei Asset Advisors, Inc., a consolidated
subsidiary of Tosei Corporation, listed shares on Tokyo Stock Exchange

December

2015

Made Urban Home Corporation a consolidated subsidiary by acquiring its shares

February

2016

Established Tosei Hotel Management Co., Ltd.

-4-

3. Business description
The Tosei Group is composed of Tosei Corporation (“Tosei” or the “Company”) and 12 subsidiaries(including 11 consolidated subsidiaries). Its main businesses are the Revitalization Business, the Development
Business, the Rental Business, the Fund and Consulting Business, and the Property Management Business.
The operations of each business segment and the main subsidiaries and/or affiliates conducting those
operations are as follows.
Segment
Revitalization
Business

Development
Business

RentalBusiness

Operations
The Tosei Group acquires, through diverse means (*1), office buildings,
commercial facilities, apartments and other properties whose asset value has
declined, boosts their value though “value-up plans” (*2) judged to best matchthe characteristics of the properties’ areas and tenant requirements, and sells
them as revitalized real estate to buyers including investors, real estate funds
and individual business entities that acquire real estate for private use. In the“Restyling Business,” the Group acquires income-generating condominiums andsells their units to end-users after boosting the value of common and private
areas by renovation.
The Tosei Group’s “value-up” activities go beyond just renewing properties andinvolve realizing comprehensive regenerations of their values. This put a focus
on not only improving the convenience and functionality of properties but also
providing satisfaction to owners and giving end users a sense of pride.
(*1) The Company carries out the acquisition of superior real estate through abroad range of means that include not only buying and selling actual realestate, but also acquisitions through the means of “real estate M&A”
where real estate held by companies with real estate holdings and by realestate business operators is acquired through M&A, and through realestate collateralized loans and rights adjustment for substituteperformance real estate.
(*2) The Company’s “value-up plans” consist of the three primary components
of improved designs to refurbish/renovate internal and external elementsthat have deteriorated or become obsolete, enhanced security functions,etc., to increase the security and functionality of facilities, andincorporating eco-friendly designs and equipment that take theenvironment into consideration, in addition to improved profitability
through conversion projects, vacancy countermeasures, rent increases, etc.
In the main districts of Tokyo, which form the Tosei Group’s core operating
area, there is a mixture of needs for office, commercial and residential space andother uses, and these different uses create significant differences between land
values. Tosei verifies the characteristics of land it acquires including area, shape,
intended purpose, relevant needs, rent, and selling price. Based on this, Tosei
carries out development and new construction to maximize the value of the land,
and then sells whole buildings or individual units.
The Group is able to respond to diverse needs by developing office buildings,
commercial buildings (T’s BRIGHTIA series) and mixed-use buildings, hotels,
condominiums (THE Palms series), as well as detached houses (THE Palms
Court series and Comodo Casa series). Once development is complete or tenants
have been found, the properties are sold to buyers including investors, real estate
funds, and end-users.
The Tosei Group has expanded the scope of its business primarily in the main
districts of Tokyo by acquiring office buildings, condominiums, stores andparking lots, and renting them out to end-users and others.
As a landlord, the Tosei Group is capable of swiftly gathering accurate
information on tenant needs to further enhance “value-up plans” by reflecting
these needs.

-5-

Main
Companies
Tosei
Corporation
Tosei
RevivalInvestment
Co., Ltd.

Tosei
Corporation
Urban
Home
Corporation

Tosei
Corporation

Fund andConsulting
Business

Property
Management
Business

The Tosei Group conducts business as a type II financial instruments businessas well as an investment advisory and agency business and an investment
management business as provided for in the Financial Instruments andExchange Act.
Specifically, in addition to providing Tosei Reit Investment Corporation’s asset
management services, the Tosei Group also provides services such as selling andbrokering trust beneficiary rights, and management of income-generating
properties as asset management services for real estate funds. Also, the Tosei
Group provides consulting services and real estate brokerage related to corporate
real estate held by business entities.
This business carries out building and equipment management, and security(building maintenance) for office buildings, apartments, hotels, commercial
facilities, and educational facilities; owner proxy services, tenant management,
tenant solicitation, and building management (property management); andmanagement services for condominiums.
With respect to building maintenance, in order to streamline building owners’
operations through building maintenance, the management of equipment, etc.,
the business maintains the asset values of buildings by implementing precise
maintenance plans regarding the age-related deterioration of buildings.
With respect to property management, the business provides comprehensive
property management such as finding the most suitable tenants and proposing
medium- to long-term property renewals, with the aim of realizing maximized
owner profit.
In the management of condominium, this business makes full use of theknowhow it has accumulated over a number of years to provide total support tomanagement associations from their launch to helping them operate smoothly
once they are started up.

-6-

Tosei
Corporation
Tosei Asset
Advisors,
Inc

Tosei
CommunityCo., Ltd.

A schematic diagram of the businesses of the Tosei Group is shown below.

-7-4. Status of subsidiaries and associates
Name

Location

Capital orinvestment in
Major lines of businesscapital(¥ thousand)Holding rateof votingrights (%)

Relationship

Consolidated subsidiaries
Tosei Community Co., Ltd. Minato-ku,
Tokyo99,500Property managementbusiness

100.0

Tosei Asset Advisors, Inc.

Minato-ku,
Tokyo100,000

Fund and consulting
business

100.0

Tosei Revival Investment
Co., Ltd.

Minato-ku,
Tokyo50,000Real estate consulting
business

100.0

Urban Home Corporation

Machida-shi,Tokyo100,000

Development business

100.0

Kishino Corporation

Minato-ku,
Tokyo

10,000

Revitalization business

100.0

Kishino Real Estate
Corporation

Minato-ku,
Tokyo

10,000

Revitalization business

100.0

Four Big Corporation

Minato-ku,
Tokyo80,000

Revitalization business

100.0

Tosei Hotel Management
Co., Ltd.

Minato-ku,
Tokyo

10,000Hotel management

100.0

Tosei Chintai Hosho LLC

Minato-ku,
Tokyo

3,000

Property managementbusiness

100.0

Tosei Singapore Pte. Ltd.

Singapore

322,787

Real estate consulting
business

100.0

Crystal Sports Club

Minato-ku,
Tokyo

35,000Sports clubmanagement

100.0

Note:

Managing theCompany’s realestate holdings
and interlocking
directorate
Interlocking
directorate
Interlocking
directorate

Urban Home Corporation, Kishino Corporation, Kishino Real Estate Corporation and Four Big Corporation wereacquired in M&A transactions during the fiscal year under review, while Tosei Hotel Management Co., Ltd and Tosei
Chintai Hosho LLC were separately established, and were included in the scope of consolidation. Urban Next Co., Ltd
was acquired in an M&A transaction during the fiscal year under review, but as of October 1, 2016, it was merged byabsorption-type merger with Urban Home Corporation and thus was extinguished.
In addition, the consolidated subsidiary previously known as NAI Tosei Japan, Inc. changed its trade name on January
31, 2016 to Tosei international, Inc. and then as a result of the completion of liquidation on August 5, 2016, it was
excluded from the scope of consolidation.

-8-5. Status of employees(1) Consolidated companies(As of November 30, 2016)
Number of employees (Person)

Segment
Revitalization Business
Development Business
Rental Business
Fund and Consulting Business
Property Management Business
Other
Corporate (common)
Total

50
80
26
67
98
7
40

[–]
[2]
[–]
[–]
[118]
[35]
[–]

368

[155]

Notes: 1. The number of employees indicates the number of working employees, and the average number of temporary
employees during this fiscal year is given in brackets separately.
2. The number of employees in the “Corporate (common)” row is the number of those belonging to the administrative
department.
3.Compared with November 30, 2015, the number of employees increased by 67 people, largely as a result of
acquisitions through M&A transactions of Urban Home Corporation , which mainly operate real estate development
business.

(2) Filing company (Tosei)
Number of employees(Person)152

Average age (Year old)
37.1

Average years of service(Year)
5.5

Segment(As of November 30, 2016)
Average annual salary(¥ thousand)
7,746

Number of employees (Person)

Revitalization Business
Development Business
Rental Business
Fund and Consulting BusinessCorporate (common)

49
37
21
5
40

Total

152

Notes: 1. The number of employees indicates the number of working employees.
2. The average annual salary includes bonuses and surplus wages.
3. The number of employees in the “Corporate (common)” row is the number of those belonging to the administrative
department.

(3) Status of labor union
A labor union has not been formed. The Company maintains stable relations with its employees.

-9-

II.

Review of operations

1. Overview of operating results(1) Operating results
During the fiscal year ended November 30, 2016, the Japanese economy remained on a moderate recovery
track despite apparent weaknesses in exports and production. There is increasing uncertainty about the
future of the global economy due primarily to the impact from concern of slowdown in emerging-market
economies, the issue of Britain’s withdrawal from the EU, and the direction that economic measures willtake in the U.S., which will soon inaugurate a new president. However, a moderate recovery is expectedbacked by robust personal consumption amid steady improvement of the employment and income
environment going forward.
In the real estate industry where Tosei Group operates, domestic real estate transactions by listedcompanies and other such entities from January 2016 to August 2016 decreased 20% year on year to¥2.6665 trillion. Transactions decreased due to a fall in property supply available to the market in addition
to investors, particularly overseas investors, refraining from making real estate transactions involving
relatively expensive properties despite very high investment motivation for investors, both in Japan andoverseas, against a backdrop of a favorable financing environment (according to a survey by a private
research institution).
In the Tokyo metropolitan area condominium market, consumer buying motivation did not increase amid asurge in condominium prices and another postponement of the consumption tax hike, and sales companies
have been reducing property supply. The number of newly-built condominium units sold from January 2016
to October 2016 decreased 15.3% year on year, and contract rates for each month were, in general, at levels
below the 70% threshold from which market conditions are viewed as favorable. In projections by a private
research institution, the number of units sold in 2016 is forecast to be around 37,000, marking the first timein seven years that the number of units sold has fallen below 40,000 since 2009, when supply fell after the
Lehman Crisis.
In the Tokyo metropolitan area build-for-sale detached house market, housing starts from January 2016 to
October 2016 rose 8.7% year on year. There continues to be strong demand for detached housing, which isrelatively inexpensive compared to new condominiums, and robust demand is expected to continue going
forward (according to the Ministry of Land, Infrastructure, Transport and Tourism data).
In the office leasing market of Tokyo’s five business wards, demand from corporate businesses forrelocation and expansion continued to be strong and the vacancy rate was low in the mid-3% range. The
average asking rent continued to increase gradually and the price per tsubo (1 tsubo = 3.3m2) as of October
2016 was in the ¥18,400 range, rising 4.7% year on year (according to a survey by a private research
institution).
In the real estate securitization market, expansion of the market is continuing against a backdrop of afavorable financing environment. The total value of assets under management in the J-REIT market as of
October 31, 2016, (acquisition cost base) increased around ¥1.4 trillion year on year to around ¥15.2 trillion.
As of June 30, 2016, the total value of assets under management in the J-REIT market amounted to approx.
¥14.8 trillion and private placement funds amounted to approx. ¥13.9 trillion for a total market size of
approx. ¥28.7 trillion (according to a survey by a private research institution).
Amid this operating environment, in the Revitalization Business, the Tosei Group made steady progress inselling assets such as income-generating office buildings and apartments, while in the Development
Business, the Group pushed ahead with sales and development of commercial facilities and detached houses.
In addition, we proactively acquired income-generating properties and land for development as futuresources of income.
As a result, consolidated revenue for the fiscal year under review, totaled ¥49,818 million (up 15.8% year
on year), operating profit was ¥9,279 million (up 34.6%), profit before tax was ¥8,450 million (up 39.9%),
and profit for the year was ¥5,547 million (up 34.1%).

Performance by business segment is shown below.
Reportable segment classifications have been changed effective from the first quarter of the fiscal year
ending November 30, 2016, and in the following yearly comparisons figures for the previous fiscal year
have been recalculated according to the segment after such change.
Revitalization Business
During the fiscal year under review, the segment sold 32 properties it had renovated, including Kinshicho
Tosei Building (Sumida-ku, Tokyo), STABLE NAKANO (Nakano-ku, Tokyo), City Forum Kamihongo- 10 -

(Matsudo-shi, Chiba), Château Espoir Kokubunji (Kokubunji-shi, Tokyo), JPT Motomachi Building(Yokohama-shi, Kanagawa) and Hakusan Asanomi Building (Bunkyo-ku, Tokyo). In addition, the segment
sold 57 units in the Restyling Business, including Hilltop Yokohama Negishi (Yokohama-shi, Kanagawa),
Hilltop Yokohama Higashi Terao (Yokohama-shi, Kanagawa) and Renai Kamakura Ueki (Kamakura-shi,
Kanagawa). During the fiscal year under review, it also acquired a total of 54 income-generating officebuildings and apartments and eight land lots for renovation and sales purposes.
As part of the acquisition, our company acquired Kishino Coporation and Kishino Real Estate Corporation,companies hold income properties mainly in Toshima-ku, Tokyo, in the second quarter and acquired Four Big
Corporation, company hold income properties mainly in Nakano-ku, Tokyo, in third quarter, through M&Atransaction and converted them into consolidated subsidiaries.
As a result, revenue in this segment was ¥25,809 million (down 0.7% year on year) and the segment profit
was ¥4,001 million (down 4.1%).
Development Business
During the fiscal year under review, the segment sold new commercial facilities T’s BRIGHTIA Minami
Aoyama (Minato-ku, Tokyo) and T’s BRIGHTIA Tsunashima (Yokohama-shi, Kanagawa). In addition, thesegment focused on the sale of detached houses, for which there was firm demand. The segment sold 119
detached houses at such properties as THE Palms Court Kashiwa Hatsuishi (Kashiwa-shi, Chiba), THE Palms
Court Koshigaya Lake Town (Koshigaya-shi, Saitama), THE Palms Court Mitaka Osawa (Mitaka-shi, Tokyo),
THE Palms Court Hashimoto (Sagamihara-shi, Kanagawa) and THE Palms Court Kitakoiwa (Edogawa-ku,
Tokyo). During the fiscal year under review, it also acquired five land lots for detached housing projects, one
land lot for condominium and three land lots for commercial facility projects.
From the three months ended February 29, 2016, the segment embarked on efforts to enhance acquisitionand sales networks in the outskirts of Tokyo and the Kanagawa area, facilitated by the Company making Urban
Home Corporation, detached house sales and custom home construction company based in Machida-shi, Tokyo,
a consolidated subsidiary.
As a result, revenue in this segment was ¥13,138 million (up 98.9% year on year) and the segment profit
was ¥3,674 million (up 586.8%).
Rental Business
During the fiscal year under review, while the segment sold 21 buildings of its inventory assets held forleasing purposes, it newly acquired 51 properties including income-generating office buildings and apartments.
In addition, the segment made efforts to lease vacancies out following acquisitions and also focused on leasing
activities for its existing non-current assets and inventory assets.
As a result, revenue in this segment was ¥5,282 million (up 25.4% year on year) and the segment profit was¥2,389 million (up 33.0%).
Fund and Consulting Business
During the fiscal year under review, while ¥74,462 million was subtracted from the balance of assets undermanagement (Note), due mainly to property dispositions by funds, ¥100,856 million was added to the balanceof assets under management ¥421,792 for the end of the previous fiscal year, due mainly to new asset
management contracts of large projects the segment obtained. The balance of assets under management as ofNovember 30, 2016, was ¥448,186 million. The acquisition of such large project contracts increased asset
management fees and contributed to revenue.
As a result, revenue in this segment was ¥2,302 million (down 5.6% year on year) and the segment profit
was ¥951 million (down 35.0%).
(Note) The balance of assets under management includes the balance of assets that were subject toconsulting contracts, etc.
Property Management Business
During the fiscal year under review, the segment worked to win new contracts and maintain existing
contracts. Consequently, the total number of properties under management was 594 as of November 30, 2016,an increase of 47 properties from November 30, 2015, with that total comprising 375 office buildings, hotel,
schools and other such properties, and 219 condominiums and apartments.
As a result, revenue in this segment was ¥2,944 million (down 4.1% year on year) and segment profit was¥141 million (down 3.8%).
OthersDuring the fiscal year under review, revenue in this segment was ¥340 million (down 51.0% year on year)- 11 -

and the segment loss was ¥17 million (in comparison with segment profit of ¥178 million in the previous fiscal
year).

(2) Cash flows
Cash and cash equivalents (hereinafter “cash”) as of November 30, 2016 totaled ¥21,640 million, an
increase of ¥2,849 million compared with November 30, 2015.
The cash flows for the fiscal year under review and factors contributing to those amounts are as follows:

Cash Flows from Operating Activities
Net cash used in operating activities totaled ¥7,472 million (up 68.2% year on year). This is mainly due toprofit before tax of ¥8,450 million, as well as an increase in inventories of ¥15,971 million, which was a resultof property acquisitions in the Revitalization Business and Development Business, and income taxes paid of¥2,297 million.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥8,193 million (net cash provided by investing activities totaled¥481 million in the previous fiscal year). This is primarily due to purchases of investment properties ¥1,743
million, payments of loans receivable ¥2,935 million and purchase of investments in subsidiaries resulting inchange in scope of consolidation totaling ¥3,297 million.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled ¥18,522 million (up 178.1% year on year).
This mainly reflects ¥23,866 million in the repayments of non-current borrowings, ¥ 926 million in interest
expenses paid and ¥771 million in cash dividends paid, despite ¥42,442 million in proceeds from non-current
borrowings.
(3) Differences between major items in consolidated financial statements prepared under IFRS andequivalent items in consolidated financial statements that would have been prepared in accordance with
the Ordinance on Consolidated Financial Statements of Japan (excluding Chapters 7 and 8)
Accounting treatment for retirement benefit obligations
Under IFRS, an entity is required to recognize actuarial gains and losses that arose in other comprehensive
income and does not recycle those actuarial gains and losses subsequently.
Due to this effect, retirement benefit costs in the previous fiscal year and the fiscal year under review
decreased by ¥6,222 thousand and ¥6,795 thousand, respectively, compared with those under Japanese GAAP.
Accounting treatment for accrued compensated absences payable
Under IFRS, the estimated amount of paid absences of the Company and some subsidiaries is recorded as
obligations.
Due to this effect, accrued compensated absences payable (selling, general and administrative expenses) inthe previous fiscal year and the fiscal year under review increased by ¥981 thousand and ¥8,677 thousand,respectively, compared with those under Japanese GAAP.
Reclassification of presentation
While non-operating income and expense items other than financial income and expenses, and extraordinary
income and loss items are not included in operating income and expenses under Japanese GAAP, these items
are included in operating income and expenses under IFRS.

- 12 -

2. Status of production, orders received and sales(1) Actual production
As the Tosei Group’s principle business activities are revitalization, development, rental, fund and consulting
and property management, it is difficult to define “actual production.” Accordingly, the Company does notreport actual production.
(2) Actual orders received
Although subsidiaries of the Company receive orders for production, the Company does not report actual
orders received because its amount is immaterial.
(3) Actual sales
Consolidated actual sales for each segment in the fiscal year under review are shown below.
Segment

Fiscal year ended November 30, 2016

Comparison withthe previous fiscal year
(%)
(0.7)
98.9
25.4
(5.6)
(4.1)
(51.0)
15.8

Amount (¥ thousand)
Revitalization Business
25,809,872
Development Business
13,138,715
Rental Business
5,282,131
Fund and Consulting Business
2,302,732
Property Management Business
2,944,458
Other340,203
Total
49,818,113
Notes: 1. Transactions between segments were eliminated.
2. The amounts of sales to each major customer and the ratios of the said sales to total sales in the two most recent fiscal
years are as follows.

Customer

Fiscal year ended
November 30, 2015
Amount (¥ thousand)Fiscal year ended
November 30, 2016

Ratio (%)

Tosei Reit Investment
10,791,865
Corporation
3. The above amounts do not include consumption taxes.

25.1- 13 -

Amount (¥ thousand)
7,342,359

Ratio (%)
14.7

3. Issues to be addressed(1) Description of present issues to be addressed

The Group is aiming to establish a firm management structure that is able to withstand any changes in
the market environment, and set the “vision of revenue ¥100 billion” a medium- to long-term vision forthe 2020 fiscal year. The fiscal year ending November 30, 2017, is the final year of the current mediumterm management plan and we are working toward realizing the 2020 concept that is the Company’s aim.
Based on future forecasts for the real estate investment market going forward and the housing market
targeting end users, we recognize that formulating a more practical new medium-term management planis an issue to be addressed.
(2) Basic policy regarding the persons who control decisions on the Company’s financial and business
policies
1) Contents of basic policy
The Company believes that the persons who control decisions on the Company’s financial and business
policies need to be persons who fully understand the details of the Company’s financial and business affairs
and the source of the Company’s corporate value and who will make it possible to continually andpersistently ensure and enhance the Company’s corporate value and, in turn, the common interests of its
shareholders.
The Company believes that ultimately its shareholders as a whole must make the decision on any
proposed acquisition that would involve a change of control of the Company. Also, the Company will not
reject a large-scale acquisition of the shares in the Company if it will contribute to the corporate value of theCompany and, in turn, the common interests of its shareholders.
Nonetheless, there are some forms of large-scale acquisition of shares that benefit neither the corporate
value of the target company nor the common interests of its shareholders including those with a purpose thatwould obviously harm the corporate value of the target company and the common interests of its
shareholders, those with the potential to substantially coerce shareholders into selling their shares; those that
do not provide sufficient time or information for the target company’s board of directors and shareholders toconsider the details of the large-scale acquisition, or for the target company’s board of directors to make analternative proposal and those that require the target company to discuss or negotiate with the acquirer inorder to procure more favorable terms for shareholders than those presented by the acquirer.
It is particularly necessary and essential for the persons who make decisions on the Company’s financial
and business policies to (i) maintain the system under which the Company internally covers the six businessfields (Note) that allow the “integration of real estate and finance,” which leads to maximization of thepotential of the Company group, (ii) maintain employees who support that system with knowledge andexperience specializing in real estate and finance, (iii) maintain the Company’s trust in the real estateindustry that has been built up over a long period of time based on the establishment of the ability andinformation networks supporting various value creation technologies, and (iv) master knowhow that enables
comprehensive business. Unless the acquirer of a proposed large-scale acquisition of the shares in the
Company understands the source of the corporate value of the Company as well as the details of financial andbusiness affairs of the Company and would ensure and enhance these elements over the medium-to-long term,
the corporate value of the Company and, in turn, the common interests of its shareholders would be harmed.
The Company believes that persons who would make a large-scale acquisition of the shares in the
Company in a manner that does not contribute to the corporate value of the Company or the common
interests of its shareholders would be inappropriate as persons that control decisions on the Company’s
financial and business policies. The Company believes that it is necessary to ensure the corporate value of theCompany and, in turn, the common interests of its shareholders by taking necessary and reasonablecountermeasures against a large-scale acquisition by such persons.
2)

Overview of special measures to realize the basic policy
Under the new medium-term management plan called “Advancing Together 2017” (the targeted period of theplan is three years from December 2014 to November 2017), the Company group aims to further strengthen
the business infrastructure by expanding and developing of the existing six business (Note) areas andconsidering its advance to peripheral areas of business, to build optimum corporate governance for expansionof the Company group and increase of the employees which are entailed in expansion of the business, and toestablish efficient organization management structure. Further, the Company group will emphasize thecultivation of the most valuable asset of the Company group, i.e. the human resources to increase satisfactionof the employees of the Company group. As the Basic Policy in the new medium-term management planfor the further growth of the Company group, the Company group is determined to establish the original anddistinctive “Tosei brand” by providing products ensuring high customer satisfaction and high-quality services.
- 14 -

Based on these policies, the Company group is dedicated to redefine existing ideas with the spirit ofchallenge and advance as the risk-taking group of companies, to aim “creation of new values and sensation as
the truly globally-minded and promising professionals”.
The Company group has previously appointed multiple outside directors (two members), invited all Audit& Supervisory Board Members (four members) from outside the company, and has notified all of the above
six outside directors and Audit & Supervisory Board Members as “independent directors and/or Audit &Supervisory Board Members” in accordance with the “Principles of Corporate Governance for Listed
Companies” of the Tokyo Stock Exchange. Also, the Company group has reinforced the business executionfunction by the introduction of the executive officer system, and the establishment of the corporate
governance board, and will continue to endeavor to further strengthen corporate governance. Specifically,
the Company group will focus on putting into practice actions based on a high-level awareness of compliancethrough raising awareness from the level of “role model” to that of “ideal” in accordance with theCompliance Principles of the Company, thorough implementation of risk management by correctly
understanding and analyzing risks involved in corporate activities, continuous performance of accountability
to various stakeholders including investors by promptly publicly disclosing correct corporate information
under the spirit of fair disclosure, and other efforts for strengthening corporate governance.
3)

Overview of measures to prevent decisions on the Company’s financial and business policies from being
controlled by persons deemed inappropriate under the basic policy
The plan is a measure to prevent decisions on the Company’s financial and business policies from being
controlled by persons deemed inappropriate under the above basic policy, and its objective is to ensure andenhance the Company’s corporate value and, in turn, the common interests of its shareholders.
The plan stipulates procedures that must be followed in any cases of purchase, etc. of share certificates,etc. of the Company ((i) a purchase or other acquisition that would result in the holding ratio of sharecertificates, etc. (kabuken tou hoyuu wariai)of a holder (hoyuusha) totaling at least 20% of the sharecertificates, etc. issued by the company; or (ii) a tender offer (koukai kaitsuke) that would result in the party
conducting the tender offer’s ownership ratio of share certificates, etc. and the ownership ratio of sharecertificates, etc. of a person having a special relationship totaling at least 20% of the share certificates, etc.
issued by the Company; or (iii) any similar action to (i) or (ii) above)
In practical terms, the acquirer must provide the Company a statement of undertaking (acquirer’s
statement) and an acquisition document that includes essential information, etc. before making theacquisition, etc.
Upon receiving these documents, the independent committee, while obtaining independent expert advice,
will conduct its consideration of the acquisition terms; collection of information on materials such as the
management plans and business plans of the acquirer and the Company’s board of directors and comparison
thereof; consideration of any alternative plan presented by the Company’s board of directors, and the like;and discussion and negotiation with the acquirer. The Company will disclose information in a timely manner.
When (i) the acquisition is not in compliance with the procedures prescribed in the plan or (ii) it threatens
to cause obvious harm to the corporate value of the Company, and, in turn, to the common interests ofshareholders, (iii) and it is reasonable to implement the gratis allotment of stock acquisition rights, theindependent committee will recommend the implementation the gratis allotment of stock acquisition rights to
the Company’s board of directors. In addition, when a meeting of shareholders is convened to confirm theintent of the Company’s shareholders, the Company’s board of directors will respond to the shareholders’intent. These stock acquisition rights will be allotted with an exercise condition that does not allow, as a
general rule, the acquirer to exercise the rights and an acquisition provision to the effect that the Company
may acquire the stock acquisition rights in exchange for shares in the Company from persons other than theacquirer. The Company’s board of directors, in exercising its role under the Companies Act, will pass a
resolution relating to the implementation or non-implementation of the gratis allotment of stock acquisitionrights, respecting the recommendation of the Independent Committee to the maximum extent. In addition,
when a meeting of shareholders is convened to confirm the intent of the Company’s shareholders, theCompany’s board of directors will respond to the shareholders’ intent. If the procedures for the plan havecommenced, the acquirer must not effect an acquisition until and unless the Company’s board of directors
resolves not to trigger the plan. The effective period of the plan expires at the conclusion of the ordinary
general meeting of shareholders for the last fiscal year ending within three years after the conclusion of the65th Ordinary General Meeting of Shareholders. However, if, before the expiration of the effective period,
the Company’s board of directors resolves to abolish the plan, the plan will be abolished at that time.

4)

Decisions by the Company’s board of directors regarding specific measures and reasons therefor
Company’s board of directors deems that the new medium-term management plan and other measures suchas the efforts to enhance the corporate value and the strengthening of corporate governance were established- 15 -

as specific measures to continuously and sustainably enhance the corporate value of the Company and, inturn, the common interests of its shareholders, and that these are truly in accordance with the basic policy,
not detrimental to the common interests of the Company’s shareholders and not for the purpose ofmaintaining the positions of the Company’s corporate officers.
In addition, the Company’s board of directors deems that the plan is not detrimental to the common
interests of the Company’s shareholders, not for the purpose of maintaining the positions of the Company’s
corporate officers, and in accordance with the basic policy based on the following reasoning: approval fromthe general meeting of shareholders must be obtained for its renewal; its effective period is stipulated as a
maximum of three years and it can be abolished at any time by the resolution of the Company’s board of
directors; an independent committee, which is composed of members who are independent from the
management of the Company, has been established; in the event that the plan’s countermeasures are triggered,
the Company must obtain a resolution by the independent committee when making a decision for triggering
the countermeasures in the plan, and the plan fully satisfies the three principles set out in the Guidelines
Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Value andShareholders’ Common Interests released by the Ministry of Economy, Trade and Industry and the Ministryof Justice on May 27, 2005.
Note: Reportable segment classifications have been changed effective from the first quarter of the fiscal
year ending November 30, 2016. For details, please refer to “6. Segment information” in “V.
Accounting 1. Consolidated financial statements, etc. (1) Consolidated financial statements [Notes toConsolidated Financial Statements]”- 16 -

4. Business and other risks
Risks that have the potential to affect the performance, share price and financial position of the Tosei Group
include, but are not limited to, the issues discussed below. Forward-looking statements are based on Tosei Group
judgments as of November 30, 2016. The Tosei Group maintains a policy of recognizing the potential for risks tooccur and working to preclude them or manage them if they arise. Furthermore, the information below is notintended to be an exhaustive list of all risks associated with the businesses of the Tosei Group or investment in the
Company’s shares.

