Quarterly Securities Report(The English translation of the “Shihanki-Houkokusho”
for the second quarter of the 70th term)from March 1, 2019
to May 31, 2019TOSEI 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 Quarterly Securities
Report (Shihanki-Houkokusho) submitted to the Director of the Kanto Local Finance Bureau of the Ministry of Finance ofJapan on July 10, 2019. Should there be any inconsistency between the translation and the official Japanese text, the latter shallprevail.

Table of Contents
Cover
A. Company Information ..........................................................................................................1
I.

Overview of the Tosei Group ......................................................................................................... 1
1. Trends in principal management benchmarks ........................................................................................1
2. Business description ...............................................................................................................................1
II. Review of operations ...................................................................................................................... 2
1. Business and other risks .........................................................................................................................2
2. Management analysis of financial position, operating results and cash flows .......................................2
3. Important operational contracts, etc. ......................................................................................................7
III. Filing company................................................................................................................................ 8
1. Information on the Company (Tosei)’s shares, etc. ................................................................................8(1) Total number of authorized shares, etc. ...............................................................................................8(2) Status of stock acquisition rights .........................................................................................................8(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause ..11
(4) Trends in total number of issued shares, share capital, etc. ...............................................................11(5) Status of major shareholders ..............................................................................................................12(6) Status of voting rights ........................................................................................................................13
2. Status of Officers ..................................................................................................................................13
IV. Accounting..................................................................................................................................... 14
1. Condensed Quarterly Consolidated Financial Statements ....................................................................15(1) Condensed Consolidated Statement of Financial Position.................................................................15(2) Condensed Consolidated Statement of Comprehensive Income........................................................16(3) Condensed Consolidated Statement of Changes in Equity ................................................................18(4) Condensed Consolidated Statement of Cash Flows ...........................................................................19(5) Notes on Condensed Quarterly Consolidated Financial Statements ..................................................20
2. Other .....................................................................................................................................................27

B. Information on Guarantee Companies, etc. of Filing Company ....................................28[Quarterly Review Report of Independent Auditors]

[Cover]Document to be filed:

Quarterly Securities Report

Provisions to base upon:

Article 24-4-7, paragraph 1 of the Financial Instruments and Exchange
Act

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

July 10, 2019

Business year:

Second quarter of the 70th term (from March 1, 2019 to May 31, 2019)

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 isTokyo Stock Exchange, Inc.

available for public inspection:(2-1, Nihonbashi-kabutocho, Chuo-ku, Tokyo)

A.
I.

Company Information
Overview of the Tosei Group

1. Trends in principal management benchmarks
Term

69th termFirst six months

70th termFirst six months

69th term

Accounting period

From December 1, 2017
to May 31, 2018

From December 1, 2018
to May 31, 2019

From December 1, 2017
to November 30, 2018

32,520,695[14,210,654]

34,452,685[17,393,228]

61,543,319

6,511,917

7,634,835

10,171,017

4,452,334[1,604,803]

5,239,985[3,204,303]

6,852,237

4,486,293

5,322,766

6,856,712

49,635,703

54,889,255

52,021,782

134,935,647

145,858,280

138,768,538

91.97[33.10]108.79[66.92]141.3691.75

108.72

141.1237.6

37.5(400,865)

554,663

7,615,322(1,723,156)(209,509)(10,786,784)

4,201,440

2,235,880

5,941,884

25,827,059

29,100,675

26,520,569

Revenue(¥ thousand)[Second quarter of the current fiscal year]
Profit attributable to owners of the parent(¥ thousand)[Second quarter of the current fiscal year]
Profit attributable to owners of the parent(¥ thousand)Comprehensive income for the period
attributable to owners of the parent(¥ thousand)Total equity(¥ thousand)Total assets(¥ thousand)Basic earnings per share(¥)[Second quarter of the current fiscal year]
Diluted earnings per share(¥)
Ratio of equity attributable to owners of theparent to total assets(%)
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 end of period(¥ thousand)

36.8

Notes: 1. Filing company’s trends in principal management benchmarks are not disclosed as the Company prepares quarterly
consolidated financial statements.
2. Revenue does not include consumption taxes.
3. The above benchmarks are based on the quarterly consolidated financial statements and consolidated financial
statements that were prepared in compliance with the International Financial Reporting Standards (hereinafter“IFRS”).

2. Business description
During the six months ended May 31, 2019, there were no significant changes in business activities operated
by the Tosei Group (the Company and its subsidiaries and affiliates) from the previous fiscal year. There werealso no changes in principal subsidiaries and affiliates.
Also, Tosei Hotel Ueno Co., Ltd. has changed its trade name to Tosei Hotel Makuhari Co., Ltd. as ofDecember 13, 2018. Urban Home Corporation has changed its trade name to Tosei Urban Home Co., Ltd as ofFebruary 27, 2019.
Reportable segment classifications have been changed effective from the first quarter of the fiscal year
ending November 30, 2019. For details, please refer to “5. Segment information” in “IV. Accounting, 1.
Condensed Quarterly Consolidated Financial Statements, (5) Notes to Condensed Quarterly Consolidated
Financial Statements.”1II. Review of operations
1. Business and other risks
There were no business and other risks that newly arose during the six months ended May 31, 2019. In
addition, there were no significant changes in “Business and other risks” described in the annual securities
report for the previous fiscal year.

2. Management analysis of financial position, operating results and cash flows
Forward-looking statements included in this section are based on information available to the Group’s
management as of May 31, 2019.
(1) Operating results
During the six months ended May 31, 2019, the Japanese economy continued to make a moderate
recovery, although concerns remain of an economic slowdown, with signs of a downturn in exports andmovements to limit capital investment due to the effects of trade frictions between the United States andChina.
In the real estate industry where Tosei Group operates, commercial real estate transactions for the threemonths from January to March 2019 decreased 17% year on year to ¥1.2 trillion, as real estate prices
remained persistently high, with few properties on the market meeting investors’ investment criteria. Sales
to individual investors remain weak, as financial institutions adopt a stricter stance on lending, but sales toinstitutional investors and other corporations continue to be favorable (according to a survey by a private
research institute).
In the real estate securitization market, the market scale continues to expand. The total value of assets
under management as of April 2019 grew to ¥18.5 trillion in J-REITs, as property acquisitions continue,
supported by sponsored property supply. The total value of assets under management in private placement
funds was ¥17.7 trillion (as of December 2018), and the securitization market scale expanded to ¥36.2
trillion (according to a survey by a private research institute).
In the Tokyo metropolitan area condominium market, the number of newly supplied units from January
to April 2019 decreased 13.6% year on year to 8,900 units, as each company limited new supply andconcentrated on the sale of existing inventory. Despite a continuing increase in selling prices per unit ofhigher price range, the average contract rate for the first month remained below the 70% threshold fromwhich market conditions are viewed as favorable during the same period. In the build-for-sale detachedhouse market, housing starts from January to April 2019 numbered 21,000 units, an increase of 8.1% year
on year. Despite little evidence of a spike in demand in anticipation of the consumption tax increase,favorable demand continues for detached houses, which appear reasonably priced relative to
condominiums (according to surveys by a private research institute and the Ministry of Land,
Infrastructure, Transport and Tourism).
The office leasing market of Tokyo’s five business wards has been performing favorably. The averagevacancy rate as of April 2019 was 1.7% (a decrease of 1.0% year on year), the lowest monthly vacancy
rate since January 2002. The average asking rent was ¥21,279 (an increase of ¥1,383 year on year), rising
for the 64th consecutive month. Rent is expected to continue to rise, as prospective tenants have largely
been arranged for the large-scale building developments due for completion in 2019 (according to a survey
by a private research institute).
In the Tokyo business hotel market, monthly guest room occupancy rates from January to March 2019
increased year on year. The number of foreign visitors to Japan is predicted to increase into the future, anddemand for accommodation is expected to grow (according to a survey by the Japan Tourism Agency).
Amid this operating environment, in the Revitalization Business, the 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 of condominiums, detached houses and commercial facilities.
In addition, the Group also proceeded with the proactive acquisition of income-generating properties andland for development as future sources of income.
As a result, consolidated revenue for the six months ended May 31, 2019 totaled ¥34,452 million (up5.9% year on year), operating profit was ¥7,964 million (up 15.6%), profit before tax was ¥7,634 million(up 17.2%), and profit for the period was ¥5,239 million (up 17.7%).

