Quarterly Securities Report(The English translation of the “Shihanki-Houkokusho”
for the third quarter of the 68th term)from June 1, 2017
to August 31, 2017TOSEI 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-General of the Kanto Local Finance Bureau of the Ministry of Financeof Japan on October 11, 2017. Should there be any inconsistency between the translation and the official Japanese text, the lattershall prevail.

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. Important operational contracts, etc. ........................................................................................................2
3. Analysis of financial position, operating results and cash flows..............................................................2
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 ..... 8(4) Details of rights plan ............................................................................................................................. 8(5) Trends in total number of issued shares, share capital, etc. .................................................................. 8(6) Status of major shareholders ................................................................................................................. 8(7) Status of voting rights ........................................................................................................................... 9
2. Status of Officers .....................................................................................................................................9
IV. Accounting...................................................................................................................................... 10
1. Condensed Quarterly Consolidated Financial Statements .....................................................................11(1) Condensed Consolidated Statement of Financial Position.................................................................. 11(2) Condensed Consolidated Statement of Comprehensive Income......................................................... 12(3) Condensed Consolidated Statement of Changes in Equity ................................................................. 14(4) Condensed Consolidated Statement of Cash Flows ............................................................................ 15(5) Notes to Condensed Quarterly Consolidated Financial Statements .................................................... 16
2. Other ......................................................................................................................................................21

B. Information on Guarantee Companies, etc. of Filing Company ....................................22[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 andExchange Act

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

October 11, 2017

Business year:

Third quarter of the 68th term (from June 1, 2017 to Aug. 31, 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

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

67th termFirst nine months

68th termFirst nine months

67th term

Accounting period

From December 1, 2015
to August 31, 2016

From December 1, 2016
to August 31, 2017

From December 1, 2015
to November 30, 2016

Revenue(¥ thousand)
39,139,416
41,978,288
49,818,113[Third quarter of the current fiscal year][8,484,199][15,618,203]
Profit before tax
8,203,330
8,521,644
8,450,048(¥ thousand)Profit attributable to owners of the parent
5,379,001
5,755,489(¥ thousand)
5,547,469[635,019][1,823,623][Third quarter of the current fiscal year]
Comprehensive income attributable toowners of the parent
5,333,508
5,769,556
5,509,307(¥ thousand)Total equity
40,822,067
45,750,993
41,010,083(¥ thousand)Total assets
111,393,983
122,644,825
121,276,292(¥ thousand)Basic earnings per share(¥)
111.40119.20114.89[Third quarter of the current fiscal year][13.15][37.77]
Diluted earnings per share
－
－
－
(¥)
Ratio of equity attributable to owners of the
36.6
37.3
33.8
parent to total assets(%)
Net cash from (used in) operating activities(1,550)5,363,558(7,472,487)(¥ thousand)Net cash from (used in) investing activities(6,274,825)
410,983(8,193,818)(¥ thousand)Net cash from (used in) financing activities
9,589,908(4,073,491)
18,522,496(¥ thousand)Cash and cash equivalents at end of period
22,097,993
23,342,594
21,640,866(¥ thousand)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. Diluted earnings per share are not presented because there were no potential shares that have dilutive effects.
4. The above indexes are based on the quarterly consolidated financial statements and consolidated financial statementsthat were prepared in compliance with the International Financial Reporting Standards (hereinafter “IFRS”).

2. Business description
During the nine months ended August 31, 2017, 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.
As for changes in significant subsidiaries and affiliates, CSC (trade name changed from “Crystal Sports
Club” as of December 1, 2016) underwent a company split and the Company sold shares of the newly
established Crystal Sports Club. With respect to changes in principal subsidiaries and affiliates, KS Properties
Co., Ltd. was acquired through M&A transaction and Tosei Hotel Kanda Co. was established as a subsidiaryand both have been included in the scope of consolidation.

1II. Review of operations
1. Business and other risks
There were no business and other risks that newly arose during the nine months ended August 31, 2017. In
addition, there were no significant changes in “Business and other risks” described in the annual securities
report for the previous fiscal year.

2. Important operational contracts, etc.
No important operational contracts, etc. were determined or entered into during the third quarter of thecurrent fiscal year.