(1) Trends in economic conditions
The demand for office buildings and commercial facilities owned by the Tosei Group may be affected byeconomic trends, and willingness of customers buying houses to buy is easily influenced by economic
trends and the resulting employment situation as well as by a decline in land prices stemming from adownturn in the real estate market or other cause. Due to these factors, when worsening of domestic andforeign economic conditions results in decreased motivation to invest in real estate, a drop in real estatetransactions, a rise in the vacancy rate or a decline in rent, there may be an impact on the Tosei Group’s
operating results and financial position.
(2) Disasters, etc.
The occurrence of a natural disaster such as a major earthquake in Tokyo, which is believed likely tohappen in the future, destructive storm or flood, or a human disaster such as war, terrorism or fire, could
cause substantial losses in the values of the real estate the Tosei Group invests in, manages, develops andcontrols, and therefore has the potential to affect the Tosei Group’s operating results and financial position.
(3) Dependency on interest-bearing debt and interest rate trend
The Tosei Group procures debt financing, primarily from financial institutions, on a project-by-project basis, tofund expenses associated with business activities including acquisition of land and buildings and construction.
Consequently, the ratio of interest-bearing debt to total assets is consistently at a certain level. Increases ininterest rates increase fund procurement costs, and therefore have the potential to affect the Tosei Group’s
operating results and financial position.
In addition, lump-sum repayments due to conflicts with financial covenants on some loans, delays of projectsales, and lower-than-expected sales revenues also have the potential to affect the operating results andfinancial position of the Tosei Group.
(4) Legal regulations
1) Legal regulations
In addition to the regulations in the Companies Act and the regulations in the Financial Instruments andExchange Act that apply to listed companies, the main legal regulations pertaining to the businesses of theTosei Group are as follows.
If these legal regulations are strengthened in the future, the cost of legal compliance measures could
increase.
Main legal regulations• Building Lots and Buildings Transaction Business Act• National Land Use Planning Act• City Planning Act• Building Standards Act• Construction Business Act• Act on Architects and Building Engineers• Housing Quality Assurance Act• Act on Sales, etc. of Financial Products• Real Estate Specified Joint Enterprise Act• Trust Business Act• Act on Investment Trust and Investment Corporations• Act on Securitization of Assets• Real Estate Investment Advisory Business Registration Rules• Act on Assurance of Performance of Specified Housing Defect Warranty• Act on Prevention of Transfer of Criminal Proceeds• Act on Advancement of Proper Condominium Management• Act on Maintenance of Sanitation in Buildings- 17 -

• Security Services Act• Fire and Disaster Management Act• Act on the Rational Use of Energy• Money Lending Business Act2)Licenses and permits, etc.
The Tosei Group’s businesses have obtained the following related licenses and permits in accordance withthe laws listed above. As Tosei Group works to observe the current requirements imposed by administrative
laws and local ordinances, there has not been any issue that could result in the revocation of licenses or
permits. However, the business activities of the Group could profoundly be affected in the event thatrevocation of licenses or permits occurred or an administrative punishment such as suspension of operating
activities for a certain period is imposed due to violation of laws and regulations.
Moreover, if the Tosei Group’s business activities are restricted by the strengthening of the above
regulations or the introduction of new regulations, the operating results or financial position of the Group
could be affected.
Tosei Corporation
Name of licenseor permit

Authority

Content oflicense or
permitExpiration

Rescission, cancellationor other reasons

Real Estate Business
LicenseGovernor of
Tokyo

Tokyo
Governor’s
License (12)No. 24043

March 23,
2017

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)

Real Estate Investment
Advisory Business
Registration

Minister ofLand,
Infrastructure,
Transport andTourism

General–No.
127

February 28,
2021

When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the registration shall be
rescinded. (Article 30 of the Real Estate Investment
Advisory Business Registration Rules)

Specified Construction
Business License

Governor of
Tokyo

Tokyo
Governor’s
License(Special–24)
No. 107905

December 9,
2017

When a situation arises so that there is no fulltime officer
or employee in the company who has experience of being
engaged for five (5) years or more in specified
construction business, the permission shall be rescinded.
(Article 29 of the Construction Business Act)First Class Architect’s
Office License

Governor of
Tokyo

Tokyo
Governor’s
Registration
No. 46219

April 9, 2021

When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification of
the first-class registered architect, etc. become applicable,
the registration shall be rescinded. (Article 26 of the Act
on Architects and Building Engineers)

Real Estate Specific
Joint Enterprise Permit

Governor of
Tokyo

Tokyo
Governor, No.
58–

When license of the building lots and buildings transaction
business has been rescinded, or the provisions of causes
for disqualification of officers, etc. become applicable, theauthorization shall be rescinded. (Article 36 of the Real
Estate Specified Joint Enterprise Act)

Registered Financial
Instrument Business(Type 2 Financial
Instrument Business,
Advisor and Agency)

Financial
Services
AgencyKanto Financial
Bureau Chief(Financial
Instruments)
No. 898–

When the registration has been made through wrongfulmeans, or there is a risk of insolvency in the light ofcapital or operation or the status of property, theregistration shall be rescinded. (Article 52 of the Financial
Instruments and Exchange Act)

Tosei Asset Advisors, Inc.
Name of licenseor permit

Authority

Real Estate Business
LicenseGovernor ofTokyo

Content oflicense or
permitTokyo
Governor’s
License (3)No. 85736

Expiration

Rescission, cancellationor other reasons

April 7, 2021

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)- 18 -Name of licenseor permit

Authority

Content oflicense or
permitExpiration

Rescission, cancellationor other reasons

Real Estate Specific
Joint Enterprise Permit

Financialservices
agencyCommissioner,
Minister ofLand,
Infrastructure,
Transport andTourism

Financialservices agency
Commissioner,
Minister ofLand,
Infrastructure,
Transport andTourism No.70－

When license of the building lots and buildings transaction
business has been rescinded, or the provisions of causes
for disqualification of officers, etc. become applicable, theauthorization shall be rescinded. (Article 36 of the Real
Estate Specified Joint Enterprise Act)

Registered Financial
Instrument Business(Investment
Management Business,
Type 2 Financial
Instrument Business,
Advisor and Agency)

Financial
Services
AgencyKanto Financial
Bureau Chief(Financial
Instruments)
No. 363–

When the registration has been made through wrongfulmeans, or there is a risk of insolvency in the light ofcapital or operation or the status of property, theregistration shall be rescinded. (Article 52 of the Financial
Instruments and Exchange Act)

License fordiscretionary proxy inrealty trading

Minister ofLand,
Infrastructure,
Transport andTourism

Minister ofLand,
Infrastructure,
Transport andTourism No. 52–

When the authorization has been obtained throughwrongful means, or damages have been caused to anotherparty in the course of business, the authorization shall be
rescinded. (Article 67-2 of the Building Lots and Buildings
Transaction Business Act)

Tosei Community Co., Ltd.
Name of licenseor permit

Authority

Content oflicense or
permitExpiration

Rescission, cancellationor other reasons

Real Estate Business
LicenseGovernor of
Tokyo

Tokyo
Governor’s
License (4) No.
80048

September 28,
2021

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)

General Construction
Building License

Governor of
Tokyo

Tokyo
Governor’s
License(General–24)
No. 119534

March 10,
2018

When a situation arises so that there is no fulltime officer
or employee in the company who has experience of being
engaged for five (5) years or more in general construction
business, the permission shall be rescinded. (Article 29 of
the Construction Business Act)

Specified Construction
Business License

Governor of
Tokyo

Tokyo
Governor’s
License(Special–24)
No. 119534

March 10,
2018

When a situation arises so that there is no fulltime officer
or employee in the company who has experience of being
engaged for five (5) years or more in specified
construction business, the permission shall be rescinded.
(Article 29 of the Construction Business Act)First Class Architect’s
Office License

Governor of
Tokyo

Tokyo
Governor’s
Registration
No. 49526

January 14,
2019

When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification of
the first-class registered architect, etc. become applicable,
the registration shall be rescinded. (Article 26 of the Act
on Architects and Building Engineers)

Condominium
Management
Business

Minister ofLand,
Infrastructure,
Transport andTourism

Minister ofLand,
Infrastructure,
Transport andTourism (3)No. 030488

May 21, 2017

When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the registration shall be
rescinded. (Article 83 of the Act on Advancement of
Proper Condominium Management)

Building Environmental
Health Comprehensive
Management Company

Governor of
Tokyo

Tokyo
Governor’s
License(Comprehensive 19) No. 273

October 3,
2019

When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the registration shall be
rescinded. (Article 12-4 of the Act on Maintenance ofSanitation in Buildings)

Security Service
LicenseTokyo Public
SafetyCommissioner

Security
Service Law
Authorization
No. 30002591

October 14,
2021

When the recognition has been obtained through wrongfulmeans, or the provisions of causes for disqualification are
applicable, the recognition shall be rescinded. (Article 8 of
the Security Services Act)- 19 -

Tosei Revival Investment Co., Ltd.
Name of licenseor permit

Authority

Real Estate Business
LicenseGovernor ofTokyo

Money Lending
Business Registration

Governor ofTokyo

Content oflicense or
permitExpiration

Rescission, cancellationor other reasons

Tokyo
Governor’s
License (2)No. 88903

February 22,
2018

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)Tokyo
Governor, (3)No. 31311

March 16,
2019

When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification are
applicable, the registration shall be rescinded. (Article 246-5 of the Money Lending Business Act)

Urban Home Corporation
Name of licenseor permit

Authority

Real Estate Business
LicenseMinister ofLand,
Infrastructure,
Transport andTourism

Specified Construction
Business License

Governor ofTokyo

First Class Architect’s
Office License

Governor ofTokyo

Content oflicense or
permitMinister ofLand,
Infrastructure,
Transport andTourism (1)No. 9038
Tokyo
Governor’s
License(Special–26)
No.112893
Tokyo
Governor’s
Registration
No.54776

Expiration

Rescission, cancellationor other reasons

August 19,
2021

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)

March 24,
2020

When a situation arises so that there is no fulltime officer
or employee in the company who has experience of being
engaged for five (5) years or more in specified
construction business, the permission shall be rescinded.
(Article 29 of the Construction Business Act)
When the registration has been made through wrongfulmeans, or the provisions of causes for disqualification of
the first-class registered architect, etc. become applicable,
the registration shall be rescinded. (Article 26 of the Act
on Architects and Building Engineers)

June 24, 2018

Kishino Corporation
Name of license

Authorityor permit
Real Estate Business
LicenseContent of

Expiration

license or
Governor ofTokyo

permitTokyo
Governor’s
License (1)No.99269

Rescission, cancellationor other reasons

June 3, 2021

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)

Expiration

Rescission, cancellation

Kishino Real Estate Corporation
Name of license

Authorityor permit
Real Estate Business
LicenseContent oflicense or

Governor ofTokyo

permitTokyo
Governor’s
License (1)No.99270or other reasons
June 3, 2021

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)

Four Big Corporation
Name of license

Authorityor permit
Real Estate Business
LicenseContent of

Expiration

license or
Governor ofTokyo

permitTokyo
Governor’s
License (1)No.99828

Rescission, cancellationor other reasons

October 21,
2021- 20 -

When the license has been obtained through wrongfulmeans, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)(5) 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 ofholding, acquiring and selling assets, and therefore have the potential to affect the operating results andfinancial position of the Tosei Group.

(6) New businesses
The Tosei Group has acquired companies, established subsidiaries, and conducted other activities for the
purpose of launching new businesses such as a hotel business, expanding the existing businesses andothers. Since entry into these businesses and business performance after the entry involve various
uncertainties, the Tosei Group has established the internal management system, developed humanresources, obtained insurance, etc. on the assumption of all possible risks. However, there may be an
impact on the Tosei Group’s financial position and operating results, depending on occurrence of risks
beyond the assumption or changes in laws and regulations.

5. Important operational contracts, etc.
None

6. Research and development activities
None

7. Analysis of financial position, operating results and cash flows
Analysis of financial position, operating results and cash flows for the fiscal year ended November 30, 2016 is asfollows.
Forward-looking statements included in this section are based on information available to the Group’s
management as of November 30, 2016.
(1) Significant accounting policies and estimates
The financial statements of the Tosei Group are prepared in accordance with IFRS. For significant accounting
policies and estimates for the presentation of these consolidated financial statements, please refer to “3.
Significant accounting policies” and “4. Significant accounting estimates and judgments requiring estimates” in“V. Accounting, 1. Consolidated financial statements, etc., (1) Consolidated financial statements, Notes toConsolidated Financial Statements.”(2) Analysis of financial position
The consolidated financial position as of November 30, 2016 was as follows. Total assets increased 30.1%
compared with the end of the previous fiscal year to ¥121,276 million, liabilities rose 40.9% to ¥80,266 million,
and equity rose 13.2% to ¥41,010 million. The ratio of equity attributable to owners of parent to total assets
was 33.8%, compared with 38.9% at the end of the previous fiscal year.
Current assets
As of November 30, 2016, the balance of current assets was ¥92,592 million, an increase of ¥24,703 million
compared with the end of the previous fiscal year. This was mainly attributable to a ¥21,142 million increase ininventories because the acquisition of properties progressed at a steady pace in the Tosei Group’s mainstay
Revitalization Business and Development Business.
Non-current assets
As of November 30, 2016, the balance of non-current assets was ¥28,683 million, up ¥3,376 million comparedwith the end of the previous fiscal year. This was mainly due to a ¥2,942 million increase in investment
properties.
Current liabilities
As of November 30, 2016, the balance of current liabilities was ¥14,651 million, up ¥832 million comparedwith the end of the previous fiscal year. This was mainly due to a ¥709 million increase in current income tax
liabilities.
- 21 -

Non-current liabilities
As of November 30, 2016, the balance of non-current liabilities was ¥65,614 million, up ¥22,465 million
compared with the end of the previous fiscal year. This was mainly due to a ¥21,596 million increase in
Borrowings.
EquityAs of November 30, 2016, equity was ¥41,010 million, an increase of ¥4,781 million compared with the end of
the previous fiscal year. This was mainly due to a ¥4,792 million increase in retained earnings.
(3) Analysis of operating results
For the fiscal year under review, operating results were as follows. Revenue increased 15.8% year on year to¥49,818 million, profit before tax rose39.9% to ¥8,450 million, and profit for the year rose 34.1% to ¥5,547
million.
Revenue
In the fiscal year under review, revenue was ¥49,818 million, a increase of ¥6,811 million compared with theprevious fiscal year. For revenue by segment, please refer to “(1) Operating results” in “II. Review ofoperations, 1. Overview of operating results.”
Cost of revenue and gross profit
In the fiscal year under review, cost of revenue was ¥33,468 million, up ¥2,376 million compared with theprevious fiscal year.
As a result, gross profit was ¥16,349 million, an increase of ¥4,434 million compared with the previous
fiscal year.
The gross profit margin was 32.8%, up from 27.7% in the previous fiscal year.
Selling, general and administrative expenses and operating profit
In the fiscal year under review, selling, general and administrative expenses were ¥7,021million, an increase of¥1,922 million compared with the previous fiscal year. This was mainly due to a ¥660 million increase in sales
expenses accordance with revenue increase in development business and a ¥751 million increase in personnel
cost related to increase in employees caused by business expansion.
As a result, operating profit in the fiscal year under review was ¥9,279 million, an increase of ¥2,387
million compared with the previous fiscal year.
Profit before tax
In the fiscal year under review, finance income, which was comprised of interest and dividends income, was¥63 million, an increase of ¥40 million compared with the end of the previous fiscal year. Finance costs,
mainly interest expenses, were ¥892 million, an increase of ¥18 million compared with the end of the previous
fiscal year.
As a result, profit before tax in the fiscal year under review was ¥8,450 million, an increase of ¥2,409
million compared with the previous fiscal year.
Income tax expense and profit for the year
In the fiscal year under review, income tax expense were ¥2,902 million, an increase of ¥998 million comparedwith the previous fiscal year.
As a result, profit for the year was ¥5,547million, an increase of ¥1,411 million compared with the previous
fiscal year.

- 22 -

(4) Analysis of cash flows
For the cash flows for the fiscal year under review, please refer to “(2) Cash flows” in “II. Review of operations,
1. Overview of operating results.”
In addition, trends of cash-flow indicators are shown below.
Fiscal year ended
Nov. 30, 2014

Fiscal year ended
Nov. 30, 2015

Fiscal year ended
Nov. 30, 2016

Ratio of equity attributable to owners of parent
to total assets
(%)

40.5

38.9

33.8

Market value ratio of equity attributable toowners of parent to total assets

43.0

39.2

33.1

(%)

Interest-bearing debt to cash flow ratio(years)

117.3

－

－

Interest coverage ratio(times)0.3－－

Ratio of equity attributable to owners of parent
to total assets:
Market value ratio of equity attributable toowners of parent to total assets:
Interest-bearing debt to cash flow ratio:
Interest coverage ratio:

Equity attributable to owners of parent to total assets / Total assets
Market capitalization / Total assets
Interest-bearing debt /Cash flows
Cash flows / Interest expenses

Notes: 1. All indicators are calculated using consolidated financial figures.
2. Market capitalization is calculated based on the number of issued shares, excluding treasury shares.
3. The figures for cash flows employ net cash from operating activities.
4. Interest-bearing debt includes all debt recorded in the consolidated statement of financial position on whichinterest is paid.
5. Interest-bearing debt to cash flows ratio and interest coverage ratio are not presented for the consolidated fiscal
year ended November 30, 2015 and the consolidated fiscal year ended November 30, 2016 because net cash usedin operating activities was recorded in the consolidated statements of cash flows for the said fiscal year.

(5) Issue recognition of the management and future policies
The Group aspires to continue to be a group of companies that make a meaningful contribution to all theirstakeholders by promptly and accurately responding to changes in the management environment andcontinually carrying out business activities that enable the Group to achieve sound growth. To this end, it
recognizes the Group’s basic management policy is to strive to maintain the sound financial condition andsteadily enhance business results.
The Group is aiming to establish a firm management structure that is able to withstand any changes in themarket environment, and set the “vision of revenue ¥100 billion” a medium- to long-term vision for the 2020
fiscal year. The fiscal year ending November 30, 2017, is the final year of the current medium-term
management plan and we are working toward realizing the 2020 concept that is the Company’s aim. Based on
future forecasts for the real estate investment market going forward and the housing market targeting end users,
we recognize that formulating a more practical new medium-term management plan is an issue to be addressed.

- 23 -

III. Facilities
1. Outline of capital expenditures
In the fiscal year ended November 30, 2016, we made capital expenditures totaling ¥1,825 million. A major portionof this amount was due to acquisition of investment properties.
During the fiscal year under review, there were no material transactions related to the retirement or sale etc. of
facilities.

2. Main facilities(1) Filing company (Tosei)(As of November 30, 2016)
Book value (¥ thousand)
Office name
(Location)

Segment

Description

Head office(Minato-ku, Tokyo)

Supervisingadministration
facilities

Office facilities

Leasing properties(19 properties in
Chiyoda-ku, Tokyo,
etc.)

RentalRental Business buildings,
stores, etc.

Total

–

–

Number of
employees(Person)

Buildings
andstructures

Land(Size m2)

987,906

2,219,719(633.53)

54,341

3,261,967

152

5,936,445

14,063,160(32,930.88)

14,327 20,013,933－

6,924,352

16,282,879(33,564.41)

68,668 23,275,900

152

Other

Total

Note: The above amounts do not include consumption taxes.

(2) Domestic subsidiaries(As of November 30, 2016)
Book value (¥ thousand)Company
nameOffice name
(Location)

Segment

Leasing
Tosei
properties
Community (2 properties inCo., Ltd.
Arakawa-ku,
Tokyo, etc.)

Property
Management
Business

RentalBusiness

Tosei
RevivalInvestment
Co., Ltd.

Leasing
properties(2 properties in
Arakawa-ku,
Tokyo, etc.)

Urban
Head officeHome(Machida-shi,
Corporation Tokyo)

Number of
employees(Person)

Buildings
andstructures

Land(Size m2)

Apartment

163,705

331,755(657.47)－

495,461－

Apartment ,Rentalbuilding

376,855

496,030(915.95)

39

872,926－

67,921

185,346(420.71)

18,850272,118

43

Description

Development Officebusinessfacilities

Note: The above amounts do not include consumption taxes.

3. Plans for new installation and retirement of facilities
None- 24 -

Other

Total

IV. Filing company
1. Information on the Company (Tosei)’s shares, etc.
(1) Total number of shares authorized, etc.
1) Total number of shares authorized
Class

2)

Total number of shares authorized (Share)

Ordinary shares

150,000,000

Total

150,000,000

Number of shares issued
Number of sharesissued(Share; as of
Nov. 30, 2016)

Number of sharesissued(Share; as ofthe date of filing:
Feb. 27, 2017)

Name of financial instruments
exchange where shares of Tosei aretraded or name of authorized
financial instruments firms
association where Tosei is registered

Details

Ordinary shares

48,284,000

48,284,000

Tokyo Stock Exchange(First Section) andMain Board of Singapore Exchange

Share unit number:
100 shares

Total

48,284,000

48,284,000

–

–

Class

(2) Status of stock acquisition rights
Stock acquisition rights issued pursuant to the Companies Act are as follows:
Resolution of the meeting of the Board of Directors held on October 28, 2015
As of November 30, 2016
Number of stock acquisition rights (units)
Number of treasury stock acquisition rights intotal stock acquisition rights (units)
Class of shares delivered upon exercise ofstock acquisition rights
Number of shares delivered upon exercise ofstock acquisition rights (shares)
Amount to be paid in upon exercise of stockacquisition rights (¥)
Period during which stock acquisition rights
may be exercised
Issue price and amount capitalized of shares
when issued through the exercise of stockacquisition rights (¥)
Terms and conditions for exercising stockacquisition rights
Transfer of stock acquisition rights

As of January 31, 2017

5,060

5,060

250

250

Ordinary shares
506,000 (Note 1)
803 (Note 2)

Same as on the left
506,000 (Note 1)
Same as on the left

From January 10, 2018
to October 28, 2020

Same as on the left

Issue price: 803
Amount capitalized: 402

Same as on the left

(Note 3)Same as on the left

Acquiring stock acquisition rights
through transfer shall requireapproval by resolution of theCompany’s Board of Directors.

Same as on the left－－

Substitute payment

Delivery of stock acquisition rights in line with(Note 4)Same as on the left
acts of structural reorganization
Notes: 1. The number of shares delivered upon exercise of each of the stock acquisition rights (the “Number of Shares
Granted”) shall be 100 shares.In the event that the Company conducts a share split (including allotment ofordinary shares of the Company without contribution; hereinafter the same for a share split) or a consolidation ofshares, of ordinary shares of the Company after the date on which the allotment of stock acquisition rights is
conducted (the “Allotment Date”), the Number of Shares Granted shall be adjusted according to the following
formula. However, the relevant adjustment shall only be made to the number of shares to be delivered upon
exercise of stock acquisition rights that have not yet been exercised as of the relevant point in time. Any fraction
less than one (1) share resulting from this adjustment shall be rounded down.

- 25 -

Number of Shares Granted
Number of Shares Granted=
×
after adjustment
before adjustment

Ratio of share split orconsolidation

In the event that the Company conducts a share split, the Number of Shares Granted after adjustment shall apply
on and after the following day of the base date of the share split (or on and after the effective date if no base date isset). In the event of a consolidation of shares, the Number of Shares Granted after adjustment shall apply on and after
its effective date. However, in the event that a share split is conducted under the condition that a proposal to decrease
surplus and increase capital stock or legal capital surplus is approved at a general meeting of shareholders of theCompany (“General Meeting of Shareholders”), and a date before the date of conclusion of the General Meeting of
Shareholders is set as the base date of the share split, the Number of Shares Granted after adjustment shall apply on
and after the following day of the date of conclusion of the General Meeting of Shareholders.
In addition, in the event that, after the Allotment Date, the Company conducts a merger, a company split or a shareexchange, and in any event equivalent to these in which it becomes necessary to adjust the Number of Shares Granted,
the Company may make the adjustment that the Board of Directors deems necessary.
2. In the event that, after the Allotment Date, the Company conducts the following (1) or (2) regarding its ordinary
shares, the Exercise Value shall be adjusted according to the respective formula below (the “Exercise Value
Adjustment Formula”). Any fraction less than one (1) yen resulting from this adjustment shall be rounded up.
(1) When the Company conducts a share split or a consolidation of shares:

Exercise Value after
adjustment=

Exercise Value before
adjustment

1×

Ratio of share split orconsolidation(2) When the Company issues new shares or disposes of its treasury shares for a value less than the market value(excluding the following cases: sale of treasury shares due to “a demand for sale of shares less than one unit by aholder of shares less than one unit” stipulated in Article 194 of the Companies Act, transfer of treasury shares inaccordance with Article 5, paragraph 2 of the Supplementary Provisions of the Act for Partial Amendment, etc. of
the Commercial Code, etc. (Act No. 79 of 2001), exercise of subscription rights to shares under Article 280-19 of
the Commercial Code before the enforcement of the Act Partially Amending the Commercial Code, etc. (Act No.
128 of 2001), conversion of securities that are or may be converted to the ordinary shares of the Company, andexercise of stock acquisition rights that may claim to deliver the ordinary shares of the Company including stockacquisition rights incidental to bonds with stock acquisition rights):

Exercise Value=after adjustment

Exercise
Value before
adjustment

×

Number ofsharesoutstanding+

Number of shares
newly issued

Number of shares outstanding×

Amount to be paid inper share

Market Value+

Number of shares newly issued

i. The “Market Value” used in the Exercise Value Adjustment Formula shall be the average value of the closing
price (including a quotation; hereinafter the same) for regular transactions of the ordinary shares of the Company
at the Tokyo Stock Exchange (excluding any day on which no closing price is made) for 30 transaction days
starting on the 45th transaction day preceding “the date on which the Exercise Value after adjustment shallapply” stipulated in (3) below (the “Application Date”). The “average value” shall be calculated to two decimal
places and rounded off to one decimal place.
ii. The “Number of shares outstanding” shall be obtained by subtracting the number of own ordinary shares held by
the Company as of the base date, if any, or the day one month before the Application Date in other cases fromthe total number of the ordinary shares issued as of such date.
iii.In the event that the Company disposes of its treasury shares, the “Number of shares newly issued” shall bedeemed to be replaced with the “Number of treasury shares to be disposed of.”
(3) The date on which the Exercise Value after adjustment applies is stipulated as follows.
i. If adjusted in accordance with (1) above, the Exercise Value after adjustment shall apply on and after thefollowing day of the base date (or on and after the effective date if no base date is set) in the case of a share split,
or on and after the effective date in the case of a consolidation of shares. However, in the event that a share split
is conducted under the condition that a proposal to decrease surplus and increase capital stock or legal capitalsurplus is approved at a General Meeting of Shareholders, and a date before the date of conclusion of theGeneral Meeting of Shareholders is set as the base date of the share split, the Exercise Value after adjustment
shall retroactively apply on the following day of such a base date, on and after the following day of theconclusion date of the General Meeting of Shareholders.
Further, in the case set forth in the preceding proviso, the ordinary shares of the Company shall be delivered
to a holder of stock acquisition rights who has exercised stock acquisition rights during the period from thefollowing day of the base date of a share split to the date of conclusion of the General Meeting of Shareholders
according to the following formula (the number of shares to be delivered upon exercise of such stock acquisitionrights is hereinafter referred to as the “Number of Shares Exercised before a share split”). Any fraction less than
- 26 -

one (1) share resulting from this adjustment shall be rounded down.

Number of
Shares=(Exercise Value before
adjustment – Exercise Valueafter adjustment)

×

Number of Shares
Exercised before ashare split

Exercise Value after adjustment
ii. The Exercise Value after adjustment adjusted in accordance with (2) above shall apply on and after the following
day of the payment due date (the last day of the payment period if such a period is set) of issuance or disposal(on and after the following day of the base date if such a date is set).
(4) In addition to the case stipulated in (1) and (2) above, in the event that the Company conducts a merger, a company
split or a share exchange after the Allotment Date, and in any event equivalent to these in which it becomes
necessary to adjust the Exercise Value, the Company may make the adjustment that the Board of Directors deems
necessary.
3. Terms and conditions for exercising stock acquisition rights are as follows:(1) Terms and conditions for respective segment of persons
i. Directors of the Company
Holders of stock acquisition rights are required to have the rank of Director of the Company at the time of
exercising the stock acquisition rights; provided, however, that this shall not apply to holders of stock acquisitionrights who no longer have the rank of Director due to retirement at the expiration of the period in office or due toresignation at the request of the Company.
ii. Executive Officers and employees of the Company, and directors of subsidiaries of the Company
Holders of stock acquisition rights are required to have either the rank of Director, Audit & Supervisory Board
Member, Executive Officer, or employee of the Company or a subsidiary of the Company; provided, however,that this shall not apply to holders of stock acquisition rights who no longer have the rank of Director or Audit &Supervisory Board Member of the Company or a subsidiary of the Company due to retirement at the expirationof the period in office, or who no longer have the rank of Executive Officer or employee of the Company or asubsidiary of the Company due to retirement at mandatory age. In addition, this shall not apply in the event that
persons with the rank of Director, Audit & Supervisory Board Member, Executive Officer, or employee of theCompany or a subsidiary of the Company lose such a rank based on justifiable grounds.
(2) Terms and conditions for all the holders of stock acquisition rights
i. Inheritance of stock acquisition rights shall not be permitted.
ii. Pledging of stock acquisition rights or any other disposition shall not be permitted.
4. Matters regarding delivery of stock acquisition rights associated with organizational restructuring are as follows:
In the event that the Company conducts a merger (limited to the case where the Company is to be absorbed as aresult of the merger), an absorption-type company split or incorporation-type company split (limited to the case where
the Company is to be a split company in both company splits), a share exchange or a share transfer (limited to the casewhere the Company is to be a wholly-owned company in both types of restructuring) (collectively “Organizational
Restructuring”), the stock acquisition rights of a company listed in Article 236, paragraph 1, item 8 (a) through (e) of
the Companies Act (the “Reorganized Company”) shall be delivered respectively to a holder of stock acquisitionrights who owns the remaining unexercised stock acquisition rights (the “Remaining Stock Acquisition Rights”)
immediately before the date when Organizational Restructuring takes effect (the date when an absorption-type merger
takes effect, the date when a stock company is incorporated through an incorporation-type merger, the date when anabsorption-type company split takes effect, the date when a stock company is incorporated through an incorporationtype company split, the date when a share exchange takes effect, or the date when a wholly owning parent company isincorporated through a share transfer; hereinafter the same), provided that such effect by which the stock acquisitionrights of the Reorganized Company shall be delivered in accordance with the following items shall be stipulated in anabsorption-type merger agreement, an incorporation-type merger agreement, an absorption-type company split
agreement, an incorporation-type company split plan, a share exchange agreement, or a share transfer plan.
(1) Number of stock acquisition rights of the Reorganized Company to be delivered
The number of stock acquisition rights of the Reorganized Company to be delivered shall equal the number of theRemaining Stock Acquisition Rights held by the holders of stock acquisition rights.
(2) Class of shares delivered upon exercise of stock acquisition rights of the Reorganized Company
The class of shares shall be ordinary shares of the Reorganized Company.
(3) Number of shares delivered upon exercise of stock acquisition rights of the Reorganized Company
The number of shares shall be determined in accordance with the preceding “Number of shares,” taking into
account conditions of the Organizational Restructuring, etc.
(4) Value of property to be contributed upon exercise of stock acquisition rights
The value of property to be contributed upon exercise of each of the stock acquisition rights to be delivered shallbe an amount obtained by multiplying the Exercise Value after Organizational Restructuring, which is obtained byadjusting the Exercise Value stipulated in the preceding “Amount to be paid in upon exercise of stock acquisitionrights ” in consideration of conditions of the Organizational Restructuring, etc., by the number of shares delivered
upon exercise of stock acquisition rights of the Reorganized Company, which shall be determined in accordancewith (3) above.
(5) Period during which stock acquisition rights may be exercised- 27 -

The period during which stock acquisition rights may be exercised shall start on either the commencing date of theexercisable period of stock acquisition rights stipulated in the preceding “Period during which stock acquisitionrights may be exercised” or the effective date of the Organizational Restructuring, whichever is later, and end on
the expiration date of the exercisable period of stock acquisition rights stipulated in the preceding “Period during
which stock acquisition rights may be exercised”.
(6) Matters regarding amount of increase of capital stock and legal capital surplus through issuing shares upon exerciseof stock acquisition rights
Matters regarding capital stock and legal capital surplus to be increased shall be determined in accordance withthe matters set forth in the Remaining Stock Acquisition Rights.
(7) Restriction on acquisition of stock acquisition rights by transfer
Any acquisition of stock acquisition rights by transfer shall be subject to the approval of the Board of Directors of
the Reorganized Company.
(8) Terms and conditions for exercising stock acquisition rights
Terms and conditions for exercising stock acquisition rights shall be determined in accordance with the preceding“Terms and conditions for exercising stock acquisition rights.”(9) Terms of acquisition of stock acquisition rights
The Company may acquire stock acquisition rights at no charge on the date stipulated separately by the Board of
Directors in the event that the any of the following proposals (i) through (v) is approved by a General Meeting of
Shareholders (or resolution is made by the Board of Directors or by Executive Officers who are delegated such a
decision pursuant to the provisions of Article 416, paragraph 4 of the Companies Act, if the resolution of theGeneral Meeting of Shareholders is not required).
(i) Proposal for approval of a merger agreement under which the Company becomes an absorbed company(ii) Proposal for approval of a company split agreement or plan under which the Company becomes a split
company(iii) Proposal for approval of a share exchange agreement or share transfer plan under which the Company
becomes a wholly-owned company(iv) Proposal for approval to change the relevant provisions of the Articles of Incorporation of the Company
which stipulate that approval by the Company is required for share transfer of all kinds of shares of theCompany(v) Proposal for approval to change the relevant provisions of the Articles of Incorporation of the Company
which stipulate that approval by the Company is required for share transfer of the shares underling stockacquisition rights, or that the Company may obtain all of the said shares by the resolution of the General
Meeting of Shareholders.

