THIS IS A PRELIMINARY PROSPECTUS AND IS SUBJECT TO FURTHER AMENDMENTS AND COMPLETION IN THE PROSPECTUS TO BE REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE(9AUTHORITY9). A COPY OF THIS PRELIMINARY PROSPECTUS HAS BEEN LODGED WITH THE AUTHORITY. THE AUTHORITY ASSUMES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PRELIMINARYPROSPECTUS. LODGMENT OF THIS PRELIMINARY PROSPECTUS DOES NOT IMPLY THAT THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE, OR ANY OTHER LEGAL OR REGULATORYREQUIREMENTS, HAVE BEEN COMPLIED WITH. A PERSON TO WHOM A COPY OF THIS PRELIMINARY PROSPECTUS HAS BEEN ISSUED SHALL NOT CIRCULATE IT TO ANY OTHER PERSON. NO OFFER OR
INVITATION SHALL BE MADE OR RECEIVED, AND NO AGREEMENT SHALL BE MADE ON THE BASIS OF THIS PRELIMINARY PROSPECTUS, TO PURCHASE ANY SHARES IN THE COMPANY. NO RELIANCE MAY
BE PLACED FOR ANY PURPOSE WHATSOEVER ON THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS.

PRELIMINARY PROSPECTUS DATED 22 FEBRUARY 2013 (Registered with the Monetary Authority of Singapore on [●])THIS IS A PRELIMINARY PROSPECTUS AND IS SUBJECT TO FURTHER AMENDMENTS AND COMPLETION IN THE PROSPECTUS TO
BE REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE.

(Incorporated in Japan with limited liability)(Registration Number: 0104-01-064940)
Offering in respect of [●] Offering Shares
Maximum Offering Price: S$[●] per Offering ShareThis document is important. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or otherprofessional adviser.
This is an offering of ordinary shares (the “Shares”) of Tosei Corporation. (the “Company”). Our Company is making an offering of up to [●]new Shares (the “Offering Shares”) for subscription at a price no higher than [●] (“Maximum Offering Price”). The Offering Price (as defined
herein) will be determined on the Price Determination Date (as defined herein), following a book-building process, by agreement between our
Company and Daiwa Capital Markets Singapore Limited, who is the sole global coordinator, issue manager and underwriter (“Sole Global
Coordinator, Issue Manager and Underwriter”) for the Offering (as defined below). The Offering consists of: (a) a public offer of [●] Offering
Shares (the “Public Offer Shares”) in Singapore (the “Public Offer”) and (b) a placement of [●] Offering Shares (the “Placement Shares”)
to investors, including institutional and other investors in Singapore (the “Placement” and together with the Public Offer, the “Offering”).
Our Shares are and will continue to be listed on the First Section of the Tokyo Stock Exchange, Inc. (the “TSE”). Application has been madeto the Singapore Exchange Securities Trading Limited (“SGX-ST”) for permission to list all our issued Shares (including the Offering Shares)on the Main Board of the SGX-ST. Such permission for the listing of our Shares will be granted when we have been admitted to the Official
List of the SGX-ST. Acceptance of applications to subscribe for Offering Shares will be conditional upon, among others, permission being
granted by the SGX-ST to deal in and for quotation of all our issued Shares. Monies paid in respect of any application accepted will be
returned, to the extent the Offering Shares have not been issued, at each investor’s own risk, without interest or any share of revenue or otherbenefit arising therefrom, and without any right or claim against us or the Sole Global Coordinator, Issue Manager and Underwriter if theOffering is not completed because the said permission is not granted or for any other reason. Our Shares will be traded in board lot sizes of
one Share. The dealing in and the quotation of our Shares on the SGX-ST will be in Singapore Dollars.
We have received a letter of eligibility from the SGX-ST for the listing and quotation of our issued Shares (including the Offering Shares) on
the Main Board of the SGX-ST. Our Company’s eligibility to list is not an indication of the merits of the Offering, our Company, our Group (asdefined herein) or our Shares.
The SGX-ST assumes no responsibility for the correctness of any statements or opinions made or reports contained in this Prospectus.
Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Offering, our Company, our Group or our
Shares.
This Prospectus has been prepared in accordance with the SGX-ST listing requirements for the purpose of giving information with regard to
our Company, the Offering Shares and the Shares. This Prospectus does not constitute, nor contain (and should not be construed as) an offer
of, or an invitation to subscribe for any of the Offering Shares or Shares or any other securities in our Company in any jurisdiction where it
would be unlawful for such person to make such an offer or invitation. In addition, the Offering Shares have not been, and will not be registeredunder the Financial Instruments and Exchange Act of Japan, as amended, (the “FIEA”) and may not be sold within Japan.
A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”) on 22 February 2013
and [●] 2013 respectively. The Authority assumes no responsibility for the contents of the Prospectus. Registration of the Prospectus by the
Authority does not imply that the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”) or any other legal
or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares being offered
or in respect of which an invitation is made for investment.
Prospective investors applying for the Offering Shares by way of Application Forms or Electronic Applications (each as defined herein) will
pay the Maximum Offering Price per Offering Share in full on application, subject to a refund of the full amount or, as the case may be, thebalance of the application monies (in each case without interest or any share of revenue or other benefit arising therefrom and without any
right or claim against us, the Sole Global Coordinator, Issue Manager and Underwriter), where (i) an application is unsuccessful or acceptedin part only; or (ii) the Offering does not proceed for any reason. However, if the Offering does not proceed and the Offering Shares havealready been issued, successful applicants may not obtain the return of their application monies. Please see “Risk Factors –Investors may not obtain the return of their application monies if our Shares are not listed on the SGX-ST” for more information.
The Offering Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (“U.S. Securities Act”), orwith any securities regulatory authority of any state or jurisdiction in the United States, and may not be offered or sold within the United Statesof America (“United States”) except in certain transactions exempt from or not subject to the registration requirements of the U.S. Securities
Act and state securities laws of the United States. Accordingly, the Offering Shares are being offered and sold only outside the United States
in offshore transactions in accordance with Regulations S under the U.S. Securities Act (“Regulation S”). The Offering Shares are nottransferable except in accordance with the restrictions described in this prospectus. For further details about the eligible offerees and resale
restrictions, see “Plan of Distribution” and “Notice to Investors” in this prospectus.
No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectusby the Authority.
Investing in our Shares involves certain risks. Please carefully read the “Risk Factors” section of this Prospectus.
Sole Global Coordinator, Issue Manager and Underwriter

Daiwa Capital Markets Singapore Limited(Company Registration No. 197200705R)(Incorporated in Singapore)TABLE OF CONTENTSNOTICE TO INVESTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . .

6

SHORT SALE RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

ENFORCEMENT OF CIVIL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

MARKET AND INDUSTRY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9PRESENTATION OF FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

CERTAIN DEFINED TERMS AND CONVENTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

SUMMARY OF THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29

INDICATIVE TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

OUR LISTING ON THE SGX-ST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73

DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74

MARKET PRICE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76

EXCHANGE RATES AND EXCHANGE CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80

SELECTED CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .

82

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

131

MANAGEMENT AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179

1

SHAREHOLDERS AND LARGE VOLUME HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . .

197

INTERESTED PERSON TRANSACTIONS AND POTENTIAL CONFLICTS OF
INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

206

DESCRIPTION OF SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

210

SHAREHOLDING REPORTING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

219

OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN JAPAN . . . . . . . . . . . . . . . .

223

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

229

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

234

CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

240

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

244

GENERAL AND STATUTORY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

245

APPENDIX A INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATEDFINANCIAL STATEMENTS OF TOSEI CORPORATION AND ITSSUBSIDIARIES FOR THE FINANCIAL YEARS ENDED 30 NOVEMBER
2009, 2010 AND 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A-1

APPENDIX B INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATEDFINANCIAL STATEMENTS OF TOSEI CORPORATION AND ITSSUBSIDIARIES FOR THE SIX-MONTH PERIOD ENDED 31 MAY 2012 . . .

B-1

APPENDIX C INDEPENDENTAUDITOR’SREPORTONTHE
UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS OF TOSEI CORPORATION
AND ITS SUBSIDIARIES FOR THE THREE-MONTH AND NINE-MONTHPERIODS ENDED 31 AUGUST 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C-1

APPENDIX D COMPARISON OF SINGAPORE CORPORATE LAW WITH JAPANESECORPORATE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D-1

APPENDIX E COMPARISON BETWEEN SINGAPORE AND JAPANESE LISTING
RULES AND SECURITIES LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

E-1

APPENDIX F OUR ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . .

F-1

APPENDIX G COMPARISON BETWEEN TOSEI CORPORATION’S ARTICLES OFINCORPORATION AND APPENDIX 2.2 OF THE LISTING MANUAL . . .

G-1

APPENDIX H LIST OF PAST AND PRESENT PRINCIPAL DIRECTORSHIPS . . . . . . . .

H-1

APPENDIX ITERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND
ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

I-1

NOTICE TO INVESTORSNo person is authorised to give any information or to make any representation not contained inthis Prospectus and any information or representation not so contained must not be relied upon
as having been authorised by or on behalf of us or Daiwa Capital Markets Singapore Limited,(“Daiwa Capital Markets” or “Sole Global Coordinator, Issue Manager and Underwriter”).
Neither the delivery of this Prospectus nor any offer, sale or transfer made hereunder shall under
any circumstances imply that the information herein is correct as at any date subsequent to thedate hereof or constitute a representation that there has been no change or development
reasonably likely to involve a change in our affairs, conditions and prospects or our Shares since
the date hereof.
Where such changes occur and are material or required to be disclosed by law, the SGX-ST
and/or any other regulatory or supervisory body or agency, we will make an announcement of thesame to the SGX-ST and, if required, issue and lodge an amendment to this Prospectus or a
supplementary Prospectus or replacement Prospectus pursuant to Section 240 or, as the casemay be, Section 241 of the Securities and Futures Act and take immediate steps to comply withthe said sections. Investors should take notice of such announcements and documents and upon
release of such announcements or documents shall be deemed to have notice of such changes.
None of us, the Sole Global Coordinator, Issue Manager and Underwriter or any of our or its
respective affiliates, directors, officers, employees, agents, representatives or advisers is making
any representation or undertaking to any investors in our Shares regarding the legality of aninvestment by such investor under appropriate legal, investment or similar laws. In addition, thisProspectus is issued solely for the purpose of the Offering and investors in our Shares should notconstrue the contents of this Prospectus or its appendices as legal, business, financial or tax
advice. Investors should be aware that they may be required to bear the financial risks of aninvestment in our Shares for an indefinite period of time. Investors should consult their own
professional advisers as to the legal, tax, business, financial and related aspects of an investment
in our Shares.
Copies of this Prospectus and Application Forms may be obtained on request, subject toavailability, during office hours, from:
Daiwa Capital Markets Singapore Limited
6 Shenton Way#26-08 Tower Two
Singapore 068809
and where applicable, from members of the Association of Banks in Singapore, members of the
SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on the
SGX-ST website: <http://www.sgx.com>.
By applying for the Offering Shares on the terms and subject to the conditions in this Prospectus,
each investor of the Offering Shares represents and warrants that except as otherwise disclosed
to the Sole Global Coordinator, Issue Manager and Underwriter, he is not (a) a director of ourCompany (the “Director”) or a substantial shareholder of our Company, (b) an associate of anyof our Directors or substantial shareholder, and (c) a connected client of the Sole Global
Coordinator, Issue Manager and Underwriter or any lead brokers or distributors of the Offering
Shares.
The distribution of this Prospectus and the offering, purchase, sale or transfer of our Shares incertain jurisdictions may be restricted by law. We and the Sole Global Coordinator, Issue Manager
and Underwriter require persons into whose possession this Prospectus comes to informthemselves about and to observe any such restrictions at their own expense and without liability3

to us or the Sole Global Coordinator, Issue Manager and Underwriter. This document does notconstitute an offer of, or an offering to purchase, any of our Shares in any jurisdiction in whichsuch offer or offering would be unlawful. Persons to whom a copy of this Prospectus has been
issued shall not circulate to any other person, reproduce or otherwise distribute this Prospectus
or any information herein for any purpose whatsoever nor permit or cause the same to occur.
PLACEMENT OUTSIDE THE UNITED STATESYou are purchasing the Offering Shares outside the United States in reliance on Regulation S
under the U.S. Securities Act. By accepting delivery of this Prospectus, you will be deemed tohave represented and agreed as follows:•

you are aware that the Offering Shares have not been and will not be registered under the
U.S. Securities Act or with any securities regulatory authority of any state or jurisdiction in the
United States, and you will not offer or sell the Offering Shares except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements under the
U.S. Securities Act, in each case in accordance with any applicable laws of any state or
territory of the United States and any foreign jurisdiction;•at the time the Offering Shares are offered or purchased pursuant to Regulation S, you andthe person, if any, for whose account you are purchasing such Offering Shares were (a)located outside the United States (within the meaning of Regulation S), and (b) not an
affiliate of us or a person acting on our behalf or on behalf of such an affiliate; and•any offer, sale, pledge or other transfer made other than in compliance with the above statedrestrictions shall not be recognised by us in respect of the Offering Shares.

Our Company is subject to the provisions of the Securities and Futures Act and the Listing Manual
regarding the contents of this Prospectus. In particular, if, after this Prospectus is lodged but
before the close of the Offering, we become aware of:•a false or misleading statement or matter in this Prospectus;•

an omission from this Prospectus of any information that should have been included in it
under Section 243 of the Securities and Futures Act; or•a new circumstance that has arisen since this Prospectus was lodged with the Authority
which would have been required by Section 243 of the Securities and Futures Act to be
included in this Prospectus if it had arisen before this Prospectus was lodged,that is materially adverse from the point of view of an investor, we may lodge a supplementary or
replacement document with the Authority pursuant to Section 241 of the Securities and Futures
Act.
Where applications have been made under this Prospectus to subscribe for the Offering Sharesprior to the lodgment of the supplementary or replacement document and the Offering Shares
have not been issued to the applicants, we shall, either:•

within seven days from the date of lodgment of the supplementary or replacement document,
provide the applicants with a copy of the supplementary or replacement document, as thecase may be, and provide the applicants with an option to withdraw their applications; or4•treat the applications as withdrawn and cancelled and return all monies paid, without interest
or any share of revenue or other benefit arising therefrom and at the applicant’s own risk, in
respect of any applications received, within seven days from the date of lodgment of the
supplementary or replacement document.

Any applicant who wishes to exercise his option to withdraw his application shall, within 14 days
from the date of lodgment of the supplementary or replacement documents, notify us whereupon
we shall, within seven days from the receipt of such notification, return the application monies
without interest or any share of revenue or other benefit arising therefrom and at the applicant’s
own risk.
See Appendix I – “Terms, Conditions and Procedures for Application and Acceptance”.
Under the Securities and Futures Act, the Authority may in certain circumstances issue a stoporder (the “Stop Order”) to our Company, directing that no or no further Shares to which thisProspectus relates, be allotted, issued or sold. Such circumstances will include a situation where
this Prospectus (a) contains a statement or matter, which in the opinion of the Authority is false
or misleading, (b) omits any information that is required to be included in accordance with the
Securities and Futures Act or (c) does not, in the opinion of the Authority, comply with therequirements of the Securities and Futures Act.
Where the Authority issues a Stop Order pursuant to Section 242 of the Securities and Futures
Act, and:•in the case where the Offering Shares have not been issued to the applicants, theapplications for the Offering Shares pursuant to the Offering shall be deemed to have been
withdrawn and cancelled and our Company shall, to the extent possible and subject tocompliance with applicable Japanese laws and regulations and our constitutional documents
including our articles of incorporation (the “Articles of Incorporation”), within 14 days fromthe date of the Stop Order, pay to the applicants all monies the applicants have paid on
account of their applications for the Offering Shares without interest or any share of revenue
or other benefit arising therefrom; or•in the case where the Offering Shares have been issued to the applicants but trading of our
Shares on the Main Board of the SGX-ST has not commenced, the issue of the Offering
Shares pursuant to the Offering is required by the Securities and Futures Act to be deemedvoid. However, since the issue of the Offering Shares would have been duly completed underJapanese law, our Company may not be able to selectively pay applicants all monies paid bythem for the Offering Shares without being in breach of Japanese law. As our Shares will not
be tradable on the SGX-ST in the case of a Stop Order, successful applicants who have had
the Offering Shares issued to them will have to trade such Shares on the TSE. Please see“Risk Factors – Investors may not obtain the return of their application monies if our Sharesare not listed on the SGX-ST” and “Clearance and Settlement” for more information.

Where the Offering Shares have not been issued, such monies paid in respect of the applicant’s
application will be returned to the applicant, in the case of applications for Offering Shares under
the Public Offer, at the applicant’s own risk, without interest or any share of revenue or otherbenefit arising therefrom, and the applicant will not have any claim against our Company or theSole Global Coordinator, Issue Manager and Underwriter.

5

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute forward-looking statements. Some of thesestatements can be identified by forward-looking terms such as “aim”, “expect”, “believe” “plan”,“intend”, “estimate”, “anticipate”, “may”, “will” and “could” or similar words or phrases. However,please note that these words are not the exclusive means of identifying forward-looking
statements. All statements other than statements of historical facts included in this Prospectus,
including those regarding our financial position and results, business strategies, plans andobjectives of management for future operations (including development plans and dividends), areforward-looking statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or achievements,
or industry results, to be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. These forward-looking statements are
based on numerous assumptions regarding our present and future business strategies and theenvironment in which we will operate in the future. The important factors that could cause ouractual results, performance or achievements to differ materially from those in the forward-looking
statements include, among others:•

general political, social and economic conditions globally, regionally and in Japan;•

regulatory developments and changes to government policies in our industry;•changes in the supply and demand of real estate;•occurrences of catastrophic events, natural disasters and acts of God that affect ourbusiness or property; and•other factors beyond our control.

Additional factors that could cause actual results, performance or achievements to differ
materially include, but are not limited to, those discussed in “Risk Factors”, “Dividend Policy”,“Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” and“Business”. These forward-looking statements speak only as at the date of this Prospectus and we
do not guarantee that the information contained herein is still current after the date of thisProspectus.
Although we believe that the assumptions upon which the forward-looking statements are based
are reasonable, given the risks and uncertainties that may cause our actual future results,
performance or achievements to be materially different from that expected, expressed or impliedby the forward-looking statements in this Prospectus, we advise you not to place undue relianceon those statements. None of us, the Sole Global Coordinator, Issue Manager and Underwriter nor
any other person, represents or warrants to you that our actual future results, performance or
achievements will be as discussed in those statements.
Our actual future results may differ materially from those anticipated in these forward-looking
statements as a result of the risks faced by us. We and the Sole Global Coordinator, Issue
Manager and Underwriter disclaim any responsibility to update any of those forward-looking
statements or publicly announce any revisions to those forward-looking statements to reflect
future developments, events or circumstances for any reason, even if new information becomes
available or other events occur in the future.
Forward-looking statements regarding our Company had been announced on the websites of the
TSE at http://www.tse.or.jp/ and our Company at http://www.toseicorp.co.jp. Such forward-looking
statements include management projections and such management projections are prospective
statements and have not been audited nor reviewed by the Independent Auditor or the Japanese
Accounting Auditor. These prospective statements may not eventually materialise and they should
not be treated as audited or reviewed financial forecasts or estimates. They are not to be deemedin any way as being part of this Prospectus or incorporated by reference in any way. Investors
should exercise care when viewing such forward-looking statements. In the event of doubt,
investors should consult their own professional advisers.
6

SHORT SALE RESTRICTIONS
In connection with the Offering, we have filed an extraordinary report with the relevant authority
in Japan pursuant to the FIEA. We hereby advise you that, under the FIEA, it is unlawful for any
investor who has sold short, or asked a broker to intermediate a short sale of, securities of thesame class as are included in the Offering, within a specific restricted period on any stock
exchange in Japan (excluding off-auction (tachiai gai) trading on a financial instruments exchange
market), to settle the borrowing of securities with respect to such short sale with securities to bepurchased by such investor in the Offering. For the purpose of this notice, the “specified restrictedperiod” referred to above shall mean a period commencing on the day immediately after the dateon which the above-mentioned extraordinary report has been filed and ending at the same timeof the filing of any amendment to such report regarding the pricing of the Offering; and “borrowing”
shall include any purchase under any resale agreement or other similar arrangement.
Registered securities brokers in Japan are prohibited from selling securities in the Offering to any
investor who intends to participate therein in order to settle the borrowing of securities withrespect to any restricted short sale, as described in the paragraph above.

7

ENFORCEMENT OF CIVIL LIABILITIESWe are incorporated in Japan and most of our Directors and Statutory Auditors named in thisProspectus are residents of Japan. Additionally, most of our assets and the assets of our Directors
and Statutory Auditors are located in Japan. As a result, you may not be able to:•effect service of process of a writ issued in Japan upon us or these persons outside Japan
without leave of the Japanese courts; or•enforce against us judgments obtained in courts outside of Japan, unless it is a final
judgment, the foreign court had jurisdiction over the subject matter, the defendant in theproceedings in the foreign court received notice of the proceedings in sufficient time
(excluding by public notice) or has appeared before such foreign court to enable it to defend
against claims made, the cause of action on which the judgment was based is not repugnant
to the due process, natural justice or public policy of Japan and reciprocity exists between
the jurisdiction in which the judgment was rendered and Japan in relation to the enforcementof a foreign judgment. Singapore has no reciprocal arrangement with Japan for theenforcement of judgments obtained in the Singapore courts.

Please also see “Risk Factors – Risks Relating to an Investment in our Shares – We areincorporated in Japan and most of our Directors and Statutory Auditors named in this Prospectus
are residents of Japan” for more information.

8

MARKET AND INDUSTRY INFORMATIONThis Prospectus includes market and industry data and forecasts that have been obtained frominternal surveys, reports and studies, where appropriate, as well as market research, publicly
available information and industry publications. Our Company has commissioned DTZ Debenham
Tie Leung K.K. to prepare the Industry Overview. The purpose of the report is to provide an
independent overview of Tokyo and the real estate sectors in which we are involved in. Industry
publications, surveys and forecasts generally state that the information they contain has beenobtained from sources believed to be reliable, but there can be no assurance as to the accuracy
or completeness of such information. While our Directors have taken reasonable steps to ensurethat the information is extracted accurately and in its proper context, our Directors have notindependently verified any of the data from third party sources or ascertained the underlying
economic assumptions relied upon therein. Consequently, none of our Directors or the Sole Global
Coordinator, Issue Manager and Underwriter makes any representation as to the accuracy ofcompleteness of such information, and each of them shall not be held responsible in respect ofany such information and shall not be obliged to provide any updates on the same.

9

PRESENTATION OF FINANCIAL INFORMATIONThis Prospectus contains the audited consolidated financial statements of our Group for thefinancial years ended 30 November 2009, 2010 and 2011, the audited consolidated financial
statements of our Group for the six months ended 31 May 2012 and the unaudited consolidated
financial statements of our Group for the three month and nine month periods ended 31 August2012 together with the related notes thereto, each of which has been prepared in accordance with
the International Financial Reporting Standards (“IFRS”) (together the “IFRS Consolidated
Financial Statements”). The aforementioned IFRS Consolidated Financial Statements havebeen prepared based on the audited consolidated financial statements of the Group for thefinancial years ended 30 November 2009, 2010 and 2011, the unaudited consolidated financial
statements of our Group for the six months ended 31 May 2012 and the unaudited consolidated
financial statements of our Group for the three month and nine month periods ended 31 August2012 respectively which were prepared in accordance with the Japanese Generally Accepted
Accounting Principles (“JGAAP”).
The preparation of the IFRS Consolidated Financial Statements in conformity with IFRS at times
requires our management to make subjective estimates and judgments regarding matters that are
inherently uncertain. Such estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. These estimates and judgments affect reported
amounts and disclosures. Our results of operations may differ if prepared under different
estimates and judgments.
We will, in accordance with the relevant laws and regulations in Singapore and Japan, prepare all
future periodic financial reports which we will release on the SGXNET, and all audited financial
statements which we will provide to Tosei CDP Depositors, in accordance with IFRS.
As at the Latest Practicable Date, the unaudited consolidated financial statements of ourGroup for FY2012 have been released in Japan and announced on the websites of the TSE
at http://www.tse.org.jp and our Company at http://www.toseicorp.co.jp. Investors shouldnote that the unaudited consolidated financial statements of our Group for FY2012 wereprepared in accordance with JGAAP and not IFRS. These unaudited consolidated financial
statements of our Group prepared in accordance with JGAAP for FY2012 have not been
audited nor reviewed by the Independent Auditor or the Japanese Accounting Auditor andare not to be deemed in any way as being part of this prospectus or incorporated byreference in any way. Investors should exercise care when viewing these financial
statements. In the event of doubt, investors should consult their own professional
advisers.

10

CERTAIN DEFINED TERMS AND CONVENTIONS
We maintain our accounts and publish our financial statements in Japanese Yen. This Prospectus
contains conversions of certain amounts into Singapore Dollar at specified rates solely for theconvenience of the reader. Unless otherwise indicated, we have made all conversions fromJapanese Yen to Singapore Dollar at the rate of S$1.00 = JPY75.96, which is the Singapore
Dollar/Japanese Yen exchange rate as at the Latest Practicable Date. We do not represent that
the Japanese Yen or Singapore Dollar amounts referred to herein could have been or could be
converted into Singapore Dollar at this rate, at any particular rate or at all. Fluctuations in theexchange rates between the Singapore Dollar and the Japanese Yen will affect the Japanese Yen
equivalent of the Singapore Dollar of our Shares on the SGX-ST and cash dividend paid by us, ifany, in Singapore Dollar.
In this Prospectus, references to “¥”, “JPY” or “Japanese Yen” are to the lawful currency of Japan,
references to “S$”, “Singapore Dollar” or “Singapore Cents” are to the lawful currency of the
Republic of Singapore. All references to dates and times are to Singapore dates and times. Pleasesee “Exchange Rates and Exchange Controls” for more information concerning the exchange
rates between Singapore Dollar and Japanese Yen. These translations should not be construed
as representations that the relevant currency amounts have been, could have been or could be,converted into the stated currency at that or any other rate.
Any discrepancies in the tables included herein between the listed amounts and totals thereof are
due to rounding, and figures herein have been rounded to the nearest one decimal place, whereapplicable, figures are rounded to the nearest whole number. Measurements in square metres(“sq m”) are converted to sq ft and vice versa based on the conversion rate of 1.0 sq m = 10.7639
sq ft. Measurements in acres are converted to sq ft and vice versa based on the conversion rateof 1.0 acre = 43,560 sq ft.
The information on our websites or any website directly or indirectly linked to such websites, is notincorporated by reference into this Prospectus and should not be relied on.
In this Prospectus, unless the context otherwise requires, references to “we”, “us”, “our”,“ourselves”, “our Company” or “the Company” refer to Tosei Corporation; references to “Group”
and “Tosei Group” refer to our Company and our consolidated subsidiaries taken as a whole.
References to our management and Directors are to the management and Directors of ourCompany; references to “our Articles of Incorporation” are to the articles of incorporation of ourCompany; and references to “our share capital” are to the share capital of our Company.
Our customers and suppliers named in this Prospectus are generally referred to in this Prospectusby their trade names. Each of our contracts with each of these customers or each of these
suppliers are typically with an entity or entities in that customer’s or supplier’s group ofcompanies.
References herein to the “Singapore Companies Act” are to the Companies Act, Chapter 50 ofSingapore. References herein to the “Japanese Companies Act” are to the Companies Act ofJapan (kaisha-hou) (Act No. 86 of 2005, as amended).
References to the “Latest Practicable Date” in this Prospectus are to 11 February 2013, being
the latest practicable date prior to the printing of this Prospectus.
Any reference to a time of day in this Prospectus refers to Singapore time unless otherwise stated.