3. Analysis of financial position, operating results and cash flows
Any forward-looking statements included in the following descriptions are based on the best estimates or
judgment of the Tosei Group as of August 31, 2017.
(1) Analysis of operating results
During the nine months ended August 31, 2017, the Japanese economy experienced continued
improvements in the employment and income environment in Japan and is expected to continue amoderate recovery, although it is necessary to keep in mind factors such as the outlook for China and otheremerging economies, impact of volatility in financial and capital markets, and growing geopolitical risks.
In the real estate industry where the Tosei Group operates, domestic real estate transactions by listedcompanies and other such entities which had been in a declining trend since the first half of the fiscal year
ended March 31, 2016 started to rise in the second half of the fiscal year ended March 31, 2017, reaching¥4,108.2 billion for the fiscal year ended March 31, 2017, an increase of 0.5% year on year. The number ofinvestors moving forward with sales of their real estate holdings increased against the backdrop ofcontinuing favorable investing demand and rising real estate prices, resulting in a growing supply of
wprivate research institute).
In the Tokyo metropolitan area condominium market, the number of units sold from January to July
2017 increased 2.2% year on year to 18,156. The average contract rate for the first month during the same
period remained slightly below the 70% threshold from which market conditions are viewed as favorable
due to signs of a partial slump in sales caused by persistently high sales prices; however, the contract rate
for July 2017 stood at 71.9%.
In the Tokyo metropolitan area build-for-sale detached house market, housing starts in the first half of2017 rose 5.3% year on year to 30,622. Demand for comparatively inexpensive detached houses is strong
and is expected to remain firm going forward (according to a survey by a private research institute and theMinistry of Land, Infrastructure, Transport and Tourism).
The office leasing market of Tokyo’s five business wards has been performing strongly against the
backdrop of office expansion by corporate entities due to business expansion and the demand forrelocation to the central Tokyo area and newly built buildings aimed at securing exceptional humanresources. vThe vacancy rate in July 2017 declined 0.7 percentage points year on year to 3.2%, and theaverage asking rent was ¥18,916 per tsubo (1 tsubo = 3.3m2), a 3.5% increase year on year. Concerns overa worsening vacancy rate due to the impact from the upsurge in supply of large-scale office buildings
anticipated from 2018 are likely to be minimal, and the office leasing market is expected to remain firm
going forward, supported by favorable office demand (according to a survey by a private research
institute).
The real estate securitization market is continuing to grow. In the REIT market in June 2017, the total
value of assets under management was ¥16.1 trillion in J-REITs and ¥2.2 trillion in private placement
REITs, while the combined total value of assets under management in J-REITs and private placement
REITs increased 11.2% year on year to ¥18.4 trillion. If the total value of assets under management inmajor private placement funds of ¥15.6 trillion, as of December 2016, is included, the overall market scale
stands at ¥34 trillion, and is expected to continue to expand going forward (according to a survey by a
private research institute).
As a result, consolidated revenue for the nine months ended August 31, 2017 totaled ¥41,978 million2(up 7.3% year on year), operating profit was ¥9,080 million (up 2.9%), profit before tax was ¥8,521
million (up 3.9%), and profit for the period was ¥5,755 million (up 7.0%).
Performance by business segment is shown below.
Revitalization Business
During the nine months ended August 31, 2017, the segment sold 45 properties it had renovated,
including The Square Seiseki-sakuragaoka Building (Tama-shi, Tokyo), Kuramochi Building First(Sumida-ku, Tokyo), Kameido Tosei Building (Koto-ku, Tokyo), T‘s garden Urayasu (Urayasu-shi,
Chiba), T‘s garden UrayasuⅡ (Urayasu-shi, Chiba), Kamiosaki 3-chome Building (Shinagawa-ku,
Tokyo), Onoe-cho 6-chome Building (Yokohama-shi, Kanagawa) and Kishino Building (Toshima-ku,
Tokyo).
In addition, the segment sold 38 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 nine months ended August 31, 2017, it also acquired a total of 37 income-generating officebuildings and apartments and six land lots for renovation and sales purposes.
As part of the acquisition, our company acquired KS Properties Corporation, company holds income
properties mainly in Suginami-ku, Tokyo, through M&A transaction and converted it into consolidated
subsidiaries.
As a result, revenue in this segment was ¥29,286 million (up 46.8% year on year) and the segment profit
was ¥7,309 million (up 84.4% year on year).
Development Business
During the nine months ended August 31, 2017, the segment focused on the sale of detached houses, forwhich there was firm demand. The segment sold 84 detached houses at such properties as THE Palms
Court Kashiwa Hatsuishi (Kashiwa-shi, Chiba), THE Palms Court Koshigaya Lake Town (Koshigaya-shi,
Saitama) and THE Palms Court Kamakura-Shiromeguri (Kamakura-shi, Kanagawa).
During the nine months ended August 31, 2017, it also acquired a land lot for hotel project, a land lot for
condominium project, a land lot for rental apartment project and land lots for 24 detached housings.
As a result, revenue in this segment was ¥3,498 million (down 68.8% year on year) and the segment loss
was ¥310 million (in comparison with segment profit of ¥3,703 million in the same period of the previous
fiscal year).
During the nine months ended August 31, 2017, all the segment revenue came from detached houses
sale. On the other hand, in the same period of the previous fiscal year the segment sold two commercial
facilities. For this reason, the segment revenue and profit decreased.
Rental Business
During the nine months ended August 31, 2017, while the segment sold 27 buildings of its inventory
assets held for leasing purposes, it newly acquired 28 properties including income-generating officebuildings 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 ¥4,600 million (up 20.3% year on year) and the segment profit
was ¥1,935 million (up 11.1%).
Fund and Consulting Business
During the nine months ended August 31, 2017, while ¥21,577 million was subtracted from the balanceof assets under management (Note), due mainly to property dispositions by funds, ¥94,394 million wasadded to the balance of Assets under management ¥448,186 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 of August 31, 2017, was ¥521,003 million. The acquisition of such large projectcontracts increased asset management fees and contributed to revenue.
As a result, revenue in this segment was ¥2,129million (up 24.5% year on year) and the segment profit
was ¥1,070 million (up 44.3%).