2

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, 2019, and in the following quarterly comparisons figures for the same period of theprevious fiscal year have been recalculated according to the segment after such change.
Revitalization Business
During the six months ended May 31, 2019, the segment sold 28 properties it had renovated, including
Seiseki C-kan Building (Tama-shi,Tokyo), Ryogoku Tosei Building Ⅰ,Ⅱ (Sumida-ku, Tokyo), T’s garden
Ojima (Koto-ku, Tokyo). In addition, the segment sold five units in the Restyling Business from Hilltop
Yokohama Negishi (Yokohama-shi, Kanagawa) etc.
During the six months ended May 31, 2019, it also acquired a total of 18 income-generating officebuildings and apartments and two land lots for renovation and sales purposes.
As a result, revenue in this segment was ¥17,075 million (down 2.9% year on year) and the segment
profit was ¥5,027 million (up 18.9%).
Development Business
During the six months ended May 31, 2019, the segment focused on the sale of condominium anddetached houses for which there was firm demand. The segment sold 138 units at THE Palms Chofu
Manorgarden (Chofu-shi, Tokyo) etc. and sold 37 detached houses at such properties as THE Palms Court
Funabashi Hoten (Funabashi-shi, Chiba), THE Palms Court Kamakura shiromeguri (Kamakura-shi,
Kanagawa). In addition, the segment sold one commercial facility, one newly-built apartment and six landlots.
During the six months ended May 31, 2019, it also acquired three lots for hotel projects, one land lot for
logistics facility project, one land lot for commercial facility project and land lots for 56 detached houses.
As a result, revenue in this segment was ¥10,226million (up 18.7% year on year) and the segment profit
was ¥1,541 million (up 9.5%).
Rental Business
During the six months ended May 31, 2019, while the segment sold 21 buildings of its inventory assets
held for leasing purposes, it newly acquired 10 properties including income-generating office buildings
and apartments. In addition, the segment made efforts to lease vacancies out following acquisitions andalso focused on leasing activities for its existing non-current assets and inventory assets.
As a result, revenue in this segment was ¥2,934 million (up 4.9% year on year) and the segment profit
was ¥1,182 million (down 1.5%).
Fund and Consulting Business
During the six months ended May 31, 2019, while ¥28,842 million was added to the balance of assets
under management (Note), due to new asset management contracts, ¥41,582 million was subtracted fromthe balance of Assets under management ¥663,359 million for the end of the previous fiscal year, mainly
due to property dispositions by funds. The balance of assets under management as of May 31, 2019, was¥650,619 million.
As a result, revenue in this segment was ¥1,309 million (down 1.2% year on year) and the segment
profit was ¥690 million (down 2.5%).
Note: The balance of assets under management includes the balance of assets that were subject to consulting contracts, etc.

Property Management Business
During the six months ended May 31, 2019, the segment made efforts to win new contracts andmaintain existing contracts. Consequently, the total number of properties under management was 632 as of
May 31, 2019, a decrease of 35 from May 31, 2018, with the total comprising 399 office buildings, hotels,
schools and other such properties, and 233 condominiums and apartments.
As a result, although the total number of properties under management decreased, revenue in thissegment was ¥2,317 million (up 19.5% year on year) and segment profit was ¥289 million (up 41.4%).