11

Various names with Japanese characters have been translated into English names. Thesetranslations are provided solely for your convenience. The English translations may not have beenregistered with the relevant Japanese authorities and should not be construed as representations
that the English names actually represent the names in Japanese characters.
Any discrepancies in the tables, graphs and charts between the listed amounts and the totals
thereof are due to rounding.
Any word defined in the Securities and Futures Act, the Singapore Companies Act, or any
statutory modification thereof and used in this Prospectus shall, where applicable, have themeaning ascribed to it under the Securities and Futures Act, the Singapore Companies Act or any
statutory modification thereof, as the case may be.
In this Prospectus, the definitions and explanation of technical terms found in this section and thesection entitled “Definitions” apply throughout where the context so admits.

12

CORPORATE INFORMATION
Registered Office andPrincipal Place ofBusiness

4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Board of Directors

Seiichiro Yamaguchi (President and Chief Executive
Officer)
Katsuhito Kosuge (Director and Chief Operating Officer)
Noboru Hirano (Director and Chief Financial Officer)
Goro Kamino (Outside Director)
Kenichi Shotoku (Outside Director)

Statutory Auditors(kansayaku)

Yasuhiro Honda (Full-time Outside Statutory Auditor)
Masao Harada 1 (Full-time Outside Statutory Auditor)
Shigeru Yamagishi 1 (Part-time Outside Statutory Auditor)
Tatsuki Nagano (Part-time Outside Statutory Auditor)

Representative Director(daihyo-torishimariyaku)

Seiichiro Yamaguchi

Sole Global Coordinator,
Issue Manager andUnderwriter

Daiwa Capital Markets Singapore Limited
6 Shenton Way#26-08 Tower Two
Singapore 068809

Legal Adviser to
our Company as toSingapore law

Rajah & Tann LLP
9 Battery Road
#25-01 Straits Trading Building
Singapore 049910

Legal Adviser to
our Company as toJapanese law

Mori Hamada & Matsumoto
Marunouchi Park Building
6-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo
100-8222 Japan

Legal Adviser to theSole Global Coordinator,
Issue Manager andUnderwriter

ATMD Bird & Bird LLP
2 Shenton Way#18-01 SGX Centre 1
Singapore 068804

1Note: As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and notseeking re-election as Statutory Auditors of our Company at our AGM on 26 February 2013. Yutaka Kitamura andOsamu Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which
will be before the registration of the Prospectus.

13

Independent Auditor

Nexia TS Public Accounting Corporation
100 Beach Road
#30-00 Shaw Tower
Singapore 189702
Director-in-charge: Loh Hui Nee(a member of the Institute of Certified Public Accountantsof Singapore)

Japanese Accounting
AuditorShinsoh Audit Corporation
7-14-13 Nittochi Ginza Building
Ginza, Chuo-ku, Tokyo
104-0061 Japan
Partner-in-charge: Giichi Yanagisawa(a member of The Japanese Institute of Certified Public
Accountants)
Partner-in-charge: Takashi Aikawa(a member of The Japanese Institute of Certified Public
Accountants)

Industry Expert

DTZ Debenham Tie Leung K.K.
9F, 1-3-3 Uchisaiwaicho
Uchisaiwaicho Daibiru Building
Chiyoda-ku, Tokyo
100-0011 Japan

Principal Banker

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
7-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo
100-8388 Japan

Receiving Bank

The Bank of East Asia, Limited
Singapore Branch
60 Robinson Road
BEA Building
Singapore 068892

Japan Share Registrar

Mitsubishi UFJ Trust and Banking Corporation
4-5 Marunouchi 1-chome
Chiyoda-ku, Tokyo
100-8212 Japan

Singapore Share
Transfer Agent

Boardroom Corporate & Advisory Services Pte Ltd
50 Raffles Place#32-01 Singapore Land Tower
Singapore 048623

14

DEFINITIONSIn this Prospectus, the following definitions apply throughout where the context so admits:−
Companies within our Group
Company or Tosei:

Tosei Corporation

Group or Tosei Group:

Our Company and our subsidiaries

Green House:

Green House Limited Company (in liquidation)

Hestia Capital:

Hestia Capital Limited Company

Metis Capital:

Metis Capital Co., Ltd.

NAI Tosei:

NAI Tosei Japan, Inc.

Tosei Asset Advisors or TAA:

Tosei Asset Advisors, Inc.

Tosei Community Co or TCC:

Tosei Community Co., Ltd.

Tosei Revival Investment or TRI:

Tosei Revival Investment Co., Ltd.

Tosei Singapore:

Tosei Singapore Pte. Ltd.

1Q:

Financial period of the three months ended, or as thecase may be, ending 28 or 29 February

2Q:

Financial period of the three months ended, or as thecase may be, ending 31 May

3Q:

Financial period of the three months ended, or as thecase may be, ending 31 August

4Q:

Financial period of the three months ended, or as thecase may be, ending 30 November

9M:

Financial period of the nine months ended, or as thecase may be, ending 31 August

Administrative Division:

The administrative division of our Company,
comprising our (i) finance and accounting department,(ii) administration and human resource department,and (iii) corporate planning department

AGM:

Annual general meeting of our Shareholders

General15

Anti-Monopoly Act:

The Anti-Monopoly Act of Japan (Act No. 54 of 1947)
and the cabinet orders and ministerial ordinances
thereunder or any statutory modification, amendmentsor re-enactment thereof for the time being in force

Application Forms:

The printed application forms for the Offering Shares
which form part of this Prospectus

Application List:

The list of applications for the subscription and/or
purchase of the Offering Shares

Articles of Incorporation:

The articles of incorporation of our Company, as
amended from time to timeATM:

Automated teller machine of a Participating Bank

AUM:

Assets under management

Authority or MAS:

Monetary Authority of Singapore

Board of Statutory Auditors:

Our Company’s(Kansayaku-kai)

Board or Board of Directors:

Our Company’s board of Directors

Book Entry Act:

The Book Entry Act of Japan (shasai kabushikitou-nofurikae-ni-kansuru-houritsu) (Act No. 75 of 2001, as
amended) and the cabinet orders and ministerial
ordinances thereunder or any statutory modification,
amendments or re-enactment thereof for the time
being in force

Building Lots andBuildings Transaction
Business Law:

The Building Lots and Buildings Transaction Business Law
of Japan (takuchi-tatemono-torihikigyouhou) (Act No. 176
of 1952, as amended)

Building Standards Act:

The Building Standards Act of Japan (kenchiku-kijunhou)(Act No. 201 of 1950, as amended)

Business Division:

The business division of our Company, comprising our(i) asset solutions departments; (ii) asset solutions
business promotion department; and (iii) architecturalplanning department

CDP or Depository:

The Central Depository (Pte) Limited

CDP Depositor:

As defined under section 130A of the Singapore
Companies Act

CEO:

Our Chief Executive Officer, who is Seiichiro
Yamaguchi (as at the Latest Practicable Date)

16

board

of

Statutory

Auditors

CFO:

Our Chief Financial Officer, who is Noboru Hirano,
who is also the senior executive officer in charge of
our Company’s Administrative Division (as at theLatest Practicable Date)

Controlling Shareholder:

In relation to a corporation means:(a)a person who has an interest in the voting sharesof the corporation and who exercises control overthe corporation; or(b)a person who has an interest in not less than
30% of the total votes attached to all voting
shares in the corporation, unless he does not
exercise control over the corporation.

COO:

Our Chief Operating Officer, who is Katsuhito Kosuge,
who is also the senior executive officer in charge of
our Company’s Business Division (as at the Latest
Practicable Date)

CY:

Calendar year

Daiwa Capital Markets or
Sole Global Coordinator,
Issue Manager and Underwriteror Sole Global Coordinator or
Issue Manager or
Underwriter:

Daiwa Capital Markets Singapore Limited

Depository Agent:As defined under section 130A of the Singapore
Companies Act

Depository Register:

As defined under section 130A of the Singapore
Companies Act

Designated Real Estate
Joint Venture Business Act:

The Act on Designated Real Estate Joint Venture
Business of Japan (fudousan-tokutei-kyoudoujigyouhou) (Act No. 77 of 1994, as amended)

Director(s):Our Company’s directors or any one of them

Discounted TSE Market Price:

The Singapore Dollar equivalent of a pricerepresenting a discount of not more than 10% to the
TSE Market Price

Distributable Amount:An amount based on the retained earnings (joyo kin)recorded in our Company’s non-consolidated financial
statements prepared in accordance with JGAAP(rather than IFRS) with certain adjustments (including
the deduction of the book value of any treasury
Shares held by our Company)

17

EDINET:Electronic Disclosure for Investors’ NETwork

Electronic Applications:

Applications for the Offering Shares made through an
ATM, through the IB website or through the mobilebanking interface of one of the Participating Banks (asthe case may be), in accordance with the terms andconditions of this Prospectus

EPS:

Earnings per Share

ESOP

:

The Tosei Employee Share Ownership Plan

FIEA

:

The Financial Instruments and Exchange Act of Japan(kinyuu-shouhin-torihiki-hou) (Act No. 25 of 1948, as
amended) and the cabinet orders and ministerial
ordinances thereunder or any statutory modification,
amendments or re-enactment thereof for the time
being in force

Foreign Exchange Act:

The Foreign Exchange and Foreign Trade Act ofJapan(gaikoku-kawase-oyobi-gaikoku-boueki-hou)(Act No. 228 of 1949, as amended) and the cabinet
orders and ministerial ordinances thereunder or any
statutory modification, amendments or re-enactment
thereof for the time being in force

FY:

Financial year ended, or as the case may be, ending
30 November

GFA:

Gross floor area

GST:

Goods and Services Tax of Singapore

HY:

Financial period of the six months ended, or as thecase may be, ending 31 May

IB or Internet Banking:

Internet banking

IFRS

:

International Financial Reporting Standards

IFRS Consolidated
Financial Statements:

The audited consolidated financial statements of ourGroup for the financial years ended 30 November
2009, 2010 and 2011, the audited consolidated
financial statements of our Group for the six months
ended 31 May 2012 and the unaudited consolidated
financial statements of our Group for the three monthand nine month periods ended 31 August 2012
together with the related notes thereto, each of which
has been prepared in accordance with IFRS

Industry Expert:

DTZ Debenham Tie Leung K.K.

18

Japanese Accounting Auditor:

Shinsoh Audit Corporation

Japanese Companies Act:

The Companies Act of Japan (kaisha-hou) (Act No. 86
of 2005, as amended) and the cabinet orders andministerial ordinances thereunder or any statutory
modification, amendments or re-enactment thereof for
the time being in force

JASDEC:Japan Securities Depository Center, Inc.

JASDEC Record of Depositors(soukabunushi-tsuuchi):

A list of names and other details of our Shareholders,issued by JASDEC in accordance with Article 151 of
the Book Entry Act

JGAAP

:

Japanese Generally Accepted Accounting Principles

JSDA

:

Japan Securities Dealers Association

Land and Building Lease Law:

The Land and Building Lease Law of Japan(shakuchi-shakuyahou) (Act No. 90 of 1991, as
amended)Large Volume Holder:

A person who is required to file a Large Volume
Holding Report and as defined in the FIEA

Large Volume Holding Report:

A report filed by a Large Volume Holder to the relevant
local financial bureau through the EDINET system.
The following persons are deemed to possess thevoting securities and would be required to make a
Large Volume Holding Report where the 5.0%
threshold is crossed:(i)persons who own voting securities or havecontractual rights to own such voting securities
whether or not such voting securities/contractual
rights are held in their own name or the name ofanother person or a fictitious name (e.g. apurchaser of the voting securities or a purchaserof a call option for the voting securities);(ii)

persons who:(a)

are authorised by contract or law to
exercise, or direct the exercise of, thevoting rights pertaining to the voting
securities as shareholders of the issuer ofsuch voting securities;(b)

are aware of having such authority as
described in (ii)(a) above; and

19

(c)

have an intention to control the business ofsuch issuer (exclusive of those who fallunder item (iii) below); and(iii) persons who are authorised by a discretionary
investment contract or any other contract or law
to invest in the voting securities (e.g. (i) a trusteewith a discretion to acquire or dispose of voting
securities in respect of trust assets, (ii) an asset
management company authorised to makeinvestment decisions pursuant to a discretionary
investment management contract).
Latest Practicable Date or LPD:

11 February 2013, being the latest practicable dateprior to the lodgment of this Prospectus with the
Authority

Law Concerning thePromotion of Control of
Housing Quality of Japan:

Law Concerning the Promotion of Control of Housing
Quality of Japan (juutaku-no-hinshitsu-kakuho-nosokushin-ni-kansuru-houritsu) (Act No. 81 of 1999, as
amended)

Listing Date:

The date trading of our Shares on the SGX-ST
commences

Listing Manual:

The listing manual of the SGX-ST, as amended,
supplemented or modified from time to time

Lock-up Period:

The period commencing from the Listing Date until thedate falling six months thereafter (both dates
inclusive)

Major Shareholder:

A shareholder having 10% or more of the outstanding
voting rights in a company as defined in Article 163 of
the FIEAManagement andUnderwriting Agreement:

The agreement dated [●] entered into between our
Company and the Sole Global Coordinator, Issue
Manager and Underwriter for the management of theOffering and underwriting of the Public Offer

Market Day:

A day on which the SGX-ST is open for trading insecurities

Money Lending Business Act:

The Money Lending Business Act of Japan(kashikingyou-hou) (Act No. 32 of 1983, as amended)

NAI Global:

New America Network, Inc.

NAV:

Net asset value

NTA:

Net tangible assets

20Offering:

Our offer to the public in Singapore to subscribe for
the Offering Shares at the Offering Price, and aplacement of Offering Shares to investors, including
institutional and other investors, in Singapore

Offering Price:

The price per Offering Share to be determinedfollowing a book-building process by agreement
between ourselves and the Sole Global Coordinator,
Issue Manager and Underwriter on the Price
Determination Date

Offering Shares:[●] Shares which are the subject of the Offering

Outside Director(shagai-torishimariyaku):

Directors who are not, and have never been, directors
with executive duties, executive officers, or
employees (including a manager) of our Company or
any of its subsidiaries, in accordance with Article 2
Item 15 of the Japanese Companies Act

Outside Statutory Auditor(shagai-kansayaku):

Statutory Auditors who have never been directors,
accounting advisors (or a member of such accounting
advisors), executive officers, or employees (including
a manager) of our Company or any of its subsidiaries,
in accordance with Article 2 Item 16 of the JapaneseCompanies Act

Participating Banks:[DBS Bank Ltd. (including POSB), Oversea-Chinese
Banking Corporation Limited and United Overseas
Bank Limited and its subsidiary, Far Eastern Bank
Limited]Placement:

The placement of the Placement Shares by the Sole
Global Coordinator, Issue Manager and Underwriteron behalf of our Company for subscription at theOffering Price subject to and on the terms andconditions of this Prospectus

Placement Agreement:

The agreement expected to be entered into between
our Company and the Sole Global Coordinator, Issue
Manager and Underwriter in respect of the Placement

Placement Shares:[●] of the Offering Shares which are the subject of thePlacement

President:

The president of our Company, as appointed by our
Board of Directors from amongst our Directors

Price Determination Date:

The date currently expected to be on or about [●]2013, on which the Offering Price will be determinedfollowing a book-building process by agreement
between ourselves and the Sole Global Coordinator,
Issue Manager and Underwriter21

Promoter Lock-up Shares:[138,855] Shares held by Seiichiro
immediately after the Offering

Personal Information
Protection Law:

The Personal Information Protection Law of Japan(kojin-jouhou-no-hogo-ni-kansuru-houritsu) (Law No.
57 of 2003, as amended)

Public Offer:

Our offer to the public in Singapore to subscribe for
the Offering Shares at the Offering Price

Public Offer Shares:[●] of the Offering Shares which are the subject of the
Public Offer

Register of Members(kabunushi-meibou):

A list of names and other details of our Shareholders,
produced by our Company in accordance with Article
121 of the Japanese Companies Act

Regulation S:

Regulation S under the U.S. Securities Act

SCS Global:

SCS Global Holdings Pte. Ltd.

SCS Global Consulting:

SCS Global Consulting K.K.

SCS Global Professionals:

SCS Global Professionals (S) Pte. Ltd.

Securities Account:

The securities account maintained by a depositor with
CDP, but does not include a securities sub-accountSecurities and Futures Act or
SFA:

The Securities and Futures Act, Chapter 289 ofSingapore, as amended, supplemented or modified
from time to time

SFR:

The Securities and Futures (Offers of Investments)(Shares and Debentures) Regulations 2005 ofSingapore, as amended, supplemented or modified
from time to time

SGX-ST or Exchange:

Singapore Exchange Securities Trading Limited

Shareholders:

Shareholders whose names appear on (a) the
JASDEC Record of Depositors, and (b) the Register ofMembers kept in Japan

Shares:Ordinary shares in the capital of our Company

22

Yamaguchi

Singapore Collation Agent:

An agent appointed by the Company to:(a)despatch any notice of Shareholders’ meetings,
together with the necessary voting instruction
form, to Tosei CDP Depositors; and(b)collate voting instructions from Tosei CDP
Depositors.

Singapore Companies Act:

The Companies Act, Chapter 50 of Singapore, as
amended, supplemented or modified from time to time

Singapore Share
Transfer Agent:

Boardroom Corporate & Advisory Services Pte. Ltd.

Singapore Take-over andMerger Laws and Regulations:

Sections 138, 139 and 140 of the Securities andFutures Act and the Singapore Take-over CodeSingapore Take-over Code:The Singapore Code on Take-overs and Mergers

Soil Contamination
Control Law:

The Soil Contamination Control Law of Japan(dojou-osen-taisakuhou) (Act No. 53 of 2002, as
amended)

Statutory Auditor(s):Our Company’s statutory auditors (kansayaku) or any
one of them

Statutory Transactions:

Pursuant to the Japanese Companies Act, a merger,
corporate split, share exchange, share transfer,business transfer and business assumption

stock acquisition right:

Any right which entitles the holder to acquire shares ina stock company by exercising the right against suchstock company, as defined in item 21 of Article 2 of theJapanese Companies Act

Subsidiary:

A company in which shares an amount exceeding
50.0% of its paid-up capital are held directly or
indirectly by our Company

substantial shareholder:

A person who has an interest or interests in one ormore voting shares in a company and the total votes
attached to that share, or those shares, is not lessthan 5.0% of the total votes attached to all the voting
shares of the company

TDNet

:

Timely Disclosure Network of the TSE

Three Committees:

Nominating committee, compensation committee andaudit committee

23

Top Ten Direct Shareholders:

The top 10 Shareholders of our Company as recordedin our Company’s Register of Members

Tosei CDP Depositors:

Depositors holding Shares under a direct account with
CDP or a securities sub-account with a Depository
Agent (as defined under the Singapore Companies
Act)

TSE

:

Tokyo Stock Exchange

TSE Securities Listing
Regulations:

The securities listing regulations of the TSE

TSE Market Price:

The closing price for trades of our Shares done on the
TSE for the full market day on which the Offering Priceis determined. If trading in our Shares is not available
for a full market day as at the time the Offering Priceis determined, or if the Offering Price is determined
before trading on the TSE commences, the TSE
Market Price shall be based on the closing price of our
Shares on the market day immediately preceding thedate the Offering Price is determined

U.S. Securities Act:

U.S. Securities Act of 1933, as amended

Zeus Lock-up Shares:[60,000] Shares held by Zeus Capital Limited
immediately after the Offering

24

SUMMARYOVERVIEW OF OUR GROUP
We are a company with diversified real estate businesses incorporated in Japan on 2 February
1950 with limited liability as a joint stock company (Kabushiki Kaisha). Our registered office andprincipal place of business is 4-2-3 Toranomon Minato-ku, Tokyo 105-0001, Japan and our
telephone number and facsimile number is +81 3 3435 2864 and +81 3 3435 2866 respectively.
Our Company’s website address is http://www.toseicorp.co.jp. Information on our website is notincorporated into and does not constitute part of this Prospectus, and should not be relied on.
OUR BUSINESSOur business activities and operations are primarily in Japan and we are active in the following
real estate sectors:(a)Revitalisation
Our Group acquires office buildings, commercial facilities, condominiums and otherproperties of a certain age profile (typically around 20 years old) and whose asset value has
declined. We aim to raise the value of such properties by implementing certain measures
known as “value-up activities”. We have also implemented a new “Restyling” business model
as an arm of our revitalisation business in 2009.

(b)

Development
We develop office, commercial and residential properties with a focus on the 23 wards ofTokyo. We actively study characteristics of the properties we purchase, including the local
area and site characteristics, end use, demand, rent levels and selling prices.

(c)

Rental
We own office buildings, residential and commercial properties primarily in the 23 wards ofTokyo. The office buildings and condominiums are typically in inner Tokyo and are all under
our direct management. Our rental business consists primarily of leasing out properties thathave been acquired and prepares for rental purposes.

(d)

Fund
Our Group’s fund business has two components and is conducted through our Company andour wholly-owned subsidiary, Tosei Asset Advisors. Whilst we structure and manage private
real-estate funds as an asset manager, we also provide asset management services andbrokerage services to private investors and other fund managers wherein we source for realestate suited to their needs.

(e)Property management
We offer comprehensive property management services to meet a variety of real estateneeds, including administration, facility management, cleaning and security for condominium
complexes and office buildings and facilities. We also undertake utilities repair work for
exclusive areas in condominiums complexes and office buildings, and undertake interiorrenovation contracting for office properties.

25

(f)

Alternative investment
Our wholly-owned subsidiary, Tosei Revival Investment, and its wholly-owned subsidiary,
Hestia Capital, invest in non-performing loans collateralised by real estate (including
mortgage-backed loans). Additionally, Tosei Revival Investment acquires properties throughmergers and acquisitions of companies with real estate assets.

Please see “Business – Business Overview” for more information.
OUR COMPETITIVE STRENGTHSOur competitive strengths are as follows:
We centre our business operations in the Tokyo area
Our business is focused on the Tokyo area of Japan and this gives us the advantage of local
knowledge of the Greater Tokyo area.
We have an experienced management and support team
Our management team consisting of our President and CEO, Seiichiro Yamaguchi, our COO,
Katsuhito Kosuge, and our CFO, Noboru Hirano, has extensive experience in property
development and building construction.
Our diverse business gives us the flexibility to operate in varying market conditions
Our six varied businesses enable us to operate flexibly in accordance with varying market
conditions.
We are a diversified business and cater to various market needs
Our core businesses are inter-linked and we have achieved substantial operational synergies
because of this.
We focus on the needs of our target customers and develop award-winning properties
We undertake all our property development and revitalisation projects after considering the local
characteristics and demographic of each area to meet customer needs. We have an in-house
quality control system which has allowed us to develop award-winning properties.
Please see “Business – Competitive Strengths” for more information.
OUR BUSINESS STRATEGIES AND FUTURE PLANS
A key objective of our mid-term management plan is to expand and reinforce our six corebusinesses. The revitalisation, development and fund businesses have been identified as key
growth drivers, and additional emphasis will be placed on these three business segments. We also
intend to expand outside Japan.

26

Revitalisation
We aim to seize the opportunities presented to us in this market, and to capitalise on our“value-up” know-how and niche product development capabilities. We have begun expanding ourinvestments in both office buildings and condominiums.
Development
The markets for condominiums and detached houses for sale have shown stable progress in 2011
and 2012. We are making a concerted effort to expand our development of detached houses whilst
continuing our development of condominiums. We will also start considering opportunities for thedevelopment of office properties.
Fund
We are actively seeking to expand the number of our asset management contracts and will
endeavour to obtain new contracts by leveraging on our strength as a one-stop real estate service
provider.
Rental/Property Management/Alternative Investment BusinessNotwithstanding our emphasis on the three business segments above, we will nevertheless seek
to enhance our rental, property management and alternative investment businesses throughvarious measures.
Expanding outside of Japan
We aim to achieve recognition of the Tosei brand outside Japan and plan to establish a regionalpresence in South-East Asia.
Please see “Business – Prospects, Business Strategies and Future Plans – Business Strategies
and Future Plans” for more information.
OUR FINANCIAL INFORMATION
The following table represents a summary of the financial highlights of our Company. The data
represented in this table is derived from the section entitled “Selected Consolidated Financial
Information” and the financial statements and notes thereto which are included elsewhere in thisProspectus. You should read those sections and the section entitled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of this Prospectus for a further
explanation of the financial data summarised here.
Selected items on the operating results of our Company:
FY2009FY2010FY2011

9M2011

9M2012(JPY’000)(JPY’000)(JPY’000)(JPY’000)(JPY’000)

Revenue . . . . . . . . . . . . . .

33,622,879

26,439,782

24,760,909

16,210,821

14,765,693

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

4,639,058

4,072,234

5,180,221

4,214,646

3,530,929

Profit before income tax . . . .

929,523588,285

1,509,510

1,502,667

776,750

Net profit . . . . . . . . . . . . . .

479,009

307,701

740,267

856,036448,231

27

Selected line items of Income Statements in Singapore Dollars
FY2009FY2010FY2011

9M2011

9M2012(SGD’000) (1)(SGD’000) (2)(SGD’000) (3)(SGD’000) (4)(SGD’000) (5)Revenue . . . . . . . . .

524,047

410,428

388,467

250,167

235,497

Gross profit . . . . . .

72,30563,214

81,27165,041

56,315

Profit before
income tax . . . . . . .

14,488

9,132

23,682

23,18912,388Net profit . . . . . . . .

7,466

4,776

11,614

13,2107,149

Notes:(1)

Based on the average daily exchange rate of S$1.00:JPY64.16.

(2)

Based on the average daily exchange rate of S$1.00:JPY64.42.

(3)

Based on the average daily exchange rate of S$1.00:JPY63.74.

(4)

Based on the average daily exchange rate of S$1.00:JPY64.80.

(5)Based on the average daily exchange rate of S$1.00:JPY62.70.

Selected items on the financial position of our Company:
As at
30 November
2011

As at
30 November
2011

As at
31 August
2012

As at
31 August
2012(JPY’000)(S$’000)(1)(JPY’000)(S$’000)(2)Current assets . . . . . . . . . . . .

43,585,120

719,701

45,835,368

729,514

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

17,014,716

280,956

17,069,406

271,676

Current liabilities . . . . . . . . . . .

8,770,754

144,828

9,124,972

145,233

Non-current liabilities . . . . . . .