(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause
None(4) Details of rights planNone(5) Trends in total number of shares issued, share capital, etc.
Date

Fluctuation in
the number ofshares issued(Shares)

Balance ofshares issued(Shares)

Fluctuation inshare capital(¥ thousand)

Balance ofshare capital(¥ thousand)July 1, 2013
45,227,160
45,684,000–
5,454,673(Note 1)
July 25, 2013
2,600,000
48,284,000
966,719
6,421,392(Note 2)
Notes: 1. This is attributable to the share split-up (100 shares for 1 ordinary share).
2. Paid-in public offering
Issue price¥743.63
Amount capitalized¥371.815
Total paid-in amount¥1,933,438 thousand- 28 -

Fluctuation inlegal capitalsurplus(¥ thousand)

Balance of legal
capital surplus(¥ thousand)–

5,538,149

966,719

6,504,868

(6) Shareholder composition(As of November 30, 2016)
Shareholder composition (Share unit number: 100 shares)
Category

PublicsectorFinancial
institutions

Financial
instruments
business
operators

Other
corporations

Foreign investors
Companies,
etc.

Individuals

Individuals,
etc.

Total

Sharesless than
one unit(Share)Number ofshareholders(Person)

–

24

30

51

150

5

6,079

6,339

－

Number ofshares held
(Unit)–

59,6806,265

69,569144,01926

203,263

482,822

1,800

Holding rateof shares
(%)

–

12.36

1.30

14.41

29.82

0.01

42.10

100.00－Note: The number of “Other corporations” includes 4 units in the name of Japan Securities Depository Center, Inc.

(7) Status of major shareholders(As of November 30, 2016)
Percentage of numberof shares held in the
total number ofshares issued (%)

Address

Number of shares
held(Share)Seiichiro Yamaguchi

Shibuya-ku, Tokyo, Japan

12,885,500 shares

26.68%

Zeus Capital Limited

2-22-26-103 Uehara, Shibuya-ku, Tokyo,
Japan

6,000,000

12.42

43, Boulevard Royal, L-2955 Luxembourg(2-15-1 Konan, Minato-ku, Tokyo, Japan)

4,846,300

10.03

1-8-11, Harumi, Chuo-ku, Tokyo, Japan

2,075,600

4.29

1,648,400

3.41

1,202,000

2.48

914,600

1.89

772,600

1.60

767,000

1.58

Name of shareholder

KBL EPB S.A 107704(Standing proxy: Mizuho Bank, Ltd., Settlement&cleaning Services Division)
Japan Trustee Services Bank, Ltd. (Trust
Account)
State Street Bank and Trust Company 505001(Standing proxy: Mizuho Bank, Ltd., Settlement&cleaning Services Division)
The Master Trust Bank of Japan, Ltd. (Trust
Account)
MSCO Customer Securities(Standing proxy: Morgan Stanley MUFG
Securities Co., Ltd. Securities Management
Department)
CBNY-Government of Norway(Standing proxy: Citibank Japan Ltd.)
Ueda Yagi Tanshi Co., Ltd.

P.O.BOX 351 Boston Massachusetts 02101
U.S.A(2-15-1 Konan, Minato-ku, Tokyo, Japan)
2-11-3, Hamamatsucho, Minato-ku, Tokyo,
Japan
1585 Broadway New York， New York
10036， U.S.A.
(Otemachi Financial City South Tower 1-97 Otemachi, Chiyoda-ku Tokyo, Japan)
388 Greenwich Street, New York, NY
10013 USA
(6-27-30 Shinjuku, Shinjuku-ku, Tokyo,
Japan)
2-4-2, Koraibashi, Chuo-ku, Osaka-shi,
Osaka, Japan

State Street Bank and Trust Company(Standing proxy:The Hongkong and Shanghai
Banking Corporation Limited Tokyo Branch)

One Lincoln Street, Boston MA USA 02111(3-11-1, Nihonbashi,Chuo-ku, Tokyo,Japan)

418,000

0.86

Total

–

31,530,000

65.30

Notes:

The change report for the large shareholding report, which was made accessible to the public as of September 5,
2016, states that SPARX Asset Management Co., Ltd. held the following shares as of August 31, 2016. However,since the Company could not confirm the actual number of shares held by this company as of the end of the fiscal
year under review, the company was not included in the status of major shareholders described above.
The content of the change report for the large shareholding report is as follows:
Large volume holder

SPARX Asset Management Co., Ltd.

Address

Shinagawa Season Terrace,q Konan 1-2-70, Minato Ward, Tokyo

Number of share certificates, etc.
held

2,485,400

Holding ratio of share certificates,
etc.

5.15%
- 29 -

2.

The change report for the large shareholding report, which was made accessible to the public as of April 6, 2016, statesthat HALLEY SICAV held the following shares as of April 1, 2016. However, since the Company could not confirm
the actual number of shares held by this company as of the end of the fiscal year under review, the company was notincluded in the status of major shareholders described above.
The content of the change report for the large shareholding report is as follows:
Large volume holder

HALLEY SICAV

Address
Number of share certificates, etc.
held

7A rue Robert Stumper, L-2557 Luxembourg
4,532,100

Holding ratio of share certificates,
etc.

9.39%

(8) Status of voting rights
a. Shares issued(As of November 30, 2016)
Number of shares(Share)Number of voting rights

Details

Shares without voting rights

–

–

–

Shares with restricted voting rights(Treasury shares, etc.)

–

–

–

Shares with restricted voting rights(Other)–––Shares with full voting rights(Treasury shares, etc.)

–

–

–

Shares with full voting rights(Other)Ordinary shares
48,282,200

482,822

Shares less than one unit

Ordinary shares
1,800

–

–

48,284,000––

482,822–Classification

Total number of shares issued
Total number of voting rights–

Tosei’s standard class ofshares with no rights
limitations

Note: The number of “Shares with full voting rights (Other)” includes 400 shares in the name of Japan Securities Depository
Center, Inc. “Number of voting rights” includes 4 units of voting rights related to shares with full voting rights in its
name.

b.

Treasury shares, etc.
(As of November 30, 2016)
Percentage ofTotal number of
number of sharesshares held
held in total number(Share)of shares issued(%)

Address

Number of shares
held under own
name(Share)Number of shares
held under the nameof others(Share)

–

–

–

–

–

–

Total

–

–

–

–

–

Name ofshareholders- 30 -

(9) Stock acquisition rights
The Company employs a stock option system. This system employs a method in which stock acquisition rights are issued
pursuant to the Companies Act.
The details of the said stock option system are as follows.
(Resolution of the meeting of the Board of Directors held on October 28, 2015)
Date of resolution

October 28, 2015

Title and number of grantees

The Company’s directors: five persons (including two
outside directors)
The Company’s executive officers: seven persons
The Company’s employees: 193 persons
Directors of the Company’s subsidiaries: four persons

Class of shares delivered upon exercise of stock acquisitionrightsDescribed in “(2) Status of stock acquisition rights” above.

Number of shares

Same as above

Amount to be paid in upon exercise of stock acquisitionrightsPeriod during which stock acquisition rights may be
exercised

Same as above
Same as above

Terms and conditions for exercising stock acquisition rights

Same as above

Transfer of stock acquisition rights

Same as above

Substitute payment

Same as above

Delivery of stock acquisition rights in line with acts ofstructural reorganization

Same as above

Note: Due to forfeit resulting from retirement of grantees, the title and number of grantees as of January 31, 2017 were as
follows. the Company’s directors: five persons (including two outside directors); the Company’s executive officers:
seven persons; the Company’s employees: 180 persons; and directors of the Company’s subsidiaries: four persons.

2. Acquisition of treasury shares[Class of shares]

None(1) Acquisition by resolution of the General Meeting of Shareholders
None(2) Acquisition by resolution of the Board of Directors
None(3) Items not based on resolutions of the General Meeting of Shareholders or Board of Directors
None(4) Status of disposal and ownership of acquired treasury sharesNone- 31 -

3. Dividend policy
Tosei’s fundamental earnings distribution policy is to strive to continuously provide stable dividends while
comprehensively considering operating results, the future operating environment and progress in its business plan
to balance dividends with the need for internal capital resources to generate long-term growth in corporate value by
taking highly profitable business opportunities.
It is also a basic policy of Tosei to pay a year-end dividend annually, determined by the General Meeting of
Shareholders.
Based on the above policy, Tosei decided to pay an annual dividend of ¥22 per share for the fiscal year underreview. As a result, the Company’s consolidated dividend payout ratio came to 19.1% for the fiscal year ended
November 30, 2016.
Tosei plans to use its internal reserves for future business expansion and to strengthen the management quality.
Tosei’s articles of incorporation stipulate that “Tosei may pay interim dividends to shareholders with the record
date of May 31 each year, upon a resolution by the Board of Directors.”
The dividend for the fiscal year ended November 30, 2016 is as follows:
Total amount of dividends(¥ thousand)Resolution dateOrdinary General Meeting of Shareholders
held on Feb. 24, 2017

Dividends per share(¥)

1,062,248

22

4. Trends in share price(1) Highest and lowest share prices for the most recent 5 years by term
Term

63rd term

64th term

65th term

66th term

67th term

Accounting
periodFiscal year ended
Nov. 30, 2012

Fiscal year ended
Nov. 30, 2013

Fiscal year ended
Nov. 30, 2014

Fiscal year ended
Nov. 30, 2015

Fiscal year ended
Nov. 30, 2016

Highest (¥)

37,650151,900
* 966

881

954

856

Lowest (¥)

18,80036,800
* 641

597

636

553

Note:1. The highest and lowest prices were prices on the First Section of Tokyo Stock Exchange.
2. The highest and lowest share prices prefixed by an asterisk in the 64th term were ex-rights prices due to the share splitup as of July 1, 2013 (share split-up by 100 shares for 1 ordinary share).

(2) Monthly highest and lowest share prices for the most recent 6 months
MonthJun. 2016

Jul. 2016

Aug. 2016

Sep. 2016

Oct. 2016

Nov. 2016

Highest (¥)

806

856

817

765

788

848

Lowest (¥)

700

735

710

710

725

740

Note: The highest and lowest prices were prices on the First Section of Tokyo Stock Exchange.

- 32 -

5. Status of officers
9 male officers and 0 female officers (Percentage of women in officers: 0%)
Title

Post

Name

Term ofofficeNumber ofshares held
(Share)Note 3

12,885,500

Note 3200,000

Apr. 1982 Entered Kokubu & Co., Ltd.
Apr. 1991 Entered Tosei-Shoji Corporation
May 1995 Director of Tosei-Shoji Corporation
Mar. 2001 General Manager of Finance and Accounting
Department of the Company
Oct. 2002 Managing Director of the Company
Jul. 2004 Director and Managing Executive Officer of
the Company
Mar. 2005 Audit & Supervisory Board Member of Tosei
Revival Investment Co., Ltd.
Apr. 2005 Audit & Supervisory Board Member of Tosei
Community Co., Ltd.
Sep. 2005 Representative Director of Tosei REIT
Note 3Advisors, Inc. (the predecessor of Tosei
Asset Advisors, Inc.)
Feb. 2006 CFO and Senior Executive Officer of
Administrative Division of the Company(current position)
Dec. 2007 Representative Director of Tosei Revival
Investment Co., Ltd.
Jan. 2013 Representative Director of Tosei Revival
Investment Co., Ltd. (current position)
Feb. 2013 Director of Tosei Community Co., Ltd.
(current position)
Feb. 2016 Director of Tosei Asset Advisors, Inc.
(current position)

150,000

Date ofbirth

Career summary
Apr. 1983 Entered Mitsui Real Estate Sales Co., Ltd.
(the predecessor of Mitsui Fudosan Realty Co.,Ltd.)

President and President andCEOCEO

Director

COO and
SeniorExecutive
Officer ofBusiness
Division; incharge of
Asset
Solution
Business
Promotion
Department

Seiichiro
Yamaguchi

Katsuhito
KosugeJan. 5,
1961

Jul. 17,1960

Apr. 1986 Entered Tosei-Shoji Corporation
Aug. 1990 Director of the Company
Jun. 1994 President and Representative Director of theCompany (current position)
Dec. 1995 Representative Director of Palms
Community Management Co. Ltd. (thepredecessor of Tosei Community Co., Ltd.)
Jul. 2004 President and CEO of the Company (current
position)
Apr. 1983 Entered Tokyu Construction Co., Ltd.
Apr. 1986 Entered Tosei-Shoji Corporation
Jan. 1996 Director of the Company
Dec. 2000 Managing Director of the Company
Jul. 2004 Director and Managing Executive Officer of
the Company
Sep. 2005 Representative Director of Tosei Revival
Investment Co., Ltd.
Feb. 2006 COO and Senior Executive Officer ofBusiness Division of the Company (current
position)
Oct. 2007 Representative Director of Tosei AssetManagement, Corp.
Apr. 2008 Director of Tosei Asset Advisors, Inc.
Feb. 2012 Director of Tosei Asset Advisors, Inc.

Director

CFO and
SeniorExecutive
NoboruOfficer of
HiranoAdministrativ
e Division

Oct. 17,1959- 33 -

TitleDirector

Director

Post

Name

Goro
KaminoKenichi
Shohtoku

Date ofbirth

Career summary

Term ofofficeNumber ofshares held
(Share)Aug. 29,1960

Apr. 1983 Entered Mitsui Trust and Banking Company,
Limited (the predecessor of Sumitomo
Mitsui Trust Bank, Limited)
Aug. 1990 Entered Chubu Gas Co., Ltd.
May 1995 Entered Gastec Service, Inc. and appointed
as Corporate Planning Department Chief
Dec. 1995 Director of Toyohashi Cable Network Inc.
(current position)
Aug. 2000 President CEO of Gastec Service, Inc.
(current position)
May 2002 President and representative director of Sala
Corporation (current position)
Jun. 2002 Director of System Location Co., Ltd.
Jan. 2004 Director of Sala House Co., Ltd. (current
Note 3
position)Mar. 2006 Representative Director of Chubu Gas Co.,
Ltd.
Feb. 2007 Chairperson of Sala Cars Japan Co., Ltd.
(current position)
Feb. 2007 Director of the Company (current position)
Oct. 2009 Director of Japan Post Holdings Co., Ltd.
Mar. 2012 President and Representative Director of
Chubu Gas Co., Ltd. (current position)
Jun. 2012 Director of Musashi Seimitsu Industry Co.,
Ltd. (current position)
Jun. 2014 Director of Nippon Venture Capital Co., Ltd.
(current position)–

Jan. 20,1971

Oct. 1995 Entered Asahi & Co., Ltd. (the predecessor
of KPMG AZSA LLC)
Sep. 1999 Transferred to Arthur Andersen & Co., Kuala
Lumpur Office
Sep. 2002 Entered SCS Global Accounting Co., Ltd.
(the predecessor of SCS Global Consulting(S) Pte Ltd)
Nov. 2003 Representative Director of SCS Global
Accounting Co., Ltd. (the predecessor of
SCS Global Consulting (S) Pte Ltd) (current Note 3
position)
Sep. 2005 Director of O-RID GLOBAL BPO PTE.
LTD.
Dec. 2010 Statutory Auditor of ROKI TECHNO CO.,LTD
Feb. 2012 Director of the Company (current position)
Jan. 2013 Audit & Supervisory Board Member of
ROKI GROUP HOLDINGS CO., LTD.
(current position)–- 34 -

TitlePost

Name

Date ofbirth

Audit &
Supervisory
Board
Member(full-time)

YutakaKitamura

Audit &
Supervisory
Board
Member(full-time)

HiroshiJul. 28,
Nishinakama 1954

Feb. 27,
1950

Career summary

Term ofofficeApr. 1972 Entered The Yasuda Trust and Banking Co.,
Ltd. (the predecessor of Mizuho Trust &Banking Co., Ltd.)May 1996 General Manager of Singapore Branch of
The Yasuda Trust & Banking Co., Ltd. (thepredecessor of Mizuho Trust & Banking Co.,Ltd.)
Apr. 1999 General Manager of Pension Business
Promotion Department III of The Yasuda
Trust & Banking Co., Ltd. (the predecessorof Mizuho Trust & Banking Co., Ltd.)
Note 4Oct. 2000 General Manager of Niigata Branch of The
Mizuho Trust & Banking Co., Ltd.
Mar. 2005 Full-time Audit & Supervisory Board
Member of Nippon Carbon Co., Ltd.
Jun. 2010 Full-time Audit & Supervisory Board
Member of J-COACH Corporation
Feb. 2013 Full-time Audit & Supervisory Board
Member of the Company (current position)
Feb. 2013 Audit & Supervisory Board Member of Tosei
Community Co., Ltd.
Apr. 1978 Entered The Sanwa Bank, Limited (thepredecessor of The Bank of TokyoMitsubishi UFJ, Ltd.)
Oct. 1987 Manager of London Branch
May 1992 Senior Manager of International Business
Promotion Department, Americas Office
Aug. 1994 General Manager of Kwai-Chung Sub
Branch of Hong Kong BranchAug. 1996 Senior Manager of Credit Administration
Department
Oct. 1999 Senior Vice President of Derivative Products
Department
Jan. 2002 UFJ Bank Limited (the predecessor of The
Bank of Tokyo-Mitsubishi UFJ, Ltd.)
Senior Manager of Internal Audit Department
Jan. 2006 The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Senior Manager of Internal Audit & Credit
Examination Division
Apr. 2007 Joined ORIX Real Estate Corporation as
General Manager of Internal Audit
Note 5
Department
Mar. 2008 Transferred to ORIX Corporation
General Manager of Internal Audit
Department (current position)
Jul. 2008 Audit & Supervisory Board Member of
ORIX Real Estate Corporation
Mar. 2012 Director and General Manager of Internal
Audit Department of ORIX Real Estate
Investment Advisors Corporation
Feb. 2015 Audit & Supervisory Board Member of theCompany (current position)
Feb. 2016 Audit & Supervisory Board Member ofTosei Asset Advisors, Inc. (current
position)
Apr. 2003 Full-time Audit & Supervisory Board
Member of the Company
Feb. 2016 Audit & Supervisory Board Member of theCompany (current position)- 35 -

Number ofshares held
(Share)––TitleAudit &
Supervisory
Board
MemberAudit &
Supervisory
Board
Member

Post

Name

TatsukiNaganoOsamu Doi

Date ofbirth

Career summary

Term ofofficeNumber ofshares held
(Share)Apr. 16,
1959

Apr. 1983 Entered The Chuo Trust & Banking Co., Ltd.
(the predecessor of Sumitomo Mitsui Trust
Bank, Limited)
Jul. 1995 Financial Planning Chief of Corporate
Planning Dept. at headquarters of The Chuo
Trust & Banking Co., Ltd. (the predecessorof Sumitomo Mitsui Trust Bank, Limited)
Jul. 2000 Management Director of RG AssetManagement PTE. LTD.
Jul. 2004 Director of Reference Group Holdings Ltd.
Aug. 2004 Representative Director of RG AssetManagement Services Co., Ltd. (thepredecessor of RG Asset Management K.K.) Note 4
Feb. 2012 Audit & Supervisory Board Member of theCompany (current position)
Apr. 2013 Director of RG Asset Management Services
Limited (BVI)
Apr. 2013 Director and Representative Partner of RG
Asset Management Services Limited (HK)Jun. 2014 Director of System Location, Co., Ltd.
(current position)
Feb. 2016 Senior Director, Head of the Management
Headquarters, and General Manager of FundManagement Division of All Nippon AssetManagement, Co., Ltd. (current position)–

Feb. 23,1964

Apr. 1987 Entered The Nikko Securities Co., Ltd. (thepredecessor of SMBC Nikko Securities Inc.)
Jul. 1993 Transferred to Nikko Europe PLC
Feb. 1998 Returned to The Nikko Securities Co., Ltd.
(the predecessor of SMBC Nikko Securities
Inc.)
Apr. 2002 Entered FinTech Global Incorporated
Oct. 2005 Senior Vice President of Structured Finance
Division of FinTech Global Incorporated
Oct. 2006 Deputy Head of Investment Banking
Division of FinTech Global Incorporated
Apr. 2007 Head of Investment Department of FinTech
Global Incorporated
Feb. 2013 Audit & Supervisory Board Member of theCompany (current position)

–

Total

Note 4

13,235,500

Notes: 1. Goro Kamino and Kenichi Shohtoku are outside directors.
2. Yutaka Kitamura, Hiroshi Nishinakama, Tatsuki Nagano and Osamu Doi are outside audit & supervisory board members.
3. Two-year period from the conclusion of the Ordinary General Meeting of Shareholders held February 25, 2016.
4. Four-year period from the conclusion of the Ordinary General Meeting of Shareholders held February 24, 2017.
5. Four-year period from the conclusion of the Ordinary General Meeting of Shareholders held February 25, 2015.

- 36 -

6. Status of corporate governance, etc.
(1) Status of corporate governance1) Basic concept on corporate governance
The Group aspires to continue to be a group of companies that make a meaningful contribution to theirshareholders, employees, business partners, and other stakeholders throughout society by promptly andaccurately responding to changes in the management environment and continually carrying out businessactivities that enable the Group to achieve sound growth. The Group has positioned the enhancement ofcorporate governance as the most important means of achieving these aims, with thorough promotion of
consciousness regarding compliance, strengthening of risk management, and implementation of timely
disclosure as the three main initiatives. In addition, the Group works to further develop a system that
responds to the trust of investors, mainly from the Board of Directors, from the top management down toeach employee of Group companies, in order to construct an internal control system as required by theCompanies Act and the Financial Instruments and Exchange Act and a system as a financial instruments
business operator that is credible to investors.
2)

Details of internal company bodies and establishment of internal control system(a) Basic explanation of internal company bodies
The Company has the Board of Directors and the Audit & Supervisory Board in place. In order to executebusiness transparently, the Company appoints outside directors, and all of its audit & supervisory board
members are from outside the Company. The Company also employs the executive officer system.
All audit & supervisory board members of the Company are outside audit & supervisory board
members and have been since the Company was listed. The audit & supervisory board members
continuously perform audits on the management of the Company from the point of view of securing andimproving the Company’s corporate value and the common interests of its shareholders. Furthermore, byinviting outside directors to the Board of Directors, the Company is strengthening its management
supervisory function further. On the management side, by employing the executive officer system, theCompany promotes optimal decision-making functions and distribution of operational duties, as well as thedelegation of authority in the execution of business, thus enhancing corporate governance.
The current system is in place because it is a system that enables the management of the Company andmanagement oversight to function sufficiently.
i) Operation of Board of Directors
The Board of Directors is composed of five directors, two of whom are outside directors. Based on theregulations of the Board of Directors, regular meetings of the Board of Directors are held every monthand extraordinary meetings are held as necessary. As the highest management decision-making body, theBoard of Directors makes resolutions on management policy and important matters, and also supervises
the execution of duties by directors.
ii) Nominating and Compensation Advisory Committee
The Company has set up the Nominating and Compensation Advisory Committee as a voluntary
advisory body for the Board of Directors for the purpose of ensuring appropriateness and transparency ofeach resolution of the Board of Directors on the process of selecting candidates proposed in a proposal
for appointing directors that is submitted to the General Meeting of Shareholders and on allocation of
remuneration, etc. for individual directors. The constituent members of the committee include a
representative director (one person), a full-time director (one person) , outside director(s) (independent
director(s), one person or more), and a full-time audit & supervisory board member (outside audit &supervisory board member, one person). An outside director who is a committee member will assume theoffice of the chair of committee. The Board of Directors will develop an appropriate governance system
to respond to the mandate of shareholders and investors with full respect for the content of reports madeby this committee.
iii) Auditing by audit & supervisory board members
The Company employs an audit & supervisory board member system with two full-time audit &supervisory board members and two part-time audit & supervisory board members. All of these four
persons are outside audit & supervisory board members. Meetings of the Audit & Supervisory Board areheld once a month in principle. At these meetings, the four audit & supervisory board members
deliberate on necessary items and work to share information by having the full-time audit & supervisoryboard members report to the part-time audit & supervisory board members about their auditing activities.
The Audit & Supervisory Board Members also attend the meeting of the Board of Directors, thepre-Board meeting discussion where matters to be resolved at the meeting of the Board of Directors- 37 -

are confirmed in advance, as well as the management meeting (constituted by the Executive
Officers appointed by the President and CEO), which is an advisory body regarding matters to beapproved by the President and CEO.
The auditing activities of audit & supervisory board members are performed in accordance with ayearly audit plan. Since such activities are carried out in coordination with the accounting auditor and theInternal Audit Department, an efficient and effective auditing system is in place. Furthermore, the fulltime audit & supervisory board members work to gain an understanding of the status of the execution ofbusiness by holding regular interviews with each director and those in charge of each division.
iv) Executive officer system
The Company employs an executive officer system, under which executive officers appointed by the
Board of Directors execute and exert control over the Company’s business in accordance with internal
regulations, in addition to matters designated by resolution of the Board of Directors.
In addition, the President and CEO holds management meetings twice a month in principle, at which
advance consultation is provided for important decisions to be made by the President and CEO, andmatters for resolution at the Board of Directors are deliberated in advance.
v) Corporate governance meeting
With the aim of continuous strengthening of corporate governance, the Company holds corporate
governance meetings consisting of full-time directors and full-time audit & supervisory board members
once a month in principle.
At the meeting, directors and audit & supervisory board members check and deliberate over corporate
governance concerns for improving corporate value and items regarding internal control. Where
necessary, they receive advice from outside experts such as corporate attorneys and certified public
accountants.
vi) Internal auditing
Five members of the Internal Audit Department under the direct supervision of the President and CEO
perform audits of the entire Group in accordance with a yearly plan. If they discover inadequacies, they
demand improvements by providing recommendations for their rectification to the audited division.
Audits are performed effectively, with matters for rectification handled through enhanced follow-up
work including deliberation with the audited division and the provision of detailed guidance.
vii) Information disclosure
The Company not only prepares documents, etc. in accordance with laws and regulations such as theCompanies Act and the Financial Instruments and Exchange Act and discloses information based on theregulations set forth by securities exchanges, but also provides timely and appropriate corporate
information to stakeholders including shareholders and investors by such means as investor relations
activities and its website.
viii) Auditing by accounting auditor
The Company’s accounting auditor is Shinsoh Audit Corporation, with which the Company has
concluded an auditing agreement in accordance with the Companies Act and the Financial Instruments
and Exchange Act. On this basis, Shinsoh Audit Corporation performs audits in accordance with a yearly
audit plan.