3

Note: The balance of assets under management includes the balance of assets that were subject toconsulting contracts, etc.
Property Management Business
During the nine months ended August 31, 2017, the segment worked to win new contracts and maintainexisting contracts. Consequently, the total number of properties under management was 652 as of August
31, 2017, an increase of 73 properties from August 31, 2016, with that total comprising 389 officebuildings, hotel, schools and other such properties, and 263 condominiums and apartments.
As a result, revenue in this segment was ¥2,462 million (up 13.2% year on year) and segment profit was¥212 million (up116.4%).
Other
For the nine months ended August 31, 2017, there was no revenue in this segment (compared to arevenue of ¥270 million in the same period of the previous year). The segment profit was ¥0 million (incomparison with segment loss of ¥22 million in the same period of the previous fiscal year).
(2) Analysis of financial position
As of August 31, 2017, total assets were ¥122,644 million, an increase of ¥1,368 million compared with
November 30, 2016, while total liabilities were ¥76,893 million, a decrease of ¥3,372 million.
Increase in total assets were primarily due to increase in investment properties. Decrease in liabilities
were due to decrease in borrowings.
Total equity increased by ¥4,740 million to ¥45,750 million, mainly due to an increase in retained
earnings and payment of cash dividends.
(3) Analysis of cash flows
Cash and cash equivalents (hereinafter “cash”) as of August 31, 2017, totaled ¥23,342 million, increasedby ¥1,701million compared with November 30, 2016.
The cash flows for the nine months ended August 31, 2017 and factors contributing to those amounts
are as follows:
Cash Flows from Operating Activities
Net cash provided by operating activities totaled ¥5,363 million (net cash used in operating activities
totaled ¥1 million in the same period of the previous fiscal year). This is mainly due to profit before tax of¥8,521 million, as well as an increase in income taxes paid of ¥3,554 million.
Cash Flows from Investing Activities
Net cash provided by investing activities totaled ¥410 million (net cash used in investing activities
totaled ¥6,274 million in the same period of the previous fiscal year). This is mainly due to ¥1,085 million
in payments of loans receivable, ¥1,272 million in payments of investment properties and proceeds fromloans receivable of ¥2,760 million

Cash Flows from Financing Activities
Net cash used in financing activities totaled ¥4,073 million (net cash provided by financing activities
totaled ¥9,589 million in the same period of the previous fiscal year). This is mainly due to ¥21,903
million in the repayments of non-current borrowings and ¥1,061 million in cash dividends paid, despite¥21,150 million in proceeds from non-current borrowings.