26,521,131

437,931

28,251,370

449,648

Total equity . . . . . . . . . . . . . . .

25,307,951

417,898

25,528,432

406,309

Notes:(1)

Based on the closing exchange rate of S$1.00:JPY60.56.

(2)

Based on the closing exchange rate of S$1.00:JPY62.83.

28

SUMMARY OF THE OFFERINGThe Company

Tosei Corporation, incorporated in Japan on 2 February 1950
with limited liability as a joint stock company (Kabushiki Kaisha)and listed on the First Section of the TSE.

The Offering[●] Offering Shares consisting of the Placement and the Public
Offer. The Offering Shares will comprise approximately [●]% of
our issued and outstanding share capital after the completion of
the Offering. The completion of the Public Offer and thePlacement are each conditional upon the completion of the other.

The Placement

The Placement, which is concurrent with the Public Offer,comprises an international placement of [●] Offering Shares toinvestors, subject to and on the terms and conditions of thisProspectus. The Placement is expected to be underwritten by theSole Global Coordinator, Issue Manager and Underwriter at theOffering Price, if the Offering Price is agreed upon between
ourselves and the Sole Global Coordinator, Issue Manager andUnderwriter. If for any reason, the Offering Price is not agreed
between ourselves and the Sole Global Coordinator, Issue
Manager and Underwriter, the Offering will not proceed.
The Offering Shares have not been and will not be registeredunder the U.S. Securities Act or with any securities regulatory
authority of any state or jurisdiction in the United States, and may
not be offered or sold within the United States except in certaintransactions exempt from or not subject to the registration
requirements of the U.S. Securities Act and state securities lawsof the United States. Accordingly, the Offering Shares are being
offered and sold only outside the United States in offshoretransactions in accordance with Regulations S. The Offering
Shares are not transferable except in accordance with therestrictions described in this prospectus. For further details about
the eligible offerees and resale restrictions, please see “Notice toInvestors” and “Plan of Distribution”.

The Public Offer[●] Offering Shares offered in Singapore at the Offering Price by
way of an offering to the public in Singapore. The Public Offer
will, subject to certain conditions, be underwritten by the Sole
Global Coordinator, Issue Manager and Underwriter at theOffering Price if the Offering Price is agreed between ourselves
and the Sole Global Coordinator, Issue Manager andUnderwriter. However, if, for any reason, the Offering does notproceed, to the extent the Offering Shares have not been issued,
all application monies will be returned (without interest or any
share of revenue or other benefit arising therefrom) to allapplicants, at their own risk (provided that such refunds are madein accordance with the procedures set out Appendix I – “Terms,
Conditions and Procedures for Application and Acceptance”) andwithout any right or claim against us or the Sole Global
Coordinator, Issue Manager and Underwriter. Please see “Risk
Factors – Investors may not obtain the return of their application29

monies if our Shares are not listed on the SGX-ST” for more
information.
Clawback andRe-allocation

Offering Shares may be re-allocated between the Placement and
the Public Offer in the event of excess applications in one and a
deficit of subscriptions in the other.

Maximum Offering Price

S$[●] for each Offering Share.
Investors applying in the Public Offer are required to pay the
Maximum Offering Price per Offering Share, subject to a refund if
and to the extent that the Offering Price is less than the Maximum
Offering Price. All refunds shall be without interest or any shareof revenue or other benefit arising therefrom. Investors in thePlacement may be required to pay a brokerage fee (and if so
required, such brokerage fee will be up to 1.0% of the Offering
Price for each Offering Share).

Price Determination

The Offering Price will be determined following a book-building
process by agreement between ourselves and the Sole Global
Coordinator, Issue Manager and Underwriter on the Price
Determination Date, which date is subject to change. If, for any
reason, the Offering Price is not agreed between ourselves andthe Sole Global Coordinator, Issue Manager and Underwriter, theOffering will not proceed and all application monies will be
refunded (without interest or any share of revenue or otherbenefit arising therefrom) to all applicants, at their own risk
(provided that such refunds are made in accordance with theprocedures set out in Appendix I – “Terms, Conditions andProcedures for Application and Acceptance”). Among the factorsthat will be taken into account in determining the Offering Priceare the demand for the Offering Shares, the prevailing market
conditions and our historical performance. The Offering Price will
not be more than S$[●] per Offering Share and is expected to be
not less than the Discounted TSE Market Price.
Notice of the Offering Price, if agreed, will be announced through
SGXNET not more than two calendar days after the Price
Determination Date and will be published in one or more major
Singapore newspapers, not more than three calendar days after
the Price Determination Date.

Lock-ups

Seiichiro Yamaguchi has agreed to a lock-up arrangement during
the Lock-up Period in respect of the Promoter Lock-up Shares,
subject to certain exceptions.
Zeus Capital Limited has agreed to a lock-up arrangement during
the Lock-up Period in respect of the Zeus Lock-up Shares,
subject to certain exceptions.

30

We have also agreed that we will not, during the Lock-up Period,
directly or indirectly, without the prior written consent of the Sole
Global Coordinator, Issue Manager and Underwriter, amongst
others, offer, issue, sell, contract to issue or sell or otherwise
dispose of any Shares or publicly announce any such intention.
Please also see “Plan of Distribution – Restrictions on Disposals
and Issues of Shares” for more information.
Use of Proceeds

We estimate that the net proceeds we will receive from theOffering will be approximately S$[●] million (based on the
Maximum Offering Price), after deduction of estimated expenses
and commissions. We intend to use these proceeds:(i)to partially fund the acquisition and revitalisation of officebuildings and residential properties in Japan;(ii)

to partially fund the acquisition and development of land for
office, residential and commercial properties in Japan; and(iii) for co-equity investment in real-estate funds (a) where wemanage the portfolio assets, or (b) which we plan to set up
and manage, in Japan.
See “Use of Proceeds”.
Listing and Trading on
SGX-ST

Application has been made to the SGX-ST for permission to list
all our issued Shares (including the Offering Shares) on the Main
Board of the SGX-ST. Such permission will be granted when we
have been admitted to the Official List of the SGX-ST.
Acceptance of applications for the Offering Shares will be
conditional upon, inter alia, permission being granted to deal in
and for quotation for all our issued Shares (including the Offering
Shares).
Our Shares will, upon their listing and quotation on the SGX-ST,
be traded on the SGX-ST under the book-entry (scripless)settlement system of CDP. Dealing in and quotation of our Shares
will be in Singapore Dollars. The Shares will be traded in board
lot sizes of one Share.
Our Shares are also currently listed and traded on the First
Section of the TSE under the code, 8923.

Subscription for theOffering Shares

Prospective investors applying for the Offering Shares by way ofApplication Forms or Electronic Applications (each as defined
herein) will pay the Maximum Offering Price per Offering Share in
full on application, subject to a refund of the full amount or, as thecase may be, the balance of the application monies (in each casewithout interest or any share of revenue or other benefit arising
therefrom and without any right or claim against us, the Sole
Global Coordinator, Issue Manager and Underwriter), where (i)an application is unsuccessful or accepted in part only; or (ii) the31

Offering does not proceed for any reason. However, if theOffering does not proceed and the Offering Shares have alreadybeen issued, successful applicants may not obtain the return of
their application monies. Please see “Risk Factors – Investors
may not obtain the return of their application monies if our Sharesare not listed on the SGX-ST” for more information.
For the purpose of illustration, an investor who applies for one
Offering Share by way of an Application Form or an Electronic
Application under the Public Offer will have to pay S$[●] (being
the Maximum Offering Price), which is subject to a refund of thefull amount or the balance thereof (without interest or any shareof revenue or other benefit arising therefrom), as the case may
be, upon the occurrence of any of the foregoing events.
Investors in Singapore must follow the application procedures set
out in Appendix I – “Terms, Conditions and Procedures forApplication and Acceptance”. Subscriptions under the Public
Offer must be paid for in Singapore dollars. No fee is payable byapplicants for the Offer Shares under the Public Offer, save for an
administration fee for each application made through theautomated teller machines and the Internet banking websites of
the Participating Banks (as defined herein) and the mobilebanking platform of DBS Bank Ltd..
Selling Restrictions

The Offering Shares have not been, and will not be registeredunder the FIEA, as amended, and may not be sold within Japan.
Please see “Plan of Distribution – Distribution and Selling
Restrictions” for more information.

Settlement and Issue of
our Offering Shares

We expect to receive payment for all the Offering Shares in thePlacement and the Public Offer on or about [●]. We expect toissue and credit the Offering Shares into the custodian account of
CDP’s Japanese custodian for subsequent crediting into the CDP
securities accounts of successful applicants on or about [●].

Voting Rights

Registered owners of our Shares will be entitled to full voting
rights, as described in “Description of Share Capital”. However,your ability to vote at Shareholders’ meetings will be limited. See“Description of Share Capital – Voting Rights”.

Dividends

For a description on our dividend policy, see “Dividend Policy”.

Share Capital

Our authorised capital, immediately prior to the completion of theOffering, is 1,500,000 Shares of which 456,840 Shares areissued and outstanding. All our issued Shares are currently listedon the First Section of the TSE. We have only one class ofshares.

32

Immediately following the completion of the Offering, our issued
and paid-up capital will amount to [●], comprising [●] Shares, allof which will be fully paid.
Trading Currency

Our Shares will be quoted and traded in Singapore Dollars on the
Official List of the SGX-ST and in Japanese Yen on the TSE
respectively.

Risk Factors

Prospective investors should carefully consider certain risks
connected with an investment in our Shares, as discussed under“Risk Factors”.

33

INDICATIVE TIMETABLE
An indicative timetable for trading in our Shares is set out below for the reference of applicantsfor our Shares:
Date and time (Singapore)

Event[●], upon registration of thisProspectus by the Authority

Opening date for the Public Offer.

[●] 2013, at [●] p.m./a.m.

Closing date and time of the Public Offer.

[●] 2013, at [●] p.m./a.m.

Price Determination Date.

[●] 2013, at [●] p.m./a.m.

Balloting of applications in the Public Offer, if
necessary (in the event of an over-subscription for theOffering Shares).
Commence returning or refunding of application
monies to unsuccessful or partially successful
applicants and commence returning or refunding of
application monies to successful applicants for theamount paid in excess of the Offering Price, if
necessary.

[●] 2013, at [●] p.m./a.m.

Commence trading on a “ready” basis.

[●] 2013, at [●] p.m./a.m.

Settlement date for all trades done on a “ready” basis.

All references to dates and times are to Singapore dates and times.
The above timetable is indicative only and is subject to change at our discretion, with theagreement of the Sole Global Coordinator, Issue Manager and Underwriter. The above timetableand procedure may also be subject to such modifications as the SGX-ST may in its discretion
decide, including the commencement date of trading on a “ready” basis. It assumes: (a) that theclosing of the Public Offer is [●] at [●] a.m./p.m.; (b) that the date of admission of our Company
to the Official List of the SGX-ST is [●]; and (c) compliance with the SGX-ST’s shareholding spreadrequirement. All dates and times referred to above are Singapore dates and times.
We, with the agreement of the Sole Global Coordinator, Issue Manager and Underwriter, may at
our discretion, subject to all applicable laws and regulations and the rules of the SGX-ST, agree
to extend or shorten the period during which the Offering is open.
In the event of the extension or shortening of the time period during which the Offering is open,
we will publicly announce the same:•

through an announcement on SGXNET to be posted on the Internet at the SGX-ST website
http://www.sgx.com; and•in one or more major Singapore newspapers, such as The Straits Times, The Business
Times and Lianhe Zaobao.

34

Investors should consult the SGX-ST announcement on the “ready” listing date on the Internet (atthe SGX-ST website) or in one or more major Singapore newspapers, or check with their brokers
on the date on which trading will commence on a “ready” basis.
We will provide details of and the results of the Public Offer through SGXNET or in one or more
major Singapore newspapers, such as The Straits Times, The Business Times and Lianhe
Zaobao.
We reserve the right to reject or accept, in whole or in part, or to scale down or ballot any
application for the Offering Shares, without assigning any reason therefor, and no enquiry and/or
correspondence on our decision will be entertained. This right applies to applications made by wayof Application Forms, Electronic Applications (each as defined in Appendix I – “Terms, Conditions
and Procedures for Application and Acceptance”), and any other forms of application as the Sole
Global Coordinator, Issue Manager and Underwriter may, in consultation with us, deem
appropriate. In deciding the basis of allocation, due consideration will be given to the desirabilityof allocating our Shares to a reasonable number of applicants with a view to establishing anadequate and orderly market for our Shares.
In respect of an application made under the Public Offer, where an application is not successful,the full amount of the application monies will be refunded (without interest or any share of revenue
or other benefit arising therefrom) to the applicant, at his own risk within 24 hours (or such shorteror longer periods which the SGX-ST may require) after balloting of applications (provided thatsuch refunds are made in accordance with the procedures set out in Appendix I – “Terms,
Conditions and Procedures for Application and Acceptance” which constitutes part of theProspectus registered by the Authority).
In respect of an application made under the Public Offer, where an application is accepted in fullor in part only, any balance of the application monies (including the excess monies arising fromthe difference between the Offering Price and the Maximum Offering Price should the Offering
Price be lower than the Maximum Offering Price) will be refunded (without interest or any shareof revenue or other benefit arising therefrom) to the applicant, at his own risk, within 14 days (orsuch shorter period as the SGX-ST may require) after the close of the Public Offer (provided thatsuch refunds are made in accordance with the procedures set out in Appendix I – “Terms,
Conditions and Procedures for Application and Acceptance” which constitutes part of theProspectus registered by the Authority).
Where the Offering does not proceed for any reason and the Offering Shares have not been
issued, the full amount of application monies paid in respect of applications made under the Public
Offer (without interest or any share of revenue or other benefit arising therefrom) will be returnedto the applicant, at his own risk (provided that such refunds are made in accordance with theprocedures set out in Appendix I − “Terms, Conditions and Procedures for Application andAcceptance”) and without any right or claim against us or the Sole Global Coordinator, Issue
Manager and Underwriter. However, if the Offering does not proceed and the Offering Shares havealready been issued, successful applicants may not obtain the return of their application monies.
Please see “Risk Factors – Investors may not obtain the return of their application monies if our
Shares are not listed on the SGX-ST” for more information.
Applications under the Placement will be determined by the Sole Global Coordinator, Issue
Manager and Underwriter at its discretion, following consultation with us.

35

OUR LISTING ON THE SGX-ST
CONDITIONS OF OUR LISTING ON THE SGX-ST
Upon admission to the Official List of the SGX-ST, we will have a dual listing on both the SGX-ST
and the TSE, with the TSE being the primary exchange and the SGX-ST being the secondary
exchange, on which our Shares may be traded. As the TSE is the primary exchange on which our
Shares may be traded, we are subject to and will have to comply with the listing rules of the TSE.
The listing rules of the TSE do not have specific requirements equivalent to the listing rules of the
SGX-ST in respect of Chapters 9, 10 and 13 of the Listing Manual. Whilst we are not generally
subject to the continuing listing requirements of the SGX-ST, the SGX-ST has imposed certain
conditions in respect of these continuing listing requirements on our Company.
The SGX-ST has approved our Company’s listing on the SGX-ST subject to, inter alia, thefollowing conditions:(a)our Company maintaining our primary listing on the First Section of the TSE;(b)

our Company appointing an Outside Director who is either resident in Singapore or who has
an international reputation. In this regard, we had in February 2012 appointed Kenichi
Shotoku as an Outside Director;(c)our Company appointing at least one director as an authorised representative forcorrespondence with the SGX-ST. In this regard, we had informed the SGX-ST in September
2012, that our CFO, Noboru Hirano will be appointed to this role;(d)our Company complying with Chapter 9 of the Listing Manual, subject to the adoption of thefollowing abstention procedure in place of Rule 919 of the Listing Manual:(i)

any Interested Person Transaction which must be approved at a shareholders’ meeting
under the Listing Manual will contain a condition precedent that (a) such transaction is
subject to the approval of Shareholders, and (b) will only be implemented by ourCompany if we have obtained confirmation from our compliance advisor (or a third party
advisor) who must be a suitable professional firm (“Expert”), that the resolution would
have been successfully passed even if the votes cast had excluded votes ofShareholders who are required to abstain in accordance with the Listing Manual;(ii)

pursuant to the sub-paragraph (i) above, our Company will convene a Shareholders’meeting to seek Shareholders’ approval for the transaction;(iii) Shareholders who are required to abstain from voting in accordance with the Listing
Manual may vote and all votes cast, including votes of the Shareholders who are
required to abstain from voting, will be counted for purposes of the requirements of theJapanese Companies Act;(iv) pursuant to sub-paragraphs (ii) and (iii) above, the Expert will confirm whether the
resolution would have been successfully passed even if the votes cast had excluded
votes of the Shareholders who are required to abstain from voting in accordance with
the Listing Manual; and(v)

our Company will proceed with the relevant transaction only upon confirmation from theExpert that the resolution would have been successfully passed even if the votes cast
had excluded votes of the Shareholders who are required to abstain from voting inaccordance with the Listing Manual. If the Expert is unable to provide such confirmation,
the transaction will not proceed;
36

(e)

our Company complying with Chapter 10 of the Listing Manual, except in respect of Rule1015 of the Listing Manual, such that the approval of our Shareholders is not required, if thefollowing conditions are met:(i)the acquisition is one involving the acquisition of assets that are profitable or expected
to be profitable;(ii)

the acquisition is in our ordinary course of business and limited to acquisition of realestate in Japan;(iii) the acquisition is considered to be a very substantial acquisition under Rule 1015 of the
Listing Manual only by virtue of the relative figures calculated on the base set out in
Rule 1006(c) of the Listing Manual;(iv) our Company must have a valid general mandate from our Shareholders in respect ofsuch acquisitions. The limit under such a mandate shall be no more than 100% of ourGroup’s latest NTA and will be applied to individual transactions;(v)

our Board of Directors must be satisfied that there will be no material change in the risk
profile of our Company arising from the acquisition; and(vi) our Company will commission a valuation by an independent property valuer acceptable
to the SGX-ST to assist our Board of Directors in their deliberations as to whether theconsideration to be paid to the counterparty is fair. The fact that we have obtained sucha valuation will be described in press releases of our Company in Japan andannouncements on the SGXNET. We will also disclose such valuations provided suchdisclosure does not breach any confidentiality obligations of our Company vis-à-vis thevendor and/or the appraiser;(f)

our Company releasing all information and documents released on the TSE and EDINET on
the SGXNET in English at the same time such documents are released on the TSE and/or
EDINET; and(g)

our Company ensuring that at least half of our Board of Statutory Auditors (or our Board of
Directors if we adopt the Three Committees system) will be independent for so long as weare listed on the SGX-ST. Independence will be determined by our Board of Directors inaccordance with the guidelines under the Code of Corporate Governance 2012.

Our Company will, prior to the Listing Date, provide the necessary undertakings to the SGX-ST.
OBLIGATIONS UNDER THE SGX-ST LISTING MANUAL AND THE JAPANESE REGULATORYREGIME
Our General Obligation under the Listing Manual
Rule 217 of the Listing Manual provides that a foreign issuer with a secondary listing on the
SGX-ST need not comply with the SGX-ST’s listing rules, provided that it undertakes to:(a)release all information and documents in English to the SGX-ST at the same time as they are
released to the home exchange;(b)

inform the SGX-ST of any issue of additional securities in a class already listed on the
SGX-ST and the decision of the home exchange; and

37

(c)

comply with such other listing rules as may be applied by the SGX-ST from time to time
(whether before or after listing).

Continuing Disclosure
Singapore – Rule 703 of the Listing Manual
Chapter 7 of the Listing Manual sets out the continuing obligations of an issuer upon admission
to the Official List of the SGX-ST. In particular, Rule 703 provides that an issuer must announce
any information known to the issuer concerning it or any of its subsidiaries or associatedcompanies which:(a)is necessary to avoid the establishment of a false market in the issuer’s securities; or(b)would be likely to materially affect the price or value of its securities.

The rule does not apply to information which it would be a breach of law to disclose or to particular
information while each of the following conditions applies:(a)a reasonable person would not expect the information to be disclosed;(b)

the information is confidential; and(c)one or more of the following applies:(i)the information concerns an incomplete proposal or negotiation;(ii)

the information comprises matters of supposition or is insufficiently definite to warrant
disclosure;(iii) the information is generated for the internal management purposes of the entity; or(iv) the information is a trade secret.
Japan – Chapter 4 of the TSE Securities Listing Regulations
Chapter 4 of the TSE Securities Listing Regulations contain certain provisions which, taken as awhole, provides a similar obligation to Rule 703. In particular, Rules 401, 411-2 and Paragraph 1of Rule 412 of the TSE Listing Regulations state, inter alia, that (i) a listed company shall makeefforts to strengthen prompt, accurate and fair disclosure of corporate information at all times fromthe viewpoint of investors with full recognition that timely and appropriate disclosure of corporate
information to investors is the basis of a sound market for financial instruments, (ii) the provisions
under the regulations are only minimum requirements and do not excuse the listed company frombeing responsible for disclosing corporate information in a more timely and appropriate manner,and (iii) the contents of the disclosed information must not contain false statements, lackinformation deemed to be significant to investors’ investment decisions, will not cause
misunderstanding and will not lack in appropriateness.
In addition, Rule 402 (in relation to the listed company) and Rule 403 (in relation to the listedcompany’s subsidiaries) of the TSE Securities Listing Regulations sets out a comprehensive listof specific events and matters which obligates timely disclosure. Paragraph 1 of each of Rule 402
and Rule 403 refers to material corporate matters where the listed company or the listedcompany’s subsidiaries has made a decision to carry out (or reverse a previous decision to carryout), including, inter alia, a public offering of shares, decreases in amount of stated capital or
capital reserves, acquisition of treasury stock, payment of dividends and a merger or demerger.
38

Paragraph 2 of each of Rule 402 and Rule 403 refers to material events which has occurred andwhich may cause a material effect on the listed company or the listed company’s subsidiaries
including, inter alia, damages from disaster, change in major shareholders or controllingshareholders, lawsuits, petition of bankruptcy proceedings against the listed company anddisciplinary action by authorities. This list of matters and events are not exhaustive, and acatch-all provision is also present in each of Rule 402 and Rule 403 which states that importantmatters relating to operations, business or assets of such listed company or the listed company’s
subsidiaries which have a remarkable effect on investors’ investment decisions will also be subject
to disclosure.
There are no equivalent rules under TSE Listing Regulations for Rule 703(2) and (3) of the Listing
Manual.
Please refer to Appendix E – “Comparison between Singapore and Japanese Listing Rules andSecurities Law” for a comparison between Rule 703 of the Listing Manual and similar provisions
under the Japanese regulatory regime.
Interested Person Transactions
Singapore – Chapter 9 of the Listing Manual
Chapter 9 of the Listing Manual regulates interested person transactions entered into bycompanies listed on the SGX-ST with the aim of guarding against the risk that interested persons
could influence the issuer, its subsidiaries or associated companies to enter into transactions withinterested persons that may adversely affect the interests of the issuer or its shareholders.
Chapter 9 provides that for transactions of more than S$100,000, an issuer is required to, inter
alia:
(a)

make an immediate announcement of any interested person transaction of a value equal to,or more than, 3% of the group’s latest audited NTA;(b)

make an immediate announcement of the latest transaction and all future transactions
entered into with that same interested person during that financial year if the aggregate valueof all transactions entered into with the same interested person during the same financial
year amounts to 3% or more of the group’s latest audited NTA; and(c)obtain shareholder approval for any interested person transaction of a value equal to, or
more than 5% of the group’s latest audited NTA, when aggregated with other transactions
entered into with the same interested person during the same financial year.

The provisions of Chapter 9 of the Listing Manual are set out in full in Appendix E − “Comparison
between Singapore and Japanese Listing Rules and Securities Laws” of this Prospectus.
Our Company will be complying with Chapter 9 of the Listing Manual, subject to the adoption of
the abstention procedure in place of Rule 919 of the Listing Manual, which we cannot comply withas a matter of compliance with Japanese law since, under the Japanese Companies Act, it isprohibited to restrict or restrain a particular group of shareholders holding the same class ofshares as other shareholders from voting on any particular resolution, except when suchprohibition is statutorily required under the Japanese Companies Act, and there is no statutory
requirement to prohibit or restrict Interested Persons from voting on Interested Person
Transactions. Please see “Our Listing on the SGX-ST – Conditions of our Listing on the SGX-ST”
above for more information.

39

Japan – Related Party Transaction Provisions under the FIEA
Under the FIEA and the Regulation for Terminology, Forms and Preparation of Consolidated
Financial Statements (the Ordinance of the Ministry of Finance No. 28 of 1976, as amended), thenotes to financial statements which are disclosed pursuant to the FIEA, must include the detailsof “material” transactions with related parties (“Related Party Transactions”).
The related parties of a Japanese company include:(a)the parent companies of the company;(b)

the unconsolidated subsidiaries 1 of the company;(c)

corporations, etc. that have the same parent company as the company;(d)other related companies (meaning a corporation, etc. which, or the subsidiaries of which, areable to effect material influence on the company’s financial and operating or businessdecision, through its relationship on capital contribution, personnel affairs, finance,technology or transactions);(e)affiliated companies of the company (meaning a corporation, etc. whose financial andoperating or business decisions could be materially influenced by the company or asubsidiary of the company through its relationship on capital contribution, personnel affairs,
finance, technology or transactions);(f)

Major Shareholders of the company (meaning a shareholder who holds 10% or more of thevoting rights held by all the shareholders in the name of him/herself or another person) andtheir close relatives (meaning relatives within the second degree of kinship);(g)

officers of the company and their close relatives;(h)officers of the parent companies of the company and their close relatives;(i)officers of the material subsidiaries of the company and their close relatives;(j)a corporation in which the majority of voting rights are held by any one of the personsprescribed in (f) through (i) for his/her own account, and the subsidiaries of such corporation;
and

(k)

the corporate pension provider for the employees of the company,(“Related Party” or “Related Parties” as the case may be).

1

Subsidiaries are not consolidated in such cases where (i) the control over such company’s governing body that
determines financial, business or operational policies is temporary or (ii) such company is not material to the extent
exclusion from the consolidation of such company will not hinder reasonable assessment of financial condition,
results of operation and cash flow of the consolidated group.

40The items to be disclosed include:(a)in cases where the Related Parties are corporations, etc., the name, address, amount of
capital stocks or contributions, content of business and the holding ratio of the voting rightsthat the company holds in the corporation, etc., or the holding ratio of the voting rights thatthe corporation, etc. holds in the company;(b)in cases where the Related Parties are individuals, the name, the occupation and the holding
ratio of the voting rights that the Related Party holds in the company;(c)the relationship between the company and the Related Party;(d)the details of the transactions;(e)transaction amounts for each category of the transactions;(f)conditions of the transactions or policy of the determination thereof;(g)

the balance, as of the end of a fiscal year, of the debts and credits generated by the relevanttransactions for each account classification;(h)in cases where there has been an amendment to the conditions of the transactions, a noteto that effect, details of the amendment and details of the influences on the consolidated
financial statements caused by the amendment;(i)in cases where receivables owed by the Related Parties are classified as (i) receivables
owed by a company that is not yet failed but has a substantial problem with payment or has
high possibility thereof (kashidaore kenen saiken) or (ii) receivables that are a claim inbankruptcy or receivables owed by a company under rehabilitation, etc. (kousei saiken tou),
the balance of the provision for possible loan loss as of the end of the relevant fiscal year,
provision for doubtful accounts, etc. realised during the relevant fiscal year and bad-debt
loss, etc. realised during the relevant fiscal year; and(j)in cases where certain reserves are set relating to the transaction between the company andthe Related Party, and it is considered appropriate to be included in the notes to financial
statements, items equivalent to the items prescribed in (i) above.