- 38 -

(b) The following is an outline of the Company’s corporate governance and internal management system- 39 -

(c)Details of internal company bodies and establishment of internal control system
Regarding systems to ensure that directors’ execution of their duties is in compliance with laws andregulations and the Articles of Incorporation and other systems necessary to ensure the properness of acompany’s operations (internal control system), the Company has established the following basic policies
with a partial amendment effective on July 27, 2015 in connection with the enforcement of the RevisedCompanies Act.
i) Basic policies for compliance with laws and regulations• Ensure awareness among all officers and employees regarding compliance with laws and regulations.
• Strengthen the checking function for breaches of laws and regulations.
• Promptly react to any breach of laws and regulations, and make timely and appropriate information
disclosure concerning such breaches.
• Eliminate any association with anti-social forces.
ii) Basic policies for storing and managing information• Ensure awareness among all officers and employees regarding the importance of storing and managing
information.
• Enhance the measures for preventing the leakage of material information.
• Ensure thorough familiarity with material information and information requiring timely disclosure andprevention of misstatements or material omissions.
iii) Basic policies for management of risk of loss
• Ensure thorough understanding, analysis and assessment of risks that may hinder the continuation of theCompany’s corporate activities.
• Enhance monitoring of risk management.
• Establish a proper internal reporting system for any occurrences and/or signs that contingencies may occur.
• Promptly react to any occurrence of contingencies and/or accidents, and make timely and appropriate
disclosure of information regarding such occurrences.
iv) Basic policies for efficient execution of duties by Directors• Carry out deliberation and decision-making on the important management matters of the Company, in an
efficient, timely and appropriate manner.
• Eliminate excessive pursuit of efficiencies in management plans and/or business targets and make balanced
decisions considering the soundness of the Company.
• Establish a system to allow appropriate and efficient execution of business in accordance with the rules ondelegation of operational authority.
v) Basic policies for properness of the operations of the entire Group• Strive for a full penetration of the understanding of the Company’s corporate philosophy and awareness forthe compliance among the officers and the employees of each of the Group companies and ensure that eachof the Group companies complies with laws and regulations.
• Strive for full awareness, analysis and evaluation of risks that impede the sustenance and continuation of
the businesses of each of the Group companies, prepare for contingencies, and establish a system to compel
prompt reporting if contingencies occur.
• Formulate a medium-term management plan, business plans for single fiscal year and budgets for the same
relating to the entire Group, periodically check the progress of these plans, and compel timely reporting on
newly occurring problems and appropriately handle such problems.
• For matters that are important and those for which timely disclosure is required at each of the Group
companies, and other matters relating to execution of duties by officers and employees at each of the Group
companies, establish a system to compel prompt reporting from each of the Group companies to theCompany.
• Enhance the system for ensuring the appropriateness of financial reporting relating to the entire Group.
• Eliminate wrongful acts and/or irregular transactions using the Group.
vi) Basic policies for systems to ensure effective audits by Audit & Supervisory Board Members• Designate members of staff to assist Audit & Supervisory Board Members in their duties, and have themcarry out assistance duties under the command of the Audit & Supervisory Board Members.
• Ensure the independence of the aforementioned members of staff from Directors and obtain prior consent
from the Audit & Supervisory Board for personnel affairs matters for the said members of staff such astransfers and performance evaluations.
• In addition to deliberations on proposals and reports on important matters at the Board of Directors, have
Audit & Supervisory Board Members attend important meetings for business execution, and carry out
periodic interviews with Directors and important employees. Furthermore, ensure prompt reporting to Audit& Supervisory Board Members from all officers and employees who have identified any material loss and- 40 -

signs of the same or any breach of regulations or misconduct, and prompt reporting to the same in response
to demands from Audit & Supervisory Board Members.
• Establish a system to compel prompt reporting to Audit & Supervisory Board Members from all officers
and employees at each of the Group companies who have identified any material loss caused bymanagement at each of the Group companies and signs of the same or any breach of laws and regulations or
misconduct, or from officers and employees of the Company who have received reports from such persons,and strive for its full implementation, and also compel prompt reporting if reporting is demanded by Audit& Supervisory Board Members.
• Ensure full notification of policy not to mete out disadvantageous treatment for the reason of a report
described in the preceding two paragraphs made by officers and employees of the Company and each of theGroup companies to Audit & Supervisory Board Members.
• Develop a whistle-blowing system across the entire Group and promptly report to Audit & Supervisory
Board Members if whistle-blowing occurs.
• When Audit & Supervisory Board Members request advance payments, etc. of expenses, promptly handle
the said expenses or debt obligations, except in cases where they are deemed unnecessary for the executionof duties.
• Directors are to make efforts to understand and support audits by Audit & Supervisory Board Members andproactively work to improve issues raised by Audit & Supervisory Board Members.
• In order to accomplish adequate audits of the entire Group performed by Audit & Supervisory Board
Members, Directors are to cooperate with Audit & Supervisory Board Members as necessary.
Under the basic policies above, in a continuous effort to develop the internal control system, the Company
establishes plans for implementation and operation of the internal control system annually taking into
consideration of revisions of relevant laws and regulations, changes in the business environment of the Group,
expansion of the businesses, etc.
The internal control system of the Group implemented and operated as of November 30, 2016 is as follows.
*Major meetings cited in the text
Meeting nameFrequency of meeting

Attendees

Board of Directors’ meeting

Monthly + Extraordinary

Directors and Audit & Supervisory Board
Members

Pre-Board meeting discussion

Monthly + Extraordinary

Full-time Directors, full-time Audit &Supervisory Board Members, Executive
Officer in charge of administrative
department, and person responsible forbriefing on the agenda

Corporate governance meeting

Monthly

Full-time Directors and full-time Audit &Supervisory Board Member

Management meeting

Twice a month +Extraordinary

All Executive Officers and Audit &Supervisory Board Members (as observers)

Risk Management and Compliance
Committee’s meeting

Monthly

Senior Executive Officers, all heads ofeach division, those responsible for risk
management and compliance at each Group
company, and full-time Audit &Supervisory Board Members (as observers)

Information Disclosure Committee’s meeting

Monthly + Extraordinary

Senior Executive Officers, heads ofdepartments involved in information
disclosure, those responsible for internal
control at the major Group companies, andfull-time Audit & Supervisory Board
Members (as observers)- 41 -

i)Compliance with laws and regulations, etc.
・Ensure awareness regarding compliance with laws and regulations
As part of the annual business plan, at the beginning of each fiscal year a risk compliance program isdrawn up, and trainings in the relevant laws and regulations, measures to cultivate awareness of legal
issues (publishing an internal monthly journal, soliciting and displaying compliance slogans etc.) havebeen implemented, in addition to which a compliance questionnaire is circulated every fiscal year in orderto check the level of awareness among all officers and employees of the Group with regard to laws andregulations.
In addition, the Risk Management and Compliance Committee’s meeting and a business law liaison
meeting attended by heads of business teams of the operational divisions and responsible personnel fromeach Group company are held every month, during which participants share information about
amendments to laws and regulations, etc. relating to businesses and notices from ministries withjurisdiction etc., while the results of deliberations by the Committee are reported to the monthly meetingsof the Board of Directors.
We also implemented the same measures for the subsidiaries that joined the Group for the first time thisfiscal year.
・Strengthen the checking function for breaches of laws and regulations
As well as monitoring and supervising by two Outside Directors and five Audit & Supervisory Board
Members (all Outside Audit & Supervisory Board Members) at the Board of Directors’ meeting, periodic
meetings are held to exchange opinions between Audit & Supervisory Board Members and Outside
Directors (held twice during the fiscal year under review), and between Audit & Supervisory Board
Members and legal advisors (held three times during the fiscal year under review), so as to check for any
signs of breaches of laws and regulations by the Directors responsible for executing business.
Moreover, while the Internal Audit Department conducts internal audits of the business executed by theCompany and the Group companies and checks for any breach of laws and regulations, the Company has
set up a whistle-blowing system providing internal, external and, from the fiscal year under review, Audit& Supervisory Board Member points of contact, further strengthening the structure that is intended todetect breaches of laws and regulations at an early stage.
From the fiscal year under review, we have begun self-inspections at the departmental level to check thestate of compliance with relevant laws and regulations, with the results monitored by the Internal Audit
Department.
・Promptly react to any breach of laws and regulations, and make information disclosure
At meetings of the Board of Directors, corporate governance meetings, management meetings andmeetings of the Risk Management and Compliance Committee, checks are made for signs, or actual
occurrences, of breaches of laws and regulations, instructions are given regarding responses, and status
reports are made. Also, the Company has prescribed and disseminated rules regarding the establishment ofa crisis management office (headed by the President and CEO) and the timely and appropriate information
disclosure in the event that such breaches occur.
・Eliminate any association with anti-social forces
The Company continues screening of counterparties at the inception of transactions and carries out
trainings on action against anti-social forces for all officers and employees of the Group in order tocompletely eliminate any association with anti-social forces.
Following the “Act on Prevention of Transfer of Criminal Proceeds” being amended and coming into
effect, we have reviewed our business practices and implemented appropriate responses.

ii) Storing and managing information
・Ensure awareness regarding the importance of storing and managing information
Every fiscal year we implement training for the information asset management, including personal
information, and for the prevention of insider trading for all employees of the Company, and by doing
so, we have continued to educate and inculcate rules for the handling of important information.
・Enhance the initiatives for preventing the leakage of important information
With regard to the state of compliance with rules for the handling of information assets (printed and- 42 -

electronic information), in addition to internal audits that cover all departments, we have strengthened
the penalties for breaches and introduced targeted guidance for those who infringe.
・Ensure thorough familiarity with material information and information for timely disclosure andprevention of misstatements
The Information Disclosure Committee meets on a monthly and a temporary basis to understand which
information is subject to timely disclosure, and to confirm information disclosed and its methods. In
addition, any changes in the rules regarding timely disclosure in connection with amendments of rules
and regulations prescribed by the Tokyo Stock Exchange and the Singapore Exchange are reviewed asnecessary by the Committee and reported to the monthly meetings of the Board of Directors.
From the fiscal year under review, by making committee members of those responsible for internal
control at the major Group companies, we have strengthened our processes for understanding
information from each Group company that should be disclosed.
iii) Management of risk of loss
・Ensure thorough understanding, analysis and assessment of risks
As part of the risk compliance program drawn up at the beginning of each fiscal year, an annual plan forrisk management is drawn up and implemented.
Additionally, we implement stress tests on a half-yearly basis in relation to the Group’s businessenvironment (real estate market conditions, the trend in interest rates and financial institution fundingetc.). The results are reported at the Board of Directors’ meetings and the growth strategy meetings held
twice a year to discuss business strategies going forward (attended by all Executive Officers and headsof each department).
For significant risks relevant to overall operations as well as individual businesses (top 30 risks), in
addition to conducting an assessment every fiscal year, new risks that should be added are extracted, andpreventive measures and responses in the event of the risk materializing are considered.
From the fiscal year under review, we have started self-inspections of significant risks specific to eachdepartment.
・Enhance monitoring of risk management
At monthly corporate governance meetings, full-time Directors report to full-time Audit & Supervisory
Board Members regarding latent and fully emerged risks to execution of business at the Company andeach Group company.
Furthermore, at the Risk Management and Compliance Committee’s meeting, the states of our responses
to emerging risks are checked and the detail is reported to the Board of Directors, in addition to which
the outcomes of the responses are monitored by the Internal Audit Department, under the guidance of
the President and CEO.
・Establish a proper internal reporting system for any occurrences and/or signs that contingencies may
occur
In order to enable the early detection of, and prompt response to, unexpected situations, business-relatedtroubles and complains, all employees are kept informed through morning briefings, training sessions
and meetings, of duty to report to the heads of each division and to the Audit & Supervisory Board
Members. Moreover, for heads of each division, in addition to creating a strong obligation for them toreport to full-time Directors and Executive Officers in charge of each division, we have also made it
known that there is a duty to report to Audit & Supervisory Board Members.
・Promptly react to any occurrence of contingencies and disclose information
In case of occurrence of a contingency that may have significant effects on the operation of theCompany, a crisis management office directed by the President and CEO as the head will be established
to collect information, confirm facts and circumstance, develop and implement countermeasures, andproperly disclose information in a timely manner.
The different types of manuals (Earthquake response, BCP outline, Detailed BCP, Other) that werepreviously used in relation to natural disasters, which come under the category of unexpected situations,have been integrated into one New Disaster Response Manual, which was created during the fiscal year
under review and which will come into use from the next fiscal year.

- 43 -

iv) Efficient execution of duties by Directors
・Carry out deliberation and decision-making on the important management matters, in an efficient, timely
and appropriate manner
In addition to the regular meetings of the Board of Directors, which are held on a monthly basis,extraordinary meetings of the Board of Directors are held flexibly in order to make decisions promptly(regular meetings were held 12 times, and extraordinary meetings were held nine times during thecurrent period).
In order to further enrich and to make more efficient the deliberations of the Board of Directors, wehave implemented management meetings and pre-Board meeting discussions to confer beforehand on
matters to be resolved by the Board of Directors.
At the beginning of the fiscal year under review, we reconsidered matters to be resolved and matters to
be reported to the Board of Directors, as a result of which some matters were made items to be resolved
by Directors who execute business, with the aim of enabling fuller deliberation of the more importantmatters at the Board of Directors.
・Eliminate excessive pursuit of efficiencies in the management plans, etc. and pursue the balance with thesoundness
Corporate philosophy has been formulated to thoroughly communicate the management policy and the
direction the Group should take, and a three-year medium-term management plan and annual businessplans and budgets are formulated in accordance with the philosophy.
With regard to the annual business plans and budgets, we draw up guidelines based on the economic
environment in Japan and overseas, the operating environment in the real estate market and the earnings
trend for the term in progress, conduct separate discussions with each department and group company,
and based on the outcome of which we make our final decisions.
・Establish a system to allow appropriate and efficient execution of businessWe have been implementing modifications and alterations in order to realize appropriate and efficientorganizations and structures. This is in response to changes in the content of the businesses, the increasein employees associated with the expansion of business, and the increase in the number of groupcompanies, etc.
From the beginning of the fiscal year under review, control of parts of the Accounting Department(previously the Finance & Accounting Department) and the Corporate Planning Department have beentransferred. During the fiscal year under review, it was also decided that from next fiscal year the Asset
Solution Department 2 will shift from a structure with two businesses to a structure with threebusinesses.
v) Properness of operations of entire Group・Ensure compliance with laws and regulations by officers and employees of each Group companies
Two major Group companies are required to establish their own risk management and complianceprogram at the beginning of the fiscal year, and at these companies, the compliance with laws andregulations are thoroughly informed, and trainings, etc. are carried out to promote their awareness. Other
Group companies are required to attend the trainings conducted by the Company to foster theirawareness. Furthermore, responsible personnel of each Group company are required to attend meetingsof the Company’s Risk Management and Compliance Committee and business law liaison meetings toensure information sharing and reporting from each company. In addition, the Company’s in-housebooklets about compliance with laws and regulations are distributed to the Group companies to keepthem informed of the importance of compliance.
The same compliance questionnaire as the Company is conducted in order to assess the effectiveness ofcompliance trainings and the degree of awareness, identify issues of each company, and consider
responses to such issues.
・Ensure thorough understanding, analysis and assessment of operational risks related to each Group
company, and responses to contingencies
At least one of the Company’s full-time Directors, Audit & Supervisory Board Members, and Executive
Officers is assigned as a part-time Officer for each Group company with the remit of monitoring andsupervising the Directors and the Board of each company.
- 44 -

Every three months, representative directors of each Group company report management issues, any
problems that have emerged and responses to latent risks at the meetings of the Board of Directors of theCompany, and at the pre-Board meeting discussions in other months. In addition, those responsible forrisk management at each company are required to attend the Risk Management and Compliance
Committee’s meeting to ensure thorough sharing of information and reporting by each company.
Moreover, the response of these companies to problems that have emerged is continuously monitored by
the Company’s Internal Audit Department, which may also conduct checks using external agencies asnecessary, with the results being reported to the President and CEO of the Company and reported at theBoard of Directors’ meeting.
・Formulate a medium-term management plan, annual business plans and budgets relating to the entire
Group, manage the progress of these plans, and respond to new issues appropriately
Based on the medium-term business plan in line with the Group’s corporate philosophy, annual businessplans and budgets are prepared toward the achievement of such plan.
With regard to the annual business plans and budgets, we draw up guidelines based on the environment
for the business of each group company and on the earnings trend for the term in progress, then makedecisions based on separate discussions with each group company.
The progress of the business plans and budgets is reported by representative directors of each company
at the Board of Directors’ meeting and the pre-Board meeting discussion of the Company on a monthly
basis, and also, responses to new issues are deliberated and areas to be focused during the next half year
period are specified at the growth strategy meeting held with each company on a half-yearly basis.
・Establish a system for prompt reporting of significant matters of each Group company to the Company
In addition to monthly reports at the meetings of the Board of Directors and the Risk Management andCompliance Committee of the Company, full-time Directors, Audit & Supervisory Board Members,
executive officers who serve concurrently as officers of Group companies report to the President andCEO of the Company as necessary.
Any contingencies, if occurred, are immediately reported to the chairman of the Risk Management andCompliance Committee of the Company, and a contingency management meeting composed ofmembers including officers of the Company and each Group company is established to deliberate andimplement countermeasures as a Group and to disclose information in a timely and appropriate manner.
・Enhance the system for ensuring the appropriateness of the financial reporting relating to the entire
Group
In order to ensure the appropriateness of the financial reporting and the expeditious consolidated
financial closing, the Accounting Department of the Company holds a financial closing meeting with theaccounting department of each Group company for every quarterly closing to share information andprovide instructions for accounting procedures.
Furthermore, annual plans for internal control (J-SOX) are prepared to ensure the appropriateness of thefinancial reporting, and in accordance with the plans, the Internal Audit Department of the Company
conducts self-assessments and the audit corporation conducts independent assessments.
・Eliminate wrongful acts and/or irregular transactions using the Group
Wrongful acts and/or irregular transactions are overseen by providing management reports of eachGroup company at the Board of Directors’ meeting etc. of the Company and having opinion-exchanging
meetings (twice a year) attended by Audit & Supervisory Board Members of the Company withrepresentative directors of major Group companies. Also, rules have been established requiring any
significant transactions by a Group company with the Company or other Group companies to bereported in advance to the Board of Directors of the Company.
vi) System to ensure effective auditing by Audit & Supervisory Board Members
・Designate members of staff to assist Audit & Supervisory Board Members in their duties
The Internal Audit Department has been assigned as the department in charge, and the personnel of theInternal Audit Department provide assistant duties under the command of Audit & Supervisory Board
Members and carry out administrative duties for the Audit & Supervisory Board.
・Ensure the independence of the aforementioned members of staff from Directors- 45 -

Evaluations, rewards and punishments, and transfers of personnel of the Internal Audit Department are
carried out after the concurrence from the Audit & Supervisory Board is obtained in advance.
・Ensure prompt reporting to Audit & Supervisory Board Members from all officers and employees who
have identified occurrence or signs of any material losses, any breach of laws and regulations or
misconduct, and prompt responses to the inquiry from Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Members are provided with reports about various issues of theCompany and each Group company regarding all aspects of management by full-time Directors at
corporate governance meetings. The President and CEO makes reports on his areas of responsibility inthe interviews by full-time Audit & Supervisory Board Members once a month, whereas other full-time
Directors make such reports once a quarter and heads of each division make the reports twice a year. In
addition to the events and signs that may lead to potential significant risks, any individual surfacing
issues are reported to Audit & Supervisory Board Members in a timely and appropriate manner.
・Ensure prompt reporting to Audit & Supervisory Board Members from all officers and employees ofeach Group companies who have identified occurrence and signs of any material losses attributable tothe management of each Group company, any breach of laws and regulations or misconduct, and prompt
responses to the inquiry from Audit & Supervisory Board Members
At the Board of Directors’ meetings or the pre-Board meeting discussions of the Company, each Group
company is required to report occurrence and signs of any material losses along with the monthly
management reporting. In addition, full-time Audit & Supervisory Board Members of the Company
have interviews with representative directors of each Group company on a regular basis (once at theinvestigation of subsidiaries, twice a year upon opinion-exchanging meetings) to share information andexchange opinions about significant risks associated with management of the Group company.
At morning briefings and training sessions, all officers and employees of the Group are informed thatthose who identify any breach of laws and regulations or misconduct have a duty to report Audit &Supervisory Board Members of the Company promptly.
・Ensure full notification of prohibition of disadvantageous treatments for the reason of a report by
officers and employees of the Company and the Group companies to Audit & Supervisory Board
Members
Regulations of the Company explicitly state that those who report Audit & Supervisory Board Members
or whistle-blowers are protected from any disadvantageous treatments, and such policy is informed attraining sessions, etc.
・Develop a whistle-blowing system across the entire Group and promptly report to Audit & Supervisory
Board Members if whistle-blowing occurs
The Company established a whistle-blowing system that provides internal contact point that leads to thechairman of the Risk management and Compliance Committee of the Company, the contact point that
leads to full-time Audit & Supervisory Board Members of the Company and external contact point that
leads to a third party organization where anonymity of the whistle-blower is preserved. All officers andemployees of the Group are provided with a pocket-size card on which the contact points of the whistleblowing system are listed, and are informed of the system through various training sessions relating torisk management and compliance, morning briefings, and the publication of internal notice, etc.
Reports to the internal and external contact points, if any, are promptly reported to Audit & Supervisory
Board Members, and when no whistle-blowing has occurred, this fact is reported on a monthly basis.
・Expenses associated with execution of duties of Audit & Supervisory Board Members
Expenses required for audit activities by Audit & Supervisory Board Members are appropriated in thebudget, and expenditures are reimbursed in a timely manner. Also, any unbudgeted expenditures
required for audit activities are properly handled.
・Directors’ understanding of and support for the audits by Audit & Supervisory Board Members andproactive improvement of the issues raised by Audit & Supervisory Board Members
At the Board of Directors’ meeting subsequent to the Ordinary General Meeting of Shareholders, theDirectors receive explanations of Audit & Supervisory Board Members’ annual audit plans and makeefforts to understand such plans and cooperate in their implementation. At the Board of Directors’
meeting once every three months, Directors report the status of their responses to the issues raised byfull-time Audit & Supervisory Board Members in the monthly audit reports as well as the issues pointed- 46 -

out and matters requested to be considered in the quarterly meetings in which the audit corporation
explains its audit result to the Directors.
With the aim of enhancing the threefold auditing structure, full-time Directors provide appropriate
cooperation for holding periodic meetings in which the audit corporation reports to the Audit &Supervisory Board Members (Audit & Supervisory Board) as well as the periodic meetings at which
Audit & Supervisory Board Members and Internal Audit Department exchange opinions.
・Cooperation by Directors aiming to enhance audits by Audit & Supervisory Board Members across theentire GroupIn addition to the Board of Directors’ meetings and the pre-Board meeting discussions, full-time Audit& Supervisory Board Members attend the important meetings of the Company (corporate governancemeetings, management meetings, the Risk Management and Compliance Committee’s meetings, theInformation Disclosure Committee’s meetings, and the growth strategy meeting) to verify the
management conditions of the entire Group, risk and financial information, and to share the informationon those. Furthermore, in addition to the periodic interviews by full-time Audit & Supervisory Board
Members with full-time Directors including the President and CEO, executive officers, andrepresentative directors of the Company’s subsidiaries, the liaison meetings of Audit & Supervisory
Board Members of the Group companies are held on a half-yearly basis with necessary cooperation by
full-time Directors.
(d) Internal auditing and auditing by audit & supervisory board membersi) Coordination between audit & supervisory board members and accounting auditor
In the course of their auditing activities in accordance with the yearly audit plan, the audit & supervisoryboard members regularly exchange information and opinions with the accounting auditor. They also
receive reports on the results of audits by the accounting auditor and coordinate closely with them bysuch means as observing their audits as appropriate.
ii) Coordination between audit & supervisory board members and Internal Audit Department
The audit & supervisory board members hold a regular exchange of opinions session with the Internal
Audit Department once every two months, and receive timely updates on internal audit results from theGeneral Manager of the Internal Audit Department. The full-time audit & supervisory board members
attend hearings conducted by the Internal Audit Department with audited divisions, while members of
the Internal Audit Department attend hearings conducted by the audit & supervisory board members withthe accounting auditor, heads of divisions and others as assistants to the audit & supervisory board
members. Through such activities, the Company works to enhance the quality of its internal audits and tocarry out efficient business audits.
(e)Accounting auditsi) Names of certified public accountants who executed audit, name of audit corporation they belong to, andyears of continuous auditing
Years of continuous
Name of certified public accountant:
Name of audit corporation:
auditing:
Designated and Engagement Partner
Shinsoh Audit Corporation(Note)
Sakashita Takayuki
Designated and Engagement Partner
Atushi Iijima

Shinsoh Audit Corporation(Note)

Note: Since the years of continuous auditing are seven years or less, this information is omitted.

ii)

Breakdown of assistants in auditing operations
Certified public accountants:
6 persons
Other:
3 persons(f) Relationship between outside directors and outside audit & supervisory board members
The Company has two outside directors and four outside audit & supervisory board members.
With regard to the nomination of Outside Directors, the Company elects persons who can oversee
the management from an independent and objective standpoint and be expected to provide- 47 -

constructive advice and recommendations to Directors concurrently serving as Executive Officers. In
nominating Outside Audit & Supervisory Board Members, the Company elects persons who can bedeemed to audit the operation of the Board of Directors and execution of duties of Directors from an
independent standpoint, and who are expected to provide constructive advice and recommendations
for the increase of corporate value with their knowledge.
Standards for independence provided by the Company are as follows:(i) He/she has not been an officer/employee of the Group in the past 10 years;(ii) He/she is not or was not an employee of any business partner whose value of transaction with theGroup accounts for 2% or more of the Company’s consolidated sales (except for a former employeewith respect to whom three years or more have passed since he/she ceased to belong to such business
partner);(iii) He/she is not a major shareholder of the Company (holding 10% or more of the total voting rights)
or a person who executes its business;(iv) He/she is not a person with respect to whom the Group holds 10% or more of the total voting rights
or a person who executes its business;(v) He/she is not an attorney, accountant, etc. who receives remuneration of ¥10 million or more perannum from the Group other than remuneration for officers; and(vi) There are otherwise no circumstances with respect to him/her that may cause doubt as to the
independence in executing duties as Independent Outside Director.
Outside Director Goro Kamino has long collaborated with the Company in the enhancement of thegovernance system of the Company and the Group by providing valuable advice on various occasions
including the Board of Directors meetings and liaison meetings with the Audit & Supervisory Board
Members of the Company since assuming office of Outside Director of the Company in February
2007, while leading SALA Corporation as a representative director and having engaged in othercompanies. In view of the growth of the Group in terms of management over the medium- to longterm, the Company deems that his reappointment as well as his advice based on the solid viewpoint as
a manager of operating companies will contribute to the interest of the Group, and in turn, common
interests of its shareholders.
Outside Director Kenichi Shohtoku has contributed to strengthening the governance system of theCompany and the Group by providing valuable advice on various occasions including the Board of
Directors meetings and liaison meetings with the Audit & Supervisory Board Members of theCompany since assuming office of Outside Director of the Company in February 2012, while leading
SCS Global Consulting (S) Pte Ltd as a representative director. In addition, with respect to theoverseas activities, etc. of the Company, the Company benefits from his suggestions based on theexpertise cultivated through his abundant overseas experiences mainly in consulting as a certified
public accountant. In view of the growth of the Group in terms of management over the medium- tolong-term, including overseas expansion, the Company deems that his reappointment will contributeto the interests of the Group, and in turn, common interests of its shareholders. Kenichi Shohtoku is
Representative Director of SCS Global Consulting (S) Pte Ltd, with which the Company has enteredinto a consignment contract of consulting on overseas business deployment, etc. However, in light ofthe content and scale of the transactions and other factors, the Company believes that this will notcause a conflict of interest with general shareholders.
Full-time outside audit & supervisory board member Yutaka Kitamura has abundant experience
including overseas assignment primarily at a major financial institution as well as specialist knowledge. As
such, the Company believes that he can perform a role in ensuring the adequacy and appropriateness of theCompany’s management, particularly from a financial and global standpoint. Yutaka Kitamura was an
employee of Mizuho Trust & Banking Co., Ltd., with which the Company has transactions, until 2005.
However, in light of the content and scale of the transactions and other factors, the Company believes that
this will not cause a conflict of interest with general shareholders.
Full-time outside audit & supervisory board member Hiroshi Nishinakama has abundant experience
including overseas assignment primarily at a major financial institution as well as specialist knowledge. As
such, the Company believes that he can perform a role in ensuring the adequacy and appropriateness of theCompany’s management, particularly from a financial and global standpoint. Hiroshi Nishinakama was an
employee of The Bank of Tokyo-Mitsubishi UFJ, Ltd., with which the Company has transactions, until
2007, and an employee of ORIX Corporation, with which the Company has transactions, until February
2015. However, in light of the content and scale of the transactions and other factors, the Company
believes that this will not cause a conflict of interest with general shareholders.
Outside audit & supervisory board member Tatsuki Nagano has experience at major financial
institutions and continues to be involved in corporate management as a company representative, and the- 48 -

Company believes that he can utilize his extensive experience and a high level of expert insight to perform
a role in ensuring the adequacy and appropriateness of the Company’s management.
The Company believes that Osamu Doi can perform a role in ensuring the adequacy andappropriateness of the Company’s management based on his abundant experience at major securities
companies and at companies that conduct investment banking activities as well as his specialist knowledge.
3)

Establishment of risk management structure
To achieve centralized and cross-sectional risk management and compliance promotion of the Group, theCompany integrated the Risk Management Committee and the Compliance Committee into the Risk
Management and Compliance Committee in December 2015. This committee examines the company-wide
policy, annual plan and other matters for risk management and compliance and assesses the status of risk
management and compliance of each group company.

4)

Remuneration, etc. of officers(a) Total amount of remuneration, etc. by position, total amount by type of remuneration, etc., and number ofrecipients at the Company
Position

Total amount of
remuneration,etc.
(¥ thousand)Total amount by type of remuneration, etc.
(¥ thousand)Basic
remuneration

Share
options

Bonus

Number ofrecipients(Person)Directors(excluding outside
directors)

150,066

122,520

3,042

24,504

3

Audit &
supervisory board
members(excluding outside
audit & supervisoryboard members)

－

－

－

－

－

44,08543,680405－

7Outside officers(b) Total amount of consolidated remuneration, etc. by each officer of the Company
Since there is no officer for whom the total amount of remuneration, etc. is ¥100 million or more, thisinformation is omitted.
(c) Significant items among employee salaries paid to officers concurrently serving as employees
None(d) Policy on determining amount of remuneration, etc. for officers
The maximum amounts of remuneration to be paid to the directors and to the Audit & Supervisory Board
Members are determined by a resolution made at the General Meeting of Shareholders. Remuneration foreach director shall consist of fixed salary according to their duties, performance-linked bonuses and stock
options that can be exercised after a defined period of time. After the discussion on the adequacy of its
contents in the Nomination and Compensation Advisory Committee, the Board of Directors shall makedecision thereof by its resolution. The remuneration of Audit & Supervisory Board Member is determinedby the deliberation of the Audit & Supervisory Board Members.
5)

Status of shareholding(a) Investment shares held for purposes other than pure investment
Number of issues
2 issues
Total carrying amount¥47,200 thousand(b) Investment shares held for purposes other than pure investment and for which the carrying amount in thecurrent period is over 1% of stated capitalNone- 49 -

(c) Investment shares held for pure investment purposes
None
6)

Outline of contracts for limitation of liability
Pursuant to the provisions of Article 427, paragraph 1 of the Companies Act, the Company has entered into
contracts with its outside directors and outside audit & supervisory board members that limits their liability
for damages provided for in Article 423, paragraph 1 of the same Act. The maximum amount of liability fordamages under the contract will be the amount prescribed by laws and regulations.

7)

Stipulations of Articles of Incorporation regarding number, etc. of directors(a) Number of directors
The Company stipulates in its Articles of Incorporation that the number of directors of the Company shallbe six persons or less.
(b) Requirements for resolutions regarding election and dismissals of directors
The Company stipulates in its Articles of Incorporation that resolutions for election of directors shall bedecided by a majority of the voting rights of the shareholders present at a meeting where the shareholders
holding one third or more of the voting rights of the shareholders who are entitled to exercise their voting
rights are present, and shall not be effected by cumulative voting
Regarding resolutions for dismissal of directors, the Company stipulates in its Articles of Incorporationthat they shall be decided by two thirds or more of the voting rights of the shareholders present at a
meeting where the shareholders holding a majority of the voting rights of the shareholders who are entitled
to exercise their voting rights are present.

8)

In cases where the Company stipulates that items for resolution at General Meeting of Shareholders may beresolved by Board of Directors, applicable items and reasons for the stipulation(a) Acquisition of treasury shares
The Company stipulates in its Articles of Incorporation that the Company can acquire its treasury shares byresolution of the Board of Directors as provided for in Article 165, paragraph 2 of the Companies Act. The
purpose of this is for the Company to acquire its own shares in market transactions and the like in order toenable the execution of a flexible capital policy in response to changes in the management environment.
(b) Exemption from liability of directors and audit & supervisory board members
The Company stipulates in its Articles of Incorporation that directors and audit & supervisory board
members (including those who previously held these positions) may be exempted from liability to theextent provided for in laws and regulations in relation to acts provided for in Article 423, paragraph 1 of
the Companies Act by resolution of the Board of Directors, as provided for in Article 426, paragraph 1 ofthe same Act. The purpose of this is to provide an environment in which directors and audit & supervisoryboard members can make use of their abilities sufficiently and fulfill the roles expected of them whencarrying out their duties.
(c) Payment of interim dividend
The Company stipulates in its Articles of Incorporation that an interim dividend may be paid with a record
date of May 31 each year by resolution of the Board of Directors as provided for in Article 454, paragraph
5 of the Companies Act, in order to flexibly distribute profits to shareholders.