4(4) Operational and financial issues to be addressed
During the nine months ended August 31, 2017, there was no significant change in issues to be addressedby 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 the corporate
value of the target company nor the common interests of its shareholders including those with a purposethat 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 their shares; thosethat do not provide sufficient time or information for the target company’s board of directors andshareholders 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 ornegotiate with the acquirer in order to procure more favorable terms for shareholders than thosepresented 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 thefive business fields that allow the “integration of real estate and finance,” which leads to maximizationof the potential of the Company group, (ii) maintain employees who support that system with knowledge
and experience specializing in real estate and finance, (iii) maintain the Company’s trust in the realestate 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 thatenables comprehensive business. Unless the acquirer of a proposed large-scale acquisition of theshares in the Company understands the source of the corporate value of the Company as well as thedetails of financial and business 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
Under the medium-term management plan called “Advancing Together 2017” (the targeted period of
the plan 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 five business areasand considering its advance to peripheral areas of business, to build optimum corporate governance for
expansion of the Company group and increase of the employees which are entailed in expansion of thebusiness, and to establish efficient organization management structure. Further, the Company group willemphasize the cultivation of the most valuable asset of the Company group, i.e. the human resources toincrease satisfaction of the employees of the Company group. As the Basic Policy in the medium-term
management plan for the further growth of the Company group, the Company group is determined toestablish the original and distinctive “Tosei brand” by providing products ensuring high customer5

satisfaction and high-quality services. Based on these policies, the Company group is dedicated toredefine existing ideas with the spirit of challenge and advance as the risk-taking group of companies, toaim “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 execution function by the introduction of the executive officer system, and theestablishment 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 compliance through raising awareness from the level of “role model”
to that of “ideal” in accordance with the Compliance Principles of the Company, thoroughimplementation of risk management by correctly understanding and analyzing risks involved incorporate activities, continuous performance of accountability to various stakeholders including
investors by promptly publicly disclosing correct corporate information under the spirit of fairdisclosure, and other efforts for strengthening corporate governance.
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
The plan is a measure to prevent decisions on the Company’s financial and business policies frombeing controlled by persons deemed inappropriate under the above basic policy, and its objective is toensure and enhance 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 sharecertificates, etc. of the Company ((i) a purchase or other acquisition that would result in the holding ratioof share certificates, etc. (kabuken tou hoyuu wariai)of a holder (hoyuusha) totaling at least 20% of theshare certificates, 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 ratioof share certificates, etc. of a person having a special relationship totaling at least 20% of the sharecertificates, 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 of shareholders, (iii) and it is reasonable to implement the gratis allotment of stock acquisitionrights, the independent committee will recommend the implementation the gratis allotment of stockacquisition rights to the Company’s board of directors. In addition, when a meeting of shareholders isconvened to confirm the intent 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 sharesin the Company from persons other than the acquirer. The Company’s board of directors, in exercising
its role under the Companies Act, will pass a resolution relating to the implementation or nonimplementation of the gratis allotment of stock acquisition rights, respecting the recommendation of the
Independent Committee to the maximum extent. In addition, when a meeting of shareholders isconvened to confirm the intent of the Company’s shareholders, the Company’s board of directors will
respond to the shareholders’ intent. If the procedures for the plan have commenced, the acquirer must
not effect an acquisition until and unless the Company’s board of directors resolves not to trigger theplan. The effective period of the plan expires at the conclusion of the ordinary general meeting of6

shareholders for the last fiscal year ending within three years after the conclusion of the 65th 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.

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
such as the efforts to enhance the corporate value and the strengthening of corporate governance were
established as specific measures to continuously and sustainably enhance the corporate value of theCompany and, in turn, the common interests of its shareholders, and that these are truly in accordancewith the basic policy, not detrimental to the common interests of the Company’s shareholders and not forthe purpose of maintaining 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 theCompany’s corporate officers, and in accordance with the basic policy based on the following reasoning:approval from the 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 theCompany’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’scountermeasures 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 thethree principles set out in the Guidelines Regarding Takeover Defense for the Purposes of Protection andEnhancement of Corporate Value and Shareholders’ Common Interests released by the Ministry of
Economy, Trade and Industry and the Ministry of Justice on May 27, 2005.