The Japanese Companies Act, the FIEA and the TSE Securities Listing Regulations do not havecomparable rules which specifically require Related Party Transactions to be subject toshareholders’ approval for a company with a board of directors, regardless of the size of thetransactions.
Acquisitions and Realisations
Singapore – Chapter 10 of the Listing Manual
Chapter 10 of the Listing Manual sets out the rules for acquisitions and disposals by issuers anddescribes how transactions are to be classified based on the size of relative figures computed on
the bases set out in Rule 1006 of the Listing Manual (“Rule 1006 bases”). Chapter 10 alsoprescribes the requirements for announcements, circulars and shareholder approval (if required)in relation to such acquisitions and disposals. The transaction categories and requirements arebriefly as follows:(a)non-discloseable transaction: no announcement required if any of the Rule 1006 bases
amounts to 5% or less;
41

(b)

discloseable transaction: immediate announcement required if any of the Rule 1006 bases
exceeds 5% but does not exceed 20%; and(c)major transaction: shareholders’ approval required if any of the Rule 1006 bases exceeds
20%; and(d)very substantial acquisitions or reverse takeovers: shareholders’ approval required if any of
the Rule 1006 bases exceeds 100%, whether or not such transactions are deemed to be in
the ordinary course of business of the issuer.

The provisions of Chapter 10 of the Listing Manual are set out in full in Appendix E of thisProspectus.
Our Company will be complying with Chapter 10 of the Listing Manual except in respect of Rule1015 of the Listing Manual, where the approval of our Shareholders is not required if certain
conditions are met. Such conditions include, inter alia, (i) the acquisition being considered to bea very substantial acquisition under Rule 1015 of the Listing Manual only by virtue of the relative
figures calculated on the base set out in Rule 1006(c) of the Listing Manual, and (ii) our Company
must have a valid general mandate from our Shareholders in respect of such acquisitions. The
limit under such a mandate shall be no more than 130% of our Group’s latest NTA. Please see“Our Listing on the SGX-ST – Conditions of our Listing on the SGX-ST” for more information.
Our Company had requested for partial compliance with Rule 1015 of the Listing Manual as we
believe that if full compliance with Rule 1015 of the Listing Manual was imposed on us, we could
lose opportunities to invest in profitable assets in the competitive and fast-moving Japanesereal-estate market, as none of our competitors would have to undertake similar procedures.
Japan – Japanese Companies Act/TSE Securities Listing Regulations
The Japanese Companies Act, the FIEA and the TSE Securities Listing Regulations do not havecomparable rules which specifically regulate transactions by issuers, principally acquisitions andrealisations, which are the subject of Chapter 10 of the Listing Manual, and such transactions are
not subject to shareholders’ approvals.
However, the shareholder protection objectives behind Chapters 9 and 10 are found elsewhere in
the Japanese regulatory regime. The Japanese Companies Act requires the directors of acompany to act in the best interests of the company and, in this connection, imposes a statutory
duty of care on such persons, known as the “duty of care of a good manager” (zenkan-chu-i-gimu).
As a general interpretation of this statutory duty of care, each director, and the board of directors
as a whole, must ensure that all transactions, including transactions covered under Chapters 9
and 10 of the Listing Manual, do not prejudice the company’s interests and, inter alia, its
shareholders’ interests. Directors who act in violation of this statutory duty of care may become
directly liable to our Company and our creditors for damages caused by an intentional or negligent(in the case of creditors, grossly negligent) violation of their duties.
While there is no equivalent requirement under Japanese law to obtain shareholders’ approval fortransactions falling under Chapter 9 and 10 of the Listing Manual, such transactions may
nevertheless be subject to shareholders’ approval under the Japanese Companies Act if ourCompany undertakes a transaction involving certain specific corporate actions such as, inter alia:(a)amendment of the Articles of Incorporation;(b)election and removal of Directors and Statutory Auditors;(c)declaration of dividends;
42

(d)

reduction of stated capital or capital reserves;(e)

Statutory Transactions;(f)share consolidation; or(g)conversion into a membership company.

Trading Halt, Suspension and DelistingSingapore – Chapter 13 of the Listing Manual
Chapter 13 of the Listing Manual sets out the requirements relating to trading halt, voluntarysuspension and withdrawal by the issuer from the Official List of the SGX-ST, and the powers of
the SGX-ST with regard to trading halt, suspension and delisting of an issuer by the SGX-ST.
Under Rule 1302 of the Listing Manual, the SGX-ST may at any time grant a trading halt to enable
the issuer to disclose material information or suspend trading of the listed securities of an issuer
at the request of the issuer.
In addition, under Rule 1303 of the Listing Manual, the SGX-ST has the discretion to suspend
trading of the listed securities of any issuer in certain circumstances, including, but not limited to:(a)where the issuer is unable or unwilling to comply with, or contravenes, a listing rule; and(b)where in the SGX-ST’s opinion, it is necessary or expedient in the interest of maintaining afair, orderly and transparent market.

Under Rule 1305 of the Listing Manual, the SGX-ST may delist an issuer if:(a)the issuer is unable or unwilling to comply with, or contravenes, a listing rule;(b)in the opinion of the SGX-ST, it is necessary or expedient in the interest of maintaining a fair,orderly and transparent market;(c)in the opinion of the SGX-ST, it is appropriate to do so; or(d)the issuer has no listed securities.

Under Rule 1307 of the Listing Manual, the SGX-ST may agree to an application by an issuer todelist from the SGX-ST if:(a)the issuer convenes a general meeting to obtain shareholder approval for the delisting;(b)

the resolution to delist the issuer has been approved by a majority of at least 75% of the total
number of issued shares excluding treasury shares held by the shareholders present andvoting, on a poll, either in person or by proxy at the meeting (the issuer’s directors andcontrolling shareholder need not abstain from voting on the resolution); and(c)the resolution has not been voted against by 10% or more of the total number of issued
shares excluding treasury shares held by the shareholders presenting and voting, on a poll,either in person or by proxy at the meeting.

43Under Rule 1309 of the Listing Manual, if an issuer is seeking to delist from the SGX-ST:(a)a reasonable exit alternative, which should normally be in cash, should be offered to (i) theissuer’s shareholders and (ii) holders of any other classes of listed securities to be delisted;
and

(b)

the issuer should normally appoint an independent financial adviser to advise on the exit
offer.

We will not be complying with Rules 1307 and 1309 of the Listing Manual. Under the TSE
Securities Listing Regulations and Japanese law, we are not required to seek the approval of our
Shareholders even if we delist from the TSE. In addition, if we seek to delist or are delisted fromthe SGX-ST only, we will be unable to make an exit offer only to Tosei CDP Depositors as suchan exit offer will render our Company in breach of Article 109 of the Japanese Companies Act
since such an exit offer will be considered preferential treatment of the Tosei CDP Depositors andin breach of the principle of shareholders equality.
Tosei CDP Depositors will have the option of transferring their shares held through CDP to abroker in Japan or a JASDEC participant for trading on the TSE. We will make an announcement
on SGXNET at the relevant time informing Tosei CDP Depositors on how they can transfer their
Shares held through CDP to a broker in Japan or a JASDEC participant for trading on the TSE.
Japan – TSE Securities Listing Regulations
The TSE Securities Listing Regulations do not have comparable rules which allow a completely
discretionary trading halt by either the TSE or a listed company. However, under Rule 29 of the
TSE Business Regulations, TSE may suspend trading under certain specific circumstances,including where information which caused or may cause a material effect to the investment
decision of investors has occurred but such information is unclear in its content, such that the TSE
needs to halt trading to investigate the matter and request the relevant listed company to makethe appropriate public announcement. If the TSE chooses to suspend trading as a result of this,trading will resume 15 minutes after the announcement of a press release by the listed company.
Chapter 6 of the TSE Securities Listing Regulations contains a set of provisions outlining thecriteria and procedures for delisting. Rule 601 (in relation to domestic companies listed on themain market of the TSE) of the TSE Securities Listing Regulations sets out a comprehensive listof specific events and matters which, in general, will result in delisting from the TSE, including,inter alia, (i) where the number of shareholders is less than 400 as of the end of a business year
and does not reach at least 400 within a year, (ii) where the number of tradable shares is less than
2,000 units as at the end of a business year and the number does not reach at least 2,000 units
within a year, (iii) where the market capitalisation of the tradable shares is less than JPY500
million as of the end of a business year and the amount does not reach at least JPY500 million
within a year, (iv) where the number of tradable shares is less than 5.0% of the total number oflisted shares as of the end of a business year and no scheduled plan of a public offering,
secondary offering or distribution is submitted by the company within a specified period, (v) where
it is necessary for the company to enter into bankruptcy proceedings, rehabilitation proceedings
or reorganisation proceedings on the basis of the relevant provisions of Japanese law, and (vi)where there is a delay of over one month in the submission of a securities report or a quarterly
report pursuant to the FIEA. This list of matters and events is not exhaustive, and a catch-all
provision is also present in Rule 601 which states that a company will also be delisted where theTSE deems that delisting of the listed shares is appropriate for the public interest or the protectionof investors.
An issuer may also apply for its listed stock to be delisted pursuant to Rule 608 of the TSE
Securities Listing Regulations.
44Under Rule 610 of the TSE Securities Listing Regulations, where a listed stock is likely to bedelisted, the TSE may designate such listed stock as a “security under supervision” to alert
investors of such a fact.
Whilst the TSE Securities Listing Regulations do not have any provision comparable to Rule 1309
of the Listing Manual, there will, generally, be an exit offer (or similar arrangement) pursuant to theJapanese Companies Act made in the following events whereby a company delists from the TSE
as a result of certain corporate actions by or with respect to such a company, including, inter alia:•

where there is a management buy-out of our Company;•

where there is a takeover of our Company;•

where our Company dissolves as a result of a merger; or•

where our Company becomes a wholly-owned subsidiary of another company by a shareexchange/share transfer.

If our Company proposes to dissolve as a result of a merger; or where our Company proposes tobecome a wholly-owned subsidiary of another company by a share exchange/share transfer, theapproval of our Shareholders via a special resolution of the shareholders’ meeting is required.
Accordingly, our Company will arrange for the provision to Tosei CDP Depositors, in English, of the
convocation notice of the Shareholders’ meetings (together with a summary of the above
proposals), together with a voting instruction form. Tosei CDP Depositors will, indirectly, be able
to vote on such matters to be decided by the Shareholders’ meeting by returning the voting
instruction form by the relevant deadline to our Singapore Collation Agent. Our Singapore
Collation Agent will, after the collation of valid voting instructions from Tosei CDP Depositors,
furnish CDP, as a Shareholder of our Company, such voting instructions on behalf of all Tosei CDP
Depositors. If our Singapore Collation Agent receives no voting instructions from Tosei CDP
Depositors by the relevant deadline, CDP will not vote at the relevant Shareholders’ meeting.
Please refer to Appendix E – “Comparison between Singapore and Japanese Listing Rules andSecurities Law” for more information.
PROSPECTUS DISCLOSURE
Information on our Shareholders
We are unable to comply with Section 4 of the SFA in relation to interests in securities. We areconsequentially unable to comply with paragraphs 1(d)(ii), 3 and 6 of Part VII and paragraph 19
of Part X of the Fifth Schedule to the Securities and Futures (Offers of Investments) (Shares andDebentures) Regulations 2005 of Singapore (“SFR”) for the following reasons:(a)the disclosure of shareholdings in Japan is based on the concept of Large Volume Holdings
under the FIEA (see “Shareholders and Large Volume Holders − Large Volume Holders” and“Shareholding Reporting Obligations” for more information) as opposed to substantial
shareholdings under Division 1 of Part VII of the SFA and there is no similar concept in Japanto that of “interest in securities” under Section 4 of the SFA (see Appendix D − “Comparisonof Singapore Corporate Law with Japanese Corporate Law” for more information);(b)

we are unable to mandate disclosure by Large Volume Holders of our beneficial owners, andwe have no statutory power under Japanese law similar to that available under Section 137F
of the SFA, which gives a “corporation” within the meaning under Section 130 of the SFA
power to require disclosure of beneficial interest in its voting shares, and such information,even if provided voluntarily by Large Volume Holders, would not be verifiable and/or reliable;
45

(c)

disclosing personal information such as the shareholdings of an individual without priorapproval may constitute a breach of the strict privacy laws regime in Japan under the
Personal Information Protection Law. An exception to the regime is when such disclosure isstatutorily required. In particular, under the Personal Information Protection Law, it isprovided that a business operator handling personal information shall not, except in thefollowing cases, provide personal data to a third party without obtaining the prior consent of
the person:(i)cases in which the provision of personal data is pursuant to laws and regulations;(ii)

cases in which the provision of personal data is necessary for the protection of the life,
body, or property of an individual and in which it is difficult to obtain the consent of theperson;(iii) cases in which the provision of personal data is especially necessary for improving
public health or promoting the sound growth of children and in which it is difficult toobtain the consent of the person; and(iv) cases in which the provision of personal data is necessary for cooperating with a stateorgan, a local government, or an individual or a business operator entrusted by one in
executing the affairs prescribed by laws and regulations and in which obtaining theconsent of the person is likely to impede the execution of the affairs.
We have included the following information in this Prospectus:(a)

In respect of paragraphs 1(d)(ii) and 3 of Part VII and paragraph 19 of Part X of the SFR
Disclosure based on the concept of “Large Volume Holders” under the FIEA instead of“interest in securities” and “substantial shareholdings” under the SFA(b)

In respect of paragraph 3 of Part VII of the SFR
Disclosure of:(i)the direct shareholdings of our Directors, Statutory Auditors and certain other
Shareholders as at the Latest Practicable Date;(ii)

the Large Volume Holders of our Company based on the information available to us asat the Latest Practicable Date; and(iii) the top 10 direct Shareholders of our Company at a date no earlier than the Latest
Practicable Date.
The items above in (a) and (b) have been disclosed in “Shareholders and Large Volume Holders”,“Management and Corporate Governance − Family Relationships” and “Plan of Distribution −Restrictions on Disposals and Issues of Shares”.
Dilution
We are further unable to comply with paragraph 19 of Part X of the SFR as we are unable todetermine the effective cash cost to a Large Volume Holder (or his associates) of our Shares assuch information is not available in the Large Volume Holding Reports filed by our Large Volume
Holders through EDINET.

46

We have included the following information in this Prospectus:(a)where there is a substantial disparity between the Maximum Offer Price and the effective
cash cost to a Director or Statutory Auditor or their associates who are Large Volume
Holders, of Shares in our Company, acquired by such person at any time during the periodof three years before the date of lodgment of this Prospectus, or which such person has theright to acquire, provide a comparison of the public contribution in the public offering and theeffective cash contribution of such person; and(b)a confirmation that we have not issued any Shares to our Directors, Statutory Auditors or
their associates during the period of three years prior to the date of lodgment of thisProspectus; and(c)a confirmation that to the best of our knowledge, none of our Directors, Statutory Auditors or
their associates have acquired any Shares in the three years prior to the date of thisProspectus.

The items above in (a) to (c) have been disclosed in “Dilution”.

47

RISK FACTORS
Investing in our Company involves inherent risks. Prospective investors should consider, among
other things, the risk factors set out herein in the Prospectus before making an investment
decision. The risks described below are not the only ones facing our Company. Additional risks notpresently known to us or that we currently deem immaterial may also impair our business
operations and adversely affect the price of our Shares. If any of the following risks actually occur,our business, financial position and operating results could be materially and adversely affected.
A prospective investor should consider carefully the factors set forth below, and elsewhere in the
Prospectus, and should consult his or her own expert advisors as to the suitability of aninvestment in our Shares. An investment in our Shares is suitable only for investors who
understand the risk factors associated with this type of investment and who can afford a loss of
all or part of the investment.
Included in this Prospectus are various “forward-looking statements”, including statements
regarding the intent, belief or current expectations of our Company or our management withrespect to, among other things, (i) our Company’s target market, (ii) evaluation of our Company’smarkets, competition and competitive position, (iii) trends which may be expressed or implied byfinancial or other information or statements contained herein. Such forward-looking statements
are not guarantees of future performance and involve known and unknown risks, uncertainties andother factors that may cause the actual results, performance and outcomes to be materiallydifferent from any future results, performance and outcomes expressed or implied by suchforward-looking statements. Such factors include, but are not limited to, the risk factors described
below and elsewhere in this Prospectus.
Investors may not obtain the return of their application monies if our Shares are not listedon the SGX-ST.
Japanese laws (specifically the Japanese Companies Act) on the issuance and offering ofshares are generally prescriptive and there are no provisions allowing for the cancellation
or rescission of a share issuance once shares are duly issued. Accordingly, there is a legal
prohibition against cancelling or rescinding an issuance of shares once such shares are
duly issued. If the listing of our Shares on the SGX-ST does not occur for any reason and
if we have already issued the Offering Shares to CDP, we will be required under applicable
Singapore laws and regulations to return the application monies to successful applicants.
The return of application monies under the Japanese Companies Act and our Articles ofIncorporation can only occur if we repurchase the Offering Shares and subsequently
cancel these Offering Shares. The means by which this can be achieved would be by wayof:(a)a take-over bid by our Company for our Shares,(b)

an off-market direct trade; or(c)on-market closing price trading.

In respect of options (a) and (b), our Company would need to have a sufficient Distributable
Amount, and all Shareholders of our Company would be entitled to participate in the
repurchase. There is also no assurance that our Distributable Amount is sufficient to pay
for all of the Shares (and not just limited to the Offering Shares) tendered under option (a)and (b). If the Distributable Amount is insufficient, then we would have to purchase Sharestendered on a pro-rata basis and CDP will still hold a portion of the Offering Shares onbehalf of successful applicants. In the event our Company has a sufficient Distributable

48

Amount to meet the cost of purchasing all Shares tendered (and not just limited to theOffering Shares), the cost involved may be substantially more than our Company is able toraise as part of the Offering.
In addition, option (b) also requires a special resolution by our Shareholders. This would
take a considerable amount of time and will not be completed within the time periods
required under applicable Singapore laws and regulations, and, as a result, we will be inbreach of applicable Singapore laws and regulations. There is one exception to the rule
under option (b) whereby the Company can earmark the Shares held by CDP on behalf ofSingapore investors for repurchase, without other Shareholders of the Company being
entitled to participate in the repurchase. This is where the price paid for the repurchase ofsuch Shares is below the market price of our Shares (as defined under the relevantJapanese laws and regulations). However, there is no assurance that such repurchase pricewill be equal to or above the Offering Price. In addition, this exception still requires a
special resolution by our Shareholders, and successful applicants, who will be interested
in the repurchase, will not be allowed to exercise their voting rights through CDP in respectof the special resolution.
In light of the above, we believe that neither option (a) or (b) is viable for us to return
application monies to successful applicants in the event our Shares are not listed on the
SGX-ST.
Option (c) allows our Company to repurchase shares on-market at the previous day’s
closing price after the close of trading, However, since trading contemplated in option (c)is on-market, we believe that this option is impractical as (i) all of our Shareholders canparticipate in such trading, and (ii) successful applicants would also have to transfer their
Shares for trading on the TSE in order to participate.
Accordingly, given the difficulties and obstacles highlighted above, in the event theOffering Shares are issued but not listed on the SGX-ST, we will not undertake any steps torepurchase and cancel the Offering Shares. Successful applicants will be required totransfer their Shares for trading on the TSE. Please see Appendix I – “Terms, Conditions
and Procedures for Application and Acceptance” for more information.
For successful applicants who do not have the requisite trading accounts to trade their
Shares on the TSE, we will use our best endeavours to provide guidance to facilitate thetrading of such applicants’ Shares on the TSE. Successful applicants with the requisite
trading accounts may approach their brokers to arrange for the transfer of Shares for
trading on the TSE. Setting up such trading accounts may involve certain applicable fees
as well as a minimum period of time. Please see “Clearance and Settlement – Mechanism
for Transmission of Shares from CDP for Trading on the TSE” for more information. Thereis no assurance whether in such an event, our Shares will trade at a price which isequivalent to the Offering Price on the TSE. In addition, successful applicants may be
exposed to exchange differences between the Singapore Dollar and Japanese Yen in
respect of their investment in their Shares.
RISKS RELATING TO OUR BUSINESS
We face intense competition in the property industry in Japan.
The property industry in Japan is competitive and may become increasingly so. Each of ourproperties is located in an area that has other competing residential and commercial properties.
Our properties may also compete with residential, office and commercial properties that may be
developed in the future. The income from, and market value of, our properties will largely dependon the ability of our properties to compete against other residential, office and commercial
49

properties in Japan in attracting prospective purchasers, and attracting and retaining prospective
and current tenants. An increase in the number of competing residential, office and commercial
properties, particularly in the areas where our properties are located and a decline in real estatetransactions and deterioration of foreign investment may result in lower prices for our revitalised
properties and new developments and decreased occupancy and rental rates for our rental
properties.
In addition, property management service fees for condominiums and office buildings arecontinuing their downward trend due to increasing competition with other companies andcost-reduction pressures from customers. Further reductions in property management service
fees or a surge in contract cancellations will have an adverse effect on our financial performance.
Further, new competitors may enter the industry resulting in increased competition or saturation.
There is no assurance that we can compete successfully against our existing or potential
competitors now or in the future.
If any of the above occurs, it may adversely affect our business, financial condition, results ofoperations and/or our prospects.
We may be affected by the increase in consumption tax in Japan.
The Japanese government has taken steps to increase the consumption tax in Japan from thecurrent 5.0% to 8.0% by April 2014, and further increase this to 10.0% by October 2015. A billproposing such amendments was passed after approval by both the House of Representatives
and the House of Councillors of Japan in June and August 2012 respectively, and waspromulgated on 22 August 2012. This increase in consumption tax may reduce the purchasing
power of consumers and may erode general market confidence, which may contribute toeconomic slowdown especially in the real estate market in Japan. The impending increase in
consumption tax may affect the purchasing power of potential buyers or tenants of residential,
office and commercial properties and dampen the general sentiments of the real estate market
and economy in Japan. If any of the above occurs, our business, financial condition, results ofoperations and/or our prospects may be adversely affected.
We currently conduct all of our operations in, and derive all our revenue from Japan.
We currently derive all our revenue from sales and business operations in Japan and we aresusceptible to the general economic conditions in Japan. The real estate industry is sensitive togeneral economic trends as purchasing power of consumers tends to decline during periods of
economic slowdown. Such periods of economic slowdown, or uncertainties regarding future
economic prospects of Japan may affect the purchasing power of potential buyers or tenants ofresidential, office and commercial properties and dampen the general sentiments of the realestate market in Japan, including a reduction in rentals and prices of new developments and may
adversely affect our business, financial condition, results of operations and/or our prospects.
We are dependent on obtaining adequate and suitable financing to fund our operations.
In relation to our revitalisation and development projects, the purchase prices of such properties
are typically payable by our customers to us on delivery. Large initial capital outlay is usuallyrequired during the land and/or building acquisition and construction phases and our gearing ratio(defined as the ratio of total borrowings divided by shareholders’ equity) as at 31 December 2012
was 1.09 times. We procure debt financing from financial institutions on a project basis to fund theacquisition of land, buildings and construction costs. Consequently, increases in interest rates
typically increase our procurement costs. Lump-sum repayments due to our inability to meetfinancial covenants, delays in the sales of properties and lower than expected sales revenue havethe potential to affect our business, financial condition, results of operations and/or our prospects.
50

Our Group’s ability to arrange adequate financing on terms which are acceptable to us depends
on a number of factors that are beyond our control, including general economic and politicalconditions, the terms on which financial institutions are willing to extend credit to our Group andthe availability of other sources of debt or equity financing. If we are unable to secure adequate
financing, or any financing at all, including the ability to re-finance our current indebtedness, thismay adversely affect our business, financial condition, results of operations and/or our prospects.
We are liable for delays in the completion of projects and any liquidated damages arisingfrom such delays could adversely affect our financial performance.
Our sale and purchase contracts in relation to sale of properties typically include a provision forthe payment of pre-determined liquidated damages by us in the event the project is completed
after the stipulated date of completion stated in the contract. Delays in the completion of a project
could occur from time to time due to factors including but not limited to adverse weather
conditions, shortages of labour, equipment and materials, the occurrence of natural disasters,
labour disputes, disputes with suppliers and subcontractors, industrial accidents, work stoppages
arising from accidents or mishaps at the worksite or delays in the delivery of building materials by
the suppliers. For our revitalisation and development projects, delays in the completion of any
project could result in a loss of income or a delay in receipt of proceeds from purchasers.
In the event of any delay in the completion of any project due to factors within our control, we may
be liable to pay liquidated damages under such contracts and incur additional overheads that will
adversely affect our earnings and erode our profit margin for the project. There is no assurance
that there will not be any delays in the existing and future revitalisation and development projects
which we undertake, which may result in the payment of liquidated damages and additional
overheads. In addition, we only recognise revenue from our revitalisation and development
businesses upon delivery of the property. Any delay in the delivery of the property may adversely
affect our business, financial condition, results of operations and/or our prospects.
Our business is dependent on our ability to replenish our land bank and identify andacquire properties and potential land sites for revitalisation and development.
To maintain the growth of our revitalisation and development businesses, we are required toconstantly identify and acquire properties for revitalisation and land sites for development. As at theLatest Practicable Date, the size of our land bank was 79,052 sq m. Please also refer to “Business– Principal Properties” for more information. We usually replenish and source for new land sites andproperties suitable for our businesses by participating in property auctions, direct acquisitions fromprivate property owners or acquisitions through property agents. We compete with other companies
in the industry for new land sites and properties suitable for development and revitalisation
respectively and there is no assurance that suitable land sites and properties will always be
available to us for the purposes of our business at costs acceptable to us, or at all. We may not beable to secure land sites and properties to maintain and expand our business as planned. In sucha situation, we may be forced to undertake fewer revitalisation and development projects orundertake such projects with reduced margins. This may adversely affect our business, financial
condition, results of operations and/or our prospects.
Our Group faces risks before realising any benefits, if at all, from revitalisation anddevelopment projects.
Revitalisation and development projects require substantial capital outlay during the land/building
acquisition and construction/renovation phases. Depending on the size of a project, it could takeup to 12 months to complete the revitalisation of a property. It takes approximately 12 months tocomplete the development of a detached housing project and up to 24 months to complete thedevelopment of a condominium or office building. Typically, it may take one or more years before
positive cash flows may be generated through pre-sales or sale of a revitalised51

property/completed development. In particular, for our “Restyling” business, the sale of individual
units may only occur as long as four to five years following the completion of the “Restyling”
process as such properties may have been acquired by us partially or fully tenanted. Please see“Business – Business Overview – Revitalisation – Restyling” for more information.
Consequently, changes in the business environment during the length of the project may affect therevenue and cost of the development, which in turn have a direct impact on the profitability of the
project. Factors that may affect the profitability of a project include high financing costs, the failure
to complete construction according to original specifications, schedule or budget and poor sales.
The sales and value of a revitalisation or development project may be adversely affected by anumber of factors, including but not limited to the international, regional and local economic
climate, local real estate conditions, perceptions of property buyers in terms of the convenienceand attractiveness of the projects, competition from other available properties and changes inmarket rates for comparable sales. If any of the risks described above materialises, it may
adversely affect our business, financial condition, results of operations and/or our prospects.
Market conditions in Japan may be volatile.
We are subject to market conditions in Japan generally. Many social, economic, political and otherfactors may affect the development of the property market. The Japanese property market may
sometimes be volatile and may experience oversupply and property price fluctuations. There isalso no assurance that there will not be any over-development in the property sector in the areas
where our properties are located and other parts of Japan in the future. Any future overdevelopment in the property sector in the areas where our properties are located and other partsof Japan may result in an oversupply of properties, including residential and commercial
properties, and a fall in property prices as well as rental rates, which could adversely affect ourbusiness and financial conditions and the results of operations.
In addition, our alternative investment business primarily purchases real estate collateralisedloans and sources for mergers and acquisitions of real estate-owning companies. However, theinability to acquire real estate collateralised loans in a shrinking market for non-performing loans,the failure of mergers and acquisitions of real estate-owning companies, or the inability to recovercapital invested in acquired loans or companies as planned may adversely affect our business,financial condition, results of operations and/or our prospects.
We may be affected by bad publicity arising from the publication of negative reports orcomplaints from our customers or investors.
The publication of reports asserting or alleging that our properties in general may be unsafe or of
low quality, could have a negative effect on our sales and rentals, regardless of whether suchreports are factually accurate or scientifically supported.
In addition, our properties may from time to time, be the subject of complaints from customers
alleging that they are of inferior quality or unsafe. While there have been no such material
complaints in the past, we cannot guarantee that there will be no such complaints in the future.
The adverse publicity arising from such allegations could materially affect our business,regardless of whether these allegations are true or valid or not. The resultant decrease in or lossof sales and rental income of the affected properties therefrom may adversely affect our business,financial condition, results of operations and/or our prospects.
Our fund business, which plays a significant role in the growth and positioning of our Group, earns
fees for fund management services. If the performance of the funds we advise does not achieve
the performance expected by investors, our reputation as a fund management company andadviser to real estate funds may decline and may adversely affect our business, financial
condition, results of operations and/or our prospects.
52