9)

Requirements for special resolutions of General Meeting of Shareholders
The Company stipulates in its Articles of Incorporation that special resolutions of the General Meeting of
Shareholders provided for in Article 309, paragraph 2 of the Companies Act shall be passed by two thirds ormore of the voting rights of the shareholders present at the meeting where the shareholders holding one thirdor more of the voting rights of the shareholders who are entitled to exercise their voting rights are present.
The purpose of this is to operate the General Meeting of Shareholders smoothly by easing the quorum
required for special resolutions at the General Meeting of Shareholders.

- 50 -

(2) Audit fees
1) Audit fees paid to certified public accountants, etc.
Fiscal year ended Nov. 30, 2015
Classification

Fees for audit
attestation services(¥ thousand)Fiscal year ended Nov. 30, 2016

Fees for non-audit
services(¥ thousand)Fees for audit
attestation services(¥ thousand)Fees for non-audit
services(¥ thousand)Filing company

31,000–31,000–Consolidated
subsidiaries

3,000

–

5,000

–

Total

34,000–36,000–2)

Other important fees
Fiscal year ended November 30, 2015
None
Fiscal year ended November 30, 2016
None

3)

Non-audit services to filing company
Fiscal year ended November 30, 2015
None
Fiscal year ended November 30, 2016
None

4)

Policy for determining audit fees
Although there are no applicable matters, audit fees are determined appropriately after considering suchfactors as the number of auditing days, the size of the Company, and the nature of the business activities, etc.

- 51 -

V.

Accounting

1. Preparation policy of the consolidated and non-consolidated financial statements(1) Tosei prepares consolidated financial statements in accordance with the International Financial ReportingStandard (IFRS), an international accounting standard designated in Article 93 of the Ordinance on
Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the
Ministry of Finance No. 28 of 1976).
(2) Tosei prepares non-consolidated financial statements in accordance with the Ordinance on Terminology,
Forms, and Preparation Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance No. 59
of 1963. Hereinafter referred to as the “Ordinance on Financial Statements, etc.”).
The Company falls under the category of companies allowed to file specified financial statements andprepares financial statements pursuant to Article 127 of the Ordinance on Financial Statements, etc.
2. Audit attestation
Pursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act, the consolidated financial
statements for the fiscal year ended November 30, 2016 (from December 1, 2015 to November 30, 2016) and thenon-consolidated financial statements for the fiscal year ended November 30, 2016 (from December 1, 2015 toNovember 30, 2016) were audited by Shinsoh Audit Corporation.
3. Special efforts made to ensure the properness of consolidated financial statements, etc. andestablishment of a system that enables appropriate preparation of consolidated financial statements, etc.
under IFRS
Tosei is carrying out the special efforts in order to ensure the properness of consolidated financial statements, etc.
(1) For the purpose of both ensuring that Tosei has an appropriate grasp of the contents of Accounting Standards
and related regulations, and establishing a system by which it is possible to ensure appropriateness of
consolidated financial statements, etc., Tosei became a member of the Financial Accounting Standards
Foundation, and is kept informed of changes in Accounting Standards and other events. In addition, Tosei
participates in seminars and other events hosted by the foundation.
(2) In applying IFRS, Tosei receives press releases and standards published by the International AccountingStandards Board as needed to keep itself informed of latest standards. In addition, for accounting proceduresin accordance with IFRS, it strives to make the Group conduct uniform accounting treatments by making
accounting policies in accordance with IFRS well known to group companies.

- 52 -

1. Consolidated financial statements, etc.
(1) Consolidated financial statements
1) Consolidated statements of financial position(¥ thousand)
As ofNovember 30, 2015

As ofNovember 30, 2016

7
9
10
11

18,791,081
2,914,639
46,156,041
27,01067,888,773

21,640,866
3,531,880
67,298,309
121,444
92,592,501

12
13
14
8
9
15
11

3,315,747
18,785,986
96,6481,225,047
1,098,687
781,146
4,014
25,307,278
93,196,052

3,595,898
21,728,740
96,612
1,441,167
1,235,065
557,392
28,914
28,683,790
121,276,292

16
17
15
18

2,734,006
9,492,795
1,150,089
442,303
13,819,195

2,955,289
9,387,249
1,859,183
450,030
14,651,752

16
17
19
18

3,510,413
39,175,846
383,31278,90543,148,478
56,967,673

4,349,965
60,772,064
413,376
79,04965,614,455
80,266,208

20
20

6,421,392
6,373,881
23,327,875
105,228

6,421,392
6,418,823
28,120,304
49,56236,228,378

41,010,083

36,228,378
93,196,052

41,010,083
121,276,292

Note
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Investment properties
Intangible assets
Available-for-sale financial assets
Trade and other receivables
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables
Borrowings
Current income tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Retirement benefits obligations
Provisions
Total non-current liabilities
Total Liabilities
EquityShare capital
Capital reserves
Retained earnings
Other components of equity
Total equity attributable to owners ofparentTotal equity
Total liabilities and equity

20- 53 -

2)

Consolidated statements of comprehensive income(¥ thousand)
Note

Fiscal year ended
November 30, 2015

Fiscal year ended
November 30, 2016

43,006,964
31,091,794
11,915,169
5,099,064
126,357
50,4996,891,963
22,840874,4936,040,311
1,904,494
4,135,816

49,818,113
33,468,138
16,349,974
7,021,724
222,197
270,540
9,279,906
63,062892,9208,450,048
2,902,579
5,547,469(5,006)

17,503(5,006)

17,503(14,420)(24,512)(28,020)(31,465)(6,982)

312(49,423)(55,665)(54,430)(38,162)

Revenue
22
Cost of revenue
23
Gross profit
Selling, general and administrative expenses
24, 25
Other income
26
Other expenses
27
Operating profit
Finance income
28
Finance costs
28
Profit before tax
Income tax expense
15
Profit for the year
Other comprehensive income
Items that will not be reclassified to net profit orloss
Remeasurements of defined benefit pension
29
plans
Total items that will not be reclassified to net
profit or loss
Items that may be reclassified to net profit orloss
Exchange differences on translation of29
foreign operations
Net change in fair values of available-for-sale29
financial assets
Net change in fair values of cash flow hedges
29
Total items that may be reclassified to net
profit or loss
Other comprehensive income for the period,
net of tax
Total comprehensive income for the year

4,081,386

5,509,307

Profit attributable to:
Owners of parent

4,135,816

5,547,469

Total comprehensive income attributable to:
Owners of parent

4,081,386

5,509,30785.66–

114.89–Profit for the year attributable to owners ofparentBasic earnings per share(¥)
Diluted earnings per share
(¥)

30
30

- 54 -

c.

Consolidated statements of changes in equity
Fiscal year ended November 30, 2015 (Dec. 1, 2014– Nov. 30, 2015)(¥ thousand)Total equity
Other
attributablecomponents
Total equity
to owners ofof equity
parentNote Share capital

Capitalreserves

Retainedearnings

6,421,392

6,375,317

19,776,474

154,652

32,727,836

32,727,836

Profit for the year––

4,135,816－

4,135,816

4,135,816

Other comprehensive income

–

–

－

(54,430)(54,430)(54,430)––

4,135,816(54,430)

4,081,386

4,081,386

Balance as of December 1, 2014

Total comprehensive income forthe yearAmount of transactions withownersDividends of surplus

21

–

–

(579,408)－(579,408)(579,408)

Share-based payment

35–(1,435)－－(1,435)(1,435)

Transfer from other components ofequity to retained earnings––(5,006)

5,006

–

–

Balance as of November 30, 2015

6,421,392

6,373,881

23,327,875

105,228

36,228,378

36,228,378

Fiscal year ended November 30, 2016 (Dec. 1, 2015– Nov. 30, 2016)(¥ thousand)Total equity
Other
attributable
Total equity
components
to owners ofof equity
parentNote Share capital

Capitalreserves

Retainedearnings

6,421,392

6,373,881

23,327,875

105,228

36,228,378

36,228,378

Profit for the year－－

5,547,469－

5,547,469

5,547,469

Other comprehensive income

－

－

－

(38,162)(38,162)(38,162)

Total comprehensive income forthe yearAmount of transactions withowners－－5,547,469(38,162)5,509,307

5,509,307

Balance as of December 1, 2015

Dividends of surplus

21

－

－

(772,544)－(772,544)(772,544)

Share-based payment

35－

44,941－－

44,941

44,941

Transfer from other components ofequity to retained earnings－－

17,503(17,503)－－

Balance as of November 30, 2016

6,421,392

6,418,823

28,120,304

49,56241,010,083

41,010,083- 55 -

d.

Consolidated statements of cash flows(¥ thousand)Fiscal year ended
November 30, 2016

Fiscal year ended
November 30, 2015

Note
Cash flows from operating activities
Profit before tax
Depreciation expense
Increase (decrease) in provisions and retirement
benefits obligations
Interest and dividends income
Interest expenses
Loss on retirement of property, plant and equipment
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade and other payables
Other, net

6,040,311
222,440

8,450,048
333,415(164,709)

43,168(22,840)
874,493
2,372(1,097,514)(8,845,226)
930,567(28,424)(63,062)
892,920
7,711
944,245(15,971,161)
235,008(110,587)

SubtotalInterest and dividends income received
Income taxes paid

(2,088,530)
22,832(2,377,395)(5,238,293)
63,063(2,297,257)

Net cash from (used in) operating activities(4,443,093)(7,472,487)(100,000)
240,000(71,303)(750,033)(37,610)(5,020)757,951(45,000)
30,000(54,277)(1,743,387)(27,711)(321,636)
124,918444,960

34,680－64(2,935,000)
72－(3,297,173)－

40,563

2,596

132

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of investment properties
Purchase of intangible assets
Purchase of available-for-sale financial assets
Collection of available-for-sale financial assets
Proceeds from sales of available-for-sale financial
assetsPayments of loans receivableCollection of loans receivable
Purchase of investments in subsidiaries resulting inchange in scope of consolidation
Proceeds from purchase of investments in subsidiaries
resulting in change in scope of consolidation
Other, net

481,605(8,193,818)

Cash flows from financing activities
Net increase (decrease) in current borrowings
Proceeds from non-current borrowings
Repayments of non-current borrowings
Cash dividends paid
Interest expenses paid
Other, net

Net cash from (used in) investing activities(95,000)
31,627,000(23,273,064)(578,436)(1,015,655)(3,745)

1,652,800
42,442,800(23,866,891)(771,761)(926,467)(7,983)

Net cash from (used in) financing activities

6,661,097

18,522,496

2,699,610
16,100,795

2,856,190
18,791,081(9,323)(6,404)

18,791,081

21,640,866

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate change on cash and cash
equivalents
Cash and cash equivalents at end of year7

7

- 56 -

[Notes to Consolidated Financial Statements]
1. Reporting entity
TOSEI CORPORATION (hereinafter, the “Company”) is a share company located in Japan whose shares arelisted on the First Section of the Tokyo Stock Exchange and the Mainboard of Singapore Exchange. The
Company and its consolidated subsidiaries (hereinafter collectively, the “Group”) engage in the following fivebusiness operations: Revitalization Business, Development Business, Rental Business, Fund and Consulting
Business and Property Management Business . The operations of each business segment are presented in “6.
Segment information” in the notes.
2. Basis of preparation(1) Compliance with IFRS
Since the Company qualifies as a “Designated International Financial Reporting Standards specified
company” as provided in Article 1-2 of the “Ordinance on Terminology, Forms and Preparation Methods ofConsolidated Financial Statements” (Ordinance of the Ministry of Finance No. 28 of 1976), its consolidated
financial statements have been prepared in accordance with IFRS under the provision of Article 93 of thesaid ordinance.
These consolidated financial statements were approved by Seiichiro Yamaguchi, the Company’s
President and CEO, and Noboru Hirano, Director and CFO, on February 22, 2017.
(2) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for assets andliabilities measured at fair value.
(3) Presentation currency and unit
The consolidated financial statements in this report are presented in Japanese yen, the Company’s functional
currency. All financial information presented in Japanese yen is rounded down to the nearest thousand yen.
3. Significant accounting policies
The significant accounting policies applied to these consolidated financial statements are consistent throughout
all the periods presented therein.
(1) Basis of consolidation
1) Subsidiaries
Subsidiaries are entities that the Group controls. The Group controls an entity when the Group is exposed,or has rights, to variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date when control is obtained until the date when it is lost.
Intra-Group balances of payables and receivables and intra-Group transactions, as well as unrealized
gains or losses arising from intra-Group transactions, are offset in preparing the consolidated financial
statements.
2) Business combinations
The Group has applied the acquisition method to account for business combinations. The considerationstransferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, liabilities
incurred, and the equity interests issued by the Group. The considerations transferred also include the fairvalue of assets or liabilities arising from contingent consideration arrangements. Acquisition-related costs
are recognized as expenses when incurred. The identifiable assets acquired, the liabilities and contingent
liabilities assumed in a business combination are initially measured at their fair values at the acquisition
date. If the considerations transferred are greater than the fair value of identifiable assets acquired andliabilities assumed, then goodwill will be measured, if lower, negative goodwill will be measured. The
measured goodwill or negative goodwill is promptly recognized in profit or loss.
(2) Foreign currency translation
1) Foreign currency transactions
Foreign currency transactions are translated into the functional currencies of each entity in the Group using
the exchange rates at the date of the transactions. Assets and liabilities denominated in foreign currencies tobe remeasured at the end of each reporting period are retranslated into the functional currencies using theexchange rates at that date. Non-monetary assets and liabilities measured at fair value in foreign currencies
are retranslated into the functional currencies using the exchange rates at the date when the fair value was- 57 -

2)

determined.
Foreign exchange differences arising on the settlement of such transactions, and exchange differences
arising on translating foreign currency-denominated monetary assets and liabilities using the exchange
rates at the end of the reporting period, are recognized in profit or loss. However, when a gain or loss on a
non-monetary item is recognized in other comprehensive income, the foregoing exchange differences arealso recognized in other comprehensive income.
Overseas operations
Assets and liabilities of overseas operations are translated into Japanese yen using the exchange rate at thereporting date. Income and expenses are translated into Japanese yen using the average exchange rate forthe period. However, if such an average exchange rate is not considered as a reasonable approximation of
the cumulative effect of the exchange rates at the transaction dates, the exchange rates at the transaction
dates are used.
Exchange differences arising on translating financial statements of overseas operations are recognizedin other comprehensive income. On the disposal of the interest in an overseas operation involving loss ofcontrol or significant influence, the cumulative amount of the exchange differences in connection with theforeign operation is recognized in profit or loss in the period during which the interest is disposed of.

(3) Cash and cash equivalents
Cash and cash equivalents are cash on hand, demand deposits, and short-term investments with maturities ofthree months or less from the date of acquisition that are readily convertible to cash and subject to an
insignificant risk of changes in value.
(4) Financial instruments
The Group classifies investments in financial assets in two categories: loans and receivables, and availablefor-sale financial assets. This classification is made according to the nature of assets and for what purpose theassets were acquired. The classification of investments is determined on initial recognition, and whether theclassification is appropriate is reassessed at each reporting date.
1) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. Financial assets classified in this category are recorded as current assets, except
for those with maturities of greater than 12 months after the reporting date or exceeding the normal
operating cycle. Loans and receivables are included in “Trade and other receivables” in the consolidated
statement of financial position.
2) Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are not classified in othercategories. Available-for-sale financial assets are recorded as non-current assets unless the management
has an intention to dispose of the investment within 12 months after the reporting date. Available-for-salefinancial assets are initially recognized at the fair value plus directly attributable transaction costs, andsubsequently measured at the fair value.
Purchase and sale of a financial asset are recognized at the transaction date, which is the date on which
the Group commits itself to purchase or sell the asset. A financial asset is derecognized when the rights toreceive cash flows from the asset are extinguished or transferred, and the Group has substantiallytransferred all the risks and economic value incidental to ownership of the asset. After initial recognition,
available-for-sale financial assets are recognized at fair value. Loans and receivables are recognized atamortized cost using the effective interest method. Financial assets or financial asset groups are assessedon a quarterly basis to determine whether there is any objective evidence that the asset or asset group is
impaired. When there is objective evidence, impairment losses are recognized. Unrealized gains or losses
attributable to changes in the fair value of available-for-sale financial assets are recognized in changes in
the fair value of available-for-sale financial assets. When available-for-sale financial assets are sold or
impaired, cumulative changes in the fair value of available-for-sale financial assets are recognized in profit
or loss.
The fair value of listed securities is measured at quoted market prices. For financial assets for which
there is no active market and unlisted securities, the Group calculates fair value using certain valuation
techniques, in particular, which include recent cases of arm’s length transactions, references to prices ofother financial instruments that are substantially equivalent, and the discounted cash flow method.
The Group assesses financial assets or financial asset groups at each reporting date to determine
whether there is any objective evidence that the asset or asset group is impaired. When there is objective
evidence, impairment losses are recognized. Objective evidences for impairment of loans and receivables
are debtors’ financial difficulties, possibility of bankruptcy, or impossibility or significant delays of- 58 -

payments. Book values of such assets are written down using allowance based on the amount of
impairment loss calculated as the difference between the present value of estimated future cash flows
discounted at the initial effective interest rate and the book value. If the asset becomes unrecoverable, it isamortized using allowance. Reversal of an amount previously amortized is recognized in the profit or loss
item in which impairment loss is accounted for. If such amount can be objectively measured because theamount of impairment loss has decreased resulting from an increase in the present value of estimated future
cash flows discounted at the initial effective interest rate, the amount of decrease in the allowance isrecognized in profit or loss in subsequent accounting periods. The book value of assets previously impaired
are increased within the scope of amount not exceeding the amortized cost that are assumed in case of nonimpairment.
For equity instruments classified as available-for-sale financial assets, the possibility that the cost ofinvestment is not recoverable and whether there is a significant or long-term decrease of fair value, which
are included in information on significant changes that have adverse effects arising in the businessenvironment where an issuer runs its business, are also taken into account in assessing whether there is any
objective evidence for impairment. When there is objective evidence of impairment for available-for-salefinancial assets, losses, which are measured as the difference between the acquisition cost and the fairvalue at the reporting date less impairment losses of the financial assets that were previously recognized in
profit or loss, are transferred to profit or loss.
(5) Inventories
Inventories are assessed at cost or, if lower, at net realizable value. Net realizable value is calculated bydeducting costs to sell from the estimated selling price.
The cost of inventories is comprised of purchase prices, development expenses, borrowing costs andseparately identified expenditure including other related expenditure.
Borrowing costs for borrowings for developed real estate are capitalized as part of cost of the developed
real estate over the period up to the end of the development, based on the specific identification method.
(6) Property, plant and equipment
The Group applies the cost model in measurement of property, plant and equipment.
Property, plant and equipment are stated at the carrying amount, which is calculated as cost less any
accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment
includes cost directly incidental to the acquisition of assets, and costs of dismantling and removing the assets
and restoring the site on which they have been located, and borrowing costs directly attributable to theacquisition, construction or production of qualifying assets.
Subsequent expenditures on property, plant and equipment that have already been recognized areincluded in the carrying amount of the assets only if it is highly probable to generate future economic benefits
related to the items for the Group and the expenditures can be measured reliably. Costs of the day-to-day
servicing of property, plant and expenditure are recognized in profit or loss when incurred.
Depreciation of assets except for land and construction in progress is principally computed under thestraight-line method over the following estimated useful lives. The declining balance method is applied, if
depreciation based on the declining balance method better reflects the pattern in which the future economic
benefits embodied in the asset are expected to be consumed by the entity.
Buildings and structures
Tools, furniture and fixtures

3 to 50 years
3 to 20 years

The estimated useful lives, residual values, and depreciation methods are reviewed at the end of each year,
and changed if necessary.
(7) Intangible assets
The Group applies the cost model in measurement of intangible assets. An intangible asset is stated at thecarrying amount, which is calculated as cost less any accumulated amortization and any accumulated
impairment losses.
Subsequent expenditures on intangible assets that have already been recognized are included in the
carrying amount of the assets only if it is highly probable to generate future economic benefits related to theitems for the Group and the expenditures can be measured reliably. Other expenditures are recognized in
profit or loss when incurred.
1) Software
Acquired software is initially recognized at cost including purchase consideration (net of discounts and- 59 -

rebates) and expenditures directly attributable to the preparation for the asset for the intended use.
After the acquisition, software is amortized under the straight-line method over its estimated useful life.
The estimated useful life and amortization method are reviewed in each fiscal year, and changed if
necessary.
(8) Leases
1) Lessee
Leases are classified as finance leases when all the risks and economic value incidental to ownership of anasset in a lease arrangement are substantially transferred to the lessee. All leases other than finance leases
are classified as operating leases.
The Group’s assets under finance leases are tools, furniture and fixtures and are capitalized at amounts
equal to the fair value of leased property at the inception of the lease or, if lower, at the present value of theminimum lease payments. Leased assets are depreciated on a straight-line basis over the estimated useful
lives or, if shorter, the lease terms. Lease obligations are recognized as liability in the consolidated
statement of financial position.
Operating lease payments are recognized in profit or loss on a straight-line basis over the lease term.
Contingent rent expense is recognized in profit or loss for the period during which it is incurred.
2) Lessor
Leases of investment properties are classified as operating leases when all the risks and rewards incidental
to ownership of an asset in a lease arrangement are substantially held by the Group. Lease income fromoperating leases (net of incentives provided to the lessee) is recognized in profit or loss on a straight-line
basis.
Initial direct costs incurred to the Group at the inception of operating leases are added to the carrying
amount of the leased assets, and are recognized in profit or loss on the same basis as lease income over thelease term.
Contingent rent income is recognized in profit or loss for the period during which it is incurred.
(9) Investment properties
Investment properties are properties held to earn rentals or for capital gain or both, and do not include
properties for sale in the ordinary course of business or used for administrative purposes.
The Group applies the cost model in measurement of investment properties.
Investment properties are initially recognized at cost, and subsequently stated at the carrying amount,which is calculated as cost less any accumulated depreciation and accumulated impairment losses.
Depreciation of investment properties is principally computed under the straight-line method over thefollowing estimated useful lives. The declining balance method is applied, if depreciation based on the
declining balance method better reflects the pattern in which the future economic benefits embodied in theasset are expected to be consumed by the entity.
Buildings and structures
Tools, fixtures and fittings

3 to 50 years
3 to 20 years

The estimated useful lives, residual values, and depreciation methods are reviewed at the end of each year,
and changed if necessary.
(10) Impairment of non-financial assets
The Group assesses whether there is any indication of impairment on a quarterly basis for the carrying
amounts of non-financial assets except inventories and deferred tax assets. If any such indication exists, therecoverable amount of the asset or each cash-generating unit (CGU) to which the asset belongs is estimated.
The recoverable amount is the higher of its fair value less costs to sell and its value in use. When therecoverable amount of the asset (or CGU) falls below the carrying amount, the carrying amount of the asset(or CGU) is reduced to the recoverable amount.
Difference between the carrying amount and the recoverable amount is recognized as impairment losses
in profit or loss.
When impairment losses are reversed after recognition, the carrying amount of the asset (or CGU) is
increased to the revised estimated recoverable amount. However, the reversal of the impairment loss does notexceed the carrying amount that would have been determined had no impairment loss been recognized for theasset (or CGU).
The reversal of impairment losses is immediately recognized through profit or loss.

- 60 -

(11) Trade and other payables
Trade and other payables are obligations to pay for goods or services provided to the Group in the ordinary
course of business and others. Trade and other payables are classified as current liabilities when suchpayables are due within one year or within the normal operating cycle, and otherwise, presented as noncurrent liabilities.
Trade and other payables are initially recognized at fair value and subsequently at amortized costcalculated using the effective interest method.
(12) Borrowings
Borrowings consist of borrowings and lease obligations. Borrowings are initially recognized at fair value andsubsequently recognized at amortized cost. Difference between net proceeds net of transaction costs and therepayment amount is recognized in profit or loss over the borrowing period using the effective interest
method.
Borrowings are recorded as current liabilities unless the Group has unconditional rights to reschedule therepayment for at least 12 months after the reporting date.
(13) Provisions
Provisions are legal or constructive obligations as a result of past events. They are recognized if it is highly
probable that outflows of economic benefits will be required to settle the obligations, and reliable estimates
can be made of the amount of obligations.
(14) Employment benefits
1) Defined benefit pension plans
Liabilities associated with defined benefit pension plans are calculated by discounting the estimatedamount of future benefits obtained in return for services that employees rendered in prior years or the
fiscal year under review to the present value. The yield of gilt-edged corporate bonds of which thematurity largely matches that of the Group’s debts is used as the discount rate. These liabilities arecalculated by actuaries using the projected unit credit method. Remeasurement amounts arising fromdefined benefit pension plans are recognized as other comprehensive income and the amounts aretransferred to retained earnings.
2)

3)

Defined-contribution pension plans
Defined-contribution pension plans are post-employment benefit plans in which an employer pays fixed
contributions to a separate entity and will have no obligation to pay further contributions.
Contributions associated with defined-contribution pension plans are recognized in profit or loss in the
period during which employees render services.
Short-term employee benefits
Short-term employee benefits are measured on an undiscounted basis and are recognized as profit or loss
when the related service is rendered.
Bonus accrual and paid absences are recognized as liabilities, when the Group has present legal orconstructive obligations to pay, and when a reliable estimate of the amount of obligations can be made.

(15) Revenue
Revenue is recorded at the fair value of the consideration received for the sale of properties and services or
receivables net of discounts, rebates and consumption taxes, etc., less internal sales. Revenue is recognized asfollows:
1) Sale of properties
Revenue from sales of properties is recognized when the significant risks and economic value incidental toownership of the assets for sale have been transferred to the buyer; the Group retains neither continuing
involvement nor effective control over the assets; it is probable that the economic benefits associated withthe transaction will flow to the Group; and the amounts of the cost and revenue incurred in respect of thetransaction can be measured reliably.
2) Operating lease of rental properties
Revenue associated with operating lease is recognized on a straight-line basis over the lease period.
3) Rendering of services
Revenue from the rendering of services is recognized according to the stage of provision of services orwhen provision of services is finished.
- 61 -

4) Interest income
Interest income is recognized using the effective interest method.
5) Dividend income
Dividend income is recognized when the right to receive dividend payment is vested.
(16) Borrowing costs
The Group adds borrowing costs directly attributable to acquisition, construction or production of assets that
require a reasonable period of time before intended use or sale becomes possible, or qualifying assets, to thecost of these assets until the intended use or sale of the assets effectively becomes possible.
Borrowing costs other than those described above are recognized in profit or loss in the period during
which these costs are incurred using the effective interest method.
(17) Derivatives and hedges
Derivatives are initially recognized at fair value on the day when the derivative contract is entered into, andsubsequently remeasured at fair value at each reporting date.
The Group has concluded interest rate swap contracts in order to hedge changes in future cash flows
associated with floating-rate borrowings. At the inception of the hedge, concluded derivatives are designatedas cash flow hedge and documented.
The Group also assesses whether a derivative used in the hedge transaction is highly effective inoffsetting fair value of the hedged item or changes in cash flows, at the inception of the hedge or on an
ongoing basis.
Changes in fair value of derivative transactions that are designated as cash flow hedge and qualify forcash flow hedge are recognized in equity through other comprehensive income. Of changes in fair value ofderivative transactions, ineffective portion is immediately recognized in profit or loss.
(18) Income tax expense
Income tax expense is comprised of current taxes and deferred taxes and recognized in profit or loss, except
for the taxes which arise from business combinations or are recognized either directly in equity or in othercomprehensive income.
Current taxes are computed by adding adjustments of the amount of expected tax payment or expected
refund up to the previous fiscal year to the estimated amount of expected tax payment or expected refund on
taxable profits or losses in the current year which are multiplied by tax rates that are enacted or substantiallyenacted at the reporting date.
Deferred tax assets and liabilities are recognized for temporary differences between accounting carrying
amounts of assets and liabilities and amounts of them for tax purpose. For differences associated with initialrecognition of assets or liabilities in transactions that have no effect on any profit and loss for bothaccounting and tax purposes, except for business combinations, deferred tax assets and liabilities are notrecognized. Deferred tax assets and liabilities are measured using the tax rate that is expected to be applied
when the temporary differences will reverse under the law which is in effect or substantially in effect at thereporting date. Deferred tax assets and liabilities are offset if the Group has a legally enforceable right tooffset current tax assets against current tax liabilities, and they are related to income taxes levied by the same
taxation authority on the same taxable entity.
Deferred tax assets are recognized only for the carry-forward of unused tax losses, unused tax credits anddeductible temporary differences, to the extent that it is highly probable that taxable profit will be available
against which they can be utilized in the future. Deferred tax assets are reviewed at each reporting date, andreduced by the amount that is highly unlikely to be utilized.
(19) Earnings per share
The Group discloses basic and diluted earnings per share (attributable to owners of the parent) related toordinary shares. Basic earnings per share are calculated by dividing profit for the year attributable to ownersof the parent, by the weighted average number of ordinary shares issued during the reporting period that is
adjusted by the number of treasury shares.
(20) Segment information
Operating segments are components of the Group that engage in business activities from which the Groupmay earn revenues and incur expenses. These are components for which discrete financial information isavailable, and whose operating results are regularly reviewed by the Board of Directors of the Company tomake decisions about resources to be allocated to the segments and assess their performances.
- 62 -

Reportable segments are determined on the basis of the operating segments.
Segment information includes items that are directly attributable to the segments and items that areallocated to the segments on a reasonable basis.
(21) Share-based compensation
The Company employs a stock option system as an equity-settled share-based compensation system. Stock
options, which are estimated at fair value as of the grant date, are recognized as expenses in the consolidated
statements of comprehensive income over the vesting period with the number of stock options that are expected
to be eventually vested taken into account, and the same amount is recognized as an increase in equity in the
consolidated statement of financial position.
4. Significant accounting estimates and judgments requiring estimates
The preparation of the consolidated financial statements in compliance with IFRS requires the management of
the Group to make judgments, estimates and assumptions that affect the application of accounting policies andthe amounts of assets, liabilities, income and expenses. However, actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes to accounting estimates
are recognized in the period in which the estimates are changed and in future periods in which the change
affects.
The management’s judgments and estimates that have a significant impact on amounts in the consolidated
financial statements are as follows:• Measurement of inventories (Note 10)• Impairment of non-financial assets (Notes 12, 13 and 14)• Estimates of useful life and residual value of property, plant and equipment, investment properties andintangible assets (Notes 12, 13 and 14)• Recoverability of deferred tax assets (Note 15)• Accounting treatment for and valuation of provisions (Note 18)• Employee benefits (Note 19)• Measurement of the fair value of financial instruments (Note 31)• Share-based compensation (Note 35)• Measurement of the fair value of assets acquired or liabilities assumed arising from contingencies inbusiness combinations (Note 36)
5. New standards not yet applied
Principal new establishment or amendment of standards and interpretations that had been published by theapproval date of the consolidated financial statements is as follows. The Group had not applied these standards
and interpretations at the end of the fiscal year under review. The impact of the application on the Group isunder review and cannot be estimated at this time.