(5) Research and development activities
No item to report.

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 issued shares
Number of issued
shares(Shares: as ofAugust 31, 2017)

Number of issued
shares(Shares: as ofthe date of filing:
October 11, 2017)

Ordinary shares

48,284,000

48,284,000

Total

48,284,000

48,284,000

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)––(2) Status of stock acquisition rights
No item to report.
(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause
No item to report.
(4) Details of rights plan
No item to report.
(5) Trends in total number of issued shares, share capital, etc.
Date
From June 1, 2017 toAugust 31, 2017

Fluctuation in
the number ofissued shares(Shares)–(¥ thousand)Fluctuation incapitalreserves(¥ thousand)

Balance ofcapitalreserves(¥ thousand)

6,421,392–

6,504,868

Balance ofissued shares

Fluctuation inshare capital

Balance ofshare capital(Shares)(¥ thousand)–

48,284,000(6) Status of major shareholders
There is no item to report due to the reporting period being a third quarter of a fiscal year.

8(7) Status of voting rights
The following status of voting rights is prepared based on the shareholder registry as of May 31, 2017,
which is the latest record date, as the information as of August 31, 2017 is not yet available.
a.

Issued shares(As of August. 31, 2017)
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)Shares with full voting rights(Treasury shares, etc.)

–

–

–

–

–

–

–

–

–

Classification

Tosei’s standard class ofshares with no rights
limitations

Shares with full voting rights(Other)Ordinary shares
48,281,400

482,814

Shares less than one unit

Ordinary shares
2,600

–

–

48,284,000––

482,814–

Total number of issued shares
Voting rights owned by all
shareholders–

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 four units of voting rights related to shares with full voting rights in its
name.

b.

Treasury shares, etc.
Number of shares held
under the name ofothers(Shares)

Total numberof shares held
(Shares)(As of August. 31, 2017)
Percentage of number of shares
held in the total number of sharesissued(%)

Name ofshareholders

Address

Number of shares
held under own
name(Shares)

–

–

–

–

–

–

Total

–

–

–

–

–

2. Status of officers
During the nine months ended August 31, 2017, there was the following change in officers after the filingdate of annual securities report for the previous fiscal year.
Change in appointments
Current position
Director, Chief Financial
Officer, and Senior
Executive Officer of
Administrative Division; in
Directorcharge of Human Resource
Department, and Chief
Director of Human
Resource Department

Director

Previous position
Director, Chief Financial
Officer, and Senior
Executive Officer of
Administrative Division,

9

Name of officers

Date of change

Noboru Hirano

April 1, 2017

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 third quarter of the fiscal year ending
November 30, 2017 (from June 1, 2017 to August 31, 2017) and for the first nine months of the fiscal year
ending November 30, 2017 (from December 1, 2016 to August 31, 2017) were reviewed by Shinsoh Audit
Corporation pursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act.

10

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
Available-for-sale 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

8
8

Total non-current liabilities
Total Liabilities
EquityShare capital
Capital reserves
Retained earnings
Other components of equity
Total equity
Total liabilities and equity

11

As of November 30, 2016

As of August 31, 2017

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

23,342,594
2,669,278
67,538,816
26,61992,592,501

93,577,308

3,595,898
21,728,740
96,612
1,441,167
1,235,065
557,392
28,914

3,539,047
22,782,024
81,871
1,373,042
883,321379,294
28,914

28,683,790

29,067,516

121,276,292

122,644,825

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

3,602,320
5,980,634
923,981250,652

14,651,752

10,757,588

4,349,965
60,772,064
413,376
79,0493,840,838
61,826,549
449,694
19,16065,614,455

66,136,243

80,266,208

76,893,831

6,421,392
6,418,823
28,120,304
49,562

6,421,392
6,452,424
32,813,546
63,62941,010,083

45,750,993

121,276,292

122,644,825

(2) Condensed Consolidated Statement of Comprehensive Income
Nine months ended August 31, 2017(¥ thousand)
Notes
Revenue
Cost of revenue