We are exposed to potential defect liability claims.
Under the Building Lots and Buildings Transaction Business Law, real estate businesses assume
statutory liability for latent defects when they sell a property to parties other than real estatebusinesses, regardless of whether the property is new or re-sale. Under such statutory liability, abuyer can enforce a cancellation of the sale of the property or request damages from the seller.
In addition, under the Law Concerning the Promotion of Control of Housing Quality of Japan, realestate businesses are obligated to provide a 10-year statutory warranty on the main structuralcomponents of the building for new properties, under which the buyer can request for repairs to
the main structural components or enforce a cancellation of the sale of the property, or request
damages from the seller. Further, our Group provides customers with an after-sales service
warranty (valid for one to 10 years, depending on the item) in line with the Group’s after-sales
service standards.
Our Architecture Planning Department conducts quality checks on our properties (see “Business –Quality Assurance” for more information). We also work to mitigate business risks by taking
measures such as requiring vendors and construction companies to provide an after-sales service
warranty equivalent to that which we provide to our customers. However, if for some reason a defectarises in a property supplied by us, and we are unable to impose the defect liability on the vendor,
or the vendor or contractor is incapable of fulfilling the warranty, we will have to incur additional
expenses to fulfill our obligations to our customers. Under certain circumstances, our contractors
may be required to reimburse or indemnify us in the event of delay or building defects. However,there is no assurance that the amount in respect of which we are reimbursed or indemnified bycontractors would be sufficient to cover the amount of liquidated damages paid or to be paid topurchasers. Should any such event occur, it may adversely affect our business, financial condition,
results of operations and/or our prospects.
In the event defect liability claims are investigated by the relevant authorities and we and/or our
properties are found to have caused the harm, we may be fined by the authorities (up to JPY3.0
million), licences issued to us may be revoked, our operations may be suspended under the
Buildings Standards Act and our officers may be subject to penal sanctions (including
imprisonment). Defect liability lawsuits could also damage our reputation and result in the loss of
our competitive edge. If any of the above were to occur, it may adversely affect our business,financial condition, results of operations and/or our prospects.
Property assets are relatively illiquid.
In general, property assets, such as the properties developed or revitalised by our Group and landsites acquired by our Group, are relatively illiquid. The illiquidity of our property assets may limit
our ability to convert these assets into cash at short notice or may result in a significant reductionin the price that we might otherwise seek for such assets in the event that we are required to effectan urgent sale. Should such an event occur, it may adversely affect our business, financial
condition, results of operations and/or our prospects.
We face risks arising from the use of Japanese standard lease agreements.
In line with the general practice in the Japan property market, the majority of the leases for our
residential rental business are standard two-year leases which tenants may terminate upon giving
one to two months notice, while the majority of leases for our office rental business are standard
two-year leases which tenants may terminate upon giving six months notice. As a result, ourproperties may experience continuous lease expiries and lease terminations each year. This
exposes us to certain risks, including the risk that vacancies following the non-renewal of leases
may lead to reduced occupancy rates, which in turn may adversely affect our business, financial
condition, results of operations and/or our prospects. Also, in general, leases are statutorily
extended automatically on the same terms and conditions upon expiry, other than the lease53

period, which shall become a non-fixed term lease, unless we obtain the tenants’ consent tochange the terms and conditions to terminate such leases. A non-fixed term lease for land may beterminated with one year prior notice by either party while a non-fixed term lease for buildings may
be terminated with six months prior notice by us, or three months prior notice by the tenants.
Under the Land and Building Lease Law, which is applicable to most of our leases, we may only
unilaterally terminate the leases if such termination can be justified. The existence of “justifiablegrounds” will be determined by a Japanese court considering a combination of factors relating to
the necessity of the use of the property or the specific characteristics of each lease and its history,
on a case-by-case basis. As a result, in the event that the tenant does not agree to an increase
in rent or other revisions in the terms and conditions of the lease, we are unable to change theterms and conditions or to terminate the lease unilaterally and the lease will have to continue
based on the existing terms and conditions unless we have justifiable grounds for terminating thelease. In the event that the amount of rent becomes unreasonable taking into consideration thesurrounding circumstances, we, or the tenants, may request the Japanese courts to adjust the
aforementioned rent. There is no assurance that such adjustments by the Japanese courts will bein line with the market rate for such rentals. Furthermore, this adjustment of rent does not provide
a right to terminate the lease. Such an arrangement restricts our ability to amend the terms of ourleases or terminate our leases in the event an agreement is not reached. If the above occurs, it
may adversely affect our business, financial condition, results of operations and/or our prospects.
There are risks associated with the acquisition of non-performing loans collateralised byreal estate in our alternative investment business.
Our alternative investment business (which accounted for 4.7% of our revenue and 3.5% of ourgross profit for 9M2012) invests, inter alia, in non-performing loans collateralised by real estate(including mortgage-backed loans). There is no assurance that such non-performing loans will
perform in the future. We acquire such loans at a discount reflecting their non-performing natureof such loans, and we have recourse against the real estate used as collateral for the loans in theevent such loans continue to be non-performing. However, enforcing security against such realestate may require us to expend further costs, including prepayment expenses, legal fees andcourt filing fees. In order to enforce the security we have over real estate, we need to file a petition
with the court to exercise our security. If the petition is granted, the real estate will be sold at an
auction, and the proceeds of sale will be appropriated for the satisfaction of security in order ofpriority. As a holder of security over the real estate in question, we will be entitled to receive such
auction proceeds in order of priority of security. There is no assurance that such real estate that
we enforce security against will be worth the amount or will be sold for the amount it had beencollateralised for. We may also on occasion sell the rights to repayment in respect of
non-performing loans to debt collecting companies and there is no assurance that any such salewill not be less than the amount we have paid for such non-performing loans. If any of the above
occurs, it may adversely affect our business, financial condition, results of operations and/or ourprospects.
In addition, our investigation on the collateral provided in respect of the non-performing loan is tothe extent commercially feasible, taking into account timing and any access restrictions to the realestate. There can be no assurance that such investigations would have identified all material
defects, breaches of laws and regulations, and other deficiencies for which we have not covered
through appropriate representations, warranties or indemnities. If the investigations undertaken
did not identify any such circumstance and we have not obtained suitable representations,warranties or indemnities from the vendor of the non-performing loan, it may adversely affect ourbusiness, financial condition, results of operations and/or our prospects.

54

Amenities and transportation infrastructure around our properties may be closed or
relocated.
There is no assurance that the amenities, transportation infrastructure and shuttle services
located around our properties will not be closed, relocated or terminated in the future. Suchclosure, relocation or termination may adversely affect the accessibility of our properties which will
reduce the demand for our properties and decrease their market value and ability to attract highrental rates. This adverse effect on the demand, market value and the rental rates for our
properties may adversely affect our business, financial condition, results of operations and/or ourprospects.
Our properties, the underlying land, or parts thereof may be acquired compulsorily by theJapanese government.
The Japanese national and municipal government has the power to compulsorily acquire any landin Japan for public interest pursuant to the provisions of applicable legislation, including the Land
Expropriation Law of Japan (tochi-shuyouhou) (Act No. 219 of 1951, as amended) and related
regulations. Under the Land Expropriation Law of Japan, the government is able to acquire landin cases where such acquisition is necessary for the conduct of businesses in the public interest,
and where it is appropriate and reasonable to use the land in question for such a business. The
necessity in such a case is required to be extraordinary and the businesses under which land canbe compulsorily acquired for include road building, dams, embankments for the prevention offlooding, canals, railways and other similar projects, and are limited by Article 3 of the Land
Expropriation Law of Japan. In the event that any property or the underlying land is compulsorily
acquired in Japan, the amount of compensation to be awarded is assessed on the basisprescribed in the relevant laws and regulations. If any of our properties, the underlying land, orparts thereof were acquired compulsorily by the Japanese government, the level of compensation
paid to us pursuant to this basis of calculation may be less than the amount which we haveinvested for such properties. Furthermore, since there is an interval between the determination of
the amount of compensation and the payment pursuant to the relevant laws of Japan and the priceof the land may change during such interval, the level of compensation paid to us may beinsufficient to compensate us for the acquired land as of the date when compensation is paid.
Our properties are subject to Japanese environmental regulations, which may result in us
incurring various costs and liabilities.
Our properties are subject to various Japanese environmental laws, including those relating tohealth and hygiene, air pollution control, water pollution control, waste disposal, noise pollution
control, the storage of dangerous goods and especially soil contamination, under which a current
land owner may be subject to strict liability for the removal or decontamination of hazardous or
toxic substances on or under such property. If any of our buildings were or are in the future built
on such contaminated land, we may be liable for substantial unexpected costs and may face court
proceedings pursuant to the Soil Contamination Control Law. In addition, under these laws, anowner or operator of real property may be subject to liability, including a fine or imprisonment, forviolations of and lack of compliance with certain environmental laws. As such, we may be required
to make capital expenditures to comply with these environmental laws. The presence ofcontamination, hazardous or toxic substances, air pollution, noise pollution or dangerous goods
without a valid licence, or the failure to remediate contamination, air pollution, noise pollution or
dangerous goods may expose us to liability or materially adversely affect our ability to sell or lease
the real property or to borrow using the real property as collateral. If any of these occur, it may
adversely affect our business, financial condition, results of operations and/or our prospects.
Prior to our acquisition of any land, we arrange, or ask the vendor to arrange, for an environmental
assessment of the land in question to be conducted by an independent engineering firm. These
assessments include, at a minimum, an on-site visual inspection of the property, an examination55

of current and historical uses of the property and the surrounding areas, discussions with persons
in charge of property management and a review of historical documents. However, theseassessments may not be adequate to identify all potential environmental problems, which may be
hidden or otherwise impossible to detect without special expertise and equipment, or at all.
In addition, there are risks inherent in purchasing second-hand properties. Although we survey abuilding’s structure, the use of asbestos, soil quality and other elements prior to our purchase ofsuch second-hand properties, our business operations in relation to a particular development orrevitalisation project may be temporarily suspended or prolonged if it is later detected that abuilding’s structural design data is missing or erroneous, a building contains asbestos, or if theresults of a soil pollution survey shows that soil improvement is necessary. Such a suspension ordelay may adversely affect our business, financial condition, results of operations and/or ourprospects.
Renovation work, repair and maintenance or physical damage to our properties may
disrupt our operations and collection of rental income or otherwise result in an adverse
impact on our financial condition.
The quality and design of our properties directly influence the rental rates of and the demand forspace in our properties. Our properties may need to undergo renovation or revitalisation from time
to time to retain their attractiveness to tenants and may also require ad hoc maintenance orrepairs in respect of faults or problems that may develop or because of new planning laws or
regulations. The costs of maintaining our properties and the risk of unforeseen maintenance orrepair costs tend to increase over time as our properties age. The business and operations of ourproperties may suffer disruption as a result of renovation or revitalisation and it may not be
possible to collect the full rate of, or, as the case may be, any rental income on the space affectedby such renovation or revitalisation works. Such renovation and revitalisation works, coupled withthe loss of rental income may adversely affect our business, financial condition, results ofoperations and/or our prospects.
Physical damage to our properties resulting from earthquakes, fire or other causes may lead to asignificant disruption to the business and operations of our properties. Furthermore, tenants
generally have the right to terminate their tenancies prematurely in the event that such physicaldamage (not caused by the tenants’ negligence or default) persists for an extended period of time.
The foregoing may impose unbudgeted costs on us and may adversely affect our business,financial condition, results of operations and/or our prospects.
Our Group may face legal disputes which may adversely affect our financial position.
We may be involved from time to time in disputes with various parties involved in the projects that
we undertake. These parties include contractors, sub-contractors, suppliers, construction
companies, purchasers and other partners. These disputes may lead to legal and otherproceedings. Please see “General and Statutory Information – Litigation” for further details on theproceedings that we are currently or have been involved in during the previous 12 months. Thereis no assurance that we will be able to successfully defend such claims. We could incur costs, andour time and management resources may be diverted towards defending such claims. If we are
required to pay damages, this may adversely affect our business, financial condition, results ofoperations and/or our prospects.

56Due to difficulties faced when obtaining boundary confirmations for land, boundary
confirmations have not been obtained from all neighbours in relation to certain of ourproperties.
Due to the difficulties faced when obtaining boundary confirmations for land, such as the time andcost involved in obtaining such confirmations, some of our land has been, and future land may be,acquired by us without obtaining boundary confirmations from title holders of adjoining land, orwithout physically inspecting boundaries. As at 31 January 2013, of the 70 properties held by ourrevitalisation, development and rental businesses, we had not obtained boundary confirmations
for eight of these properties. The total book value of these properties as at 31 January 2013 wasapproximately JPY2.99 billion (S$39.4 million), or 6.75% of the total book value of our portfolio as
at 31 January 2013. Boundary disputes in respect of these properties or future acquisitions
without boundary confirmations may cause difficulties in future dispositions of the land or
unexpected costs or losses including, but not limited to, the loss of part of the area of the land or
liability for damages arising in relation to such land or future acquisitions. If there is an
encroachment on land, such encroachment may restrict the use of the land or lead to claims fromneighbours and such restrictions or claims may adversely affect sales or rental income of ourdevelopments or revitalised properties and cause us to incur additional expense in the removal ofany such encroachment or defending any such claim. If we are required to pay damages or rectify
any encroachment in any other way, this may adversely affect our business, financial condition,
results of operations and/or our prospects.
We are dependent on our contractors and suppliers.
In the ordinary course of our business, we rely on our contractors to provide various construction
services for the completion of a development or revitalisation project. While we adopt a stringent
selection process in selecting our contractors and ensuring that their works are acceptableaccording to our specifications, there is no assurance that the services and products rendered byour contractors will always be satisfactory and compliant with our standards and requirements.
Should our contractors fail to rectify any unsatisfactory works and we are unable to find suitable
alternative solutions in a timely manner, we may not be able to complete the project within the set
budget and time schedule, resulting in cost overruns and project delays. Moreover, should ourcontractors fail to sustain their operations due to adverse changes in their financial conditions,and we are unable to secure suitable replacements in a timely manner, our projects will be subject
to disruption and delay. If any of the above were to occur, it may adversely affect our business,financial condition, results of operations and/or our prospects.
We are dependent on our suppliers for the supply of materials required in the course of ourrevitalisation and development projects. There is no assurance that we will be able to continue
sourcing for these materials and services from our suppliers at prices that are favourable to us.
In the event our suppliers terminate the supply of their materials to us, we may not be able to seek
alternative sources in a timely manner and/or at reasonable prices, or at all. This will cause adelay in our revitalisation and development projects, thereby affecting the completion of suchprojects. In addition, we may face an increase in the cost of supply should we switch to new
suppliers. Under such circumstances, our profit margin for the project will be reduced or eroded
and accordingly, may adversely affect our business, financial condition, results of operations
and/or our prospects.
We are subject to fluctuations in the costs of construction, materials and equipment andother construction risks.
The construction costs of our projects fluctuate with the prices of various materials, such as metal,stone, cement, sand, pipes, electric cables, sanitary fittings, window and door fittings, light fittingsand other materials. The costs of leasing construction equipment, including excavators, cranes
and lifting hoists, may also fluctuate over time due to changing market supply and demand
57conditions. Whilst these costs are generally incurred by our contractors, we may nevertheless be
unable to secure such contracts at costs acceptable to us and the operating costs of our projects
will increase. Where we are unable to pass such additional costs to our customers, it may
adversely affect our business, financial condition, results of operations and/or our prospects.
We may also be affected by delays in constructions and costs and time overrun whether fromvariation to original design plans or any other reason, inclement weather conditions, unforeseen
engineering, environmental or geological problems, defective materials or building methods,
default by contractors and other third party service and goods providers of their obligations, or
financial difficulties faced by such persons, disputes with or between counterparties to a
construction or construction related contract, work stoppages, strikes, accidents, among others.
If any of the above were to occur, it may adversely affect our business, financial condition, resultsof operations and/or our prospects.
Our properties are subject to accounting adjustments in accordance with the relevant
accounting standards.
The financial information in this Prospectus has been, and any future financial information werelease on the SGXNET will be, prepared in accordance with IFRS. Under IFRS, inventories held
for sale are stated at the lower of cost plus, where appropriate, a portion of attributable profit, andestimated net realisable value. As a result, unsold properties held in our inventory may be written
down on an annual basis if net realisable value is lower than the cost of acquisition plus whereappropriate, a portion of attributable profit, and the loss on the difference between the net
realisable value and the cost of acquisition after taking into account attributable profit will bereflected in our results. On an annual basis, the net realisable value of our unsold properties may
be lowered in accordance with the prevailing market and economic conditions, and any such
lowering in adverse market and economic conditions may be significant and will be reflected asa loss in the results of our Group. This may adversely affect our business, financial condition,
results of operations and/or our prospects.
We may be required to pay compensation in connection with non-recourse loans obtainedby funds that we manage.
Certain real estate funds that we advise may use special purpose companies to obtain borrowings
in the form of a non-recourse loan to acquire real estate. In our capacity as asset manager,
lenders may request us to provide an indemnification for certain extraordinary events of default
either by the borrower or us, and under such indemnification, we may be held to be liable tocompensate, inter alia, damages incurred by the lender on the grounds of fraud or unlawful acts,
environmental pollution or other incidents arising from wilful intent or gross negligence by theborrower or us. In our capacity as asset manager, we manage the real estate held as collateralby such lenders on a day-to-day basis and there is no assurance that the actions of our Company
or our employees will not affect the value of the collateral, thereby causing damages to the lender.
This potential liability is not a guarantee of the loan repayment obligations of the borrower, but
may nonetheless affect our financial performance if we are held liable to compensate the lenderdue to gross negligence by the borrower on our part, to the extent that damages (which may
include things such as costs and expenses incurred by the lender and reputational damage) are
incurred by the lender.
We will be affected by changes in government regulations and suspension or revocation or
non-renewal of our governmental licences and approvals.
We are subject to various government regulations in Japan. Certain of our businesses are subject
to licensing and regulation by a number of governmental authorities which approve, permit andregulate matters including the construction of properties, sale of properties and fund and asset
management.
58

Certain of our businesses are required to be registered with certain authorities while some requireapprovals, permits or licences from the relevant government authority to operate. Please see“Business – Material Licences, Permits, Registrations and Approvals” and “Overview of Relevant
Laws and Regulations in Japan” for more information. Regulations governing our businesses are
subject to periodic review and changes. Furthermore, approvals, permits and/or licences are
typically renewed periodically and may be revoked or suspended for cause at any time by therelevant government authority. Any unfavourable change in regulations or the failure to receive,
renew or retain the relevant approvals, permits and licences for any of our businesses may
adversely affect our business, financial condition, results of operations and/or our prospects.
Although we believe our properties are in compliance with current Japanese requirements
imposed by administrative laws and local ordinances in all material respects, the enactment of
new or additional laws and regulations, including those relating to building standards, handicap
accessibility to our properties and zoning restrictions could force us to incur additional costs andadditional time in order to renovate, revitalise or reconstruct our properties to comply with any
such regulations, or could prevent us from disposing of our properties or from making
improvements to our properties without also incurring costs and the additional time required tomake these modifications. In general, properties that have been in compliance with applicablelaws and regulations at the time of their completion but no longer comply with such laws andregulations as these laws and regulations have been amended or newly enacted are protectedunder Japanese grandfathering rules (kizon futekikaku) including those stipulated under related
regulations to the Building Standards Act, subject to such properties fulfilling certain conditions
imposed under the grandfathering rules, for example, the maintenance of the existing buildingto-land ratio, floor space, building height and installations of the building.
There is no assurance that the Japanese Government will not impose new regulatory
requirements in respect of our businesses. The costs, time and resources spent on compliance
may adversely affect our business, financial condition, results of operations and/or our prospects.
There is no assurance that our expansion plans will be successful.
Our track record is based on our operations in Japan. We have commenced the expansion of ouroperations into South-east Asia, and have incorporated Tosei Singapore as part of that expansion.
However, there is no assurance that we will be able to successfully replicate our business modelin South-east Asia or such other countries where we may be expanding our operations to in the
future. There is also no certainty that we will ultimately be successful in penetrating our target
markets and recouping these investments or rendering them profitable. Furthermore, we expect
to incur start-up losses for our aforementioned expansion plans and the above may adversely
affect our business, financial condition, results of operations and/or our prospects.
We rely on our management team and ability to retain or attract management staff andskilled employees.
The continued success of our Group is dependent to a large extent on our management team, inparticular, our President and CEO, Seiichiro Yamaguchi, as well as our senior management staff,
each of whom has substantial experience in our industry. Please see “Management and Corporate
Governance” for more details on the background and responsibilities of our Directors. The loss ofthe services of Seiichiro Yamaguchi or that of other key management staff without adequate andtimely replacement may adversely affect our businesses and our financial performance. We also
believe that our future success will depend upon our ability to attract, retain and motivate oursenior management staff. Our inability to do so may adversely affect our business, financial
condition, results of operations and/or our prospects.

59

In addition to our senior management staff, our continued success depends in part upon our ability
to attract, motivate and retain a sufficient number of qualified and skilled employees. Any failure
to recruit the appropriate personnel and to retain our experienced employees may adversely
impact our business operations and expansion plans. In addition, competition for qualified
employees would require us to pay higher wages to attract and retain adequate experienced
employees. This may adversely affect our business, financial condition, results of operations
and/or our prospects.
We are in possession of a substantial amount of confidential personal information.
Across our businesses, we have in our possession the personal information of many customers.
The volume of personal information our Group holds is expected to increase along with our
proposed future business expansion. In line with the Personal Information Protection Law, wehave established internal regulations for managing information assets, provided our employeeswith appropriate training, strengthened our information management system and taken thoroughmeasures to manage the personal information in our possession. However, the release or leak of
personal information or material corporate information held by the Group to the public due tounforeseen circumstances could cause a loss of trust in the Group and may adversely affect ourbusiness, financial condition, results of operations and/or our prospects.
We may require additional funding for our future growth.
We may have to raise capital by issuing equity or debt securities or by borrowing funds from banks
or other sources for our business expansion. We cannot assure you that any additional financing
we may need will be available on terms favourable to us, or at all. If we are unable obtain
additional financing on favourable terms, our future plans and growth may be adversely affected.
An issue of Shares or other securities to raise funds will dilute equity interests of our Shareholders
or Tosei CDP Depositors and may, in the case of a rights issue, require additional investments by
Shareholders. Further, an issue of Shares below the then prevailing market price will also affectthe value of Shares then held by investors. Dilution in Shareholders’ or Tosei CDP Depositors’
equity may occur even if the issue of Shares is at a premium to the market price.
In addition, any additional debt financing may, apart from increasing interest expense and gearing,
have conditions that:•

limit our ability to pay dividends;•

increase our exposure to general adverse economic and industry conditions as a breach of
any financial covenants may result in default and require early repayment of our debt
financing;•require us to dedicate a substantial portion of our cash flows from operations to payments on
our debt, thereby reducing the availability of our cash flows to fund capital expenditure,
working capital and other requirements; and/or•

limit our flexibility in planning for, or reacting to, changes in our business and our industry.