3

Hotel Business
During the six months ended May 31, 2019, the Group worked towards increasing the average daily rate
and occupancy rate for TOSEI HOTEL COCONE Kanda, opened in December 2017, as well as TOSEIHOTEL COCONE Ueno which newly opened in December 2018 contributed to revenue.
As a result, revenue in this segment was ¥589 million (up 125.1% year on year) and segment profit was¥131 million (up 32.0%).
(2) Analysis of financial Positions
As of May 31, 2019, total assets were ¥145,858 million, an increase of ¥7,089 million compared with
November 30, 2018, while total liabilities were ¥90,969 million, an increase of ¥4,222 million.
Total assets increase is mainly due to an increase in cash and cash equivalents and an increase ininventories. Increase in liabilities were primarily due to an increase in borrowing.
Total equity increased by ¥2,867 million to ¥54,889 million, mainly due to an increase in retained
earnings, payment of cash dividends and purchase of treasury shares.
(3) Analysis of cash flows
Cash and cash equivalents (hereinafter “cash”) as of May 31, 2019 totaled ¥29,100 million, up ¥2,580
million compared with November 30, 2018.
The cash flows for the six months ended May 31, 2019 and factors contributing to those amounts are as
follows:
Cash Flows from Operating Activities
Net cash provided by operating activities totaled ¥554 million (in comparison with segment net cashused in operating activities of ¥400 million in the same period of the previous fiscal year). This ismainly due to profit before tax of 7,634 million, an increase in inventories of ¥4,584 million and income
taxes paid of ¥2,831 million.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥209 million (down 87.8% year on year). This is
primarily due to payments of loans receivable of ¥126 million.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled ¥2,235 million (down 46.8% year on year). This
mainly reflects ¥23,084 million in proceeds from non-current borrowings, despite ¥17,860 million in therepayments of non-current borrowings and ¥1,454 million in cash dividends paid.
(4) Operational and financial issues to be addressed
During the six months ended May 31, 2019, there was no significant change in issues to be addressed by
the Tosei Group.
The Company has set the basic policy regarding the persons who control the decision-making on thefinancial and business policies of the Company. The contents of basic policy (matters set forth in Article
118, item 3 of the Ordinance for Enforcement of the Companies Act) are as follows:a.Contents of basic policy
The Company believes that the persons who control decisions on the Company’s financial andbusiness policies need to be persons who fully understand the details of the Company’s financial andbusiness affairs and the source of the Company’s corporate value and who will make it possible tocontinually and persistently ensure and enhance the Company’s corporate value and, in turn, thecommon 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 the Company and, in turn, the common interests of its shareholders.
Nonetheless, there are some forms of large-scale acquisition of shares that benefit neither the4corporate value of the target company nor the common interests of its shareholders including those witha purpose that would 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 theirshares; those that do not provide sufficient time or information for the target company’s board of
directors and shareholders to consider the details of the large-scale acquisition, or for the target
company’s board of directors to make an alternative proposal and those that require the target company
to discuss or negotiate with the acquirer in order to procure more favorable terms for shareholders thanthose 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 group covers with
its comprehensive capability the diverse business fields and peripheral fields that allow the “integrationof real estate and finance,” which leads to maximization of the potential of the Company group, (ii)maintain employees who support those businesses with knowledge and experience specializing in realestate and finance, etc., (iii) maintain the Company’s trust in the real estate industry that has been built
up over a long period of time based on the establishment of the ability and information 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 valueof the Company and, in turn, the common interests of its shareholders by taking necessary andreasonable countermeasures against a large-scale acquisition by such persons.
b.Overview of special measures to realize the basic policy
The Group established its three-year medium-term management plan aiming to further increase theGroup’s corporate value and is pushing ahead with business under the plan.
The Group is promoting its medium-term management plan “Seamless Growth 2020” (December
2017 to November 2020) with the fiscal year ended November 30, 2018 as its first year. The major
policy of the plan is “to continue growth as a Group to build a firm position as an originalcomprehensive real estate company.” In the fiscal year ending November 30, 2019, the Company willcontinue implementing its growth strategy based on this plan.
The Revitalization Business will revitalize and create added value for existing properties and aim to
expand operations through initiatives such as product line expansion and diversification of sales
methods. With regard to the acquisition of properties, the Company will actively increase the number ofsmall- to medium-size and high liquid property in the metropolitan area and acquire over ¥2.0 billion of
medium- to large-size and profitable property, while paying attention to the portfolio. The Development
Business will promote the development and sales of detached houses and condominiums that are insteady demand, as well as active development of properties such as logistics facility and hotels after
assessing good location. On the other hand, the Stock and Fee Business, the Company’s stable source ofincome, aims to expand all segments. The Rental Business will strive to expand Company-held fixed
assets; the Fund and Consulting Business will accumulate assets under management; and the Property
Management Business will increase properties under management.
Moreover, as an initiative to establish new income-generating businesses, the Hotel Business segment
is newly established from the fiscal year ending November 30, 2019. In addition to the operation andrental of the existing properties, the Company is currently advancing the development of own brandhotel at three locations following TOSEI HOTEL COCONE Kanda, opened in December 2017, and
TOSEI HOTEL COCONE Ueno, opened in December 2018, and will continue to work toward thegrowth of hotel business and enhancement of Tosei brand.

5

c.Overview of measures to prevent decisions on the Company’s financial and business policies from being
controlled by persons deemed inappropriate according to the basic policy
This plan is a measure to prevent persons deemed as inappropriate, in view of the aforementioned
basic policy, from controlling the decisions on the Company’s financial and business policies, and its
objective is to ensure and enhance the Company’s corporate value and, in turn, the common interests of
its shareholders.
The plan stipulates procedures to be followed in an acquisition, etc. of shares, etc. of the Company((A) a purchase and/or other acquisition of the shares and the like issued by the Company that would
result in the holding ratio of share certificates, etc. (kabuken tou hoyuu wariai) of a holder (hoyuusha) of
20% or more; or (B) a tender offer (koukai kaitsuke) with respect to the shares, etc. issued by theCompany that would result in the sum of the offeror’s ownership ratio, and that of the persons having a
special relationship with the offeror, of 20% or more; or any actions similar to (A) or (B) above) bythose trying to acquire (hereinafter, the “Acquirer”).
Specifically, the Acquirer must provide the Company a statement of undertaking and an acquisition
document that includes necessary information, prior to making an acquisition.
Upon receiving these documents, an independent committee will conduct the review of the acquisition
terms, collection of information on materials such as the management plans and business plans of theAcquirer and the Company’s board of directors and comparison thereof, the review of alternative plans,
etc. presented by the Company’s board of directors, and discussions and negotiations with the Acquirer,
while obtaining advice from independent experts. In the meantime, the Company will disclose
information in a timely manner.
When the acquisition is not in compliance with the procedures stipulated in the plan, and/or there ispossibility of such offer to apparently cause harm to the corporate value of the Company and, in turn, tothe common interests of shareholders, and it is appropriate for the Company to implement the gratis
allotment of stock acquisition rights, the independent committee will recommend the implementation thegratis allotment of stock acquisition rights to the Company’s board of directors. In addition, when ameeting of shareholders is convened to confirm the intent of the Company’s shareholders, theCompany’s board of directors will comply with 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 will acquire the stock acquisitionrights in exchange for shares of the Company from persons other than the Acquirer. The Company’sboard of directors will resolve, as an agency stipulated by the Companies Act, as to the implementation
or non-implementation of the gratis allotment of stock acquisition rights, fully respecting therecommendation of the Independent Committee. In addition, when a meeting of shareholders isconvened to confirm the intent of the Company’s shareholders, the Company’s board of directors will
follow the shareholders’ intent. If the procedures under this plan have commenced, the Acquirer mustrefrain from making any acquisition until the Company’s board of directors resolves not to trigger theplan. The plan will remain in effect until the conclusion of the ordinary general meeting ofshareholders for the last fiscal year ending within three years of the conclusion of the 68th Ordinary
General Meeting of Shareholders. However, if, before the expiration of the effective period, theCompany’s board of directors resolves to abolish the plan, the plan will be abolished at that time.
d. Assessment by the Company’s board of directors regarding specific measures and reasons thereofCompany’s board of directors is of the view that the various measures to enhance the corporate value,
including the new medium-term management plan and other measures to strengthen corporate
governance have been established as specific actions to continuously and sustainably enhance thecorporate value of the Company and, in turn, the common interests of its shareholders, and that these arein line with the basic policy, do not undermine the common interests of the Company’s shareholders andare not for the purpose of maintaining the positions of the Company’s corporate officers.
In addition, the Company’s board of directors is of the view that the plan is in line with the basic
policy, does not undermine the common interests of the Company’s shareholders, and is not for the
purpose of maintaining the positions of the Company’s corporate officers, based on the following
reasons: an approval at the general meeting of shareholders has been obtained for its renewal; its
maximum effective period is stipulated to be 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 comprised of themembers that are independent of the management of the Company, has been established and the6countermeasures stipulated in the plan requires the decision by the independent committee for actual
executions; 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 and Shareholders’Common Interests” released by the Ministry of Economy, Trade and Industry and the Ministry of Justiceon May 27, 2005.
(5) Research and development activities
No item to report.