5

Nine months ended
August 31, 2016

Nine months ended
August 31, 2017

39,139,416
24,920,553

41,978,288
27,884,108

14,218,863
5,326,917
201,341
270,105

14,094,180
5,195,378
203,037
20,9808,823,182
62,546682,398

9,080,858
76,767
635,981

Profit before tax
Income tax expense

8,203,330
2,824,329

8,521,644
2,766,154

Profit for the period
Other comprehensive income
Items that may be transferred to net profit or loss
Exchange differences on translation of foreign
operations
Net change in fair values of available-for-salefinancial assets
Net change in fair values of cash flow hedges

5,379,001

5,755,489(34,142)6,826(9,153)(6,083)(2,196)

13,324

Subtotal
Other comprehensive income for the period, net oftax
Total comprehensive income for the period(45,492)

14,067(45,492)

14,067

5,333,508

5,769,556

Profit attributable to:
Owners of the parent

5,379,001

5,755,489

Total comprehensive income attributable to:
Owners of the parent

5,333,508

5,769,556

111.40119.20－－Gross profit
Selling, general and administrative expenses
Other income
Other expenses
Operating profit
Finance income
Finance costs

Earnings per share attributable to owners of the parent
Basic earnings per share (yen)Diluted earnings per share (yen)

5

7
7

12

Third quarter ended August 31, 2017(¥ thousand)
Notes

Revenue
Cost of revenue

5

Third quarter ended
August 31, 2016

Third quarter ended
August 31, 2017

8,484,199
6,013,353

15,618,203
11,025,534

2,470,846
1,343,907
66,49845,4894,592,668
1,793,131
42,891
3,375

1,147,947
31,412
216,347

2,839,052
43,811
218,651

Profit before tax
Income tax expense

963,012
327,992

2,664,212
840,588

Profit for the period
Other comprehensive income
Items that may be transferred to net profit or loss
Exchange differences on translation of foreign
operations
Net change in fair values of available-for-salefinancial assets
Net change in fair values of cash flow hedges

635,019

1,823,623(14,413)

6,524(16,426)(57)

Gross profit
Selling, general and administrative expenses
Other income
Other expenses
Operating profit
Finance income
Finance costs

5

565

1,428

(30,274)

7,895(30,274)

7,895

604,745

1,831,519

Profit attributable to:
Owners of the parent

635,019

1,823,623

Total comprehensive income attributable to:
Owners of the parent

604,745

1,831,519

13.15

37.77

－

－

Subtotal
Other comprehensive income for the period, net oftax
Total comprehensive income for the period

Earnings per share attributable to owners of the parent
Basic earnings per share (yen)Diluted earnings per share (yen)

7
7

13

(3) Condensed Consolidated Statement of Changes in Equity
Nine months ended August 31, 2016 (December 1, 2015 – August 31, 2016)(¥ thousand)Other
components ofequityTotal equity

23,327,875

105,228

36,228,378－

5,379,001－

5,379,001－－－(45,492)(45,492)－－

5,379,001(45,492)

5,333,508－－(772,544)－(772,544)－

32,724－－32,724

6,421,392

6,406,605

27,934,333

59,73540,822,067

Share capital

Capital reserves

Retainedearnings

6,421,392

6,373,881

Profit for the period－

Other comprehensive income
Total comprehensive income
for the period

Notes
Balance at December 1, 2015

Dividends of surplus

6

Share-based payment
Balance at August 31, 2016

Nine months ended August 31, 2017 (December 1, 2016 – August 31, 2017)(¥ thousand)Other
components ofequityTotal equity

28,120,304

49,56241,010,083－

5,755,489－

5,755,489－－－

14,067

14,067－－

5,755,489

14,067

5,769,556－－(1,062,248)－(1,062,248)－

33,601－－33,601

6,421,392

6,452,424

32,813,546

63,62945,750,993

Share capital

Capital reserves

Retainedearnings

6,421,392

6,418,823

Profit for the period－

Other comprehensive income
Total comprehensive income
for the period

Notes
Balance at December 1, 2016

Dividends of surplus
Share-based payment
Balance at August 31, 2017614

(4) Condensed Consolidated Statement of Cash Flows
Notes
Cash flows from operating activities
Profit before tax
Depreciation expense
Increase (decrease) in provisions and retirement
benefits obligations
Interest and dividends income
Interest expenses
Gain on sales of stocks of subsidiaries and affiliates
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(¥ thousand)Nine months ended
August 31, 2017