Our properties may be affected by the discovery of cultural artifacts on the land where ourproperties are situated.
Under Japanese law, including the Cultural Properties Conservation Law of Japan(bunkazai-hogohou) (Act No. 214 of 1950, as amended), should cultural artifacts be discovered on
the land where our properties are situated, the relevant authorities are empowered to order a halton all ongoing development activities in order to analyse and remove the artifacts, or cease the60

development altogether. This may cause delays and affect the revitalisation and development
work undertaken by us. If this was to occur, it may adversely affect our business, financial
condition, results of operations and/or our prospects.
RISKS RELATING TO JAPAN
Changes and other events in the operating environment could have a material adverse
effect on our business activities, results of operations and financial condition.
As our Group focuses primarily on acquiring and selling and, in some cases, holding real estate
properties, the levels of income it generates from properties and income from rental properties
held for investment purposes are closely linked to the price of real estate in Japan. Income
generated by properties and, therefore, the market value of properties may be significantly
affected by adverse economic conditions. Following a long period of recession and deflationary
conditions, characterised by high rates of corporate and individual bankruptcies and weak
consumer confidence and spending, the Japanese economy has recently begun to show signs ofimprovement. However, there can be no assurance that such positive trends in the general
economic environment and in the real estate market in Japan will continue. Since 1991, Japan has
experienced several short periods of economic growth which have been followed by stagnation or
decreases in real gross domestic product. If economic conditions in Japan worsen again, they
could have a material adverse effect on the Group’s business and cause deterioration in the valueof the Group’s real estate assets, including income generated from these assets.
Additionally, governments, government ministries and agencies, as well as various financial
markets are proceeding with system reforms and amendments to laws concerning stock markets
and other markets related to our businesses. Any major changes to fiscal policy, system reforms
and legal amendments in the future may adversely affect our business, financial condition, resultsof operations and/or our prospects.
We may suffer substantial losses in the event of a natural disaster such as an earthquake,terrorist attack or other casualty event in Japan.
All of our assets, as well as our head office, are located in Japan and are concentrated in theTokyo area. All of our revenue is derived from our operations in Japan. Japan has historicallyexperienced numerous large-scale earthquakes that have resulted in extensive property damage(including the earthquake on 11 March 2011 measuring 9.0 degrees on the Richter scale that
occurred in Tohoku district, northeast of Tokyo which, coupled with aftershocks in the days after
the earthquake, associated tsunami waves on the east coast of Japan and a nuclear plant crisis
in Fukushima in Japan, caused considerable physical and economic damage to Japan). Whilst
none of our Group’s properties (including our head office) have been affected by earthquakes in
the past, any future earthquake or other disaster affecting the Tokyo area could significantly
disrupt all of our operations. Additionally, large disasters, outbreaks of disease, terrorist attacks
or other mass casualty events affecting our businesses in Japan could disrupt some or all of ouroperations even in the absence of direct physical damage to our properties or cause a material
economic downturn in the affected area or country, which in turn may adversely affect ourbusiness, financial condition, results of operations and/or our prospects.
We do not have insurance against any earthquake damages or business interruption. With orwithout insurance, damage to any of our offices or properties, due to fire, earthquake, typhoon,
flood, terrorism, outbreaks such as the H1N1 pandemic, avian flu or other man-made or natural
disasters or casualty events may adversely affect our business, financial condition, results ofoperations and/or our prospects.

61

Climate change regulation could increase our capital and operating expenses.
The national and various local governments in Japan have adopted (and may adopt further)
regulations intended to limit activities they deem to contribute to global warming. For example, in
April 2009, the amendment of the Tokyo Metropolitan Ordinance on Environmental Preservation
to impose on owners of large properties an obligation to decrease carbon dioxide emissions tookeffect. Our capital and operating expenses could increase in the future as a result of, for example,
the imposition of stricter energy efficiency standards for buildings or the increased cost ofenvironmentally-friendly building materials.
The Japanese real property registration system may not accurately reflect the ownership of
the real property-related title or right.
Japan has a system of registering the ownership of real property (which includes land andbuildings) as well as certain other real property-related rights, such as security rights over real
property and easements, pursuant to which an unregistered owner of real property or an
unregistered holder of certain other rights cannot assert its title or such rights against a third party.
However, the real property register does not necessarily reflect the true owner of the real
property-related title or right. In practice, parties who plan to enter into a real property transaction
usually rely upon the register, as it is generally the best indication of the true owner of the real
property-related title or right. However, a party has no recourse to anyone but the seller if, relying
on the register, it purchases the property or a related right from a seller and the information
contained in the register turns out to be incorrect. The purchaser may claim for damages against
the seller pursuant to statutory warranties or contractual warranties, but, in general, cannot
acquire the ownership of or title to the real property. Imperfect title to one or more of properties
in Japan may adversely affect our business, financial condition, results of operations and/or ourprospects.
RISKS RELATING TO AN INVESTMENT IN OUR SHARESJapanese law may not protect our Tosei CDP Depositors as extensively as that in Singapore
and there will be limited regulatory oversight by the SGX-ST over our Company.
Our corporate affairs are governed by our Articles of Incorporation, relevant laws governing
corporations incorporated in Japan and the TSE Securities Listing Regulations. Tosei CDP
Depositors in Singapore may have more difficulty in protecting their interests than they would asshareholders of a company incorporated in Singapore.
As the listing and quotation of our Shares on the SGX-ST is a secondary listing, with a primarylisting on the TSE, we are subject to limited regulatory oversight by the SGX-ST. Under the Listing
Manual, a foreign issuer having a secondary listing on the SGX-ST, as is our case, need notcomply with the SGX-ST’s listing rules, provided that it undertakes to:•release all information and documents in English to the SGX-ST at the same time as they are
released to the TSE;•

inform the SGX-ST of any issue of additional securities in a class already listed on the
SGX-ST and the decision of the TSE; and•to comply with such other listing rules as may be applied by the SGX-ST from time to time.

Whilst the SGX-ST has imposed certain conditions on us in connection with the listing andquotation of our Shares on the SGX-ST (see “Our Listing on the SGX-ST” for more information),including, inter alia, compliance with substantial parts of Chapters 9 and 10 of the Listing Manual,
our compliance with such conditions will nonetheless be less than that required of a company
62

incorporated in Singapore and primarily listed on the SGX-ST. For example, whilst we may haveto obtain our Shareholders’ approval under Chapters 9 and 10 of the Listing Manual for certaintransactions, such Shareholders’ resolutions will only be advisory in nature and not legallybinding. Shareholders’ resolutions can only be binding on our Company where such shareholders’approval is required as under the applicable Japanese law, including the Japanese Companies Act
and our Articles of Incorporation. However, whilst there is no Japanese legal jurisprudence in thisrespect and the position remains untested, it is possible that our Directors may be considered to
be in breach of their fiduciary duties to our Company if they nonetheless act against a
Shareholders’ resolution which is advisory in nature and not legally binding. In addition, ourCompany will be in breach of our undertakings to the SGX-ST in respect of our obligations under
Chapters 9 and 10 of the Listing Manual, and the statements in “Our Listing on the SGX-ST −Conditions of our Listing on the SGX-ST” may also be regarded as false and misleading under the
SFA, if our Directors (i) do not obtain the approval of our Shareholders when required, or (ii)nonetheless proceed with a transaction which our Shareholders’ have voted down, in respect ofmatters requiring the approval of our Shareholders under Chapters 9 and 10 of the Listing Manual.
Furthermore, we are also not subject to the continuing disclosure obligations under Chapter 7 of
the Listing Manual but will be subject to the relevant laws and regulations governing listed
corporations in Japan. We are also not required to comply with Chapter 13 of the Listing Manualand accordingly Tosei CDP Depositors will not be entitled to an exit offer under Rule 1309(1) of
the Listing Manual in the event of a delisting from the SGX-ST only. The SGX-ST’s role inperforming any regulatory, disciplinary or enforcement role against us may also be limited.
Tosei CDP Depositors will not be considered as Shareholders of our Company.
Tosei CDP Depositors who subscribe for Shares in the Offering and those who trade Shares listedon the SGX-ST would hold their Shares through the CDP system. Under Japanese law and ourArticles of Incorporation, persons holding our Shares in a Securities Account with CDP and whosenames appear in the depository register of CDP will not be regarded as our Shareholders as longas CDP is not a system participant of JASDEC. Only Shareholders whose names appear on (a)the JASDEC Record of Depositors, and (b) the Register of Members kept in Japan are entitled toattend meetings of Shareholders and exercise their voting rights under their names with regard to
Shares directly owned by them. Accordingly, CDP will be the only holder on record of the Shares
held by the Tosei CDP Depositors through CDP and, accordingly, the only person or entity
recognised as a Shareholder and legally entitled to vote on any matter to be submitted to the voteof our Shareholders at a general meeting of Shareholders. Tosei CDP Depositors and Depository
Agents will not be able to attend, speak or vote at such shareholders’ meetings. Please see“Clearance and Settlement – Voting Instructions” for more information.
In the event that a take-over bid is made by a person (“Offeror”) for our Shares, each of our
Shareholders (as defined in the Japanese Companies Act and the Book Entry Act) will be entitled
to exercise their rights as Shareholders in respect of the take-over bid under the FIEA. As Tosei
CDP Depositors are not Shareholders, they will not be entitled to receive the necessary
documents, materials and instruction forms (“Offer Documents”) from the Offeror. Whilst we willcommunicate to any Offeror the fact that we are listed on the SGX-ST and that there may be Tosei
CDP Depositors who hold Shares through CDP, such an Offeror will not be within the control of
our Company and there is no assurance that the Offeror will extend the offer to Tosei CDP
Depositors by preparing the Offer Documents in English and dispatching them to Tosei CDP
Depositors.
We may experience capital market risks and our share price may be volatile.
The performance of the SGX-ST and the TSE are very much dependent on external factors suchas the performance of the regional and world bourses and the flows of foreign funds. Sentiments
are also largely driven by internal factors such as the economic and political conditions in

63Singapore and Japan as well as the growth potential of the various sectors of the economy. These
factors invariably contribute to the volatility of trading volumes witnessed on the SGX-ST and theTSE, thus adding risk to the market price of the listed securities.
In addition, the market price of our Shares may be highly volatile and could fluctuate significantly
and rapidly in response to, among other factors, some of which are beyond our control:•

variations in our results of operations;•

success or failure of our management team in implementing business and growth strategies;•

gain or loss of an important business relationship;•changes in securities analysts’ recommendations, perceptions or estimates of our financial
performance;•changes in conditions affecting the industry, the general economic conditions or stock market
sentiments or other events;•changes in market valuations and share prices of companies with similar businesses to ourCompany that may be listed on the SGX-ST or the TSE;•

additions or departures of key personnel;•

fluctuations in stock market prices and volume; or•

involvement in litigation.

Fluctuations in the exchange rate between the Singapore Dollar and the Japanese Yen may
affect the proceeds which you receive from the sale of your Shares or the dividends
distributed by us.
Investors will be able to trade our Shares on both the SGX-ST and the TSE, and investors will beable to freely purchase our Shares on one exchange for sale on another, subject to compliancewith applicable laws, rules and regulations. Please see “Clearance and Settlement” for more
information. Transactions in our Shares on the TSE are settled in Japanese Yen, while those on
the SGX-ST will be settled in Singapore Dollars. As a consequence, if you decide to purchase ourShares on one exchange and sell them subsequently on another exchange, the proceeds which
you receive from the sale of your Shares may be affected by fluctuations in the exchange rate
between the Singapore Dollar and the Japanese Yen. For instance, should you purchase ourShares on the SGX-ST (to be settled in Singapore Dollar) and sell them on the TSE (to be settled
in Japanese Yen), and you decide to convert the proceeds from the sale into Singapore Dollars,
you will be subject to the prevailing exchange rate between the Singapore Dollars and theJapanese Yen at the time you convert the proceeds from your sale of Shares into Singapore
Dollars. Any fluctuation in exchange rates of this nature may have an impact on the proceeds
which you receive from the sale of your Shares.
We will declare and pay dividends in Japanese Yen and CDP will make the necessary
arrangements to convert these dividends into Singapore Dollars for onward distribution to Tosei
CDP Depositors whose Shares are held through CDP. Any fluctuation in exchange rates of thisnature may have an impact on distribution which you receive from the dividends we have declared.
Please see “Exchange Rates and Exchange Controls” for more information.

64

We may not be able to pay dividends.
Our ability to declare dividends in relation to our Shares will depend on our Group’s future financial
performance which, in turn, depends on the successful implementation of our strategies and futureplans and on financial, competitive, regulatory, technical and other factors, general economic
conditions, and other factors specific to our industry or specific projects, many of which arebeyond our control. Further, to the extent that any dividends that we pay are converted intocurrencies other than Japanese Yen, such dividends may be subject to any foreign exchange
controls that may be in effect at the relevant time. Please see “Capitalisation and Indebtedness”
and “Exchange Rates and Exchange Controls” for more information.
Future sales of our Shares, and the availability of large amounts of the Shares for sale,
could depress the Share price.
The sale of a substantial number of our Shares or securities exchangeable or convertible into our
Shares in the public market, or the perception that such sales may occur, could adversely affectthe prevailing market price of our Shares. The sale of substantial amounts of our Shares in the
public market by any of our Shareholders could have a material adverse impact on the price of our
Shares.
Japanese laws and regulations contain provisions that could discourage a take-over of ourCompany.
As our Company is incorporated outside Singapore and does not maintain a primary listing in
Singapore, it is not subject to the provisions of the Singapore Take-over Code. A take-over bid(koukai kaitsuke) in respect of our Company will be regulated by the FIEA. Under the FIEA, if aparty intends to purchase shares of companies that are required to submit annual security reports(including listed companies) or that issue specified listed securities, this must be done by way of
a take-over bid (as described below) in the following cases (with several exceptions):(i)

If the purchase is made outside the stock exchange market (excluding the over-the-countersecurity market) and, after the purchase, the aggregate voting rights held by a purchaser
making a take-over bid (the “take-over bidder”) and certain related persons of the take-overbidder divided by the total voting rights of the target company (“Total Voting Ratio”) exceeds
5.0%. An exception applies if the aggregate number of sellers in the contemplated sharepurchase and the sellers of shares to the take-over bidder outside the stock exchange
market in the 60 days before the day the purchase is made (“Total Sellers”) equals ten or
less.

(ii)

If the purchase is made outside the stock exchange market (excluding the over-the-countersecurity market), the number of Total Sellers is 10 or less and the Total Voting Ratio exceeds
one-third after the purchase.

(iii) If the Total Voting Ratio exceeds one-third after the purchase, and the purchase is made by
the methods of purchase prescribed by the Prime Minister (including purchasing throughcertain off-floor trading methods at a stock exchange).
(iv) If, within three months:•

over 5.0% of the voting shares are purchased outside the stock exchange market(excluding the over-the-counter security market) or by the methods of purchaseprescribed by the Prime Minister mentioned above;

65

(v)

•

a total of over 10.0% of the voting shares are obtained through the purchase (including
purchases described in the preceding bullet point) or the issuance of new shares; and•the Total Voting Ratio exceeds one-third after the purchase or the issuance.

If, during the period in which another party’s take-over bid is made, a party, whose Total
Voting Ratio before the purchase exceeds one-third, purchases over 5.0% of the voting
shares.

(vi) In other specified cases set out in the relevant cabinet order.
Notwithstanding the foregoing, whether, and to what extent, a foreign shareholder of a Japanese
corporation which does not have Japan as its primary jurisdiction would be obliged to follow
additional rules, regulations and laws under the jurisdiction of Japan is not definitively stated inregulatory or statutory provisions or guidelines issued by the relevant authorities, nor is it
explained by judicial precedents. The relevant Japanese laws and regulations relating to our
Shares on the SGX-ST are complex, often ambiguous and may be subject to different
interpretations as to their applicability to foreign shareholders of our Company who only trade via
the SGX-ST. As these relevant provisions remain vague and their interpretation can involve a
degree of uncertainty, foreign shareholders of our Shares, including the Offering Shares, may
therefore be subject to additional obligations under the rules, regulations and laws of Japan,
including the take-over bid provisions described hereunder.
If a purchaser of our Shares breaches any of the provisions regarding the take-over bid asprovided by the FIEA, the purchaser might be subject to any of the following:(i)a liability to pay civil compensation;(ii)

an administrative monetary penalty; and/or(iii) criminal penalties (which, for the most serious charges, may include 10 years of
imprisonment or fines of up to JPY10 million, or both).
Please also see “Description of Share Capital – Take-overs” for more information.
Our Articles of Incorporation include a provision which may discourage a take-over of ourCompany.
Article 45 of our Articles of Incorporation allows Shareholders in general meeting to adopt,
exercise, maintain and abolish defensive takeover measures. Such defensive takeover measures
can only be put in place prior to the commencement of a takeover. If such defensive takeovermeasures are adopted by our Company, it may make our Company an unattractive proposition topotential bidders.
Measures that we can adopt include the issuing and allotting of shares or share options forpurposes other than in the ordinary course of business or fund-raising. Pursuant to our Articles ofIncorporation, we have adopted defensive takeover measures involving the gratis allotment ofshare options in 2008, and such measures were renewed in 2009 and 2012 respectively. When
deciding on measures relating to the issuance or allotment of shares or share options inconnection with a defensive takeover measure, we may put in place all or part of the following:(i)certain persons specified in the defensive takeover measures (“Non-Qualified Persons”)
shall not exercise share options;

66

(ii)

we may acquire share options only from persons other than the Non-Qualified Persons anddeliver our Company’s shares in exchange for such share options; and/or(iii) we may acquire share options from Non-Qualified Persons and deliver our shares, new shareoptions, bonds, cash or other consideration in exchange for such share options.
The Offering may not result in an active or liquid market on the SGX-ST for our Shares.
As at the date hereof, there is no public market for our Shares in Singapore. We have received
an eligibility-to-list letter from the SGX-ST to have our Shares listed and quoted on the SGX-ST.
Listing and quotation does not, however, guarantee that a trading market for our Shares on the
SGX-ST will develop or, if a market does develop, the liquidity of that market for our Shares.
Although we currently intend that our Shares will remain listed on the SGX-ST and the TSE, there
is no guarantee of the continued listing of our Shares on the SGX-ST.
The Offering Price of our Shares under the Offering will be determined following a book-building
process by agreement between the Sole Global Coordinator, Issue Manager and Underwriter andus and may not be indicative of prices that will prevail in the trading market. You may not be able
to resell our Shares at a price that is attractive to you.
The trading prices of our Shares could be subject to fluctuations in response to variations in our
results of operations, changes in general economic conditions, changes in accounting principles
or other developments affecting us, our clients or our competitors, changes in financial estimatesby securities analysts, the operating and stock price performance of other companies and otherevents or factors, many of which are beyond our control. Volatility in the price of our Shares may
be caused by factors outside of our control or may be unrelated or disproportionate to our resultsof operations. It may be difficult to assess our performance against either domestic or international
benchmarks.
The trading prices of our Shares on the SGX-ST and the TSE may differ significantly due not only
to currency fluctuations but also due to differences in market liquidity for the Shares, trading
participants and investor bases, exchange trading systems, and other factors outside of ourcontrol. There is no guarantee that the trading prices of our Shares on the SGX-ST will beequivalent of the trading prices of our Shares on the TSE.
Tosei CDP Depositors may be diluted as they may not be able to participate in any
additional equity fund-raising or rights issue.
We may require additional equity funding after the Offering and our Shareholders and Tosei CDP
Depositors may face dilution of their shareholdings should we issue new Shares to obtain such
equity funding. Furthermore, if we were to conduct a rights issue in Japan only, Tosei CDP
Depositors will not be entitled to participate in such a rights issue. Compliance with securities laws
or other regulatory provisions in Singapore may prevent us from offering such rights to Tosei CDP
Depositors without us incurring substantial additional costs (over and above any requirements wemust comply with in Japan) involved in the offering of such rights to Tosei CDP Depositors,
including having to lodge an offer information statement with the MAS. If that is the case andShares to be issued pursuant to a rights issue in Japan only were offered to our Shareholders at
a discount, Tosei CDP Depositors will face dilution of their beneficial shareholdings.

67

Negative publicity may adversely affect our Share price.
Any negative publicity or announcement involving our Group, any of our Directors, Controlling
Shareholders or key personnel may adversely affect the market perception of our Company or
performance of our Share price, whether or not this is justifiable. Such negative publicity or
announcement may include, inter alia, involvement in insolvency proceedings and failed attempts
in take-overs and joint ventures.
Control by our single large shareholder may limit the ability of Shareholders to influence
the outcome of decisions requiring approval of Shareholders.
Our Company has one Shareholder (Seiichiro Yamaguchi) with approximately 30% ownership andwho also has influence in the Company through his position as our President and CEO. Mr.
Yamaguchi also has a voting arrangement with Zeus Capital Limited, which has approximately
13% ownership (see “Shareholders and Large Volume Holders” for more information). Mr.
Yamaguchi will be able to exercise significant influence over all matters requiring the approval of
Shareholders, including the election of directors and the approval of significant corporatetransactions, the result of which may not be in, or may conflict with, the best interests ofShareholders and Tosei CDP Depositors. Such concentration of ownership may also have theeffect of delaying, preventing or deterring a change in control of which may benefit the minority
Shareholders.
Our Group may invest or spend the net proceeds of the Offering in ways with whichinvestors may not agree.
Our Group has a broad discretion in the way we invest or spend the net proceeds of the Offering.
We currently expect to use the net proceeds of the Offering (i) to partially fund the acquisition andrevitalisation of office buildings and residential properties in Japan, (ii) to partially fund theacquisition and development of land for office, residential and commercial properties in Japan,
and as (iii) co-equity investment in real-estate funds (a) where we manage the portfolio assets, or(b) which we plan to set up and manage, in Japan. However, our current intentions may notmaterialise. Due to the number and variability of factors that determine the use of the net proceedsof the Offering, the actual uses of the net proceeds from the Offering may vary substantially fromcurrent intentions as described in “Use of Proceeds”.
We are incorporated in Japan and most of our Directors and Statutory Auditors named inthis Prospectus are residents of Japan.
We are incorporated in Japan and are subject to the provisions of the Japanese Companies Act.
With the exception of Kenichi Shotoku, all of our Directors and Statutory Auditors named in thisProspectus are residents of Japan. We are not and our Directors (including Kenichi Shotoku) andStatutory Auditors are not subject to the provisions of the Singapore Companies Act and our duties
and those of our Directors and Statutory Auditors under the Japanese Companies Act differ fromthat of companies incorporated under the Singapore Companies Act.
Additionally, most of our assets and the assets of our Directors and Statutory Auditors are locatedin Japan. As a result, Tosei CDP Depositors may not be able to effect service of process of a writ
issued in Japan upon us or these persons outside Japan without leave of the Japanese Courts.
Tosei CDP Depositors may also not be able to enforce against us judgments obtained in courts
outside of Japan, unless it is a final judgment, the foreign court had jurisdiction over the subject
matter, the defendant in the proceedings in the foreign court received notice of the proceedings
in sufficient time (excluding by public notice) or has appeared before such foreign court to enable
it to defend against claims made, the cause of action on which the judgment was based is not
repugnant to the due process, natural justice or public policy of Japan and reciprocity exists

68between the jurisdiction in which the judgment was rendered and Japan in relation to theenforcement of a foreign judgment. Singapore has no reciprocal arrangement with Japan for theenforcement of judgments obtained in the Singapore courts.
Although our Shares are currently listed on the First Section of the TSE and will be listedon the SGX-ST, there is no assurance that we will remain listed on either the TSE or the
SGX-ST.
There is no assurance of the continued listing of our Shares on either or both of the TSE and the
SGX-ST. We may not be able to continue to satisfy the TSE listing requirements as well as otherrelevant rules, regulations and laws in Singapore or in Japan. Under the TSE Securities Listing
Regulations and the Japanese Companies Act, the TSE may remove our Shares from the tradingon the TSE. Our conditional eligibility-to-list on the SGX-ST is conditional upon, among otherthings, the maintenance of our primary listing on the TSE. Thus, in the event that our Shares are
removed from trading on the TSE, there is no assurance that our Shares will remain listed on the
Official List of the SGX-ST. If our Shares are suspended from quotation on, or removed fromtrading on the TSE and/or the SGX-ST, Shareholders and Tosei CDP Depositors, as the case may
be, will not be able to trade their Shares on the TSE and/or the SGX-ST and there is no assurance
that Shareholders and Tosei CDP Depositors will be entitled to compensation or an exit offer, or
should they be so entitled, that Shareholders and Tosei CDP Depositors will receive realisation for
their investments that they would have been able to obtain through trading their Shares on the
TSE or the SGX-ST. If our Shares are removed from the Official List of the SGX-ST and in theevent that there is no exit offer or that Tosei CDP Depositors choose not to accept an exit offer,Tosei CDP Depositors whose Shares are listed on the Official List of the SGX-ST may have totransfer their Shares to the TSE for disposal or trading. Please see “Clearance and Settlement”
for information on the transfer of Shares between the SGX-ST and the TSE.
Investors may face risks from the transfer of Shares for trading between the SGX-ST and
the TSE.
Investors have the option of transferring their Shares for trading between the TSE and the
SGX-ST. In addition, Tosei CDP Depositors who wish to attend our Shareholders’ meetings inperson will have to transfer their Shares in our Company to the TSE and hold such Shares in asecurities account opened with a Japanese broker or make appropriate arrangements to hold theShares directly through a JASDEC participant prior to any record date. There is no assurance thatthe transfer of Shares for trading on the different exchanges will occur in an orderly and timely
fashion. In addition, we will not have control of the transfer of Shares between the TSE and the
SGX-ST and there could be disruptions caused to the transfer by a number of factors, including
temporary disruptions to trading and technical difficulties. The transfer of shares between the TSE
and the SGX-ST may take several days (see “Clearance and Settlement” for more information).
During such a period, investors may not be able to trade their Shares. Furthermore, investors may
incur additional costs (including transfer fees and stamp duty) in the transferring Shares between
the TSE and the SGX-ST.
Tosei CDP Depositors may be subject to additional obligations under the rules, regulations
and laws of Japan and there are uncertainties and ambiguities as to what these additional
obligations are.
Among other things, the following requirements or regulations may apply to Tosei CDP Depositors:•

takeover regulations and certain trading regulations including insider trading regulations
under the FIEA;•

notification requirement prior to the acquisition of shares under the Anti-Monopoly Act;69

•filing requirement of large shareholding report and sale-purchase report and short-swing
regulation for Major Shareholders under the FIEA;•

certain reporting requirements under the Foreign Exchange Act; and•certain requirements regarding taxation under the Income Tax Act, the Corporation Tax Act
and Local Taxes Act with respect to the Implementation of Tax Treaties.

Please see “Description of Share Capital”, “Shareholding Reporting Obligations” and “Taxation”
for more information.
CDP is not required to comply with such filing, tax reporting and/or disclosure of interest
obligations as set out above or any other applicable additional obligations on behalf of the Tosei
CDP Depositors and the Tosei CDP Depositors should obtain independent professional advice inorder to comply with the filing, tax reporting, disclosure of interest or other obligations under thethen applicable Japanese law. However, whether and to what extent, a foreign shareholder of aJapanese corporation would be obliged to follow additional rules, regulations and laws of Japanare not definitively stated in regulatory or statutory provisions or guidelines issued by the relevant
authorities, nor are they resolved by judicial precedents. The relevant laws and regulations
relating to the Shares are complex, often ambiguous and may be subject to different
interpretations. As the relevant provisions remain vague and their interpretation can involve a
degree of uncertainty, Tosei CDP Depositors may therefore be subject to additional obligations
under the rules, regulations and laws of Japan.

70

USE OF PROCEEDS
Based on the Maximum Offering Price of S$[●] per Offering Share, we estimate that the aggregate
net proceeds we will receive from the Offering will be approximately S$[●] million, after deducting
underwriting commissions and other estimated transaction and issue expenses payable in relation
to the Offering of approximately S$[●] million.
USE OF PROCEEDS
We intend to use the net proceeds for the following purposes:•

approximately S$[●] million (based on the Maximum Offering Price) or [●] cents for eachdollar of the net proceeds from the Offering will be used to partially fund the acquisition andrevitalisation of office buildings and residential properties in Japan;•

approximately S$[●] million (based on the Maximum Offering Price) or [●] cents for eachdollar of the net proceeds from the Offering will be used to partially fund the acquisition anddevelopment of land for office, residential and commercial properties in Japan;•

approximately S$[●] million (based on the Maximum Offering Price) or [●] cents for eachdollar of the net proceeds from the Offering will be used as co-equity investment inreal-estate funds (a) where we manage the portfolio assets, or (b) which we plan to set up
and manage, in Japan.