3. Important operational contracts, etc.
No important operational contracts, etc. were determined or entered into during the second quarter of the
fiscal year under review.

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

b.

Class

Total number of authorized shares

Ordinary shares

150,000,000

Total

150,000,000

Number of shares issued
Number of issued
shares(Shares: as of
May 31, 2019)

Number of issued
shares(Shares: as ofthe date of filing:
July 10, 2019)

Ordinary shares

48,548,800

48,548,800

Total

48,548,800

48,548,800

Class

Name of financial instruments
exchange where the stock of Tosei istraded or the name of authorized
Details
financial instruments firms
association where Tosei is registered
Tokyo Stock Exchange
Share unit number:(First Section),
100
Singapore Exchange (Mainboard)––

Note: Shares issued through the exercise of stock acquisition rights between July 1, 2019 and the submission date of thisQuarterly Securities Report are not included under “Number of shares issued.”(2) Status of stock acquisition rights
1) The detail of the stock option system
Date of resolution

April 25, 2019

Title and number of grantees

The Company’s directors: seven persons (including two outside
directors)
The Company’s executive officers: five persons
The Company’s employees: 264 persons
Directors of the Company’s subsidiaries: four persons

Number of stock acquisition rights

7,250(Note 1)

Number of shares delivered upon exercise of stock acquisition
Ordinary shares 725,000 (Note 1)
rights (shares)
Amount to be paid in upon exercise of stock acquisition rights
1,006 (Note 2)(¥)
Period during which stock acquisition rights may be exercised From May 1st, 2021 to April 25, 2024
Issue price and amount capitalized of shares when issued
through the exercise of stock acquisition rights (¥)

Issue price: 1,006

Terms and conditions for exercising stock acquisition rights(Note 3)

Transfer of stock acquisition rights

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

Amount capitalized: 503

Delivery of stock acquisition rights in line with acts of(Note 4)structural reorganization (Note1)
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 of ordinary
shares of the Company without contribution; hereinafter the same for a share split) or a consolidation of shares, ofordinary 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, therelevant adjustment shall only be made to the number of shares to be delivered upon exercise of stock acquisition rightsthat have not yet been exercised as of the relevant point in time. Any fraction less than one (1) share resulting from thisadjustment shall be rounded down.

8Number of Shares Granted=

Number of Shares Granted×

Ratio of share split orafter adjustment
before adjustment
consolidation
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 is set). 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 andincrease capital stock or legal capital surplus is approved at a general meeting of shareholders of the Company (“General
Meeting of Shareholders”), and a date before the date of conclusion of the General Meeting of Shareholders is set as thebase date of the share split, the Number of Shares Granted after adjustment shall apply on and after the following day ofthe 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 theCommercial Code, etc. (Act No. 79 of 2001), exercise of subscription rights to shares under Article 280-19 of theCommercial 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, and exercise ofstock acquisition rights that may claim to deliver the ordinary shares of the Company including stock acquisitionrights incidental to bonds with stock acquisition rights):
Exercise Value=after adjustment

Exercise Value
before×
adjustment

Number of shares newly
Amount to be paid in
Number of×
issuedper shareshares+outstanding
Market Value
Number of shares outstanding + 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 theTokyo 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 shall apply” stipulatedin (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 from thetotal 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 be deemed
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 the following
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 andafter the effective date in the case of a consolidation of shares. However, in the event that a share split is conductedunder the condition that a proposal to decrease surplus and increase capital stock or legal capital surplus is approved
at a 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 Exercise Value after adjustment shall retroactively applyon the following day of such a base date, on and after the following day of the conclusion 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 toa holder of stock acquisition rights who has exercised stock acquisition rights during the period from the following
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 acquisition rights ishereinafter referred to as the “Number of Shares Exercised before a share split”). Any fraction less than one (1)share resulting from this adjustment shall be rounded down.

9Number of
Shares=(Exercise Value before
adjustment – Exercise Value ×
after adjustment)
Exercise Value after adjustment

Number of Shares
Exercised before ashare split

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 (onand 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 acquisition rights who
no longer have the rank of Director due to retirement at the expiration of the period in office or due to resignation
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 expiration of
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 acquisition rights
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 an absorption-typecompany split takes effect, the date when a stock company is incorporated through an incorporation-type company
split, the date when a share exchange takes effect, or the date when a wholly owning parent company is incorporated
through a share transfer; hereinafter the same), provided that such effect by which the stock acquisition rights of theReorganized Company shall be delivered in accordance with the following items shall be stipulated in an absorptiontype merger agreement, an incorporation-type merger agreement, an absorption-type company split agreement, anincorporation-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 accountconditions 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 shall bean 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 accordance with
(3) above.
(5) Period during which stock acquisition rights may be exercised
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 acquisition rights

10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 whichstock acquisition rights may be exercised”.
(6) Matters regarding amount of increase of capital stock and legal capital surplus through issuing shares upon exercise ofstock acquisition rights
Matters regarding capital stock and legal capital surplus to be increased shall be determined in accordance with thematters 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 theReorganized 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 the General
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 becomesa 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 the Company(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 stock acquisitionrights, or that the Company may obtain all of the said shares by the resolution of the General Meeting of
Shareholders.

2) Details of other stock acquisition rights, etc.
No item to report.
(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause
No item to report.
(4) Trends in total number of issued shares, share capital, etc.
Fluctuation in
the number ofissued shares(Shares)

Balance ofissued shares(¥ thousand)Fluctuation incapitalreserves(¥ thousand)

Balance ofcapitalreserves(¥ thousand)

6,556,175

2,036

6,639,651

Fluctuation inshare capital

Balance ofshare capital(Shares)(¥ thousand)From March 1, 2019 to
4,000
48,548,800
2,036
May 31, 2019
Notes: The increases were due to the exercise of stock acquisition rights.