Standard

Name of standard

Timing of mandatory
application
Fiscal year in which
Overview of new establishment and(fiscal year in which
the Company
amendment
the application
applies the standard
commences)

IAS 7

Statements of cashflows

Jan. 1, 2017

Fiscal year ending
Nov. 30, 2018

Explanation about changes inliabilities arising from financing
activities

IAS 40Investment properties

Jan. 1, 2018

Fiscal year ending
Nov. 30, 2019

Clarification of requirements fortransfers to, or from, investment
properties

IFRS 9Financial Instruments

Jan. 1, 2018

Fiscal year ending
Nov. 30, 2019

Replacement of IAS 39 with IFRS 9
regarding classification,measurement and impairment offinancial assets, classification andmeasurement of financial liabilities,
and hedge accounting

IFRS 15

Revenue fromContracts with
Customers

Jan. 1, 2018

Fiscal year ending
Nov. 30, 2019

Accounting for and disclosure ofrevenue recognition for contracts
with customers

IFRS 16

Lease

Jan. 1, 2019

Fiscal year ending
Nov. 30, 2020

Replacement of IAS 17 with IFRS
16 regarding lease accounting- 63 -

6. Segment information(1) Summary of reportable segments
The Group’s reportable segments are components of the Group about which separate financial information
is available that the Board of Directors regularly conducts deliberations to determine the allocation ofmanagement resources and to assess the performance. The Group draws up comprehensive strategies for eachof the following five business segments and conducts business activities accordingly; “Revitalization
Business”, “Development Business”, “Rental Business”, “Fund and Consulting Business”, and “Property
Management Business”. In the Revitalization Business, the Group acquires the properties whose asset values
have declined, renovates, and resells them. In the Development Business, the Group sells condominium units
and detached houses to individual customers as well as apartment and office buildings to investors. In the
Rental Business, the Group rents office buildings and apartments. The Fund and Consulting Business mainly
provides asset management services for the properties placed in real estate funds. The Property Management
Business provides comprehensive property management services.
The Tosei Group has made changes to its reportable segments, reducing the number of such segmentsfrom six up through the end of the previous fiscal year to five as of the first quarter of the fiscal year ending
November 30, 2016. Accordingly, the reportable segments are now: the Revitalization Business,
Development Business, Rental Business, Fund and Consulting Business, and Property Management Businesssegments.
With this change, transactions formerly classified as being associated with the Alternative Investment
Business segment, based on the point of view that they involved acquisition of real estate arising frompurchases of real estate collateralized loans, M&As of real estate-owning companies and other alternativemeans of investment, are now classified as being associated with either the Revitalization Business, Rental
Business, Fund and Consulting Business, or Other, depending on the nature of the revenue derived from therespective transaction. The “Other” category includes business involving sports club facilities.
(2) Method for calculating revenue, profit or loss and other items by reportable segment
The methods of accounting applied in the reported operating segments are consistent with the accounting
policies adopted by the Group.
The reportable segment profit is calculated on an operating profit basis. Intersegment revenue or transfers
are based on actual market prices.
The Group’s revenue and profit by reportable segment are as follows:
Segment information for the fiscal year ended November 30, 2015 has been prepared in accordance with
the new reportable segment classifications.
Fiscal year ended November 30, 2015
(December 1, 2014 – November 30, 2015)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Other

Adjustment

Total

Revenue
Revenue from externalcustomers

25,986,125

6,605,956

4,211,591

2,439,354

3,069,740

694,195－

43,006,964

Intersegment revenue－－

50,5084,726

504,491－(559,726)－

25,986,125

6,605,956

4,262,100

2,444,081

3,574,232

694,195(559,726)

43,006,964

4,174,428

534,965

1,797,180

1,464,587

146,925

178,153(1,404,277)

6,891,963

Total
Segment profit
Finance income/costs, net(851,652)

Profit before tax

6,040,311

Other items
Depreciation expense－－

151,636

4,652

14,974

4,816

46,360222,440

Notes: 1. The details of adjustment are as follows:(1) Adjustment of segment profit of ¥(1,404,277) thousand includes eliminations of intersegment transactions of¥(12,409) thousand and corporate expenses that are not allocated to any particular reportable segment of¥(1,391,868) thousand. Corporate expenses mainly consist of selling, general and administrative expenses of the- 64 -

parent that are not attributable to any particular reportable segment.
(2) Adjustment of depreciation of ¥46,360 thousand consists of corporate expenses that are not attributable to any
particular reportable segment.
2. Segment profit is adjusted to operating profit in the consolidated statements of comprehensive income.

Fiscal year ended November 30, 2016
(December 1, 2015 – November 30, 2016)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Other

Adjustment

Total

Revenue
Revenue from externalcustomers

25,809,872

13,138,715

5,282,131

2,302,732

2,944,458

340,203－49,818,113

Intersegment revenue－－

42,057

27,242

1,061,175

1,376(1,131,851)－

25,809,872

13,138,715

5,324,188

2,329,975

4,005,633

341,579(1,131,851)

49,818,113

4,001,446

3,674,377

2,389,804

951,468

141,274(17,904)(1,860,559)

9,279,906

Total
Segment profit or loss
Finance income/costs, net(829,858)

Profit before tax

8,450,048

Other items
Depreciation expense

－

5,824

235,300

17,813

22,252

6,684

45,541

333,415

Notes: 1. The details of adjustment are as follows:(1) Adjustment of segment profit of ¥(1,860,559) thousand includes eliminations of intersegment transactions of¥(134,259) thousand and corporate expenses that are not allocated to any particular reportable segment of¥(1,726,300) thousand. Corporate expenses mainly consist of selling, general and administrative expenses of theparent that are not attributable to any particular reportable segment.
(2) Adjustment of depreciation of ¥45,541 thousand consists of corporate expenses that are not attributable to any
particular reportable segment.
2. Segment profit is adjusted to operating profit in the consolidated statements of comprehensive income.

(3) Income from principal products and services
This information is omitted since similar information is disclosed in “(2) Method for calculating revenue,
profit or loss and other items by reportable segment.”(4) Information by geographical area
This information is omitted since the amount of non-current assets located in Japan and revenue fromexternal customers in Japan account for large portions of non-current assets and total revenue, respectively.
(5) Information on major customers
Fiscal year ended November 30, 2015
(December 1, 2014 – November 30, 2015)(¥ thousand)Name

Net sales

Tosei Reit Investment Corporation

10,791,865

Related segment
Revitalization Business, Fund andConsulting Business, Property
Management Business

Fiscal year ended November 30, 2016
(December 1, 2015 – November 30, 2016)(¥ thousand)Name

Net sales

Tosei Reit Investment Corporation

7,342,359- 65 -

Related segment
Revitalization Business, Fund andConsulting Business, Property
Management Business7. Cash and cash equivalents
Components of cash and cash equivalents are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Cash and deposits

18,081,081

21,620,866

Short-term deposits

710,000

20,00018,791,081

21,640,866

Total

8. Available-for-sale financial assets
Components of available-for-sale financial assets are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Shares

1,200

60,624

Bonds－

51,505

1,097,963

1,298,216

Investments in silent partnership

78,534－

Other

47,34830,821

1,225,047

1,441,167

1,225,047

1,441,167

Investment trust beneficiary certificate

Total
Non-current assets- 66 -

9. Trade and other receivables
Components of trade and other receivables are as follows:(¥ thousand)As of November 30, 2015
Trade notes and accounts receivable

As of November 30, 2016

610,529

720,042

Short-term loans receivable72

1,675,075

Other accounts receivable

1,550,456

384,608

Current advances to suppliers

271,785

295,209

Deposits and guarantee money

1,087,122

1,210,974

Claims provable in bankruptcy, claims provable inrehabilitation and other

25,946

13,318

Other494,587

482,040

Allowance for credit losses(27,174)(14,321)

4,013,327

4,766,946

Current assets

2,914,639

3,531,880

Non-current assets

1,098,687

1,235,065

Total

The amount net of allowance for credit losses is presented in the consolidated statement of financial position.
10. Inventories
Components of inventories are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Real estate for sale

36,760,659

54,482,121

Real estate for sale in process

9,395,382

12,816,187

Total

46,156,041

67,298,309

21,036,559

26,115,361

Inventories scheduled to be sold after 12 months

Inventories recognized as expenses in the previous fiscal year and the fiscal year under review were¥26,026,890 thousand and ¥28,335,684 thousand, respectively.
Inventories recorded at fair value net of selling expenses at the end of the previous fiscal year and the fiscal
year under review were ¥1,658,159 thousand and ¥2,903,079 thousand, respectively.
Of the Group’s inventory balance, ¥41,585,649 thousand and ¥64,902,608 thousand were pledged ascollateral on borrowings as of November 30, 2015 and 2016, respectively.
The above figures include real estate for sale and real estate for sale in process to be sold after 12 months
after respective fiscal years. However, since these properties are held within the normal operating cycle, they
are included in inventories.
Borrowing costs capitalized in the previous fiscal year and the fiscal year under review were ¥97,252
thousand and ¥102,690 thousand, respectively.
Components of expenses for inventories recognized as loss on valuation are as follows:
Fiscal year ended
November 30, 2015
Loss on valuation(71,551)- 67 -(¥ thousand)Fiscal year ended
November 30, 2016
(92,487)

11. Other assets
Components of other assets are as follows:
As of November 30, 2015

As of November 30, 2016

Supplies

7,010

6,444

Membership

4,014

28,914

Other

20,000115,000

31,025150,358

Current assets

27,010

121,444

Non-current assets

4,014

28,914Total

Of the Group’s “others” in other assets, ¥45,000 thousand was pledged as collateral on trade and other payables
as of November 30, 2016.

- 68 -

12. Property, plant and equipment
Changes in acquisition cost, accumulated depreciation and accumulated impairment loss of property, plant andequipment are as follows:(¥ thousand)
Buildings andstructures

Land

Other

Total

1,212,577

2,219,719

169,499

3,601,795

21,007－60,05781,064(289)－(49,987)(50,276)

1,233,295

2,219,719

179,569

3,632,583

Acquisition

15,138－67,00882,147

New consolidation

154,011

185,346

61,739401,097

Sales or disposal(2,475)－(44,830)(47,306)

1,399,970

2,405,065

263,486

4,068,522

Balance as of December 1, 2014

188,911－

119,576

308,487

Depreciation expense

25,444－

24,79950,244(179)－(41,717)(41,896)

Balance as of November 30, 2015

214,177－

102,658

316,836

Depreciation expense

39,788－33,621

73,409New consolidation

82,000－41,280123,281

Sales or disposal(9,519)－(31,383)(40,903)

Balance as of November 30, 2016

326,446－

146,177472,623

As of December 1, 2014

1,023,665

2,219,719

49,923

3,293,308

As of November 30, 2015

1,019,118

2,219,719

76,9103,315,747

As of November 30, 2016

1,073,524

2,405,065

117,308

3,595,898

Acquisition cost
Balance as of December 1, 2014
Acquisition
Sales or disposal
Balance as of November 30, 2015

Balance as of November 30, 2016

Accumulated depreciation andimpairment loss

Sales or disposal

Carrying amountThe carrying amounts of leased assets under finance leases as of November 30, 2015 and 2016 were ¥11,911
thousand and ¥31,811 thousand, respectively.
Of the balance of the Group’s property, plant and equipment as of November 30, 2015 and 2016,¥3,216,552 thousand and ¥3,452,559 thousand were pledged as collateral on loans payable, respectively.
Depreciation is recorded in “Cost of revenue” and “Selling, general and administrative expenses” in the
consolidated statement of comprehensive income.

- 69 -

13. Investment properties(1) Changes in acquisition cost, accumulated depreciation and accumulated impairment loss of investment
properties are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Acquisition cost
Balance at beginning of period

14,955,926

19,953,882

Acquisition

750,033

1,743,387

Transfer

4,247,922

1,388,992

Balance at end of period

19,953,882

23,086,262

1,097,597

1,167,895

Depreciation expense

149,206

233,774

Transfer(78,908)(44,147)

Balance at end of period

1,167,895

1,357,522

Carrying amount at end of period

18,785,986

21,728,740

Accumulated depreciation and impairment loss
Balance at beginning of period

Depreciation expense is recorded in “Cost of revenue” in the consolidated statement of comprehensive income.
Of the balance of the Group’s investment properties as of November 30, 2015 and 2016, ¥17,703,593
thousand and ¥20,593,093 thousand were pledged as collateral on loans payable, respectively.
(2) Fair value
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Fair value

28,976,118

36,967,640

Rent income from investment properties

1,760,457

2,631,774

Direct expenses incidental to rent income

597,586

982,484

The fair value of investment properties was internally calculated in accordance with the Real Estate Appraisal
Standards.

- 70 -

14. Intangible assets
Changes in acquisition cost, accumulated amortization and accumulated impairment loss of intangible assets
are as follows:(¥ thousand)
Software

Other

Total

Acquisition cost
Balance as of December 1, 2014

238,3312,518

240,849

Acquisition

41,963－

41,963

Sales or disposal(2,050)－(2,050)

Balance as of November 30, 2015

278,2442,518

280,762

Acquisition

27,711－

27,711

Sales or disposal(126,917)－(126,917)

Balance as of November 30, 2016

179,038

2,518

181,556

Balance as of December 1, 2014

163,174－

163,174

Amortization expense

22,989－22,989

Sales or disposal(2,050)－(2,050)

Balance as of November 30, 2015

184,113－

184,113

Amortization expense

26,231－

26,231(125,401)－(125,401)

84,943－84,943As of December 1, 2014

75,157

2,518

77,675

As of November 30, 2015

94,1302,518

96,648

As of November 30, 2016

94,094

2,518

96,612

Accumulated amortization and accumulated
impairment loss

Sales or disposal
Balance as of November 30, 2016

Carrying amountAmortization expense of intangible assets is recorded in “Selling, general and administrative expenses” in the
consolidated statement of comprehensive income.

- 71 -

15. Deferred taxes and income tax expense(1) Deferred taxes
Main components of deferred tax assets and liabilities are as follows:
Fiscal year ended November 30, 2015 (December 1, 2014 – November 30, 2015)(¥ thousand)As of December
1, 2014

Recognizedthrough profit orloss

Recognized inothercomprehensive
incomeAs of November
30, 2015

Deferred tax assets
Accrued enterprise taxes, currently not
deductible
Estimated expenses, currently not
deductible

98,8704,173－

103,044

54,950(54,950)－－–

46,696－

46,696

Unrealized gain from substituteperformance

154,692(2,946)－

151,745

Provision for bonuses

93,5394,626－

98,165116,083

8,378－

124,462

132,606(125,823)

－

6,783

－

116,365－

116,365

Impairment loss

56,775(6,124)－50,650

Revaluation of fair value arising fromassets and liabilities of subsidiaries

46,837－－

46,837

Carry-forward of unused tax losses

150,456(50,111)－

100,345

Other

101,324

4,767－

106,091

Subtotal

1,006,136(54,949)－

951,187

Valuation reserves(421,345)

294,632－(126,712)

584,791

239,683－

824,474

Valuation difference on available-forsale securities(65,888)－

22,559(43,328)

Other(3,137)

3,137

－

－

Total

(69,025)

3,137

22,559(43,328)

Deferred tax assets, net

515,765

242,821

22,559781,146

Provision for loss on rental businessLiability for retirement benefits toemployees
Liability for retirement benefits to key
management personnel
Long-term accounts payable-other for
directors

Total
Deferred tax liabilities- 72 -

Fiscal year ended November 30, 2016 (December 1, 2015 – November 30, 2016)(¥ thousand)As of December
1, 2015

Recognizedthrough profit
or loss

Recognized inothercomprehensive
income103,044

8,705－

12,672

124,422－

17,226－－

17,226

Provision for loss on rental business

46,696(46,696)－－－

Unrealized gain from substituteperformance

151,745(2,360)－－149,385

Provision for bonuses

98,16544,849－－143,015

124,462

6,756

－

－

131,219

6,783

1,127

－

－

7,910

116,365(5,915)－36,840147,289

Impairment loss

50,650(40,300)－

42,69053,041

Revaluation of fair value arisingfrom assets and liabilities ofsubsidiaries

46,83770,889－60,215

177,941

Carry-forward of unused tax
losses100,345(93,376)－

49,25656,225

Other

106,091(38,552)(914)

15,601

82,225

Subtotal

951,187(77,646)(914)

217,276

1,089,903

Valuation reserves(126,712)

63,854－(68,494)(131,352)

824,474(13,792)(914)

148,782

958,550(43,328)－

17,018

1,334(24,975)－(376,182)－－(376,182)

Total(43,328)(376,182)

17,0181,334(401,158)

Deferred tax assets, net

781,146(389,975)

16,104150,117557,392

Others (Note)

As of
November 30,
2016

Deferred tax assets
Accrued enterprise taxes, currently
not deductible
Estimated expenses, currently not
deductible

Liability for retirement benefits toemployees
Liability for retirement benefits to
key management personnel
Long-term accounts payable-otherfor directors

Total
Deferred tax liabilities
Valuation difference on availablefor-sale securities
Revaluation of fair value arisingfrom assets and liabilities ofsubsidiaries

Note: The number of “Others” includes recognized deferred tax assets by acquisition of subsidiaries throughbusiness combinations.
In recognizing deferred tax assets, the Group takes into account the possibility that deductible temporary
differences or carry-forward of unused tax losses can be utilized for taxable income. In assessing therecoverability of deferred tax assets, the Group considers scheduled reversal of deferred tax liabilities,
expected future taxable income and tax planning.
As a result of the assessment of recoverability of deferred tax assets as stated above, the Group has notrecognized deferred tax assets for some of deductible temporary differences and carry-forward of unused tax
losses. The amounts of deductible temporary differences and deferred tax assets (after tax effected) have notbeen recognized are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Deductible temporary differences

88,288

118,756

Carry-forward of unused tax losses

38,424

12,596

126,712131,352

Total- 73 -

The expiry dates of carry-forward of unused tax losses for which deferred tax assets have not beenrecognized are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

First year––

Second year––

Third year––

Fourth year––

108,666

36,185

108,666

36,185

Fifth year or after
Total

For taxable temporary differences associated with investments in subsidiaries, as the Company may control
their reversal and there is high possibility that the temporary differences will not be reversed within aforeseeable period, deferred tax liabilities are not recognized. Such taxable temporary differences were¥2,350,460 thousand and ¥3,593,875 thousand as of November 30, 2015 and 2016, respectively.
(2) Income tax expense
In the previous fiscal year and the fiscal year under review, major income taxes imposed on the Company
were corporate tax, inhabitant tax and office tax, and the resulting statutory effective tax rate was 35.64% and33.06%, respectively. For temporary differences expected to be reversed from the fiscal year beginning
December 1, 2016, to fiscal year ending November 30, 2018 the statutory effective tax rate is 30.86%. For
temporary differences expected to be reversed in and after the fiscal year beginning December 1, 2018, thestatutory effective tax rate for the calculation of deferred tax assets and liabilities is 30.62%. However,overseas subsidiaries are subject to corporate tax and other taxes applicable in their location.
Components of current and deferred tax expenses are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Current tax expense
Current tax expense on profit for the year

2,139,365

2,815,976

2,139,365

2,815,976(277,554)

51,551

42,68435,051

Total deferred tax expense(234,870)

86,603

Income tax expense

1,904,494

2,902,579

Total current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Differences due to changes in tax rates

Current tax expense includes tax losses used to reduce tax expense for which tax effects were not recognizedpreviously, or benefits arising from temporary differences in past years. The resulting decreases in current tax
expense in the previous fiscal year and the fiscal year under review are immaterial.
Deferred tax expense includes tax losses for which tax effects were not recognized previously, or benefits
arising from temporary differences in past years. The resulting decreases in current tax expense in theprevious fiscal year and the fiscal year under review are immaterial.
Reconciliation between income tax expense calculated at the statutory effective tax rate and income tax
expense recognized in the consolidated statement of comprehensive income is as follows. The statutory
effective tax rate of 35.64% and 33.06% in the previous fiscal year and the fiscal year under review,
respectively, were applied.

- 74 -

Fiscal year ended
November 30, 2015
Profit before tax¥ thousand)Fiscal year ended
November 30, 2016

6,040,311

8,450,048

2,152,766

2,793,586

8,808

18,803

Changes in temporary differences, etc. forwhich deferred tax assets were notrecognized(293,845)

37,069Differences due to changes in tax rates

42,68435,051

Differences in tax rates of subsidiarycompanies

9,274

24,341

Tax exemption(12,199)(19,778)

Other(2,995)

13,505

1,904,494

2,902,579

Income tax expense based on the statutory
effective tax rate
Adjustments
Expenses not deductible permanently

Income tax expense

16. Trade and other payables
Components of trade and other payables are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Trade notes and accounts payable

678,788695,753

Other accounts payable

415,428

620,502

Advances received

1,205,457

978,374

Guarantee deposits

3,136,522

3,746,701

808,222

1,263,923

6,244,419

7,305,255

Current liabilities

2,734,006

2,955,289

Non-current liabilities

3,510,413

4,349,965

Other
Total

Advances received at the end of the fiscal year under review include secured debts of ¥45,000 thousand. Other
assets have been pledged as collateral.

- 75 -

17. Borrowings
Components of borrowings are as follows:(¥ thousand)As of November 30, 2015 As of November 30, 2016

Averageinterest rate(%)

Repayment due

Current liabilities－

2,045,800

1.60–

9,487,831

7,332,999

1.43

–

4,964

8,449

–

–

9,492,795

9,387,249

39,167,833

60,745,830

1.31

2017–2036

8,013

26,234–2017–2025

39,175,846

60,772,064

Current borrowings
Current portion of noncurrent borrowings
Lease obligations
Total
Non-current liabilities
Non-current borrowings
Lease obligations
Total

Notes: 1. The average interest rate is a weighted-average coupon rate on the balance at the end of the fiscal year underreview.
2. Borrowings at the end of the previous fiscal year and the fiscal year under review include secured debts of¥47,664,665 thousand and ¥68,176,359 thousand, respectively. Inventories, Property, plant and equipment andinvestment properties have been pledged as collateral.

18. Provisions
Components and changes of provisions are as follows:
Fiscal year ended November 30, 2015 (December 1, 2014 – November 30, 2015)(¥ thousand)
Provision forbonuses

AccruedcompensatedabsencespayableAsset retirement
obligations

Provision forloss on rental
business

Balance as of December 1, 2014

243,272

24,00878,764－

346,045

Increase during the fiscal year

278,359－－

141,248419,607(243,272)－－－(243,272)－(1,312)－－(1,312)

－

－

141

－

141

278,359

22,69578,905

141,248

521,208

Decrease during the fiscal year
(specific purposes)
Decrease during the fiscal year
(reversal)
Discounted interest costs
Balance as of November 30, 2015

Total

Fiscal year ended November 30, 2016 (December 1, 2015 – November 30, 2016)(¥ thousand)
Provision forbonuses

AccruedcompensatedabsencespayableAssetretirement
obligations

Balance as of December 1, 2015

278,359

22,69578,905

141,248－

521,208

Increase during the fiscal year

415,238

10,295

－

－

1,800

427,334

Decrease during the fiscal year
(specific purposes)(278,359)－－(141,248)－(419,607)

Discounted interest costs

－

－

144

－

－

144

Balance as of November 30,
2016415,238

32,991

79,049－1,800

529,079- 76 -

Provision for
Provision forwarranties forloss on rental
completedbusiness
construction

Total(¥ thousand)As of November 30, 2015

As of November 30, 2016

Current liabilities

442,303450,030

Non-current liabilities

78,90579,049As asset retirement obligations, the disposal costs of some investment properties held by the Company, whichcontain asbestos or polychlorinated biphenyl (PCB) that must be treated in special ways specified by laws andregulations when they are dismantled or removed, are recognized.
These costs are expected to be paid principally after one year or more passed. However, the timing isaffected by future business plans and other factors.
Provisions other than asset retirement obligations are expected to be expensed principally in the following
fiscal year.
19. Employee benefits(¥ thousand)As of November 30, 2015

As of November 30, 2016

Liability for retirement benefits to employees

364,128

390,505

Liability for retirement benefits to key management
personnel

19,18422,870383,312413,376

Total(1) Retirement benefits for employees
To cover payments of retirement benefits for employees, the Group has adopted defined benefit plans anddefined contribution plans. The amount of benefits is determined based on salary level at the time ofretirement, period of service and other factors. Defined benefit plans are exposed to actuarial risks.
1)

Defined benefit plans
Components of Liability for retirement benefits to employees(¥ thousand)As of November 30, 2015

As of November 30, 2016

Defined benefit obligations (with no plan assets)

364,128

390,505

Defined benefit obligations in the consolidated
statement of financial position

364,128

390,505

The components of retirement benefit costs recognized in profit or loss are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Current service costs

47,83066,560Interest costs

2,947

2,995

Total retirement benefit costs (Note)

50,77769,555

Note: Retirement benefit costs are recorded in “Selling, general and administrative expenses.”- 77 -

Changes in the present value of defined benefit plan obligations are as follows:(¥ thousand)Fiscal year ended
November 30, 2016

Fiscal year ended
November 30, 2015
Balance at beginning of period

326,364

364,128

Current service costs

49,284

59,103

Interest costs

2,947

2,995

Benefits paid
Actuarial gains and losses arising fromchanges in financial assumptions(22,037)(10,041)

7,569(25,679)

Balance at end of period

364,128

390,505

The weighted average term for the Group’s defined benefit obligations in the previous fiscal year and thefiscal year under review is 13.5 years and 10.4 years, respectively.
Major assumptions used in actuarial calculation are as follows:(%)
As of November 30, 2015

As of November 30, 2016

Discount rate

0.88

0.41

Rate of salary increase

2.12

3.52

The effects of a change in the discount rate on defined benefit obligations are as follows. This analysis
assumes that change factors other than the discount rate are constant.
Negative values represent a decline in defined benefit obligations, while positive values represent anincrease in those obligations.
(¥ thousand)As of November 30, 20152)

As of November 30, 2016

0.5% increase in the discount rate

(21,117)(18,690)

0.5% decrease in the discount rate

23,11020,225

Defined contribution plans
The amount of the entire Group’s contributions is as follows:
Fiscal year ended
November 30, 2015
Contributions

11,588(¥ thousand)Fiscal year ended
November 30, 2016
25,770(2) Retirement benefits to key management personnel
Fiscal year ended
November 30, 2015
Balance at beginning of period(¥ thousand)Fiscal year ended
November 30, 2016

371,315

19,184

Provision for the benefits

8,579

4,003

Payment of the benefits

－

(316)

(360,711)－

19,18422,870

Reversal of provision due to abolition of the plan
Balance at end of period

The above provisions are recorded at the amount the Group companies would be required to pay based on
their internal regulations if all eligible such personnel retired at the end of the period.
This accounting policy is adopted because it is deemed difficult to make actuarial estimates and discountliability for retirement benefits to key management personnel highly reliably since the number of key- 78 -

management personnel of the Group is small and their age distribution is biased. The Group believes theforegoing amount that would be required to pay at the end of the period is the best estimate of liability for
retirement benefits to key management personnel.
At the Ordinary General Meeting of Shareholders held on February 25, 2015, the Company resolved tomake final payments of retirement benefits to retiring officers upon abolition of its Retirement Benefits Plan
for Officers. The full amount of the Company’s “Provision for directors’ retirement benefits” has been
reversed and an unpaid portion of ¥360,711 thousand in final payments has been presented included in“Trade and other payables” in non-current liabilities.
In addition, “Trade and other payables” includes certain consolidated subsidiaries’ unpaid portion of¥100,000 thousand in final payments of retirement benefits to key management personnel which is notdescribed above.
20. Equity and other components of equity(1) Share capital and capital reserves

Balance as of December 1, 2014
ChangeBalance as of November 30, 2015
ChangeBalance as of November 30, 2016

Total number ofshares authorized(shares)

Total number ofshares issued(shares)

Share capital(¥ thousand)Capital reserves(¥ thousand)

150,000,000

48,284,000

6,421,392

6,375,317–––(1,435)150,000,000

48,284,000

6,421,392

6,373,881–––

44,941150,000,000

48,284,000

6,421,392

6,418,823

Notes: 1. Shares issued by the Company are ordinary shares without par value.
2. Issued shares are fully paid up.
3. Capital reserves are mainly consisted of legal capital surplus.

(2) Other components of equity
Fiscal year ended November 30, 2015 (December. 1, 2014 – November 30, 2015)(¥ thousand)Exchange
Net change in fair
Net change in fairdifferences onvalues ofvalues of cashtranslation ofavailable-for-saleflow hedges
foreign operations financial assets

Total

Balance as of December 1, 2014

37,614

118,983(1,945)

154,652

Other comprehensive income(14,420)(28,020)(6,982)(49,423)

Balance as of November 30, 2015

23,19490,962(8,928)105,228

Fiscal year ended November 30, 2016 (December. 1, 2015 – November 30, 2016)(¥ thousand)Exchange
Net change in fair
Net change in fairdifferences onvalues ofvalues of cashtranslation ofavailable-for-saleflow hedges
foreign operations financial assets

Total

Balance as of December 1, 2015

23,19490,962(8,928)105,228

Other comprehensive income(24,512)(31,465)

312(55,665)

Balance as of November 30, 2016

(1,318)59,496(8,616)49,562

1)

Exchange differences on translation of foreign operations
These are exchange differences that arise when foreign operations’ financial statements prepared in foreign
currencies are consolidated.

2)

Net change in fair values of available-for-sale financial assets
This is unrealized gains and losses of fair values of available-for-sale financial assets.
- 79 -

3)

Net change in fair values of cash flow hedges
This is the portion considered effective of changes in fair values of derivative transactions that aredesignated as cash flow hedge.