Nine months ended
August 31, 2016
8,203,330
244,535

8,521,644
289,665(130,536)(149,574)(62,546)
682,398(76,767)
635,981(123,505)－
5,436
88,949(6,562,541)(221,645)(124,415)

SubtotalInterest and dividends income received
Income taxes paid
Net cash from (used in) operating activities
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
Proceeds from sales of investments in subsidiaries
resulting in change in scope of consolidation
Other, net－(358,925)(68,938)
123,134
48,835

2,122,964
61,897(2,186,413)

8,841,551
76,767(3,554,759)(1,550)5,363,558(45,000)－(37,469)(1,695,354)(15,160)(80,250)
80,452－95,000(13,062)(1,272,601)(6,963)(50,166)
7,619－

84,071(1,260,000)
54(1,085,000)
2,760,056(3,286,137)(159,328)

64,000－－39,32837

12,032

Net cash from (used in) investing activities(6,274,825)

410,983

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(10,600)
29,048,800(17,982,036)(771,458)(688,761)(6,034)(1,575,800)
21,150,850(21,903,138)(1,061,250)(681,691)(2,461)

Net cash from (used in) financing activities

9,589,908(4,073,491)

3,313,532
18,791,081

1,701,051
21,640,866(6,620)676

22,097,993

23,342,594

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 period15(5) Notes to 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 Tokyo Stock Exchange and the Mainboard of Singapore Exchange. The
Company’s condensed quarterly consolidated financial statements for the third quarter (June 1, 2017 toAugust 31, 2017) and first nine months (December 1, 2016 to August 31, 2017) of the current fiscal year
have been prepared in respect of the Company and its subsidiaries (hereinafter collectively, the “Group”).
The Group engages in the following five business operations: Revitalization Business, Development
Business, Rental Business, Fund and Consulting Business and Property Management 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 October 10, 2017.
(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
The condensed quarterly 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
Significant accounting policies that the Group applies in condensed quarterly consolidated financial
statements are the same as the accounting policies used in the consolidated financial statements for theprevious fiscal year.
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.

16

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 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 theproperties 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 andapartments. The Fund and Consulting Business mainly provides asset management services for theproperties placed in real estate funds. The Property Management Business provides comprehensive
property management services.
The Group’s revenue and profit/loss by reportable segment are as follows:
Nine months ended August 31, 2016
(December 1, 2015 – August 31, 2016)(¥ thousand)Reportable Segments
Total

Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Other

Revenue from externalcustomers

19,946,219

11,211,309

3,825,255

1,711,203

2,174,627

270,800－

39,139,416

Intersegment revenue－－

31,413

21,277754,700

836(808,227)－

19,946,219

11,211,309

3,856,668

1,732,480

2,929,328

271,637(808,227)

39,139,416

3,963,177

3,703,230

1,741,568

742,061

98,346(22,116)(1,403,086)

8,823,182

Adjustment

Revenue

Total
Segment profit or loss
Finance income/costs, net(619,851)

Profit before tax

8,203,330

Nine months ended August 31, 2017
(December 1, 2016 – August 31, 2017)(¥ thousand)Reportable Segments
Total

Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Revenue from externalcustomers

29,286,776

3,498,952

4,600,566

2,129,893

2,462,098－－

41,978,288

Intersegment revenue－－

32,37130,205899,991－(962,569)－

29,286,776

3,498,952

4,632,938

2,160,099

3,362,090－(962,569)

41,978,288

7,309,731(310,914)

1,935,014

1,070,596

212,825

147(1,136,541)

9,080,858

Other

Adjustment

Revenue

Total
Segment profit or loss
Finance income/costs, net(559,214)

Profit before tax

8,521,644

17

Third quarter ended August 31, 2016
(June 1, 2016 – August 31, 2016)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Other

Adjustment

Total

Revenue
Revenue from externalcustomers

4,522,071

1,114,271

1,407,943

633,573

737,242

69,096－8,484,199

Intersegment revenue－－

10,598

8,677

229,161465(248,902)－

4,522,071

1,114,271

1,418,542

642,250

966,404

69,562(248,902)