Date

11

(5) Status of major shareholders(As of May 31, 2019)
Ownership percentage
to the number ofissued shares(excluding treasury
stock) (%)

Address

Number of shares
held(Share)Seiichiro Yamaguchi

Shibuya-ku, Tokyo, Japan

12,885,500

27.10

Zeus Capital Limited

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

6,000,000

12.62

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

4,862,600

10.22

1,900,900

3.99

1,435,600

3.01

1,252,000

2.63

1,242,200

2.61

827,059

1.73

692,600

1.45

627,500

1.31

31,725,959

66.73

Name of shareholder

KBL EPB S.A 107704(Standing proxy: Mizuho Bank, Ltd., Settlement&cleaning Services Division)
SSBTC CLIENT OMNIBUS ACCOUNT(Standing proxy: The Hongkong and Shanghai
Banking Corporation Limited, Tokyo Branch)

ONE LINCOLN STRREET, BOSTON MA
USA 02111(3-11-1 Nihonbashi,Chuo-ku, Tokyo, Japan)
Bankplassen 2, 0107 Oslo 1 Oslo 0107
Government of NORWAYNO(Standing proxy: Citibank, N.A., Tokyo Branch) (6-27-30 Shinjuku, Shinjuku-ku, Tokyo,
Japan)The Master Trust Bank of Japan, Ltd. (Trust 2-11-3, Hamamatsucho, Minato-ku, Tokyo,
Account)
Japan
Japan Trustee Services Bank, Ltd. (Trust
1-8-11, Harumi, Chuo-ku, Tokyo, Japan
Account)
GOLDMAN SACHS & CO. REG
200 WEST STEET NEW YORK, NY, USA(Standing proxy: Goldman Sachs Securities (6-10-1, Roppongi, Minato-ku, Tokyo,
Company)
Japan)GOLDMAN SACHS AND CO, 180
JPMC GOLDMAN SACHS TRUST JASDEC MAIDEN LANE, 37/90TH FLOOR, NEW
LENDING ACCOUNTYORK, NY 10038 U.S.A.
(Standing proxy: MUFG Bank, Ltd.)(2-7-1 Marunouchi, Chiyoda-ku, Tokyo,
Japan)PALISADES WEST 6300, BEE CAVE
ROAD BUILDING ONE AUSTIN TX
DFA INTL SMALL CAP VALUE PORTFOLIO
78746 US
(Standing proxy: Citibank, N.A., Tokyo Branch)(6-27-30 Shinjuku, Shinjuku-ku, Tokyo,
Japan)
Total

Notes:–

1. Ownership percentage to the number of issued shares (excluding treasury shares) is rounded down to the second decimal
place.
2. In addition to the above, there are 1,008,805 shares of treasury shares owned by the Company.
3. The change report for the large shareholding report, which was made accessible to the public as of October 2, 2018,states that SPARX Asset Management Co., Ltd. held the following shares as of September 28, 2018. However, since
the Company could not confirm the actual number of shares held by this company as of May 31, 2019, 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, 1-2-70, Konan, Minato Ward, Tokyo

Number of share certificates, etc. held
(shares)

2,620,200

Holding ratio of share certificates, etc. (%)

5.40

12

(6) Status of voting rights
a. Issued shares(As of May 31, 2019)
Number of shares(Shares)Number of voting rights

Details

Shares without voting rights

–

–

–

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

–

–

–

–

–

–

–

–

Classification(Treasury shares held)
Ordinary shares
1,008,800
Ordinary shares
47,536,300
Ordinary shares
3,700

Shares with full voting rights(Treasury shares, etc.)
Shares with full voting rights(Other)Shares less than one unit
Total number of issued shares

48,548,800

Voting rights owned by all
shareholders–

475,363

–

–

–

–

–
475,363–

Note:1. 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.
2. Number of ordinary shares in “Shares less than one unit” includes 5 shares of treasury shares.

b.

Treasury shares, etc.

Name of shareholder

Address(Treasury shares held)TOSEICORPORATION

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

Total

–

Number of shares
Number of shares
held under theheld under own
name of others
name (Shares)(Shares)

Total number ofshares held
(Shares)(As of May 31, 2019)
Percentage of numberof shares held in the
total number of issued
shares (%)

1,008,800–

1,008,800

2.07

1,008,800–

1,008,800

2,.07

Note: At the board of directors meeting held on February 5, 2019, the Company resolved the acquisition of treasury sharesfrom February 7, 2019 to August 31, 2019, and the Company acquired 1,008,800 treasury shares. And the acquisition has
ended on April 23, 2019.

2. Status of Officers
There was no change in officers during the six months ended May 31, 2019 after the filing date of annual
securities report for the previous fiscal year.

13IV. Accounting
1. Preparation policy of the condensed quarterly consolidated financial statements
The condensed quarterly consolidated financial statements of the Company have been prepared inaccordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” under theprovision of Article 93 of the “Ordinance on Terminology, Forms and Preparation Methods of Quarterly
Consolidated Financial Statements” (Cabinet Office Ordinance No. 64 of 2007).
2. Audit attestation
The condensed quarterly consolidated financial statements for the second quarter of the fiscal year
ending November 30, 2019 (from March 1, 2019 to May 31, 2019) and for the first six months of the fiscal
year ending November 30, 2019 (from December 1, 2018 to May 31, 2019) were reviewed by Shinsoh
Audit Corporation pursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act.

14

1. Condensed Quarterly Consolidated Financial Statements(1) Condensed Consolidated Statement of Financial Position(¥ thousand)
Notes
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets

8
8

Total current assets
Non-current assets
Property, plant and equipment
Investment properties
Intangible assets
Other financial assets
Trade and other receivables
Deferred tax assets
Other non-current assets

8
8

Total non-current assets
Total assets
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables
Borrowings
Current income tax liabilities
Provisions

8
8

Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Retirement benefits obligations
Provisions
Deferred tax liabilities

8
8

Total non-current liabilities
Total Liabilities
EquityShare capital
Capital reserves
Retained earnings
Treasury shares
Other components of equity
Total equity attributable to owners of parent
Total equity
Total liabilities and equity

15

As of November 30, 2018

As of May 31, 2019

26,520,569
3,090,237
62,457,864
30,495

29,100,675
3,187,999
67,206,468
12,52992,099,167

99,507,673

8,785,869
33,752,847
87,9662,244,831
865,235
903,707
28,914

8,722,238
33,395,236
85,9932,427,694
935,084
780,345
4,014

46,669,371

46,350,607

138,768,538

145,858,280

4,075,579
7,308,494
2,445,597
593,669

4,082,927
8,370,717
2,045,521
322,799

14,423,341

14,821,965

3,708,969
67,716,752
493,5546,817
397,320

3,466,038
71,850,579
502,142
6,894
321,403

72,323,414

76,147,059

86,746,756

90,969,024

6,554,139
6,544,924
38,843,309(128)
79,537

6,556,175
6,543,844
42,626,953(1,000,037)
162,318

52,021,782

54,889,255

52,021,782

54,889,255

138,768,538

145,858,280

(2) Condensed Consolidated Statement of Comprehensive Income
Six months ended May 31, 2019(¥ thousand)Notes

Six months ended
May 31, 2019

32,520,695

34,452,685

Cost of revenue

21,749,086

22,487,881

Gross profit

10,771,608

11,964,804

Selling, general and administrative expenses

3,922,865

4,049,042

Other income

123,51156,652Other expenses

85,236

7,888

6,887,017

7,964,525

Finance income

40,81541,255

Finance costs

415,915

370,945

Profit before tax

6,511,917

7,634,835

Income tax expense

2,059,583

2,394,849

Profit for the period

4,452,334

5,239,985－

91,911－

91,911(5,583)(9,901)37,820－Net change in fair values of cash flow hedges

1,723

771

Subtotal

33,959(9,130)