21. Dividends(1) Dividends paid
Fiscal year ended November 30, 2015 (December 1, 2014 – November 30, 2015)
Dividends per share(¥)

Resolution
Ordinary General Meeting of
Shareholders held on Feb. 25, 2015

Total dividends(¥ thousand)

Record date

Effective date579,408

Nov. 30, 2014

Feb. 26, 201512

Fiscal year ended November 30, 2016 (December 1, 2015 – November 30, 2016)
Dividends per share(¥)

Resolution
Ordinary General Meeting of
Shareholders held on Feb. 25, 2016

Total dividends(¥ thousand)

Record date

Effective date

772,544

Nov. 30, 2015

Feb. 26, 201616(2) Dividends whose record date is included in the fiscal year under review and effective date is after the end of
the fiscal year under review
Fiscal year ended November 30, 2016 (December 1, 2015 – November 30, 2016)
Dividends per share(¥)

Resolution
Ordinary General Meeting of
Shareholders held on Feb. 24, 2017

Total dividends(¥ thousand)

Record date

Effective date

1,062,248

Nov. 30, 2016

Feb. 27, 201722

22. Revenue
Components of revenue are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Revenue from real estate for sale32,592,081

38,948,587

Revenue from services

10,414,882

10,869,525

43,006,964

49,818,113

Total

23. Cost of revenue
Components of cost of revenue are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Cost of inventories sold25,955,339

28,243,197

Depreciation expense

159,647

249,128

Gain or loss on valuation of inventories

71,551

92,487

Outsourcing costs and others

4,905,256

4,883,325

Total

31,091,794

33,468,138- 80 -

24. Selling, general and administrative expenses
Components of selling, general and administrative expenses are as follows:
Fiscal year ended
November 30, 2015
Employee benefits expense(¥ thousand)Fiscal year ended
November 30, 2016

2,786,621

3,538,159

Sales expenses (Revitalization)

583,557

666,633

Sales expenses (Development)

479,618

1,140,167

Advertising expenses

74,147

152,438

Compensations

107,331

120,366

Commission fee

245,169

261,559

Taxes and dues

421,422665,742

Transportation expenses

69,29965,598Communication expenses

44,56953,129Stationery expenses

54,62945,410Depreciation and amortization expense

62,792

84,286

Provision of allowance for credit losses(24,021)(14,209)

Other

193,928

242,441

5,099,064

7,021,724

Total

25. Personnel cost
Components of personnel cost are as follows:
Fiscal year ended
November 30, 2015
Salaries, bonuses and allowances(¥ thousand)Fiscal year ended
November 30, 2016

2,250,508

2,800,265

Retirement benefit costs

71,55197,857

Legal welfare expenses

297,471374,003596

44,941

166,494

221,091

2,786,621

3,538,159

Expenses for the share-based compensation
Other short-term employee benefits
Total

26. Other income
Components of other income are as follows:
Fiscal year ended
November 30, 2015
Gain on negative goodwill
Miscellaneous income
Total(¥ thousand)Fiscal year ended
November 30, 2016－

145,019

126,357

77,177

126,357

222,197

Notes: The “Gain on negative goodwill” in the fiscal year under review was primarily the result of considerations paid
following the acquisition of shares in Urban Home Corporation being lower than the fair value of said company’s
identifiable assets acquired and liabilities assumed.

- 81 -

27. Other expenses
Components of other expenses are as follows:
Fiscal year ended
November 30, 2015
Loss on retirement of non-current assets
Stock acquisition related expenses
Miscellaneous losses
Total(¥ thousand)Fiscal year ended
November 30, 2016

2,372

7,711

－

240,853

48,126

21,97650,499270,540

Note: “Miscellaneous losses” as of November 30, 2015 and 2016 includes losses on exchange differences on translationof ¥4,860 thousand and ¥8,892 thousand respectively.

28. Finance income/costs
Components of finance income/costs are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Interest income

3,992

3,188

Dividends income

18,84859,874

Total finance income

22,84063,062

Interest expenses (Note)

874,493

892,920

Total finance costs

874,493

892,920

Note: Commission expense incurred from financial liabilities not measured by fair values that were charged to profit andloss in the fiscal years ended November 30, 2015 and 2016 are ¥195,705 thousand and ¥132,172 thousand,respectively.

29. Other comprehensive income
For each item of comprehensive income, the amount arising during the period and reclassification adjustments
to profit and loss and tax effect amount, which are included in “Other comprehensive income” in each fiscal
year, are as follows:
Fiscal year ended November 30, 2015 (December 1, 2014 – November 30, 2015)(¥ thousand)Amount arising
Reclassification
during theadjustments
periodItems that will not be reclassified
to net profit or loss
Remeasurements of defined
benefit pension plans
Total items that will not bereclassified to net profit or loss
Items that may be reclassified to
net profit or loss
Exchange differences ontranslation of foreign operations
Net change in fair values ofavailable-for-sale financial assets
Net change in fair values of cash
flow hedges
Total items that may bereclassified to net profit or loss
Total

Before tax
effectTax effect

After tax effect(7,569)－(7,569)2,563(5,006)(7,569)－(7,569)2,563(5,006)(14,420)－(14,420)－(14,420)

632,797(683,388)(50,591)

22,570(28,020)(11,234)－(11,234)

4,251(6,982)607,142(683,388)(76,245)

26,822(49,423)599,572(683,388)(83,815)

29,385(54,430)- 82 -

Fiscal year ended November 30, 2016 (December 1, 2015 – November 30, 2016)(¥ thousand)Amount arising
Reclassification
during theadjustments
periodItems that will not be reclassified
to net profit or loss
Remeasurements of defined
benefit pension plans
Total items that will not bereclassified to net profit or loss
Items that may be reclassified to
net profit or loss
Exchange differences ontranslation of foreign operations
Net change in fair values ofavailable-for-sale financial assets
Net change in fair values of cash
flow hedges
Total items that may bereclassified to net profit or loss
Total

Before tax
effectTax effect

After tax effect

25,679－25,679(8,176)

17,50325,679－25,679(8,176)

17,503(24,512)－(24,512)－(24,512)(48,484)－(48,484)

17,018(31,465)

1,226

－

1,226

(914)

312

(71,770)－(71,770)

16,104(55,665)(46,090)－(46,090)

7,928(38,162)

30. Earnings per share
Fiscal year ended
November 30, 2015
Profit for the year attributable to owners of parent(¥ thousand)
Weighted average number of outstanding ordinary
shares(shares)
Basic earnings per share(¥)

Fiscal year ended
November 30, 2016

4,135,816

5,547,469

48,284,000

48,284,000

85.66

114.89Notes: 1. Basic earnings per share is calculated by dividing profit for the year attributable to owners of parent, by theweighted average number of outstanding ordinary shares during the reporting period.
2. Information on diluted earnings per share is omitted due to an absence of potential shares.

31. Financial instruments(1) Capital control
The Group recognizes that it is necessary to secure sufficient fund-raising capacity in order to make flexible
investments for achieving sustainable growth. To this end, the Group strives to ensure financial soundness
and flexibility for future investments in businesses and establish a capital structure with balanced return on
investment.
The Group is careful about the balance between cash and cash equivalents, interest-bearing debts andequity.
As of the end of each fiscal year, balances of cash and cash equivalents, interest-bearing debts and total
equity are as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Cash and cash equivalents

18,791,081

21,640,866

Interest-bearing debt

48,668,642

70,159,313

Equity36,228,378

41,010,083

Some of the Company’s bank loan contracts include financial covenants with requirements such as themaintenance of a certain level of equity. The Group carries out monitoring to maintain the level required
under the said covenants.
(2) Risk management
The Group is exposed to financial risks (exchange risk, interest rate risk, credit risk, liquidity risk and pricerisks) in the course of operating activities. In order to mitigate these financial risks, the Group conducts risk
- 83 -

management. For risks that fundamentally cannot be prevented from arising from the cause (risk aversion) or
avoided, the Group tries to reduce such risks. In addition, as its policy, the Group does not carry out tradingof derivatives and shares, etc. for speculation purposes.
(3) Exchange risks
Exchange risks arise from transactions denominated in currencies other than the Group’s functional currency.
Because there is no significant foreign currency transaction in the Group’s operating activities, the Group is
not exposed to significant exchange risks.
Furthermore, though other comprehensive income fluctuates due to currency transaction of financial
statements of the Group’s foreign operations, it believes that the impact on the Group is not significant.
(4) Interest rate risks
Interest risks principally arise from borrowings with floating interest rate from financial institutions. For
management of these risks, the Accounting Department periodically makes a list of interests on borrowings
for each financial institution and monitors the fluctuations of interests on borrowings.
Interest rate sensitivity analysis
For borrowings with floating interest rate held by the Group as of the end of each fiscal year, the impact of a
1.0% increase in the interest rate on profit before tax in the consolidated statement of comprehensive income
is as follows:
Fiscal year ended
November 30, 2015
Impact on profit before tax(461,960)(¥ thousand)Fiscal year ended
November 30, 2016
(681,880)(5) Credit risks
Financial assets included in trade and other receivables are exposed to credit risks of customers. With respect
to these risks, the due dates and outstanding balances are managed for each business partner. Past due
receivables are periodically reported to the management meeting and individually monitored and respondedto.
The maximum exposure to credit risks of financial assets is the book value of financial assets after
impairment presented in the consolidated financial statement of financial position.
1)

Past due financial assets
The age analysis of financial assets included in trade and other receivables that were past due but not
impaired as of the end of fiscal year is as follows:(¥ thousand)As of November 30, 2015
Within 3 months’ past due

15,63737,780Over 3 months and within 6 months’ past due

2,138

15,533

Over 6 months’ past due

1,045

1,623

18,82254,937

Total

2)

As of November 30, 2016

Impaired financial assets
The Group individually reviews financial position, credit status and collection of receivables and otherfactors of major business partners to establish allowance for credit losses.
Trade and other receivables that were individually determined as impaired at the end of fiscal year are
as follows:(¥ thousand)As of November 30, 2015

As of November 30, 2016

Trade and other receivables

28,037

14,111

Allowance for credit losses(27,199)(13,964)

Total

838

146

- 84 -

3)

Changes in allowance for credit losses
If a financial asset is impaired, the Group records allowance for credit losses for the impairment rather thandirectly decreasing the book value of the financial asset. Changes in allowance for credit losses are as
follows:
Fiscal year ended
November 30, 2015
Balance at beginning of period(¥ thousand)Fiscal year ended
November 30, 2016

52,537

27,174

6,421

1,815

Decrease during the fiscal year (reversal)(30,662)(14,652)

Decrease during the fiscal year (utilization ofallowance)(1,122)(15)

27,174

14,321

Amount provided in the fiscal year

Balance at end of period(6) Liquidity risks
Since the Group raises funds through borrowings from financial institutions, it is exposed to liquidity risks offailure to make payments on due dates because of deterioration in the financing environment, etc.
The Company’s Accounting Department periodically grasps and aggregates information on the situationsof liquidity on hand and interest-bearing debts, etc. and reports such information to the management meeting.
The balances of financial liabilities by due date are as follows:(¥ thousand)Within 1 year

Over 1 year
within 5 years

Over 5 years

Total

Trade and other payables

1,350,786

2,382,860

753,661

4,487,309

Borrowings

9,492,795

33,311,549

5,864,297

48,668,642－

13,180－13,180Trade and other payables

1,742,110

4,043,288

270,561

6,055,959

Borrowings

9,387,249

53,770,625

7,001,438

70,159,313－

12,031

24,084

36,115

As of November 30, 2015
Non-derivative financial liabilities

Derivative financial liabilities
Trade and other payables
As of November 30, 2016
Non-derivative financial liabilities

Derivative financial liabilities
Trade and other payables(7) Price risks
The Group is exposed to price risks of financial instruments arising from investments classified as availablefor-sale financial assets. These financial instruments are primarily listed securities and investments inprivately placed funds. To manage the price risks arising from the said financial instruments, the Company’s
Accounting Department periodically reports holding amounts of listed securities and investments in privately
placed funds to the management meeting.
If the prices of the listed securities were to fluctuate by 10% as of November 30, 2015 and 2016,
assuming all other variable factors including tax rates to be fixed, the impact of the fluctuation on total
comprehensive income for the year and equity would be ¥74,363 thousand and ¥94,227 thousand,respectively.
(8) Fair value measurement
1) Fair values and carrying amounts
Fair values of financial assets and liabilities and their carrying amounts presented in the consolidated
statement of financial position are as follows:- 85 -

(¥ thousand)As of November 30, 2015

As of November 30, 2016

Carrying
amountFair value

Carrying
amountFair value

Cash and cash equivalents

18,791,081

18,791,081

21,640,866

21,640,866

Available-for-sale financial assets

1,225,047

1,225,047

1,441,167

1,441,167

Trade and other receivables (Note 1)

4,013,327

4,013,327

4,766,946

4,766,946

Trade and other payables (Note 2)

6,244,419

6,244,419

7,305,255

7,305,255

Borrowings

48,668,642

48,696,153

70,159,313

70,207,138

Notes: 1. The above carrying amount shows the figure in the consolidated statement of financial position. Of theseamounts, financial assets at amortized cost, which are financial instruments, as of November 30, 2015 and2016 are ¥3,260,662 thousand and ¥4,011,785 thousand, respectively.
2. The above carrying amount shows the figure in the consolidated statement of financial position. Of theseamounts, financial liabilities at amortized cost, which are financial instruments, as of November 30, 2015
and 2016 are ¥4,487,309 thousand and ¥6,055,959 thousand, respectively.

Method for measuring fair value of financial instruments
Cash and cash equivalents, trade and other receivables, trade and other payables, and current borrowings
The book values of these financial instruments that are settled in a short period of time approximate the fairvalues.
However, the fair values of interest rate swaps are based on market values presented by financial
institutions.
Available-for-sale financial assets
The fair values of listed securities are measured based on quoted market prices. For financial assets forwhich there is no active market and unlisted securities, the Group estimates fair values using certain
valuation techniques including the use of recent arm’s length transactions, reference to other instrumentsthat are substantially at the same price, and the discounted cash flow method. Securities that do not have aquoted market price in an active market and of which the fair value cannot be reliably estimated aremeasured based on the acquisition cost.
Non-current borrowings
The fair values of non-current borrowings with floating interest rate approximate the book values, asinterest rates reflect market interest rates in short-term intervals. The fair values of those with fixed interest
rate are measured based on the present value of the total amount of principal and interest discounted by theinterest rate that would be charged for a new similar borrowing.
2)

Fair value hierarchy
The following shows the analysis of financial instruments measured at fair value after the initialrecognition. Fair values of financial instruments are classified into level 1 to level 3.
Level 1:
Level 2:
Level 3:

Fair values measured at a price quoted in an active market
Fair values calculated directly or indirectly using an observable price except for level 1
Fair values calculated through valuation techniques, including inputs that are not based on
observable market data(¥ thousand)As of November 30, 2015
Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

1,097,925

38

127,083

1,225,047

Financial liabilities measured atfair value with the change in fairvalue recognized through othercomprehensive income(derivative) (Note)－

13,180－13,180- 86 -

(¥ thousand)As of November 30, 2016
Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

1,363,10638

78,021

1,441,167

Financial liabilities measured atfair value with the change in fairvalue recognized through othercomprehensive income(derivative) (Note)－

36,115－

36,115

Note: These are interest rate swap contracts concluded in order to hedge changes in future cash flows associated withfloating-rate borrowings. The estimated period of cash flows arising in association with designated cash flow
hedges and the period in which they are expected to have impact on profit or loss is eight years or less after theend of the fiscal year under review.

Reconciliation of financial assets classified in level 3 at the beginning of the period with those at the end of
the period is as follows:
Fiscal year ended
November 30, 2015
Balance at beginning of period(¥ thousand)Fiscal year ended
November 30, 2016

942,565

127,083

1,376

91,084

Profit (loss) (Note 1)

27,565

19,481Other comprehensive income (Note 2)(86,471)－

Disposal(757,951)(159,626)

Balance at end of period

127,083

78,021

Acquisition
Comprehensive income

Notes: 1. All of the amounts are related to the Fund and Consulting Business, which are included in “Revenue” or“Cost of revenue” in each fiscal year.
2. The Group mainly uses the discounted cash flow method as valuation techniques.

32. Operating leases

1) Lessee
The Group rents offices and residences from non-related parties under operating lease contracts, some ofwhich contain the clause that specifies the contract is irrevocable for a certain period of time. Future minimum
lease payments under irrevocable operating leases are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Due within 1 year

491,322507,953

Due over 1 year through 5 years

570,400

1,518,260

1,061,722

2,026,214

Total

Lease payments recognized as expenses under revocable or irrevocable operating lease contracts as of November
30, 2015 and 2016 were ¥456,115 thousand and ¥585,433 thousand respectively.

- 87 -

2) Lessor
The Group lends offices and residences to non-related parties under operating lease contracts, some of whichcontain the clause that specifies the contract is irrevocable for a certain period of time. Future minimum lease
payments received under irrevocable operating leases are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Due within 1 year

154,800

246,604

Due over 1 year through 5 years

81,656

302,708

Over 5 years

15,424

178,384

251,881

727,697Total

33. Related parties(1) Transactions with related parties
The Group conducts transactions with key management personnel as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Trade and other receivables

293

267

Trade and other payables

78－

Revenue

－

2,460

2,539

2,872

2,911

5,599

Selling, general and administrative expenses
Total

Transactions with related parties are conducted on the same terms as ordinary business transactions.
(2) Compensation for principal key management personnel
Compensation for principal key management personnel is as follows:
Fiscal year ended
November 30, 2015
Short-term employee benefits
Retirement benefits
Total(¥ thousand)Fiscal year ended
November 30, 2016

319,069

346,057

8,579

4,002

327,649

350,059

34. Structured entities
The Company and certain consolidated subsidiaries are involved with structured entities whose purpose is toinvest in real estate, through investments, asset management service, etc., and these structured entities are notconsolidated.
The balance of assets under our management for the unconsolidated structured entities in the fiscal year
ended November 30, 2015 and the fiscal year ended November 30, 2016 is ¥300,643,218 thousand and¥287,924,357 thousand, respectively, while fees received from these entities in the fiscal year ended November
30, 2015 and the fiscal year ended November 30, 2016 are ¥2,005,413 thousand and ¥1,426,285 thousand,respectively.
These structured entities procure funds principally via real estate non-recourse loans.
The carrying amounts of assets recognized in the consolidated statement of financial position in association
with the involvement with the unconsolidated structured entities are as follows. These carrying amounts are themaximum exposure.

- 88 -

(¥ thousand)As of November 30, 2015

As of November 30, 2016

Trade and other receivables

265,939

359,875

Available-for-sale financial assets

105,693

10,471

371,632

370,347

Total

The maximum exposure is the maximum amount of losses that may arise due to a decline in the value of assets
held by the structured entities, and does not represent the amount of losses that are expected from theinvolvement with these entities.
35. Share-based compensation(1) Details of the share-based compensation system
The Company employs a stock option system and grants stock options to the Company’s directors, executive
officers and employees as well as to directors of its consolidated subsidiaries. This system is designed tofurther increase motivation and morale for improving the Group’s business performance and corporate value.
The period during which stock options may be exercised is a period specified in the allotment agreement ofstock acquisition rights. Stock options that are not exercised in the period are forfeited. Holders of stockacquisition rights are required to have either the rank of Director, Audit & Supervisory Board Member,
Executive Officer, or employee of the Company, however, if the grantee retires or resigns from the Company
by the vesting date, his or her options are also forfeited, except in cases allowed in the stock acquisitionrights allotment agreement such as resignation due to the expiration of the grantee’s term of office.
Stock options under the Company’s share-based compensation system are accounted for as equity-settled
share-based compensation. Expenses for the equity-settled share-based compensation transactions for the
fiscal year ended November 30, 2015 and 2016 were ¥569 thousand and ¥44,941 thousand for the fiscal year
under review respectively.
The Group’s stock option system that exists in the fiscal year under review is as follows:
Number of stock
options granted(shares)
Fifth Series of Stock
Acquisition Rights

506,000

Grant dateNovember 26, 2015

Period during whichstock options may be
exercised
January 10, 2018 to
October 28, 2020

Exercise price (¥)803(2) Total number of exercisable shares and average exercise price of stock options
Fiscal year ended November 30, 2015

Fiscal year ended November 30, 2016

803

803

－

506,000

506,000－

Forfeited during the year (shares)－－

Exercised during the year (shares)－－

Expired during the year (shares)－－

506,000

506,000－－

Exercise price (¥)
Unexercised, outstanding stock options
at the beginning of the year (shares)
Granted during the year (shares)

Unexercised, outstanding stock options
at the end of the year (shares)
Exercisable, outstanding stock options at
the end of the year (shares)

36. Business combinations
During the fiscal year ended November 30, 2016, the Group engaged in the following business combinations.
Acquisition of Kishino Corporation and Kishino Real Estate Corporation
On March 31, 2016, the Company acquired 100% of the shares in Kishino Corporation and Kishino Real- 89 -

Estate Corporation, companies owning income-generating properties mainly in Toshima Ward, Tokyo, andengaging in the rental business.
The Group is stepping up its activities to acquire future sources of income. This M&A activity was
performed as part of the acquisition methods therefor.
The fair values of consideration paid, assets acquired and liabilities assumed as of the acquisition date wereas follows:
Amount (Thousands of yen)
3,054,784
Fair value of consideration paid (Note)
Fair values of assets acquired and liabilities assumed
5,239,508
Current assets[431,500][Of which, cash and cash equivalents]
109,202
Non-current assets(285,402)
Current liabilities(2,008,552)
Non-current liabilities
3,054,784
Net assets
Note: Consideration paid was in cash.
The fair values of assets acquired and liabilities assumed were calculated by taking into overall consideration
financial and asset conditions examined through third-party due diligence.
Acquisition costs related to these business combinations, of ¥170,553 thousand, were recorded in “otherexpenses.”Profit and loss information and pro forma profit and loss information for these business combinations after
the acquisition date are not stated, as its amount of impact on the consolidated financial statements isimmaterial.
37. Contingencies
None
38. Subsequent events
None
39. Significant subsidiaries
The Company’s significant subsidiaries are as described in “I. Overview of the Tosei Group, 4. Status ofsubsidiaries and associates.”(2)Others
Quarterly data of the fiscal year ended November 30, 2016
(Cumulative period)First quarter(Three months ended
Feb. 29, 2016)

Second quarter(Six months ended
May 31, 2016)

Third quarter(Nine months ended
Aug. 31, 2016)

Fiscal year ended
November 30, 2016

Revenue(¥ thousand)

13,527,209

30,655,217

39,139,416

49,818,113

Profit before tax(¥ thousand)

3,914,810

7,240,317

8,203,330

8,450,048

Profit for the period (year)
attributable to owners of parent(¥ thousand)

2,611,296

4,743,981

5,379,001

5,547,469

54.08

98.25

111.40114.89Basic earnings per share(¥)

First quarter(Dec. 1, 2015 –Feb. 29, 2016)(Each quarter)
Basic earnings per share(¥)

Second quarter(Mar. 1, 2016 –May 31, 2016)

54.08

44.17

- 90 -

Third quarter(Jun. 1, 2016 –Aug. 31, 2016)
13.15

Fourth quarter(Sep. 1, 2016 –Nov. 30, 2016)
3.49

2. Non-consolidated financial statements, etc.
(1) Non-consolidated financial statements
1) Non-consolidated balance sheets(¥ thousand)AssetsCurrent assets
Cash and deposits
Accounts receivable-trade
Real estate for sale
Real estate for sale in process
Supplies
Short-term loans receivable from subsidiaries andaffiliates
Accounts receivable-other
Advance payments-trade
Prepaid expenses
Deferred tax assets
Other
Allowance for credit losses
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Lease assets
Total property, plant and equipment
Intangible assets
SoftwareTelephone subscription right
Total intangible assets

As of November 30, 2015

As of November 30, 2016

16,519,614
47,08935,377,728
9,416,577
2,886

18,114,002
68,87047,226,720
12,586,032
2,592

*1
*2
*1
*1

*1
*1

240,000
*2

*2

*1

*1

1,550,284
268,332
358,014
198,367
75,804(909)
64,053,789*2

376,666
282,555
332,905
207,438
28,079(290)
81,046,134

6,165,762
6,151
40
10,83926,942
14,118,502
1,271
20,329,508*1

6,940,710
5,445
7,153
7,229
46,751
16,282,879
8,893
23,299,063

38,633
1,889
40,522- 91 -

1,820,560*139,582
1,889
41,471(¥ thousand)As of November 30, 2015
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Investments in capital
Long-term loans receivable
Long-term accounts receivable-other
Long-term loans receivable from subsidiaries
and affiliates
Claims provable in bankruptcy, claims
provable in rehabilitation and other
Lease and guarantee deposits
Deferred tax assets
Other
Allowance for credit losses
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes payable-trade
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Accounts payable-otherAccrued expenses
Income taxes payable
Advances received
Deposits received
Provision for bonuses
Provision for loss on rental businessTotal current liabilities
Non-current liabilities
Long-term loans payable
Guarantee deposits
Lease obligations
Asset retirement obligations
Provision for retirement benefits
Long-term accounts payable-other
Long-term accounts payable-other for directors
Derivative liabilities
Total non-current liabilities
Total liabilities

*4

*2

*2

*2
*1, 5

*2
*2

*1, 5
*2

- 92 -

1,197,357
1,123,160
4,100
3,143
11,259As of November 30, 2016

*2

1,325,160
5,784,833
4,100
3,068
23,055－1,200,200

59,089

9,195

1,052,734
251,725
4,014(59,108)
3,647,475
24,017,506
88,071,296

1,158,117
195,885
4,014(9,213)
9,698,416
33,038,951
114,085,085

427,343－8,944,043
1,335
338,181
44,487934,252
1,170,304
34,296
149,930
141,248
12,185,423
37,727,751
3,043,359－
18,905
243,652－
360,711
13,18041,407,558
53,592,981

*2
*1, 5

*2

*1, 5
*2

398,372
1,675,000
7,102,361
2,709
552,696
64,6101,558,973
786,583
202,033
228,980－
12,572,321
58,892,256
3,359,086
6,895
19,049300,924
106,437
360,711
12,031
63,057,390
75,629,712

(¥ thousand)As of November 30, 2015

As of November 30, 2016

6,421,392

6,421,392

6,504,868
6,504,868

6,504,868
6,504,868

7,250

7,250

15,00021,447,154
21,469,404
34,395,664

15,00025,409,376
25,431,626
38,357,887

90,98160,295

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Deferred gains (losses) on hedges
Total valuation and translation adjustments
Stock acquisition rights
Total net assets
Total liabilities and net assets- 93 -(8,928)(8,347)

82,053596
34,478,314
88,071,296

51,94845,53838,455,373
114,085,085

2)

Non-consolidated statements of operations(¥ thousand)Fiscal year ended
November 30, 2015

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Total extraordinary income
Extraordinary loss
Loss on retirement of non-current assets
Total extraordinary loss
Income before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Net income

*1
*1
*1,2

*1
*1
*1

- 94 -

Fiscal year ended
November 30, 201637,242,841
27,869,478
9,373,362
3,424,943
5,948,418
9,980
418,808
23,888452,677

*1
*1
*1,2

*1
*1
*1

41,965,432
29,444,927
12,520,504
4,683,942
7,836,561
21,45862,03059,987
143,476

840,296
4,458
3,223
847,977
5,553,118

845,9128,602
2,087
856,602
7,123,434

－
－

680
680

1,913
1,913
5,551,204
1,857,205(212,733)
1,644,472
3,906,732

3,491
3,491
7,120,623
2,322,937
62,9192,385,857
4,734,766

Detailed schedule of cost of sales
Schedule of the cost in the Revitalization Business
Fiscal year ended November 30, 2015
Accounts

Amounts(¥ thousand)

Notes

Ratio
(%)

Fiscal year ended November 30, 2016
Amounts(¥ thousand)

Ratio
(%)

I. Land
II. Acquisition and improvement
cost of buildings
III. Book values written down
following a decline in therevenue in the revenue expected
to be generated from theinventories

13,084,683

63.8

11,305,579

56.2

7,440,249

36.2

8,812,365

43.8

－

－

－

－

Total

20,524,932

100.0

20,117,944

100.0

Note: The cost is calculated based on specific-order cost system.

Schedule of the cost in the Development Business
Fiscal year ended November 30, 2015
Accounts

Notes

I. Land costs
II. Construction costs
III. Book values written down
following a decline in therevenue in the revenue expected
to be generated from theinventories
Total

Fiscal year ended November 30, 2016

Amounts(¥ thousand)
3,432,627
1,660,930

Ratio
(%)
66.8
32.3

Amounts(¥ thousand)
4,560,152
2,168,631

Ratio
(%)
67.1
31.9

43,8290.966,5541.0

5,137,386

100.0

6,795,338

100.0

Note: The cost is calculated based on specific-order cost system.

Schedule of the cost in the Rental Business
Fiscal year ended November 30, 2015
Accounts

Notes

I. Outsourcing costs
II. Miscellaneous expenses[Of which taxes and dues][Of which depreciation andamortization][Of which water and power]
Total

Amounts(¥ thousand)
424,688
1,754,780[259,851]

Ratio
(%)
19.5
80.5

[139,467][446,837]
2,179,469

Fiscal year ended November 30, 2016
Amounts(¥ thousand)
532,374
1,969,601[342,737]

Ratio
(%)
21.3
78.7

[222,903]

100.0[475,148]
2,501,976

100.0

Schedule of the cost in the Fund and Consulting Business
Fiscal year ended November 30, 2015
Accounts
Miscellaneous expenses
Total

Notes

Amounts(¥ thousand)
27,69027,690- 95 -

Ratio
(%)
100.0
100.0

Fiscal year ended November 30, 2016
Amounts(¥ thousand)
29,66829,668

Ratio
(%)
100.0
100.0

3)

Non-consolidated statements of changes in net assets

Fiscal year ended November 30, 2015
(December 1, 2014 – November 30, 2015)(¥ thousand)Shareholders’ equity
Capital surplus

Balance at the beginning of
the year
Changes of items during
the year
Dividends fromsurplusRetained earnings
Other retained earnings

Capital
stock

Legal
capitalsurplus6,421,392

6,504,868

Total capitalsurpluses

6,504,868

Legalretainedearnings

Generalreserve

7,250

15,000Net income
Net changes of items
other thanshareholders’ equity
Total changes of items
during the year
Balance at the end of the
year

Total
retainedearnings

18,119,830

18,142,080

31,068,340(579,408)(579,408)(579,408)

3,906,732

3,906,732

3,906,732

－

－

－

－

－

3,327,324

3,327,324

3,327,324

6,421,392

6,504,868

6,504,868

7,250

15,00021,447,154

21,469,404

34,395,664

Valuation and translation adjustments
Total valuation andValuation difference
Deferred gains
translation
on available-for-sale(losses) on hedges
adjustments
securities
Balance at the beginning of
the year
Changes of items during
the year
Dividends fromsurplus63,330－63,330Stock acquisitionrights－Total net assets

31,131,670(579,408)

Net income
Net changes of items
other thanshareholders’ equity
Total changes of items
during the year
Balance at the end of theyear

Total shareholders’equityRetainedearnings
brought
forward3,906,732
27,651(8,928)18,723596

19,31927,651(8,928)18,723596

3,346,643

90,981(8,928)82,053596

34,478,314- 96 -

Fiscal year ended November 30, 2016
(December 1, 2015 – November 30, 2016)(¥ thousand)Shareholders’ equity
Capital surplus

Balance at the beginning of theyear
Changes of items during theyear

Retained earnings
Other retained earnings

Capital
stock

Legal
capitalsurplusTotal
capitalsurpluses

6,421,392

6,504,868

6,504,868

Legalretainedearnings

Total shareholders’equity21,469,404

34,395,664

Dividends from surplus(772,544)(772,544)(772,544)

Net income

4,734,766

4,734,766

4,734,766

Balance at the end of the year

15,000Total retained
earnings

21,447,154

Net changes of items otherthan shareholders’ equity
Total changes of items during
the year

7,250

Generalreserve

Retainedearnings
brought
forward

－

－

－

－

－

3,962,222

3,962,222

3,962,222

6,421,392

6,504,868

6,504,868

7,250

15,00025,409,376

25,431,626

38,357,887

Valuation and translation adjustments
Total valuation andValuation difference
Deferred gains
translation
on available-for-sale(losses) on hedges
adjustments
securities
Balance at the beginning of theyear
Changes of items during theyear

90,981(8,928)82,053

Stock acquisitionrights596

Total net assets

34,478,314

Dividends from surplus(772,544)

Net income

4,734,766

Net changes of items
other than shareholders’equityTotal changes of items during
the year
Balance at the end of the year

(30,686)581(30,105)

44,941

14,836(30,686)581(30,105)

44,941

3,977,058

60,295(8,347)51,94845,53838,455,373- 97 -

[Notes to Non-consolidated Financial Statements]
Significant accounting policies
1. Valuation basis and methods for assets(1) Valuation basis and methods for securities
1) Stocks of subsidiaries
2) Available-for-sale securities• With market value• Without market value

Stated at cost determined by the moving-averagemethodStated at fair value based on market value and others asof the balance sheet date (unrealized gains and losses,
net of applicable taxes, are reported in a separate
component of net assets, and costs of securities sold aredetermined by the moving-average method).
Stated at cost determined by the moving-averagemethod(2) Valuation basis and method for Derivatives
Derivatives

Stated at fair value(3) Valuation basis and methods for inventories
The cost method (the carrying amounts in the non-consolidated balance sheet are written down due to a
decline in profitability of assets) is used as the valuation basis.
1) Real estate for sale and real estate for sale in process
Specific identification method
2) Supplies
Last purchase price method
2. Depreciation methods for non-current assets(1) Property, plant and equipment(excluding lease assets)(2) Intangible assets(excluding lease assets)• Internal use software(3) Lease assets

3. Recognition of allowances(1) Allowance for credit losses

The straight-line method is applied. For certain assets,
the declining balance method is applied.