Whilst we have not earmarked any amount of the net proceeds from the Offering to be used forany specific acquisition, building or expansion plans, the foregoing represents the best estimateof our allocation of the net proceeds we will receive from the Offering based upon the Maximum
Offering Price and our current plans and estimates in relation to our anticipated expenditures.
Actual expenditures may vary from these estimates and we may re-allocate the net proceeds fromthe Offering within the categories described above or use portions of the net proceeds from theOffering for other purposes. When the net proceeds from the Offering are materially disbursed orin the event that we decide to re-allocate the net proceeds from the Offering or use portions of the
net proceeds from the Offering for other purposes, we will make an announcement through
SGXNET and TDNet. Such announcements will be posted on the Internet at the SGX-ST website(http://www.sgx.com) and the TSE website (http://www.tse.or.jp) respectively.
Pending the deployment of the net proceeds as aforesaid, we may place the funds in fixeddeposits with banks and financial institutions or use the funds for investment in short-term money
market instruments, as our Directors may deem appropriate in their absolute discretion. In thereasonable opinion of our Directors, there is no minimum amount that we must raise in theOffering.

71

ISSUE EXPENSES
The estimated amount of the expenses (based on the Maximum Offering Price) payable inconnection with the Offering and the application for listing, including the underwriting, placement
and management commission, professional and other fees and all other incidental expenses
relating to the Offering (to be borne by our Company) will be approximately S$[●] million. A
breakdown of these estimated expenses is as follows (1):(S$ million)

As apercentage of thegross proceeds

Professional and other fees (2) . . . . . . . . . . . . . . . . . . . . .

[●]

[●]

Underwriting, placement and management
commission (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[●]

[●]

Miscellaneous Offering expenses (4) . . . . . . . . . . . . . . . . .

[●]

[●]

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

[●]

[●]

Estimated Expenses (based on
the Maximum Offering Price)Notes:(1)

Amounts include GST, where applicable.

(2)

Includes legal advisers’ fees and fees for the Independent Auditor and other professionals’ fees.

(3)

The final underwriting and placement commission actually payable in connection with the Offering will be [●]% of the
TSE Market Price per Offering Share.

(4)

Includes cost of prospectus production, road show and other marketing expenses and certain other expenses
incurred or to be incurred in connection with the Offering.

72

DILUTION
The NAV per Share as at 31 August 2012 based on the pre-Offering issued share capital of ourCompany of 456,840 Shares was S$889.39.
Based on the issue of [●] Offering Shares at the Maximum Offering Price of S$[●] per Offering
Share and after deducting the estimated issue expenses to be paid by our Company in relation to
the Offering, the adjusted NAV of our Group as at 31 August 2012 would have been S$[●] per
Share based on the post-Offering issued share capital of [●] Shares. This represents an immediate
decrease in NAV of S$[●] per Share to our existing Shareholders and an immediate increase in
NAV of S$[●] per Share to investors subscribing for the Offering Shares at the Maximum Offering
Price. The following table illustrates such increase on a per Share basis:
S$
Issue Price[●]

NAV of our Group per Share before the Offering based on the pre-Offering
share capital of 456,840 Shares (as at 31 August 2012)

889.39Decrease in NAV per Share pursuant to the Offering attributable toexisting Shareholders[●]

NAV per Share based after the Offering based on the post-Offering sharecapital of [●] Shares and as adjusted for the estimated net proceeds of theOffering Shares[●]

Increase in NAV per Share to new investors[●]

We have not issued any Shares to our Directors, Statutory Auditors or their associates during theperiod of three years prior to the date of lodgment of this Prospectus and to the best of ourknowledge, none of our Directors, Statutory Auditors or their associates have acquired any Sharesin the three years prior to the date of this Prospectus.
As our Company has no knowledge of the price at which our Large Volume Holders (except
Directors, Statutory Auditors or their associates who are Large Volume Holders) have acquired ourShares in the three years prior to the date of lodgment of this Prospectus, if any, we are unable
to provide a comparison of the price to be paid by public shareholders under pursuant to Offeringand the price paid by such Large Volume Holder, in the three years prior to the date of lodgmentof this Prospectus, if any.

73

DIVIDEND POLICYStatements contained in this “Dividend Policy” section that are not historical facts are forwardlooking statements. Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially from those which may be forecasted and projected. Underno circumstances should the inclusion of such information herein be regarded as a representation,
warranty or prediction with respect to the accuracy of the underlying assumptions by us, the Sole
Global Coordinator, Issue Manager and Underwriter or any other person. Investors are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the datehereof. Please see “Cautionary Note Regarding Forward-looking Statements” for more
information.
In accordance with the Japanese Companies Act and our Articles of Incorporation, through a
resolution of our Shareholders in general meeting, we may declare dividends to our Shareholders(as of the record date of 30 November each year) subject to a limit equal to the Distributable
Amount (as defined herein) then existing. Our Articles of Incorporation further provide that we may
distribute half-yearly interim dividends (subject to a limit equal to the Distributable Amount) to
Shareholders by a resolution of our Board of Directors (as of the record date of 31 May each year).
As set out in our Articles of Incorporation, the record date to determine dividend entitlement is 30
November for full-year dividends and 31 May for half-yearly interim dividends.
Pursuant to the Japanese Companies Act and the relevant Ordinance of the Ministry of Justice ofJapan, our Company’s distributable amount is calculated based on the retained earnings (joyo kin)recorded in our Company’s non-consolidated financial statements prepared in accordance with
JGAAP (rather than IFRS) with certain adjustments (including the deduction of the book value ofany treasury Shares held by our Company) (“Distributable Amount”). If dividends are declaredby our Company while we do not have a Distributable Amount, our Directors and others
responsible for the payment of the dividend are under an obligation to reimburse our Company forthe amount paid out as dividend, unless such person proves that he was not negligent in carrying
out his duties.
Cash dividends on our Shares, if any, will be paid in Japanese Yen. CDP, as Shareholder, will also
receive dividends in Japanese Yen. CDP will make the necessary arrangements to pay Tosei CDP
Depositors dividends in Singapore Dollars. As a result, Tosei CDP Depositors may receive theirdividends later than Shareholders. The equivalent of any dividends in Singapore Dollars will also
be affected by changes in the exchange rate between the Japanese Yen and the Singapore Dollar.
Neither our Company nor CDP will be liable for any loss whatsoever arising from the conversionof the dividend entitlement of Tosei CDP Depositors holding their Shares through CDP fromJapanese Yen into the Singapore Dollar equivalent.
Other distributions, if any, will be paid to our Shareholders by any means which our Directors
consider legal, fair and practicable. Dividends paid by our Company to our Shareholders (otherthan Shareholders holding 3% or greater of our Shares) who are non-resident individuals of Japanor that are non-Japanese corporations without a permanent establishment in Japan weregenerally subject to a withholding tax in Japan of 7.0% until 31 December 2012. From 1 January
2013 until 31 December 2037, dividends payable to a beneficial owner of shares who is a
non-resident individual of Japan or non-Japanese corporation without a permanent establishment
in Japan are subject to a Special Measures Tax for Reconstruction and the withholding tax rate willbe 7.147%. We are required by Japanese law to withhold such tax prior to payment of dividends.
Please see “Taxation” for further details.

74

We had declared and paid dividends in the amount of ¥500 per Share in respect of each of
FY2009, FY2010 and FY2011. We have announced a dividend of ¥600 per Share in respect of
FY2012, with such dividend subject to the approval of our Shareholders at our AGM on 26
February 2013. For the avoidance of doubt, investors subscribing for the Offering Shares will not
be entitled to a dividend in respect of FY2012 as the record date for determining the dividend
entitlement for FY2012 was 30 November 2012.
There is no assurance that dividends of any amount will be declared or distributed in any year,
whether by way of interim or final dividends. In making their recommendations, our Directors willconsider, inter alia, the factors outlined below as well as any other factors deemed relevant by our
Board:(a)the level of our cash and retained earnings;(b)

our actual and projected financial performance;(c)our projected levels of capital expenditure and other investment plans; and(d)the prevailing and projected market conditions and business environment.

The following table shows the dividends we have declared and paid in respect of each of FY2009,
FY2010 and FY2011:
Cash Dividend(JPY per share)

Total Dividend(JPY million)

FY2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

500

197.92FY2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

500

228.42FY2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

500

228.42

PeriodYou should note that all the foregoing statements (being non-legally binding statements)
are merely statements of our present intention and shall not constitute legally binding
statements in respect of our Company’s future dividends, which may be subject tomodification (including reduction or non-declaration thereof) in the sole and absolute
discretion of our Board.
No inference should or can be made from any of the foregoing statements as to ourCompany’s actual future profitability or our Company’s ability to pay dividends in any ofthe periods discussed.

75

MARKET PRICE INFORMATIONOur Company is currently listed on the First Section of the TSE. The following table below shows
certain pricing and trading volume information for our Shares on the TSE for the three most recent
completed financial years and for each of the last six months prior to the Latest Practicable Date.
No inference should or can be made from any of the information below as to our actual share priceperformance or movement of our Shares. There can be no assurance that the market price of our
Shares following the close of the Offering will attain a price which is higher or lower than the rangeof prices set forth below or a price which is within such range.
Average Daily
Trading Volume(Number of Shares) (1)High (1)Low (1)(¥)(¥)

FY201044,70018,6102,543

FY2011

43,00018,0202,233

FY201237,65018,8002,760

July 2012

33,90028,4001,713

August 2012

30,70026,6101,106

September 2012

27,89023,5803,260

October 2012

31,90026,0602,659

November 2012

37,65029,7006,196

December 2012

54,40036,8007,863January 2013

72,90049,00011,366

PeriodNote:(1)Source: Bloomberg L.P..
Bloomberg L.P. has not provided its consent, for the purposes of Section 249 of the Securities and Futures Act, tothe inclusion of the exchange rates quoted under this section and is therefore not liable for such information under
Sections 253 and 254 of the Securities and Futures Act. Our Company has included the above information in its
proper form and context in this Prospectus and has not verified the accuracy of the above information.

High (1)Low (1)(¥)(¥)

1Q201029,70018,6102Q201044,70022,2403Q201038,00026,5104Q201032,95026,540

1Q2011

43,00032,1002Q2011

39,85023,6603Q2011

29,00019,8104Q2011

23,49018,020

1Q2012

28,98018,8002Q201234,50024,1003Q201233,90024,0704Q201237,65023,580Period76

Note:(1)

Source: Bloomberg L.P..
Bloomberg L.P. has not provided its consent, for the purposes of Section 249 of the Securities and Futures Act, tothe inclusion of the exchange rates quoted under this section and is therefore not liable for such information under
Sections 253 and 254 of the Securities and Futures Act. Our Company has included the above information in its
proper form and context in this Prospectus and has not verified the accuracy of the above information.

The closing price of our Shares on the TSE as of the Latest Practicable Date was JPY68,500 1.
The closing price of our Shares on the TSE on [●] 2013, being the last trading day before the dateof this Prospectus was JPY[●].
There has been no significant trading suspension that has occurred on the TSE from the date of
our listing on the TSE to the Latest Practicable Date. Our Shares have been regularly traded on
the TSE.

1

The Latest Practicable Date was a public holiday in Japan. Accordingly, the closing price was that of the last trading
day prior to the Latest Practicable Date, being 8 February 2013.

77

EXCHANGE RATES AND EXCHANGE CONTROLSEXCHANGE RATESThe following table below shows the high, low, average and period-end exchange rates between
Singapore Dollar and Japanese Yen (in JPY per Singapore Dollar) as announced by the
Bloomberg L.P.. These exchange rates have been presented for solely for information only. We do
not make any representations that the Japanese Yen or Singapore Dollar amounts set forth below
and referred to elsewhere in this Prospectus could have been or could be converted into any of
the respective other currencies at the rate indicated or at any other rate or at all.
Japanese Yen per Singapore Dollar (1)HighestLowestJuly 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63.37

61.80

August 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63.65

62.46

September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64.77

62.55

October 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65.88

63.24

November 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67.78

64.52

December 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71.06

67.13

January 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74.17

70.47

February 2013 (through to the Latest Practicable Date) . . . .

76.11

73.92

Average

Closing

FY2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64.33

63.38

FY2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63.74

60.56

FY2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63.42

67.59

1Q2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61.60

64.83

2Q2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63.72

60.77

3Q2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62.88

62.83

4Q2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65.48

67.59

9M2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62.73

62.83

Note:
(1)

Source: Bloomberg L.P..
Bloomberg L.P. has not provided its consent, for the purposes of Section 249 of the Securities and Futures Act, tothe inclusion of the exchange rates quoted under this section and is therefore not liable for such information under
Sections 253 and 254 of the Securities and Futures Act. Our Company has included the above information in its
proper form and context in this Prospectus and has not verified the accuracy of the above information.

On the Latest Practicable Date, the closing rate of the Japanese Yen per Singapore Dollar was
JPY75.96.
Fluctuations in the exchange rate between the Singapore Dollar and the Japanese Yen will affect
the Japanese Yen equivalent of the Singapore Dollar price of our Shares on the SGX-ST and theJapanese Yen value of the cash dividends paid by us in Singapore Dollar.

78

EXCHANGE CONTROLSJapan
The Foreign Exchange Act governs certain matters relating to the issuance of equity-related
securities by us and the acquisition and holding of shares of common stock by “exchange
non-residents” and by “foreign investors” as hereinafter defined.
“Exchange non-residents” are defined under the Foreign Exchange Act as individuals who are
not resident in Japan and corporations whose principal offices are located outside Japan.
Generally branches and other offices of Japanese corporations located outside Japan are
regarded as exchange non-residents, but branches and other offices located within Japan of
non-resident corporations are regarded as residents of Japan. “Foreign investors” are defined tobe (i) individuals not resident in Japan, (ii) corporations which are organised under the laws offoreign countries or whose principal offices are located outside Japan and (iii) corporations ofwhich (a) 50% or more of the shares are held directly or indirectly by (i) and/or (ii) above, (b) amajority of officers consists of non-resident individuals or (c) a majority of the officers having thepower of representation consists of non-resident individuals. Under the Foreign Exchange Act,
dividends paid on, and the proceeds of sales in Japan of, shares held by exchange non-residents
in general may be converted into any foreign currency and repatriated abroad.
Under the Foreign Exchange Act, an acquisition of shares of a Japanese company listed on any
Japanese stock exchange or traded on the over-the-counter market in Japan, or the listed shares,
by an exchange non-resident from a resident of Japan is generally not subject to a prior filing
requirement.
In the case of a foreign investor acquiring listed shares (whether from a resident of Japan or an
exchange non-resident, from another foreign investor or from or through a designated securities
company) and as a result of such acquisition the number of shares held directly or indirectly bysuch foreign investor (including shares held by persons who agree to act in concert with suchforeign investor in connection with the exercise of shareholders’ rights) would become 10% ormore of our total issued shares, such acquisition constitutes a direct inward investment and theforeign investor is required to make a subsequent report on such acquisition to the Minister ofFinance and other Ministers having jurisdiction over the business of the subject company, or to thecompetent ministers by the 15th day of the month following the month containing the date ofacquisition. If a foreign investor has failed to make a subsequent report or makes a false
subsequent report, the foreign investor shall be punished by imprisonment for not more than 6months or a fine of not more than ¥500,000. Also, in the case of a company, if the representative
person of the company such as a director, or an agent, employee, or other worker of the company
has failed to make a subsequent report or makes a false subsequent report with regard to thebusiness or property of the company, the offender shall be punished by imprisonment for not morethan 6 months or by a fine of not more than ¥500,000, and the company is liable to be punishedby a fine of not more than ¥500,000. In certain exceptional cases, a prior filing is required and thecompetent ministers may recommend the modification or abandonment of the proposed
acquisition and, if the foreign investor does not accept the recommendation, order its modificationor prohibition. If a foreign investor, without the prior filing, has made a share acquisition or priorfiling containing a misstatement, the foreign investor shall be punished by imprisonment for not
more than three years or by a fine of not more than ¥1 million, or both. Also, in the case of acompany, if the representative person of the company such as a director, or an agent, employee,or other worker of the company, without the prior filing, has made a share acquisition or prior filingcontaining a misstatement with regard to the business or property of the company, the offendershall be punished by imprisonment for not more than three years or by a fine of not more than ¥1
million, or both, and the company is liable to be punished by a fine of not more than ¥1 million.
Singapore
There are no exchange control restrictions in Singapore.
79

CAPITALISATION AND INDEBTEDNESSThe following table shows the cash and cash equivalents as well as capitalisation andindebtedness of our Group as at 31 December 2012, based on our unaudited management
accounts:(a)on an actual basis; and(b)

as adjusted to give effect to the issue of [●] Offering Shares pursuant to the Offering and theapplication of net proceeds (1) from the Offering.
Unaudited
As at 31 December 2012

ActualAs adjusted for the
net proceeds fromthe Offering(JPY’000)(JPY’000)(S$000)10,619,906

[●]

[●]

7,125,449

[●]

[●]

Nil

Nil

Nil

64,130

[●]

[●]

Nil

Nil

Nil

22,586,859

[●]

[●]

Nil

Nil

Nil

40,840

[●]

[●]

Nil

Nil

Nil

Total Indebtedness

29,817,278

[●]

[●]

SHAREHOLDERS’ EQUITY

27,258,704

[●]

[●]

TOTAL CAPITALISATION AND
INDEBTEDNESS

57,075,982

[●]

[●]

CASH AND CASH EQUIVALENTSINDEBTEDNESS
Short-term indebtedness−

secured (2) and non-guaranteed−

secured and guaranteed−

unsecured and non-guaranteed−

unsecured and guaranteed

Long-term indebtedness−

secured (2) and non-guaranteed−

secured and guaranteed−

unsecured and non-guaranteed−

unsecured and guaranteed

Notes:(1)

The net proceeds from the Offering were translated based on the closing exchange rate of S$1.00:¥75.96 as at theLatest Practicable Date.

(2)

These are secured by way of mortgages and charges on our properties and/or projects, as the case may be.

As at 31 December 2012, our cash and cash equivalents amounted to approximately JPY10,619.9
million, of which approximately JPY230.2 million was placed as short term bank deposits.
As at 31 December 2012, our Group had outstanding borrowings of JPY29,817.2 million. Whilenone of the loan agreements we have entered into have conditions directly restricting changes incontrol of our Company, some of these loan agreements contain conditions which place certain
restrictions on our corporate actions and financial performance and this may include: (i)restrictions on our ability to undertake corporate restructurings or business transfers (which may
or may not be accompanied by a change of control), and (ii) the requirement to maintain our
80operating profits and net assets at a certain level. To the best of our Directors’ knowledge, we are
not in breach of any of the terms and conditions or covenants associated with any credit
arrangement or bank loan which could materially affect our financial position and results orbusiness operations, or the investments of our Shareholders. We may also, from time to time,
seek to re-finance our current indebtedness. Whilst we have never faced difficulties re-financing
our indebtedness with our existing providers and new providers, there is no assurance that we willcontinue to be able to re-finance our indebtedness (see also “Risk Factors – Risks Relating to ourBusiness – We are dependent on obtaining adequate and suitable financing to fund ouroperations” for more information).
From 31 December 2012 to the date of this Prospectus, there have been no material changes in
our total capitalisation and indebtedness, save for changes in our retained profits and cash andcash equivalents arising from our day-to-day operations in the ordinary course of business.
As at the Latest Practicable Date, we do not have any material capital commitments, operatinglease commitments or finance lease commitments.
As at the Latest Practicable Date, we do not have any material contingent liabilities.

81

SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables present our selected consolidated financial information as at and for FY2009,
FY2010, FY2011, 9M2011 and 9M2012. The selected consolidated financial information as at andfor FY2009, FY2010, FY2011, 9M2011 and 9M2012 should be read in conjunction with Appendix
A – “Independent Auditor’s Report on the Consolidated Financial Statements of Tosei Corporation
And Its Subsidiaries for the Financial Years Ended 30 November 2009, 2010 and 2011”, Appendix
B – “Independent Auditor’s Report on the Consolidated Financial Statements of Tosei Corporation
And Its Subsidiaries For the Six-Month Period Ended 31 May 2012” and Appendix C –“Independent Auditor’s Report on the Unaudited Consolidated Financial Statements of Tosei
Corporation And Its Subsidiaries For the Three-Month and Nine-Month Periods Ended 31 August
2012”. Our consolidated financial statements for FY2009, FY2010, FY2011, 9M2011 and 9M2012
have been prepared in accordance with IFRS.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FY2009FY2010FY2011

9M2011

9M2012(¥’000)(¥’000)(¥’000)(¥’000)(¥’000)

Revenue . . . . . . . . . . . . . . . . . . . .

33,622,879

26,439,782

24,760,909

16,210,821

14,765,693

Cost of revenue . . . . . . . . . . . . . . . .

(28,983,821)(22,367,548)(19,580,688)(11,996,175)(11,234,764)

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

4,639,058

4,072,234

5,180,221

4,214,646

3,530,929

Other income . . . . . . . . . . . . . . . . .

75,566

28,79262,65525,22016,858Other losses – net . . . . . . . . . . . . . .

(322,286)(3,503)(17,155)–(21,181)− Administrative . . . . . . . . . . . . . . . .

(2,656,989)(2,682,504)(2,937,343)(2,146,466)(2,276,710)− Finance. . . . . . . . . . . . . . . . . . . .

(805,826)(826,734)(778,868)(590,733)(473,146)

Expenses . . . . . . . . . . . . . . . . . . . .

Profit before income tax . . . . . . . . . . .

929,523588,285

1,509,510

1,502,667

776,750

Income tax expense . . . . . . . . . . . . .

(450,514)(280,584)(769,243)(646,631)(328,519)

Net profit . . . . . . . . . . . . . . . . . . .

479,009

307,701

740,267

856,036448,231− Fair value (losses)/gains . . . . . . . . .

(1,183)

1,162(3,143)(1,186)618

Currency translation differences arisingfrom consolidation . . . . . . . . . . . . . .

–

–

–

–

52

Other comprehensive (losses)/income,net of tax . . . . . . . . . . . . . . . . . . . .

(1,183)

1,162(3,143)(1,186)670

Total comprehensive income . . . . . .

477,826

308,863

737,124

854,850448,901

479,009

307,701

740,267

856,036448,231477,826

308,863

737,124

854,850448,901

1,262.82

711.31

1,620.41

1,873.82

981.15

Other comprehensive(losses)/income:Available-for-sale financial assets

Profit attributable to:Equity holders of the Company . . . . . .
Total comprehensive income
attributable to:Equity holders of the Company . . . . . .
Earnings per share attributable toequity holders of the Company(¥ per share)− Basic and diluted. . . . . . . . . . . . . .

82

CONSOLIDATED BALANCE SHEETS
As at
30 November
2011

As at
31 August2012(¥’000)(¥’000)8,381,689
17,805
10,0001,205,353
33,967,938
2,335

6,541,823
17,89010,0002,386,408
36,877,367
1,880

43,585,120

45,835,368

369,867
125,635
11,378,055
3,341,262
66,8568,380
1,724,661

391,160
172,179
11,714,742
3,331,802
48,5198,380
1,402,624

17,014,716

17,069,406

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

60,599,836

62,904,774

LIABILITIESCurrent liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,517,703
81,331
6,171,720

2,438,105
72,0036,614,864

8,770,754

9,124,972

1,835,279
23,900,745
280,380
504,727

2,112,596
25,413,598
192,711532,465

26,521,131

28,251,370

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

35,291,885

37,376,342

NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,307,951

25,528,432

EQUITY
Capital and reserve attributable to equity holdersof the Company
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,454,673
14,339,149
5,514,129

5,454,673
14,558,960
5,514,799

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,307,951

25,528,432

ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets, at fair value through profit or loss . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current assets
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . .
Investment properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefits obligations . . . . . . . . . . . . . . . . . . . . . . .

83

CONSOLIDATED STATEMENTS OF CASH FLOWS
FY2009FY2010FY2011

9M2011

9M2012(¥’000)(¥’000)(¥’000)(¥’000)(¥’000)479,009

307,701

740,267

856,036448,231450,514
175,370–

280,584
156,141–

769,243
172,284
16,977646,631
127,447–

328,519
133,043
–

456

–

–

–

–

(308)

(1,184)–––41,700

4,687

178

–

2,307

–
(14,610)(2,832)805,826––(9,612)(2,814)
826,734––(2,796)(2,861)
778,868––(2,600)(2,217)590,733–

18,874(1,514)(2,217)473,14652

1,935,125

1,562,237

2,472,160

2,216,030

1,400,441

15,050,168
331,469(1,594,447)
109,4693,594,789(248,546)

750,119(58,876)(3,453,385)(1,225,236)

92
167
330,000(903,757)
34,40249(348)(286,136)(678,678)
53,607(3,185)(662)
286,136
1,014,322
41,774(17,890)(27)–
774,180
28,735(85)455–
202,398
27,738Cash generated from/(used in) operations.
Interest received. . . . . . . . . . . . . . . . . .
Dividend received . . . . . . . . . . . . . . . . .
Income tax paid . . . . . . . . . . . . . . . . . .

16,777,666
15,0392,832(3,185,010)(834,247)
10,3332,814(46,933)

7,156,788
2,063
2,861
(27,521)

3,692,271
1,875
2,217
(36,198)(3,047,674)
1,514
2,217
(104,154)

Net cash provided by/(used in)operating activities . . . . . . . . . . . . . . .

13,610,527(868,033)

7,134,191

3,660,165(3,148,097)(29,653)(20,275)(1,766)(14,055)(8,895)(3,579)(22,704)(45,623)(37,016)(20,195)(39,642)(34,984)(21,438)(107,110)(4,280)

(20)
3,480

–
–

(333,350)–(133,350)–(20,000)
–

709
–

4,948
–

–
–

–
–

–
216,967(47,525)(21,581)(438,693)(228,171)64,139Cash flows from financing activities
Proceeds from issuing of
ordinary shares . . . . . . . . . . . . . . . . . .
Proceeds from borrowings . . . . . . . . . . .
Repayment of borrowings. . . . . . . . . . . .
Repayment of lease liabilities . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . .
Dividends paid to equity holders of
the Company . . . . . . . . . . . . . . . . . . . .

625,843
1,965,814––
9,230,000 17,099,900 11,474,100
5,942,000(21,566,988) (18,129,820) (15,661,378) (8,688,866)(559)(1,569)(1,567)(1,174)(833,513)(820,646)(774,726)(635,777)–
11,806,000(9,852,537)(930)(480,021)(376,840)(197,920)

Net cash used in financing activities . .

(12,922,057)

Net increase/(decrease) in cash andcash equivalents . . . . . . . . . . . . . . . . .