Other comprehensive income for the period, net oftax

33,95982,781

4,4886,293

5,322,766

4,452,334

5,239,985

4,486,293

5,322,766

Revenue

Operating profit

5

Six months ended
May 31, 2018

5

Other comprehensive income
Other comprehensive income Items that will not bereclassified to profit or loss
Net change in financial assets measured at fairvalues through other comprehensive income
Subtotal
Other comprehensive income Items that may bereclassified to profit or loss
Exchange differences on translation of foreign
operations
Net change in fair values of available-for-salefinancial assets

Total comprehensive income for the period
Profit attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
Earnings per share attributable to owners of the parent
Basic earnings per share (¥)

7

91.97

108.79Diluted earnings per share (¥)

7

91.75

108.7216

Second quarter ended May 31, 2019(¥ thousand)Second quarter ended
May 31, 2018

Second quarter ended
May 31, 201914,210,654

17,393,228

Cost of revenue

9,629,849

10,573,497

Gross profit

4,580,805

6,819,730

Selling, general and administrative expenses

2,045,072

1,993,905

Other income

29,528

17,118Other expenses

19,664

3,744

2,545,596

4,839,199

623

485

Finance costs

184,593

192,024

Profit before tax

2,361,627

4,647,660

Income tax expense

756,823

1,443,356

Profit for the period

1,604,803

3,204,303－

58,872

Subtotal－

58,872Other comprehensive income Items that may bereclassified to profit or loss
Exchange differences on translation of foreign
operations
Net change in fair values of available-for-salefinancial assets

422(8,188)

4,955

－

819

616

Subtotal

6,197(7,571)Other comprehensive income for the period, net of
tax

6,197

51,3001,611,000

3,255,603

1,604,803

3,204,303

1,611,000

3,255,603

Notes
Revenue

Operating profit

5

5

Finance income

Other comprehensive income
Other comprehensive income Items that will not bereclassified to profit or loss
Net change in financial assets measured at fairvalues through other comprehensive income

Net change in fair values of cash flow hedges

Total comprehensive income for the period
Profit attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
Earnings per share attributable to owners of the parent
Basic earnings per share (¥)

7

33.10

66.92

Diluted earnings per share (¥)

7

33.03

66.88

17

(3) Condensed Consolidated Statement of Changes in Equity
Six months ended May 31, 2018 (December 1, 2017 – May 31, 2018)(¥ thousand)

Notes
Balance at December
1, 2017

SharecapitalCapitalreserves

Retainedearnings

Treasuryshares6,421,392

6,464,240

33,209,210－

Profit for the period

64,024－－

122,669

70,0994,452,334－

46,158,867

4,452,334

4,452,334

33,95933,95933,95933,9594,486,293

4,486,293

192,768

192,768

(61)

(61)

(61)
6

(1,207,100)

Share-based payment(1,207,100) (1,207,100)

4,935

Balance at May 31,
2018

6,544,061

6,539,274

36,454,444

Total
equity46,158,867

4,452,334

Other comprehensive
incomeTotal comprehensive
income for the period
Amount oftransactions withownersIssuance of newsharesPurchase of treasury
sharesDividends of surplus

Total
Other
equitycomponents attributableof equity
to ownersof parent(61)

97,983

4,935

4,935

49,635,703

49,635,703

Six months ended May 31, 2019 (December 1, 2018 – May 31, 2019)(¥ thousand)

Notes
Balance at December
1, 2018

SharecapitalCapitalreserves

Retainedearnings

Treasuryshares6,554,139

6,544,924

38,843,309(128)

Profit for the period

－

－

2,036

1,121

5,239,985(2,711)
6－

52,021,782

5,239,985

5,239,985

82,78182,78182,78182,781

5,322,766

5,322,766

3,157

3,157

(999,909)(1,002,620) (1,002,620)(1,456,340) (1,456,340)

510
6,556,175

6,543,844

42,626,953 (1,000,037)

18

Total
equity52,021,782(1,456,340)

Share-based payment
Balance at May 31,
2019

79,537

5,239,985

Other comprehensive
incomeTotal comprehensive
income for the period
Amount oftransactions withownersIssuance of newsharesPurchase of treasury
sharesDividends of surplus

Total
Other
equitycomponents attributableof equity
to ownersof parent

162,318510

510

54,889,255

54,889,255

(4) Condensed Consolidated Statement of Cash Flows(¥ thousand)
Notes
Cash flows from operating activities
Profit before tax
Depreciation expense
Increase (decrease) in provisions and retirement
benefits obligations
Interest and dividend 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
SubtotalInterest and dividend income received
Income taxes paid
Net cash from (used in) operating activities
Cash flows from investing activities
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of investment properties
Purchase of intangible assets
Purchase of other financial assets
Payments of other financial assets
Payments of loans receivableCollection of loans receivable
Purchase of investments in subsidiaries resulting inchange in scope of consolidation
Other, net

Six months ended
May 31, 2018

Six months ended
May 31, 2019

6,511,917
292,035

7,634,835
435,606(223,006)(261,403)(40,815)415,915608
68,276(7,344,536)
996,483(80,806)(41,255)
370,945－
275,084(4,584,930)(480,791)(3,068)596,073
40,811(1,037,751)

3,345,022
41,086(2,831,445)(400,865)

554,663－(29,447)(205,711)(19,868)
(150)
－
－
38

20,000(33,613)(37,909)(12,811)(50,820)
6,280(126,730)
5,679(1,471,733)

－

3,715

20,413

Net cash from (used in) investing activities(1,723,156)(209,509)

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

841,000
22,280,950(17,407,178)
192,431(1,205,363)(498,509)(61)(1,827)(26,600)
23,084,545(17,860,068)
3,134(1,454,261)(508,132)(999,909)(2,827)

Net cash from (used in) financing activities

4,201,440

2,235,880

2,077,418
23,750,239

2,581,034
26,520,569

(598)

(928)

25,827,059

29,100,675

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate change on cash and cash
equivalents
Cash and cash equivalents at end of period19(5) Notes on Condensed Quarterly 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’s condensed quarterly consolidated financial statements for the second quarter (March 1, 2019
to May 31, 2019) and first six months (December 1, 2018 to May 31, 2019) of the current fiscal year
have been prepared in respect of the Company and its consolidated subsidiaries (hereinafter collectively,
the “Group”). The Group engages in the following six business operations: Revitalization Business,
Development Business, Rental Business, Fund, Consulting Business and Property Management Businessand Hotel Business. The operations of each business segment are presented in “5. 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 of Quarterly Consolidated Financial Statements” (Cabinet Office Ordinance No. 64 of 2007),
its condensed quarterly consolidated financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34 “Interim Financial Reporting” under the provision of
Article 93 of the “Ordinance on Terminology, Forms and Preparation Methods of Quarterly
Consolidated Financial Statements” (Cabinet Office Ordinance No. 64 of 2007).
These condensed quarterly consolidated financial statements were approved by Seiichiro Yamaguchi,
the Company’s President and CEO, and Noboru Hirano, Director and CFO, on July 5, 2019.
(2) Basis of measurement
The condensed quarterly consolidated financial statements have been prepared on the historical costbasis except for assets and liabilities measured at fair value.
(3) Presentation currency and unit amountThe condensed quarterly consolidated financial statements in this report are presented in Japaneseyen, the Company’s functional currency. All financial information presented in Japanese yen isrounded down to the nearest thousand yen.