Amortized by the straight-line method over theestimated useful life.
Lease assets are depreciated by the straight-line method
over the lease term with no residual value.

To cover losses from bad debts, allowance for credit
losses is provided in the amount expected to beuncollectible based on historical experience of bad debts
for general receivables and individual collectability forspecific receivables such as doubtful receivables.

(2) Provision for bonuses

To cover bonus payments to employees, provision forbonuses is provided in the amount for the fiscal year
based on the estimated amount of payment.

(3) Provision for retirement benefits

To cover retirement benefits to employees, the amountthat would be required to pay if all eligible employees
retired at the fiscal year-end is provided based on theestimated amount of retirement benefit obligations as of
the fiscal year-end.
In calculating retirement benefit obligations, the portionof expected benefits attributed to the periods up to thefiscal year-end is determined using the benefit formula- 98 -

basis.
Actuarial differences are amortized on a straight-line
basis over a period equal to or less than the averageremaining service period of eligible employees at thetime of occurrence.

4. Other significant matters for preparing financial statements(1) Accounting for consumption taxes
Transactions subject to consumption taxes are recorded
at amounts exclusive of consumption taxes.
(2) Translation of assets and liabilities denominatedin foreign currencies into Japanese currency(3) Method for hedge accounting

Monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at the
spot exchange rate prevailing at the balance sheet date,and differences arising from such translation arerecognized in the non-consolidated statement ofoperations.
1) Method for hedge accounting
Based on the deferred hedge accounting.
2) Hedging instrument and hedged item
- Hedging instrument: interest rate swaps- Hedged item: interest on borrowings
3) Hedging policy
To mitigate risks of fluctuations in interest rates
on borrowings and improve the financial accountbalance, the Company hedges interest volatility
risks within the scope of the hedged items.
4) Method for assessing hedge effectiveness
The Company compares cumulative changes in
the market price or cumulative changes in cash
flows of the hedged item with cumulativechanges in the market price or cumulativechanges in cash flows of the hedging instrument
semi-annually, and assesses hedge effectivenessbased on the amount of these changes of bothand other factors.

Notes on changes in accounting policies
Change in the depreciation method of property, plant and equipment
Following the revision to the Corporation Tax Act, the Company has applied the “Practical Solution on a
Change in Depreciation Method Due to Tax Reform 2016” (ASBJ PITF No. 32, June 17, 2016) from the fiscal
year ended November 30, 2016, and changed the depreciation method for facilities attached to buildings andstructures acquired on or after April 1, 2016 from the declining balance method to the straight-line method.
The effect of this change is immaterial.
Additional information
Change in holding purpose of assets
Leasehold property previously held as property, plant and equipment of ¥2,401,614 thousand was transferred toreal estate for sale due to the change in business policy.
Leasehold property previously held as real estate for sale of ¥3,834,754 thousand was transferred to property,
plant and equipment due to the change in business policy.

- 99 -

Notes to non-consolidated balance sheets*1. Pledged assets and secured debts are as follows:
Pledged assets
As of November 30, 2015(¥ thousand)As of November 30, 2016

Cash and deposits
Real estate for sale
Real estate for sale in process
Buildings
Land690,000
31,432,164
9,156,247
5,960,646
13,244,263－
46,259,608
12,051,301
6,696,680
15,405,528

Total

60,483,322

80,413,119

Debts secured by security interests
As of November 30, 2015
Current portion of long-term loans payable
Long-term loans payable
Total(¥ thousand)As of November 30, 2016

8,898,043
36,782,751

6,962,361
58,892,256

45,680,795

65,854,617*2. Monetary receivables from and payables to subsidiaries and affiliates
As of November 30, 2015
Short-term monetary receivables
Long-term monetary receivables
Short-term monetary payables
Long-term monetary payables

7,315
61,25919,68237,503(¥ thousand)As of November 30, 2016
5,123
23,055
19,78240,014

3. Contingent liabilities
The Company guarantees the borrowings of the following companies from financial institutions as follows:
As of November 30, 2015
Tosei Revival Investment Co., Ltd.
Tosei Community Co., Ltd.

1,163,000
82,578*4. Securities lent
As of November 30, 2015
Investment securities include securities lent of ¥353,400 thousand.
As of November 30, 2016
No item to report.

- 100 -(¥ thousand)As of November 30, 2016
874,580
75,834*5. Financial covenants
As of November 30, 2015
(1) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank ofTokyo-Mitsubishi UFJ, Ltd. (outstanding balance: ¥854,400 thousand) includes financial covenants. If theCompany violates any two or more items of the following covenants, the Company may repay the amountof the relevant loan to the lender in a lump sum.
Covenants
・ In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of the higher of total equity as of the end of the fiscal year ended
November 30, 2013, and total equity as of the end of the previous fiscal year.
・ In the consolidated statement of comprehensive income, profit before tax must be kept at ¥0 or more.
* However, the value calculated by adding loss on valuation of inventories included in cost of
sales, which is described in the notes to consolidated statement of comprehensive income, to
profit before tax shall be used as profit before tax in the formula above.
・ In the consolidated statement of financial position and the consolidated statement of comprehensive
income, the reference value, which is calculated by the formula below, must be 2.8 or less.
Reference value = Total interest-bearing debt ÷ Total equity* Total interest-bearing debt = Corporate bonds + Loans payable + Trade and other payables(2) Of the Company’s loans payable, the individual contract of cash loan for consumption with Mizuho Bank,
Ltd. (outstanding balance: ¥4,500,000 thousand) includes financial covenants. If the Company violates
any two or more items of the following covenants, the Company may repay the amount of the relevantloan to the lender in a lump sum.
Covenants
・In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of the higher of total equity as of the end of the fiscal year ended
November 30, 2014, and total equity as of the end of the previous fiscal year.
・ In the consolidated statement of comprehensive income, operating profit must not be less than ¥0 for
two consecutive periods.
* However, the value calculated by adding loss on valuation of inventories included in cost of
sales, which is described in the notes to consolidated statement of comprehensive income, tooperating profit shall be used as operating profit in the formula above.
(3) Of the Company’s loans payable, the individual contract of cash loan for consumption with Sumitomo
Mitsui Banking Corporation (outstanding balance: ¥2,322,500 thousand) includes financial covenants. If
the Company violates any two or more items of the following covenants, the Company may repay theamount of the relevant loan to the lender in a lump sum.
Covenants
・In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of total equity as of the end of the fiscal year ended November 30, 2014, and total
equity as of the end of the previous fiscal year.
・In the consolidated statement of comprehensive income, operating profit must not be less than ¥0 for
two consecutive periods.
* However, the value calculated by adding loss on valuation of inventories included in cost of sales,
which is described in the notes to consolidated statement of comprehensive income, to operating
profit shall be used as operating profit in the formula above.
As of November 30, 2016
(1) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank ofTokyo-Mitsubishi UFJ, Ltd. (outstanding balance: ¥786,800 thousand) includes financial covenants. If theCompany violates any two or more items of the following covenants, the Company may repay the amountof the relevant loan to the lender in a lump sum.
Covenants
・ In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of the higher of total equity as of the end of the fiscal year ended
November 30, 2014, and total equity as of the end of the previous fiscal year.
- 101 -

・ In the consolidated statement of comprehensive income, profit before tax must be kept at ¥0 or more.
* However, the value calculated by adding loss on valuation of inventories included in cost of
sales, which is described in the notes to consolidated statement of comprehensive income, to
profit before tax shall be used as profit before tax in the formula above.
・ In the consolidated statement of financial position and the consolidated statement of comprehensive
income, the reference value, which is calculated by the formula below, must be 2.8 or less.
Reference value = Total interest-bearing debt ÷ Total equity* Total interest-bearing debt = Corporate bonds + Loans payable + Trade and other payables(2) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank ofTokyo-Mitsubishi UFJ, Ltd. (outstanding balance: ¥800,000 thousand) includes financial covenants. If theCompany violates any two or more items of the following covenants, the Company may repay the amountof the relevant loan to the lender in a lump sum.
Covenants
・ In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of the higher of total equity as of the end of the fiscal year ended
November 30, 2015, and total equity as of the end of the previous fiscal year.
・ In the consolidated statement of comprehensive income, profit before tax must be kept at ¥0 or more.
* However, the value calculated by adding loss on valuation of inventories included in cost of
sales, which is described in the notes to consolidated statement of comprehensive income, to
profit before tax shall be used as profit before tax in the formula above.
・ In the consolidated statement of financial position and the consolidated statement of comprehensive
income, the reference value, which is calculated by the formula below, must be 2.8 or less.
Reference value = Total interest-bearing debt ÷ Total equity* Total interest-bearing debt = Corporate bonds + Loans payable + Trade and other payables(3) Of the Company’s loans payable, overdraft agreements with The Bank of Tokyo-Mitsubishi UFJ, Ltd.
(outstanding balance: ¥980,000 thousand) includes financial covenants. If the Company violates any two
or more items of the following covenants, the Company may repay the amount of the relevant loan to thelender in a lump sum.
Covenants
・ In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of the higher of total equity as of the end of the fiscal year ended
November 30, 2014, and total equity as of the end of the previous fiscal year.
・ In the consolidated statement of comprehensive income, profit before tax must be kept at ¥0 or more.
* However, the value calculated by adding loss on valuation of inventories included in cost of
sales, which is described in the notes to consolidated statement of comprehensive income, to
profit before tax shall be used as profit before tax in the formula above.
・ In the consolidated statement of financial position and the consolidated statement of comprehensive
income, the reference value, which is calculated by the formula below, must be 2.8 or less.
Reference value = Total interest-bearing debt ÷ Total equity* Total interest-bearing debt = Corporate bonds + Loans payable + Trade and other payables(4) Of the Company’s loans payable, the individual contract of cash loan for consumption with Mizuho Bank,
Ltd. (outstanding balance: ¥4,500,000 thousand) includes financial covenants. If the Company violates
any two or more items of the following covenants, the Company may repay the amount of the relevantloan to the lender in a lump sum.
Covenants
・In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of the higher of total equity as of the end of the fiscal year ended
November 30, 2014, and total equity as of the end of the previous fiscal year.
・ In the consolidated statement of comprehensive income, operating profit must not be less than ¥0 for
two consecutive periods.
* However, the value calculated by adding loss on valuation of inventories included in cost of
sales, which is described in the notes to consolidated statement of comprehensive income, tooperating profit shall be used as operating profit in the formula above.
(5) Of the Company’s loans payable, the individual contract of cash loan for consumption with Sumitomo- 102 -

Mitsui Banking Corporation (outstanding balance: ¥2,212,500 thousand) includes financial covenants. If
the Company violates any two or more items of the following covenants, the Company may repay theamount of the relevant loan to the lender in a lump sum.
Covenants
・In the consolidated statement of financial position as of the end of the fiscal year, total equity must be
kept at 75% or more of total equity as of the end of the fiscal year ended November 30, 2014, and total
equity as of the end of the previous fiscal year.
・In the consolidated statement of comprehensive income, operating profit must not be less than ¥0 for
two consecutive periods.
* However, the value calculated by adding loss on valuation of inventories included in cost of sales,
which is described in the notes to consolidated statement of comprehensive income, to operating
profit shall be used as operating profit in the formula above.

- 103 -

Notes to non-consolidated statements of operations*1. The following shows the item that includes transactions with associated companies.
Fiscal year ended
November 30, 2015

Sales
Purchase amount
Other business turnover
Transaction volume other than business turnover

150,370
363,32130,807
413,660(¥ thousand)Fiscal year ended
November 30, 2016
64,485
911,095
53,386
31,068*2. The approximate ratio to selling expenses is 33.4% in the fiscal year ended November 30, 2015 and 41.0% in
the fiscal year ended November 30, 2016, while the approximate ratio to general and administrative expenses is
66.6% in the fiscal year ended November 30, 2015 and 59.0% in the fiscal year ended November 30, 2016.
Main components of selling, general and administrative expenses are as follows:
Fiscal year ended
November 30, 2015(¥ thousand)Fiscal year ended
November 30, 2016

Sales expenses (Revitalization)

596,637

683,337

Sales expenses (Development)
Salaries and allowances
Provision for bonuses
Retirement benefit expenses
Provision for directors’ retirement benefits
Provision of allowance for credit losses
Taxes and dues
Depreciation

476,264

1,142,792

805,258
149,930
39,4495,472
5,673
408,805
46,306871,144
228,980
61,414－
2,579
628,80345,533

Securities
As of November 30, 2015
As shares in subsidiaries (carrying amount in the balance sheet: ¥1,123,160 thousand) have no quoted market
prices and, at the same time, it is considered extremely difficult to determine the fair values, they are omitted.
As of November 30, 2016
As shares in subsidiaries (carrying amount in the balance sheet: ¥5,784,833 thousand) have no quoted market
prices and, at the same time, it is considered extremely difficult to determine the fair values, they are omitted.

- 104 -Tax effect accounting
1. Significant components of deferred tax assets and liabilities
As of November 30, 2015
Deferred tax assets
Current assets
Accrued enterprise taxes, currently not deductible
Provision for bonuses
Provision for loss on rental business
Estimated expenses, currently not deductible
Other83,66453,617
46,696

Subtotal
Non-current assets
Provision for retirement benefits
Long-term accounts payable-other for directors
Loss on valuation of stocks of subsidiaries andaffiliates
Impairment loss
Other
Subtotal
Total deferred tax assets
Deferred tax liabilities
Non-current liabilities
Valuation difference on available-for-sale securities
Subtotal(¥ thousand)As of November 30, 2016－
14,38995,66978,225－
16,387
17,156

198,367

207,438

78,602
116,365

92,142
110,449

22,581－50,65026,853－
19,903

295,054

222,496

493,421429,934(43,328)(26,610)(43,328)(26,610)

Total deferred tax liabilities(43,328)(26,610)Net deferred tax assets

450,093403,324

2. The account for the difference between the statutory effective tax rate and the effective tax rate after adoptionof tax-effect accounting
As of November 30, 2015
35.6%

Statutory effective tax rate
(Adjustments)
Expenses not deductible permanently such asentertainment expenses
Valuation reserves for deferred tax assets

(2.3)
(4.3)

Difference due to tax-rate changes

0.7

Other

(0.1)

Effective tax rates after adoption of tax effect accounting

29.6

As of November 30, 2016
This note is omitted since thedifference between thestatutory effective tax rate andthe effective tax rate after
adoption of tax effectaccounting is not more than 5%of the statutory effective tax
rate.

3. Adjustment of the amounts of deferred tax assets and deferred tax liabilities due to a change of income tax rate
Following the enactment of the “Act for Partial Revision of the Income Tax Act, etc.” and the “Act for Partial
Revision, etc. of the Local Tax Act, etc.” in the Diet on March 29, 2016, the statutory effective tax rate used forthe calculation of deferred tax assets and liabilities in association with temporary differences expected to bereversed during the period from December 1, 2016 to November 30, 2018 will be changed to 30.86% andtemporary differences expected to be reversed on and after December 1, 2018 will be changed to 30.62%.
The impact of this change on deferred tax assets and liabilities is immaterial.
Important subsequent events
None- 105 -

d. Supplementary statements[Detailed schedule of property, plant and equipment and others]

Property, plant and equipment

Category

Type of assets

Depreciation
Increase in the Decrease in the
Balance as ofduring the fiscal Balance as of
fiscal year ended fiscal year ended
Dec. 1, 2015
year ended
Nov. 30, 2016
Nov. 30, 2016 Nov. 30, 2016
Nov. 30, 2016

Buildings

6,165,762

2,021,402

1,008,953

237,500

6,940,710

1,439,991

Structures

6,151

－

－

705

5,445

17,522

40

7,400

－

286

7,153

1,126

Vehicles

10,839

－

－

3,609

7,229

5,774

Tools, furniture and fixtures

26,942

30,692

94

10,78846,75170,438

14,118,502

3,544,518

1,380,141－

16,282,879

－

1,271

10,036

143

2,271

8,893

1,143

－

14,40014,400－－－20,329,508

5,628,449

2,403,733

255,162

23,299,063

1,535,997

Software38,633

15,7401,516

13,274

39,582－

Telephone subscription right

1,889

－

－

－

1,889

－

Total

40,522

15,7401,516

13,274

41,471－

Machinery and equipment

Land
Lease assets
Construction in progress
Total

Intangible
assets(¥ thousand)Accumulated
depreciation oramortization
as ofNov. 30, 2016

Notes: 1. In the increase in the fiscal year ended Nov. 30, 2016, principal events are as follows:
Buildings: Transfer from real estate for sale (2 properties)¥1,229,056 thousand
Land:
Transfer from real estate for sale (2 properties)¥2,597,409 thousand
2. In the decrease in the fiscal year ended Nov. 30, 2016, principal events are as follows:
Buildings: Transfer to real estate for sale (1 property)¥1,007,073 thousand
Land:
Transfer to real estate for sale (1 property)¥1,380,141 thousand[Detailed schedule of allowances](¥ thousand)Category

Balance as ofDec. 1, 2015

Increase in
the fiscal year
ended
Nov. 30, 2016

Decrease in
the fiscal year
ended
Nov. 30, 2016

Balance as of
Nov. 30, 2016

Allowance for doubtful accounts

60,0171,241

51,753

9,504

Provision for bonuses

149,930

228,980

149,930

228,980

Provision for loss on rental business

141,248－

141,248－(2) Principal assets and liabilities
This information is omitted since the consolidated financial statements have been prepared.
(3) Others
No item to report.

- 106 -

VI. Outline of filing company’s business concerning sharesBusiness year

From December 1 to November 30

Ordinary General Meeting of
Shareholders

February

Record dateNovember 30

Record dates for dividends fromsurplus

May 31
November 30

Share unit number

100 shares

Purchase of shares less than one
unit:
Office for handling business

Shareholder registryadministrator

1-4-5, Marunouchi, Chiyoda-ku, Tokyo
Corporate Agency Department, Mitsubishi UFJ Trust and Banking
Corporation
1-4-5, Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation

Forwarding office–Handling charge for purchase

No charge

Method of public noticeElectronic public notice will be made.
URL for public notice:
http://www.toseicorp.co.jp/ir/publicly/index.html
However, if it is impossible to publish public notices electronically becauseof an accident or other unavoidable circumstances, the public notices shallbe made by publication in the Nihon Keizai Shimbun.

Special benefits for shareholders

None

Notes: 1. Pursuant to the provisions of the Company’s Articles of Incorporation, the Company’s shareholders may not
exercise any right, in relation to their holding shares less than one unit, other than the rights set forth in each of thefollowing items:(1) Rights set forth in each item of Article 189, paragraph 2 of the Companies Act(2) A right to claim that is set forth in the provisions of Article 166, paragraph 1 of the Companies Act(3) A right to receive allocation of shares and stock acquisition rights for subscription according to the number ofshares held by shareholders
2. Due to the enforcement of the Act for Partial Revision of the Act on Transfer of Bonds, etc. for Achieving
Rationalization of Settlements for Transactions of Shares, etc. and Other Acts (June 9, 2004, Act No. 88), treatmentof shares including purchase and sale of shares less than one unit shall be conducted via securities brokers and otheraccount management institutions in principle. However, shares recorded in special accounts are directly dealt withby Mitsubishi UFJ Trust and Banking Corporation , which is the account management institution of special accounts.

- 107 -

VII. Reference information on filing company
1. Information on filing company’s parent company
Tosei does not have a parent company as described by the provisions of Article 24-7, paragraph 1 of the
Financial Instruments and Exchange Act.

2. Other reference information
From the beginning of this fiscal year until the filing date of this Annual Securities Report, Tosei has filed thefollowing documents.
(1) Annual Securities Report and Appendices, and Confirmation Letter
66th term; from December 1, 2014 to November 30, 2015, filed to Director-General of Kanto Local Finance
Bureau on February 26, 2016.
(2) Internal Control Report and Appendices
Filed to Director-General of Kanto Local Finance Bureau on February 26, 2016.
(3) Quarterly Securities Reports and Confirmation Letter
First quarter of the 67th term; from December 1, 2015 to February 29, 2016, filed to Director-General of
Kanto Local Finance Bureau on April 8, 2016.
Second quarter of the 67th term; from March 1, 2016 to May 31, 2016, filed to Director-General of Kanto
Local Finance Bureau on July 8, 2016.
Third quarter of the 67th term; from June 1, 2016 to August 31, 2016, filed to Director-General of Kanto
Local Finance Bureau on October 7, 2016.
(4) Extraordinary Reports
Filed to Director-General of Kanto Local Finance Bureau on February 27, 2017.
Extraordinary Report based on Article 19, paragraph 2, item 9-2 (Results of Exercise of Voting Rights) of
the Cabinet Office Ordinance on the Disclosure of Corporate Affairs, etc.

- 108 -

B.

Information on Guarantee Companies, etc. of Filing Company
No items to report- 109 -

Independent Auditors’ Audit Report and Internal Control Audit ReportFebruary 22, 2017
To the Board of Directors of
Tosei Corporation
Shinsoh Audit Corporation
Designated and Engagement Partner,
Certified Public Accountant:
Takayuki Sakashita (Seal)
Designated and Engagement Partner,
Certified Public Accountant:
Atushi Iijima(Seal)[Audit of Financial Statements]
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements included in the Accounting Section, namely, the consolidated statement offinancial position, the consolidated statement of comprehensive income, the consolidated statement of changes inequity, consolidated statement of cash flows and the notes to the consolidated financial statements of Tosei
Corporation for the fiscal year from December 1, 2015 to November 30, 2016.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statementsin accordance with the International Financial Reporting Standards, pursuant to the provisions of Article 93 of
the Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements, andfor designing and operating such internal control as management determines is necessary to enable thepreparation and fair presentation of the consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion from an independent perspective on these consolidated financial
statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Tosei Corporation and consolidated subsidiaries as of November 30, 2016, and theconsolidated results of their operations and their cash flows for the year then ended in conformity with IFRS.
[Audit of Internal Control over Financial Reporting]Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited
management’s report on internal control over financial reporting of Tosei Corporation as of November 30, 2016.
Management’s Responsibility for the Management’s ReportManagement is responsible for designing and operating internal control over financial reporting, and for the
preparation and fair presentation of the Management’s Report in accordance with standards for assessment ofinternal control over financial reporting generally accepted in Japan.
Internal control over financial reporting may not prevent or detect misstatements.
Auditor’s Responsibility
Our responsibility is to express an opinion from an independent perspective on the Management’s Report based on
our internal control audit. We conducted our internal control audit in accordance with auditing standards forinternal control over financial reporting generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the Management’s Report is free from material
misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the result of management’s
assessment on internal control over financial reporting in the Management’s Report. The
procedures selected depend on the auditor’s judgment, including the materiality of effect on the reliability offinancial reporting. An internal control audit also includes evaluating the overall presentation of the Management’s
Report, including disclosures on scope, procedures and conclusions of management’s assessment of internal control
over financial reporting.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the Management’s Report referred to above, which represents that the internal control over financial
reporting as at November 30, 2016 of Tosei Corporation is effective, present fairly, in all material respects, theresult of management’s assessment on internal control over financial reporting in conformity with standards forassessment of internal control over financial reporting generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with the Certified Public
Accountants Act.
*1.
*2.

The above is a digitization of the text contained in the original copy of the Audit Report, which is in the custody of theCompany as attachments to the financial statements.
XBRL data is excluded from the scope of the audit.

* The English version of the financial statements consists of an English translation of the audited Japanese financial
statements. The actual text of the English translation of the financial statements was not covered by our audit.
Consequently, for the auditor’s report of the English financial statements, the Japanese original is the official text,
and the English version is a translation of that text.

Independent Auditors’ Audit ReportFebruary 22, 2017
To the Board of Directors of
Tosei Corporation
Shinsoh Audit Corporation
Designated and Engagement Partner,
Certified Public Accountant:
Takayuki Sakashita (Seal)
Designated and Engagement Partner,
Certified Public Accountant:
Atushi Iijima(Seal)

Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited thefinancial statements included in the Accounting Section, namely, the balance sheets and the related statements ofoperations and changes in net assets, the significant accounting policies, the other related notes and supplementaryschedules of Tosei Corporation for the 67th fiscal year from December 1, 2015 to November 30, 2016.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating suchinternal control as management determines is necessary to enable the preparation and fair presentation of the
non-consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion from an independent perspective on these financial statements based on
our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. The purpose of an audit of
the financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but inmaking these risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fairpresentation of the non-consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Tosei Corporation as of November 30, 2016, and its financial performance for the year then ended inconformity with accounting principles generally accepted in Japan.

Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with the Certified Public
Accountants Act.

*1.

The above is a digitization of the text contained in the original copy of the Audit Report, which is in the custody of theCompany as attachments to the financial statements.
2. XBRL data is excluded from the scope of the audit.

* The English version of the financial statements consists of an English translation of the audited Japanese financial
statements. The actual text of the English translation of the financial statements was not covered by our audit.
Consequently, for the auditor’s report of the English financial statements, the Japanese original is the official text,
and the English version is a translation of that text.

[Cover]Document to be filed:Management’s Report on Internal Control

Provisions to base upon:

Article 24-4-4, paragraph 1 of the Financial Instruments andExchange Act

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

February 27, 2017

Company name (Japanese):

トーセイ株式会社 (Tosei Kabushiki-Kaisha)Company name (English):TOSEI CORPORATION

Title and name of representative:

Seiichiro Yamaguchi, President and CEO

Title and name of Chief Financial
Officer

Noboru Hirano, Director and CFO

Location of head office:4-2-3, Toranomon, Minato-ku, Tokyo, Japan

Places where the document to be filed isavailable for public inspection:

Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi-kabutocho, Chuo-ku, Tokyo)

1. Basic Framework of Internal Control Over Financial Reporting
Seiichiro Yamaguchi, President and CEO of TOSEI CORPORATION (the “Company”) and Noboru Hirano, CFO
Senior Executive Officer of the Company, having the responsibility to design and operate internal control overfinancial reporting of the Company and its consolidated subsidiaries (hereinafter collectively, the “Group”), designs
and operates such internal control of the Company in accordance with the basic framework set forth in “On the
Setting of the Standards and Practice Standards for Management Assessment and Audit concerning Internal Control
Over Financial Reporting (Council Opinions)” published by the Business Accounting Council.
Note that internal control aims at achieving its objectives to a reasonable extent given that all individualcomponents of internal control are integrated, and function as a whole. Thus, internal control over financial
reporting may not be able to completely prevent or detect misstatement in financial reporting.
2. Scope of Assessment, Assessment Date and Assessment Procedure
Assessment of internal control over financial reporting was performed as of November 30, 2016(i.e., the last day ofthis fiscal year) in accordance with assessment standards for internal control over financial reporting generally
accepted in Japan.
In this assessment, the management first assessed company-level control which would have a material impact
on the reliability of overall financial reporting on a consolidated basis, and based on such result, the management
then selected the business processes to be assessed. In the process-level control assessment, the management
assessed the effectiveness of internal control by analyzing the business processes in scope, identifying key controlsthat would have a material impact on the reliability of the financial reporting, and assessing the design andoperation of such key controls.
Management determined the scope of assessment of internal control over financial reporting, by selecting theCompany, consolidated subsidiaries and companies accounted for by the equity method based on their materialityof impacts on the reliability of financial reporting. The materiality of the impacts on the reliability of financial
reporting was determined in consideration of both quantitative and qualitative aspects, and the management
reasonably determined the scope of assessment of process-level control based on the result of the company-level
control assessment, which included the Company and its 4 significant consolidated subsidiaries.
For the purpose of determining the scope of process-level control assessment, 1 business location was selected
as “Significant Business Locations”, which comprises the Company and its consolidated subsidiaries selected indescending order based on their fiscal year’s consolidated net sales (after elimination) and contributed
approximately two-thirds of the Company’s consolidated net sales in the aggregate. Note that the management
confirmed that the scope of internal control assessment was sufficient based on this fiscal year’s consolidated net
sales. In such Significant Business Locations, all business processes related to the accounts that are closely
associated with the Company’s business objectives, such as sales, accounts receivable, and inventory were includedin the scope of assessment. Furthermore, regardless of the Significant Business Locations, certain businessprocesses related to significant accounts involving estimates and management’s judgment and business processes
on businesses or operations in which transactions involving significant risks are conducted were added to the scopeof assessment as “business processes with material impacts on financial reporting.”
3. Assessment Result
Based on the above mentioned assessment results, the management concluded that the internal control overfinancial reporting of the Group at the end of this fiscal year was effective.
4. Supplementary Information
None
5. Special Affairs
NoneThis is an English translation prepared for the convenience of non-resident shareholders by translating theManagement’s Report on Internal Control submitted to the Director of the Kanto Local Finance Bureau of the
Ministry of Finance of Japan on February 27, 2017 pursuant to Article 24-4-4, paragraph 1 of the Financial
Instruments and Exchange Act. Should there be any inconsistency between the translation and the official Japanesetext, the latter shall prevail.