8,484,199

335,857

43,343

738,527

311,72128,013

1,680(311,197)

1,147,947

Total
Segment profit
Finance income/costs, net(184,935)

Profit before tax

963,012

Third quarter ended August 31, 2017
(June 1, 2017– August 31, 2017)(¥ thousand)Reportable Segments
Total

Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Revenue from externalcustomers

11,338,076

1,354,413

1,612,078

488,481825,153－－

15,618,203

Intersegment revenue－－

10,810

10,132

324,650－(345,592)－

11,338,076

1,354,413

1,622,888

498,614

1,149,804－(345,592)

15,618,203

2,509,480(91,636)

631,930

155,563

78,215(882)(443,618)

2,839,052

Other

Adjustment

Revenue

Total
Segment profit or loss
Finance income/costs, net(174,840)

Profit before tax

2,664,212

18

6. Dividends
Dividends paid in the nine months ended August 31, 2016 and August 31, 2017 are as follows:
Nine months ended August 31, 2016
Resolution

Dividends per share(¥)

Ordinary General Meetingof Shareholders held on
February 25, 2016

Total dividends(¥ thousand)

16

772,544

Record date

Effective dateNovember 30, 2015

February 26, 2016

Nine months ended August 31, 2017
Resolution

Dividends per share(¥)

Ordinary General Meetingof Shareholders held on
February 24, 2017

Total dividends(¥ thousand)

22

1,062,248

Record date

Effective dateNovember 30, 2016

February 27, 2017

7. Earnings per share
Nine months ended
August 31, 2016
Profit attributable to owners of the parent

Nine months ended
August 31, 2017(¥ thousand)

5,379,001

5,755,489

Weighted average number of outstanding ordinary shares(shares)

48,284,000

48,284,000

111.40119.20

Basic earnings per share(¥)

Third quarter ended
August 31, 2016
Profit attributable to owners of the parent

Third quarter ended
August 31, 2017(¥ thousand)

635,019

1,823,623

Weighted average number of outstanding ordinary shares(shares)

48,284,000

48,284,000

13.15

37.77

Basic earnings per share(¥)

Notes: 1. Basic earnings per share is calculated by dividing profit attributable to owners of the parent, by the weighted average
number of ordinary shares outstanding during the nine months ended August 31,2017 and during the third quarter ended
August 31, 2017.
2. Diluted earnings per share are not presented because there were no potential shares that have dilutive effects.

198. Financial instrumentsi) Fair values and carrying amounts
Fair values of financial assets and liabilities and their carrying amounts presented in the condensed
consolidated statement of financial position are as follows:(¥ thousand)As of November 30, 2016

As of August 31, 2017

Carrying
amountFair value

Carrying
amountFair value

Cash and cash equivalents

21,640,866

21,640,866

23,342,594

23,342,594

Available-for-sale financial assets

1,441,167

1,441,167

1,373,042

1,373,042

Trade and other receivables

4,766,946

4,766,946

3,552,599

3,552,599

Trade and other payables

7,305,255

7,305,255

7,443,158

7,443,158

Borrowings

70,159,313

70,207,138

67,807,184

67,851,615

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.
Available-for-sale 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. Securities
that do not have a quoted market price in an active market and of which the fair value cannot be
reliably estimated are measured 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 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 data20(¥ 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)－

36,115－

36,115(¥ thousand)As of August 31, 2017
Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

1,268,056－

104,985

1,373,042

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

16,014－16,014

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)Nine months ended
August 31, 2017
Balance at beginning of period

78,021

Acquisition

50,166Comprehensive income
Profit (loss)(3,573)

Disposal(19,629)

Balance at end of period

104,985

9. Significant subsequent events
No item to report.

2. Other
No item to report.

21

B.

Information on Guarantee Companies, etc. of Filing Company

No items to report.

22

(Translation)
Quarterly Review Report of Independent Auditors
October 10, 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, wehave reviewed 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 third quarter (June 1, 2017 to August
31, 2017) and the nine-month period (December 1, 2016 to August 31, 2017) of the fiscal year from December
1, 2016 to November 30, 2017.
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. A quarterly 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 August 31, 2017, their operating results for the third quarter and the nine month ended
August 31, 2017, and their cash flows for the nine months 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 transl ation of that text.