20

3. Significant accounting policies
With the exception of the following items, significant accounting policies that the Group applies incondensed quarterly consolidated financial statements are the same as the accounting policies used in the
consolidated financial statements for the previous fiscal year.
Changes in accounting policies
The Group applied the following standards effective from the first quarter of the fiscal year ending
November 30, 2019.
Standard

Name of standard

Overview of new establishment and amendment

IFRS 9Financial Instruments

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

IFRS 15

Revenue from Contracts
with Customers

Accounting for and disclosure of revenue recognition forcontracts with customers

Clarification of requirements for transfers to, or from,investment properties
The above standards have no material impact on the condensed quarterly consolidated financial statements.
IAS 40Investment properties(1) IFRS 9 “Financial Instruments”
1) Classification and measurement of financial instruments
Regarding financial instruments, the Group classified as “Financial instruments measured atamortized cost,” “Financial instruments measured at fair value through other comprehensive income”
and “Financial instruments measured at fair value through profit or loss.”
Equity instruments previously classified as “Available-for-sale financial assets” are now classified
into “Financial assets measured at fair value through other comprehensive income” and “Financial
assets measured at fair value through profit or loss.” “Available-for-sale financial assets” have been
reclassified to “Other financial assets” in the Condensed Consolidated Statement of Financial Position.
In accordance with transition provisions, the Group has not applied IFRS 9 retrospectively toconsolidated financial statements for the previous fiscal year.
2) Impairment loss of financial assets
The method of recognizing impairment on financial assets measured at amortized cost has beenchanged to recognize a loss allowance for expected credit losses on these assets.
(2) IFRS 15 “Revenue from Contracts with Customers”
With the application of IFRS 15, revenue from contracts with customers is recognized based on thefive-step approach shown below. In applying IFRS 15, the Group applies the transition provisions andrecognizes the cumulative effect of the standard at the date of initial application. For this reason, theGroup has not applied IFRS 15 retrospectively to consolidated financial statements for each priorreporting period.
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract(s)Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation21

4. Significant accounting estimates and judgments requiring estimates
The preparation of the condensed quarterly consolidated financial statements in compliance with IFRS
requires the management of the Group to make judgments, estimates and assumptions that affect theapplication of accounting policies and the amounts of assets, liabilities, revenue and expenses. However,actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting
estimates are recognized in the period in which the estimates are changed and in future periods in which
the change will affect.
5. Segment information
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 theallocation of management resources and to assess the performance. The Group draws up comprehensive
strategies for each of the following six business segments and conducts business activities accordingly;“Revitalization Business”, “Development Business”, “Rental Business”, “Fund and Consulting
Business”, “Property Management Business” and “Hotel Business”. In the Revitalization Business, theGroup acquires the properties whose asset values have declined, renovates, and resells them. In theDevelopment 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 officebuildings 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 Hotel Business provides mainly hotel operating
services.
The Tosei Group has made changes to its reportable segments, increasing the number of suchsegments from five up through the end of the previous fiscal year to six as of the first quarter of the
fiscal year ending November 30, 2019. Accordingly, the reportable segments are now: the Revitalization
Business, Development Business, Rental Business, Fund and Consulting Business, and Property
Management Business segments, Hotel Business.
As the quantitative importance of "Hotel Business", which was included in " Rental Business" and"Others", increased, it is now classified as a separate reportable segment.
Segment information for the six months ended May 31, 2018 and second quarter ended May 31,2018
have been prepared in accordance with the new reportable segment classifications.
The Group’s revenue and profit/loss by reportable segment are as follows:

Six months ended May 31, 2018
(December 1, 2017 – May 31, 2018)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Hotel
Business

Adjustment

Total

Revenue
Revenue from externalcustomers

17,585,038

8,613,547

2,797,069

1,324,657

1,938,389

261,992－

32,520,695

Intersegment revenue－－

21,92921,543536,650500(580,623)－

17,585,038

8,613,547

2,818,999

1,346,200

2,475,040

262,492(580,623)

32,520,695

4,227,735

1,408,139

1,199,967

707,671

204,446

99,926(960,869)

6,887,017

Total
Segment profit
Finance income/costs, net(375,100)

Profit before tax

6,511,917

22

Six months ended May 31, 2019
(December 1, 2018 – May 31, 2019)(¥ thousand)Reportable Segments
Total

Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Hotel
Business

Adjustment

Revenue from externalcustomers

17,075,798

10,226,890

2,934,058

1,309,000

2,317,170

589,767－

34,452,685

Intersegment revenue－－

22,852

9,979

583,352

1,830(618,015)－

17,075,798

10,226,890

2,956,910

1,318,980

2,900,522

591,597(618,015)

34,452,685

5,027,397

1,541,304

1,182,085

690,162

289,167

131,884(897,475)

7,964,525

Revenue

Total
Segment profit
Finance income/costs, net(329,689)

Profit before tax

7,634,835

Second quarter ended May 31, 2018
(March 1, 2018 – May 31, 2018)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Hotel
Business

Adjustment

Total

Revenue
Revenue from externalcustomers

3,159,624

7,847,355

1,446,107

650,586

963,438

143,543－

14,210,654

Intersegment revenue－－

11,144

8,453

280,938500(301,036)－

3,159,624

7,847,355

1,457,251

659,040

1,244,377

144,043(301,036)

14,210,654

433,823

1,553,570

605,815330,035

96,01857,199(530,865)

2,545,596

Total
Segment profit
Finance income/costs, net(183,969)

Profit before tax

2,361,627

Second quarter ended May 31, 2019
(March 1, 2019 – May 31, 2019)(¥ thousand)Reportable Segments
Total

Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Hotel
Business

Adjustment

Revenue from externalcustomers

10,451,865

3,181,386

1,463,840

705,716

1,253,332

337,087－

17,393,228

Intersegment revenue－－

11,438

5,772

305,8281,130(324,168)－

10,451,865

3,181,386

1,475,279

711,488

1,559,160

338,217(324,168)

17,393,228

3,603,240

495,350

575,716

392,913

168,895

82,936(479,942)

4,839,199

Revenue

Total
Segment profit
Finance income/costs, net(191,538)

Profit before tax

4,647,660

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6. Dividends
Dividends paid in the six months ended May 31, 2018 and May 31, 2019 are as follows:
Six months ended May 31, 2018
Resolution
Ordinary General Meetingof Shareholders held on
February 27, 2018

Dividends per share(¥)

Total dividends(¥ thousand)25

1,207,100

Record date

Effective dateNovember 30, 2017

February 28, 2018

Record date

Effective dateNovember 30, 2018

February 28, 2019

Six months ended May 31, 2019
Resolution
Ordinary General Meetingof Shareholders held on
February 27, 2019

Dividends per share(¥)

Total dividends(¥ thousand)30

1,456,340

7. Earnings per share
Six months ended
May 31, 2018
Profit attributable to owners of the parent (¥ thousand)Six months ended
May 31, 2019

4,452,334

5,239,985

4,452,334

5,239,985

48,409,489

48,167,280

117,265

29,64048,526,754

48,196,920

Basic earnings per share (¥)

91.97

108.79Diluted net income per share (¥)

91.75

108.72

Net income used to figure diluted net income per share(¥ thousand)
Weighted average number of outstanding ordinary shares(shares)
The number of increased ordinary shares used to figure
diluted earnings per share (shares)
The weighted-average number of ordinary shares used tofigure diluted earnings per share (shares)

Second quarter ended
May 31, 2018
Profit attributable to owners of the parent (¥ thousand)Second quarter ended
May 31, 2019

1,604,803

3,204,303

1,604,803

3,204,303

48,488,725

47,884,220

96,70729,433

48,585,432

47,913,653

Basic earnings per share (¥)

33.10

66.92

Diluted net income per share (¥)

33.03

66.88

Net income used to figure diluted net income per share(¥ thousand)
Weighted average number of outstanding ordinary shares(shares)
The number of increased ordinary shares used to figure
diluted earnings per share (shares)
The weighted-average number of ordinary shares used tofigure diluted earnings per share (shares)

Notes: Basic earnings per share is calculated by dividing profit attributable to owners of the parent, by the weighted average
number of outstanding ordinary shares during the reporting period.

24

8. Financial instrumentsi) Fair values and book values
Fair values of financial assets and liabilities and their book values presented in the condensed
consolidated statement of financial position are as follows:(¥ thousand)As of November 30, 2018

As of May 31, 2019

Book value

Fair value

Book value

Fair value

Cash and cash equivalents

26,520,569

26,520,569－－

Trade and other receivables

2,751,391

2,751,391－－

2,244,831

2,244,831－－

Cash and cash equivalents－－

29,100,675

29,100,675

Trade and other receivables－－

2,439,872

2,439,872－－

2,010,382

2,010,382－－

417,312417,312Trade and other payables

6,138,677

6,138,677

5,904,638

5,904,638

Borrowings

75,025,247

75,035,318

80,221,297

80,231,420

Financial assets
Loans receivables and other receivables

Available-for-sale financial assets
Available-for-sale financial assets
Financial assets measured at amortized cost

Financial assets measured at fair value
through other comprehensive income
Other financial assets
Financial assets measured at fair value
through profit or loss
Other financial assets
Financial liabilities
Financial liabilities measured at amortized cost

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 fair values.
However, the fair values of interest rate swaps are based on market values presented by financial
institutions.
Other financial assets
The fair values of listed securities are measured based on quoted market prices. For financial assets
for which 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
instruments that are substantially at the same price, and the discounted cash flow method.

25

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 fixedinterest rate are measured based on the present value of the total amount of principal and interest
discounted by the interest rate that would be charged for a new similar borrowing.
ii)

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, 2018
Level 1

Available-for-sale financial assets

Level 2

Level 3

Total

1,613,044－

631,7872,244,831

－

9,469

－

9,469

Financial liabilities measured at fairvalues through other comprehensive
income (derivative)

As of May 31, 2019
Level 1
Financial assets measured at fairvalues through other comprehensive
incomeFinancial assets measured at fairvalues through profit or loss
Financial liabilities measured at fairvalue through other comprehensive
income (derivative)

Level 2

Level 3

Total

1,788,511－

221,8702,010,382－－

417,312417,312

－

8,339

－

8,339

Reconciliation of financial assets classified in level 3 at the beginning of the period with those at theend of the period is as follows:(¥ thousand)Six months ended
May 31, 2019
Balance at beginning of period

631,787

Acquisition

2,457

Comprehensive income
Profit (loss)

5,848

Other comprehensive income

5,371

Disposal(6,280)

Balance at end of period

639,18326

9. Significant subsequent events
No item to report.

2. Other
No item to report.

27

B.

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

28

(Translation)
Quarterly Review Report of Independent Auditors
July 5, 2019

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 havereviewed the condensed quarterly consolidated financial statements of Tosei Corporation included in the“Accounting” section, namely, the condensed consolidated statements of financial position, comprehensive
income, changes in equity, and cash flows, as well as their notes, for the second quarter (March 1, 2019 to May
31, 2019) and the first six-month period (December 1, 2018 to May 31, 2019) of the fiscal year from
December 1, 2018 to November 30, 2019.
Management’s Responsibility for the Condensed Quarterly Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these condensed quarterly
consolidated financial statements in conformity with International Accounting Standard 34 “Interim
Financial Reporting” under the provision of Article 93 of the Ordinance on Terminology, Forms andPreparation Methods of Quarterly Consolidated Financial Statements of Japan; this includes the design,
implementation, and maintenance of internal control as management determines is necessary to enable thepreparation and fair presentation of condensed quarterly consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express a conclusion from an independent perspective on these condensed
quarterly consolidated financial statements based on our quarterly review as independent auditor. We
conducted our review in conformity with quarterly review standards generally accepted in Japan.
A quarterly review consists principally of making inquiries, primarily of management and persons
responsible for financial and accounting matters, and applying analytical procedures and other quarterly
review procedures. Such a review is substantially less in scope than an audit conducted in conformity
with auditing standards generally accepted in Japan.
We believe that we have obtained the evidence to provide a basis for our conclusion.
Auditor’s Conclusion
In our quarterly review, we have concluded that the condensed quarterly consolidated financial
statements referred to above are in conformity with International Accounting Standard 34 “Interim
Financial Reporting”, and nothing has come to our attention that causes us to believe that they do not
fairly present, in all material respects, the financial positions of the Company and its consolidated
subsidiaries as of May 31, 2019, and the consolidated results of their operations and their cash flows forthe six-month period then ended the same date.

Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure isrequired under the provisions of the Certified Public Accountants Act.
End

*1.The above is a digitization of the text contained in the original copy of the Quarterly Review Report, whichis in the custody of the Company (filing company of the quarterly securities report) as attachments to thefinancial statements.
2.XBRL data is excluded from the scope of the quarterly review.

Note:
The English version of the financial statements consists of an English translation of the reviewed
Japanese financial statements. The actual text of the English translation of the financial statements was
not covered by our review. Consequently, for the auditors’ review report of the English financial
statements, the Japanese original is the official text, and the English version is a translation of that text .
Should there be any inconsistency between the translation and the official Japanese text, the latter shallprevail.