640,945

Cash flows from operating activities
Net profit. . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:− Income tax expense . . . . . . . . . . . . . .
− Amortisation and depreciation . . . . . . .
− Impairment loss on membership . . . . . .
− Impairment loss on available-for-salefinancial assets . . . . . . . . . . . . . . . . .
− Net gain on disposal of available-forsale financial assets . . . . . . . . . . . . . .
− Write off of property, plant andequipment . . . . . . . . . . . . . . . . . . . .
− Loss on disposal of investment
properties . . . . . . . . . . . . . . . . . . . . .
− Interest income . . . . . . . . . . . . . . . . .
− Dividend income . . . . . . . . . . . . . . . .
− Interest expense . . . . . . . . . . . . . . . .
− Unrealised currency translation losses . .
Change in working capital:− Inventories . . . . . . . . . . . . . . . . . . . .
− Trade and other receivables . . . . . . . .
− Financial assets, at fair value throughprofit or loss . . . . . . . . . . . . . . . . . . .
− Other assets . . . . . . . . . . . . . . . . . . .
− Cash restricted in use over 3 months . .
− Trade and other payables . . . . . . . . . .
− Retirement benefits obligations. . . . . . .

Cash flows from investing activities
Additions to property, plant andequipment . . . . . . . . . . . . . . . . . . . . . .
Additions to investment properties . . . . . .
Additions of intangible assets . . . . . . . . .
Purchases of available-for-salefinancial assets . . . . . . . . . . . . . . . . . .
Disposal of property, plant and equipment.
Disposal of available-for-salefinancial assets . . . . . . . . . . . . . . . . . .
Disposal of investment properties . . . . . .
Net cash used in investing activities. . .

(228,420)(228,420)(228,420)(84,241)(5,191,991) (3,612,237)

1,244,092(973,855)

1,503,507(180,243)(1,839,866)

Cash and cash equivalents
Beginning of financial year/period . . . . . .

7,191,092

7,832,037

6,858,182

6,858,182

8,361,689

End of financial year/period . . . . . . . . .

7,832,037

6,858,182

8,361,689

6,677,939

6,521,823

84

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Unless otherwise stated, the following discussion has been based on, and should be read in
conjunction with Appendix A – “Independent Auditor’s Report on the Consolidated Financial
Statements of Tosei Corporation And Its Subsidiaries for the Financial Years Ended 30 November
2009, 2010 and 2011”, Appendix B – “Independent Auditor’s Report on the Consolidated Financial
Statements of Tosei Corporation And Its Subsidiaries For the Six-Month Period Ended 31 May
2012” and Appendix C – “Independent Auditor’s Report on the Unaudited Consolidated Financial
Statements of Tosei Corporation And Its Subsidiaries For the Three-Month and Nine-Month
Periods Ended 31 August 2012”, together with the related notes thereto, all of which are included
elsewhere in this Prospectus. Interim results referred to in this discussion are not indicative of ourfull year results. This discussion contains forward-looking statements that involve risks anduncertainties. Our actual results may differ significantly from those projected in the forwardlooking statements. Factors that might cause future results to differ significantly from thoseprojected in the forward-looking statements include, but are not limited to, those discussed below
and elsewhere in this Prospectus, particularly in “Risk Factors” of this Prospectus.
Under no circumstances should the inclusion of such forward-looking statements herein be
regarded as a representation, warranty or prediction with respect to the accuracy of the underlying
assumptions by our Directors, Statutory Auditors, our Company, our Group and the Sole Global
Coordinator, Issue Manager and Underwriter or any other person. Investors are cautioned not toplace undue reliance on these forward-looking statements that speak only as of the date hereof.
See “Cautionary Note Regarding Forward-looking Statements”.
OVERVIEW
We are a real estate company with diversified businesses as follows:(a)

Revitalisation business
Our Group acquires office buildings, commercial facilities, rental condominiums and otherproperties of a certain age profile and whose asset value has declined, primarily in the 23
wards of Tokyo.
We focus on quality and detail in order to enhance the value of original and distinctive
properties. In addition, we implement redevelopment plans matched to the local
characteristics and needs to restore the asset values of these properties. By tailoring ourrevitalisation of aging properties to fit the local area’s characteristics and needs and profilesof tenants, we increase the value of such properties before we resell them to investors, realestate funds, and individual end-users.
In 2009, we implemented a new “Restyling” business model as an arm of our revitalisation
business. We usually sell our revitalised projects to purchasers as a whole building, while wesell the subdivided units in the “Restyling” business. Our “Restyling” business also only
targets condominiums, while our revitalisation projects generally include condominiums andoffice buildings. As part of the “Restyling” process, we also set up property management
associations and formulate maintenance and repair guidelines for ongoing maintenancepurposes.

85

(b)

Development businessWe develop office, commercial and residential properties with a focus on the 23 wards ofTokyo. We develop our commercial properties under our “T’S BRIGHTIA” brand while ourresidential properties are developed under our “THE Palms” and “Palms Court” brands forcondominiums and single-family dwellings respectively.

(c)

Rental businessWe own office buildings, residential and commercial properties primarily in the 23 wards ofTokyo. Our rental properties are office buildings and condominiums typically in inner Tokyoand are all under our direct management. Our rental business consists primarily leasing out
properties that have been treated as investment assets which we intend to retain for the longterm for the purpose of leasing. Our expertise in our other business segments, especiallyrevitalisation, “Restyling”, development and property management enables us to offer
comprehensive services and maintain or raise property value whilst contributing to acomfortable and convenient living and business environment.

(d)Fund business
Our fund business has two components. Whilst we structure and manage private real-estate
funds as an asset manager, we also provide asset management services and brokerage
services to private investors and other fund managers wherein we source for real estate
suited to their needs. In addition, we also provide asset management services and brokerage
services for real estate invested in or owned by our clients. From time to time, we also
co-invest with our clients.

(e)

Property management businessWe offer comprehensive property management services, including administration, facility
management, cleaning and security for condominium complexes and office buildings andfacilities. We also undertake utilities repair work for exclusive areas in condominium
complexes and office buildings, and undertake interior renovation contracting for officeproperties. In addition, we manage and maintain certain properties sold by our revitalisationand development businesses, properties rented out by our rental business and real estate
assets held by funds that use our real estate asset management services.

(f)

Alternative investment businessOur alternative investment business invests in non-performing loans collateralised by realestate (including mortgage-backed loans). Additionally, we also acquire properties throughmergers and acquisitions of companies with real estate assets.

Our business activities and operations are primarily in Japan and our revenues are denominatedprincipally in JPY.
FACTORS AFFECTING OUR RESULTS OF OPERATION
Our results of operation are affected by many factors, including the following:(a)the state of the economy in Japan, as well as the global economy in general. A strong andgrowing economy will generally lead to growth in the property market;(b)changes in government legislation, regulations or policies, budget and expenditure which
may directly or indirectly affect the property market in Japan;
86

(c)

our ability to complete our real estate development projects as scheduled;(d)our ability to continually acquire properties and secure customers. The demand for our
products and services is mainly influenced by, amongst other factors, property vacancy
rates, selling prices or rental rates, the prevailing interest rate environment, quality andtimely completion of the developments;(e)the timing of project launches and the progress of our real estate development projects;(f)the occurrence of natural disasters such as an earthquake, terrorist attack or other casualty
event in Japan;(g)our ability to compete with our competitors;(h)our ability to cope with fluctuations in the sub-contracting costs of construction, material andequipment and other construction work;(i)the fluctuation in the prices of the land and properties;(j)the sub-contracting and outsourcing costs; and(k)the fluctuation in the market valuation of properties.

Please see “Risk Factors” for an in-depth discussion of other factors which may affect ourbusiness operations, revenue and financial performance of our business segments describedabove.
Revenue
The breakdown of our revenue, gross profit and gross margin by business segments for FY2009,
FY2010, FY2011, 9M2011 and 9M2012 is set out below:
FY2009¥’000
Revenue
Revitalisation . . . 9,962,365
Development . . . 16,556,368
Rental . . . . . . .
Fund . . . . . . . .
Property
management . . .
Alternative
investment . . . . .

FY2010%¥’000

FY2011%¥’000

9M2011

9M2012

%

¥’000

%

¥’000

%

29.6 8,149,422
49.2 11,682,418

30.8 12,040,887
44.2 5,256,146

48.7
21.2

9,033,574
1,658,736

55.8
10.2

4,529,756
4,619,149

30.7
31.3

3,422,431
896,95210.2
2.7

2,591,502
1,077,760

9.8
4.1

2,533,995
1,234,805

10.2
5.0

1,884,746
1,055,073

11.6
6.5

1,763,987
607,378

11.9
4.1

2,597,765

7.7

2,768,513

10.5

3,514,569

14.2

2,442,930

15.1

2,552,117

17.3

186,9980.6

170,167

0.6

180,5070.7

135,7620.8

693,306

4.7

100 14,765,693

100

Total. . . . . . . . . 33,622,879

100 26,439,782

100 24,760,909

Gross Profit
Revitalisation . . .
Development . . .

35,971
951,5560.8
20.5

677,439
132,570

16.6
3.3

1,963,281 37.9
(45,444) -0.9

1,516,089 36.0
(253,965) -6.0

Rental . . . . . . .
Fund . . . . . . . .
Property
management . . .
Alternative
investment . . . . .

2,559,173
818,05555.2
17.6

1,820,648
1,043,558

44.7
25.6

1,745,121
1,162,976

33.7
22.5

1,345,920
991,830

356,0097.7

406,29010.0

485,252

9.4(81,706)-1.8(8,271)-0.2(130,965)-2.5

Total. . . . . . . . .

4,639,058 100.0

4,072,234 100.087

100 16,210,821

5,180,221 100.0

543,158
688,132

15.4
19.5

31.9
23.5

1,176,545
571,94533.3
16.2

354,040

8.4

426,600

12.1

260,732

6.2

124,549

3.5

4,214,646 100.0

3,530,929 100.0

Gross Margin
Revitalisation . . . . . . . . . . . . .
Development . . . . . . . . . . . . . .
Rental . . . . . . . . . . . . . . . . . . .
Fund . . . . . . . . . . . . . . . . . . . .
Property management. . . . . . .
Alternative investment . . . . . .

FY2009FY2010FY2011

9M2011

9M2012

%

%

%

%

%

0.4%
5.8%
74.8%
91.2%
13.7%
-43.7%

8.3%
1.1%
70.3%
96.8%
14.7%
-4.9%

16.3%
-0.9%
68.9%
94.2%
13.8%
-72.6%

16.8%-15.3%
71.4%
94.0%
14.5%
192.1%

12.0%
14.9%
66.7%
94.2%
16.7%
18.0%

13.8%

15.4%

20.9%

26.0%

23.9%

Revenue from the revitalisation business
Revenue from our revitalisation business refers to revenue derived from the sale of the revitalised
properties and “Restyling” units. For our “Restyling” business, we source for entire condominium
buildings and sell individual units when the renovation/revival process is completed.
Revenue from the development business
Revenue from our development business refers to revenue derived from the sale of office,commercial and residential properties which are developed by us. We also occasionally sell landlots which we have previously obtained for property development when the initial development
plan in respect of those land lots change. Condominiums may be sold as whole buildings or byindividual units. Entire buildings sold by us are generally used as rental properties. We willconsider the characteristics of the area before deciding whether to sell entire buildings or only
individual units. If an area has a high number of single individuals, such as students, we will
generally sell entire buildings as there would be a demand for rental properties. If the area has ahigher concentration of families, we will generally sell individual units as there would be a greater
demand for properties for sale.
For revenue from our revitalisation and development businesses, revenue is recognised when therisks and rewards of ownership have been transferred to the buyer, which usually coincides withthe delivery of the property to the buyer. We do not recognise revenue on a percentage ofcompletion basis.
Revenue from the rental business
Revenue from our rental business refers to revenue derived from leasing our office buildings,
residential and commercial properties. Rental income is recognised on a straight-line basis overthe lease term.
Revenue from the fund business
Revenue from our funds business mainly includes asset management fees, acquisition fees,
disposition fees, brokerage fees, incentive fees and distribution income and is recognised as andwhen the services are rendered.
Asset management fees are charged as a percentage of the value of real estate assets under ourmanagement on behalf of our clients, who are generally private equity investors and real estate
fund managers.
Acquisition fees and disposition fees arise when we help clients execute property acquisitions anddisposals, and are charged as a percentage of transaction value.
88

We receive brokerage fees by providing brokerage services on assets to be acquired/disposed of
by funds. Since most of the properties we undertake brokerage services in respect of aredesignated to be injected into funds, we record the fees under our fund business. Brokerage fees
are generally payable as a percentage of the transaction value. There are guidelines as to the
maximum amount of brokerage fees (inclusive of the applicable consumption tax) payable inJapan. As at the Latest Practicable Date, the maximum brokerage fees payable (inclusive of theapplicable consumption tax) under the applicable public notice is the aggregate of the amountpayable for each portion of the transaction value calculated with reference to the table below:
Amount (JPY)

Rate (%)

0 to 2,000,000
2,000,001 to 4,000,000
Over 4,000,001

5.25
4.20
3.15

Incentive fees are received by us when the internal rates of return on managed assets exceed acertain threshold and are charged as a percentage of such amount exceeded.
The breakdown of our revenue from our fund business is set out below:

Asset management fees. . . . . . .
Acquisition fees . . . . . . . . . . . . .
Disposition fees . . . . . . . . . . . . .
Brokerage fees . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .

FY2009FY2010FY2011

9M2011

9M2012

¥’000

¥’000

¥’000

¥’000

¥’000

794,524
21,99828,00923,587
28,834

770,116
11,07024,626
193,034
78,914522,372
109,196
46,025429,195
128,017406,028
90,051
46,024
411,933
101,037

351,356
14,64637,87885,133
118,365

896,952

1,077,760

1,234,805

1,055,073

607,378

Certain details of funds that had assets managed by us at the end of financial periods underreview are set out below:
As at
30 November
2009

As at
30 November
2010

As at
30 November
2011

As at
31 August2012

Number of funds . . . . . . . . . . .

34

40

38

36

Asset under management(JPYMillion) . . . . . . . . . . . . . . .

209,143

264,135

285,904

284,002

Revenue from the property management business
Revenue from our property management business refers to revenue derived from providing
property management services, including administration, facility management, cleaning andsecurity, utilities repair, and interior renovation. Fees for administration, facility management,
cleaning and security are usually fixed prior to the commencement of the contract, and such rates
would differ from contract to contract, depending on the type of properties and extent of services
to be provided. In contrast, fees for utilities repair and interior renovation are negotiated on an
ad-hoc and case-by-case basis. Revenue is recognised as and when the services are rendered.

89

Revenue from the alternative investment businessWe generally acquire non-performing loans at a discount to face value. Revenue from ouralternative investment business refers to the interest and disposal gain (or loss) from suchnon-performing loans collateralised by real estate (including mortgage-backed loans), rental anddisposal gain (or loss) from collateralised real estate which were transferred to us by debtors when
debtors are unable to repay us. Revenue is recognised when the right to receive income isestablished. The difference between (i) the consideration received by our Company for the
disposed non-performing loans collateralised by real estate (including mortgage-backed loans) or
the collateralised real estate, and (ii) the acquisition cost of the corresponding non-performing
loans is recorded as disposal gains or losses, as the case may be. We will lose the right to receive
rental income and/or interest income upon disposal of non-performing loans collateralised by realestate (including mortgage-backed loans). We also acquire properties through mergers andacquisitions of distressed companies with real estate assets. In this respect, the difference
between (i) the consideration received by the our Company for such real estate assets, and (ii) the
acquisition costs of such distressed companies with real estate assets is recorded as disposal
gains or losses, as the case may be.
The details and values of alternative investment business portfolio at the end of financial periods
under review are set out below:
As at
30 November
2009

As at
30 November
2010

As at
30 November
2011

As at
31 August
2012

¥’000

¥’000

¥’000

¥’000

Non-performing loans . . . . .

121,291

86,467

81,361

6,277

Properties held for sale . . .

2,217,775

2,185,012

1,480,824

712,859

Properties held for rental . .

––505,047

1,043,821

2,339,066

2,271,479

2,067,232

1,762,957

Cost of revenue
Our cost of revenue for FY2009, FY2010, FY2011, 9M2011 and 9M2012 is set out below:−
FY2009¥’000

FY2010%¥’000

FY2011%¥’000

9M2011

9M2012

%

¥’000

%

¥’000

%

Cost ofinventories . . . . 23,017,904

79.4 17,037,368

76.2 14,608,545

74.6

8,846,873

73.8

8,212,538

73.1

Property
management
and maintenancefees . . . . . . . . .

3,112,141

10.7

3,115,047

13.9

3,843,164

19.6

2,653,955

22.1

2,713,193

24.1

Inventory
write-down –net. . . . . . . . . .

2,738,818

9.5

2,121,339

9.5

1,029,029

5.3

420,2193.5

233,251

2.1

Others . . . . . . .

114,958

0.4

93,7940.4

99,9500.5

75,1280.6

75,782

0.7

Total . . . . . . . . 28,983,821 100.0 22,367,548 100.0 19,580,688 100.0 11,996,175 100.0 11,234,764 100.090Our cost of inventories comprises mainly the purchase of land and buildings, construction cost,architectural cost, property selling expenses and other direct costs incurred for properties to be
sold. Our cost of inventories for FY2009, FY2010, FY2011, 9M2011 and 9M2012 are set out
below:

Land cost . . . . . . . . . . . . . .
Building cost . . . . . . . . . . . .
Outsourced construction
expenses (1) . . . . . . . . . . . . .
Renovation/refurbishment
expenses (2) . . . . . . . . . . . . .
Sales and marketing
expenses . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

FY2009FY2010FY2011

9M2011

9M2012¥’000
13,915,492
1,591,157¥’000
10,016,026
1,827,392¥’000
7,915,246
3,485,314¥’000
4,971,329
2,534,170¥’000
4,819,257
1,275,684

6,661,936

4,566,925

1,945,177

603,036

1,134,564

214,030

271,983

356,204

191,422421,133

635,289

355,042906,604

546,916

561,900

23,017,904

17,037,368

14,608,545

8,846,873

8,212,538

Our cost of inventories in respect of our revitalisation business and development business for
FY2009, FY2010, FY2011, 9M2011 and 9M2012 are set out below:
Revitalisation Business:
FY2009FY2010FY2011

9M2011

9M2012¥’000
6,504,431
1,591,157¥’000
4,855,412
1,827,392¥’000
5,511,630
3,485,314¥’000
4,419,620
2,534,170¥’000
2,042,873
1,275,684

187,165
256,114

93,743201,649

301,989
618,856

147,222413,821

207,630
244,946

8,538,867

6,978,196

9,917,789

7,514,833

3,771,133

FY2009FY2010FY2011

9M2011

9M2012¥’000
7,411,061¥’000
5,160,614¥’000
2,403,616¥’000
551,709¥’000
2,351,486

6,661,936

4,566,925

1,945,177

603,036

1,134,564

26,865

178,240

54,21544,200137,691

379,175

153,393287,748

133,095

284,850

14,479,037

10,059,172

4,690,756

1,332,040

3,908,591

Land cost . . . . . . . . . . . . . . . . . .
Building cost. . . . . . . . . . . . . . . .
Renovation/refurbishment
expenses (2) . . . . . . . . . . . . . . . . .
Sales and marketing expenses .
Total . . . . . . . . . . . . . . . . . . . . . .

Development Business:

Land cost . . . . . . . . . . . . . . .
Outsourced construction
expenses (1) . . . . . . . . . . . . . .
Renovation/refurbishment
expenses (2) . . . . . . . . . . . . . .
Sales and marketing
expenses . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . .
Notes:(1)

Includes construction expenses paid to sub-contractors for development costs.

(2)

Mainly comprises building interior and exterior renovation expenses and expenses for the installation ofequipment and facilities.

91

Our cost of inventories is mainly affected by the different types of properties sold in the respective
financial years.
Our property management and maintenance fees comprise mainly the costs paid for property
management, including repair, mechanical and electrical works.
The inventory write-down relates to the write-down of the carrying amount of real estate to its net
realisable value, and the reversal of write-down is due mainly to an upturn in the property market.
Others mainly comprise the depreciation cost of rental properties.
Other income
Other income comprises mainly the forfeiture of deposits received from customers for options topurchase, refunds from cancellation of insurance premiums, interest income and dividend income.
Other losses – net
Other gains/losses comprise mainly forfeiture of deposits paid by us for options to purchase andthe impairment loss on a club membership.
Administrative expenses
Administrative expenses comprise mainly employee compensation, tax and dues, commission
fees, advertising expense and professional fees.
Employee compensation comprises mainly salaries and bonuses, statutory welfare expense,
retirement benefits and other short-term benefits. The statutory welfare expense includes
employee pension premiums and medical insurance premiums. Other short-term benefits mainlycomprise staff transportation allowance.
Tax and dues comprise mainly non-deductible consumption tax and the portion of business tax
recorded under administrative expenses, which are directly attributable to the administration of
our Company. The other portion of business tax is recorded under income tax expenses.
Commission fees are fees paid to recruitment agents, agents who recommend potential buyers aswell as non-statutory valuation consultants. One of the typical commission fees paid to recruitment
agents are for the services of temporary staff provided by the recruitment agents.
Professional fees are paid to professionals, including local auditors, a corporate secretary, tax
agents, property valuation consultants and professionals involved in this secondary listing on the
SGX-ST.

92

The breakdown of our administrative expenses is set out below:
FY2009FY2010FY2011

9M2011

9M2012

¥’000

¥’000

¥’000

¥’000

¥’000

Advertising expenses . . . . . . . . . .

85,18012,37747,605

16,207

20,799Allowance for impairment – tradeand other receivables − net . . . . .

7,100

16,843(1,362)(2,192)

2,962

Amortisation of intangible assets .

34,221

32,91933,57725,242

22,617

Bad debts written off . . . . . . . . . .

2,069

3,545

1,983

576

–

Commission fee . . . . . . . . . . . . . .

116,931137,032

184,392

147,080

114,659

Communication expenses . . . . . .

38,03535,90638,311

28,84429,712

Depreciation of property, plantand equipment. . . . . . . . . . . . . . .

26,19029,42737,001

26,72431,888

Employee compensation . . . . . . .

1,847,153

1,888,951

2,045,891

1,528,692

1,617,026

Entertainment expenses. . . . . . . .

13,171

10,60630,747

9,171

11,718Other professional fees . . . . . . . .

79,86570,199103,591

49,161103,997

Rental expense on operatingleases . . . . . . . . . . . . . . . . . . . . .

30,95823,131

24,677

18,192

17,482

Stationary expenses . . . . . . . . . .

48,32842,22242,44831,66036,181

Tax and dues . . . . . . . . . . . . . . . .

206,436

270,395

228,120

170,279

178,711

Transportation expenses . . . . . . .

30,67828,09537,77827,95430,225

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

90,67480,856

82,58468,87658,733

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

2,656,989

2,682,504

2,937,343

2,146,466

2,276,710

Finance expenses
Our finance expenses comprise interest incurred on bank borrowings.
Income tax expenses
Income tax expenses comprise corporate income tax, resident tax and the portion of business tax
recorded under income tax expenses. The aggregate effective tax rate was 41.0% for FY2009,
FY2010, FY2011 and 9M2012.
REVIEW OF RESULTS OF OPERATIONS
FY2009 compared to FY2010
Revenue(a)

Revenue from revitalisation businessOur revenue from our revitalisation business decreased by JPY1,813.0 million, or 18.2%,
from JPY9,962.4 million in FY2009 to JPY8,149.4 million in FY2010. The decrease wasmainly because we sold 11 revitalised buildings amounting to JPY5,255.2 million in FY2010,
compared to 20 revitalised buildings amounting to JPY9,531.5 million in FY2009. We hadsold more revitalised buildings in FY2009 during the financial crisis as we had wanted tolower our inventory levels and pay off debt secured with these properties as we had intended93

to reduce our exposure to external financing and on-balance sheet risk. We had alsopurchased less office buildings for the revitalisation business after the financial crisis in
2009. This was partially offset by selling 63 units amounting to JPY2,894.2 million throughthe “Restyling” business in FY2010, compared to four units amounting to JPY430.9 million
in FY2009. The “Restyling” business only started in the second half of FY2009 and was in fulloperation in FY2010.
(b)

Revenue from development businessOur revenue from our development business decreased by approximately JPY4,874.0
million, or 29.4%, from JPY16,556.4 million in FY2009 to JPY11,682.4 million in FY2010. We
sold three office buildings amounting to JPY3,724.6 million in FY2010, compared to four
office buildings, including a large scale building (Heiwajima Tosei Building), amounting to
JPY12,579.4 million in FY2009. None of the buildings sold in FY2010 were on the same scaleas the Heiwajima Tosei Building transaction. The decrease in FY2010 was partially offset by
the increase in the revenue from condominium buildings, condominium units and land lots.
We sold five condominium buildings amounting to JPY7,670.2 million and four land lots
amounting to JPY287.7 million in FY2010, compared to three condominium buildings
amounting to JPY2,462.7 million and 43 condominium units amounting to JPY1,514.3 million
in FY2009.

(c)

Revenue from rental businessOur revenue from our rental business decreased by approximately JPY830.9 million, or
24.3%, from JPY3,422.4 million in FY2009 to JPY2,591.5 million in FY2010. The decreasein the revenue from our rental business was due mainly to (i) the decrease in the effective
rental rate of approximately 17.1% from FY2009 to FY2010, as a result of generally lower
rents, and (ii) the disposition of income generating properties during FY2009 when we werelowering our inventory levels. Effective rental rate is calculated using the following formula:
Rental Income(Size of leased space at the end of
the previous financial period + Size ofleased space at the end of the current
financial period)/2
The effective annual rental rate in FY2009 was JPY53,727/sq m in FY2009 and
JPY44,537/sq m in FY2010.

(d)

Revenue from fund businessOur revenue from our fund business increased by approximately JPY180.8 million, or 20.2%,
from JPY897.0 million in FY2009 to JPY1,077.8 million in FY2010. The increase in revenue
mainly comprised an increase in brokerage fees received in respect of property transactions
amounting to JPY169.4 million. The increase in the brokerage fees was due mainly to a few
larger scale transactions in FY2010.

(e)

Revenue from property management businessOur revenue from our property management business increased by approximately JPY170.7
million, or 6.6%, from JPY2,597.8 million in FY2009 to JPY2,768.5 million in FY2010. The
increase in revenue was due mainly to the increase in the number of properties managed byus. The property management fee rates remained stable. Whilst we provide property

94management services for some of properties to which we also provide services under ourfund business, we also provide property management services for properties which do nothave a fund and/or asset management business relationship with us.
(f)

Revenue from alternative investment businessOur revenue from our alternative investment business decreased by approximately JPY16.8
million, or 9.0%, from JPY187.0 million in FY2009 to JPY170.2 million in FY2010. The
decrease in revenue was due mainly to (i) a decrease in disposal gains in FY2010 as there
was a one-off disposal gain of JPY8.0 million from the sale of a non-performing loan in
FY2009, and (ii) a decrease in interest income of JPY7.1 million in FY2010 as thenon-performing loan mentioned above at (i) had contributed JPY1.8 million in interest income
in FY2009 and there was also a further one-off late interest payment of JPY4.6 million madein respect of another non-performing loan in FY2009.

In total, our revenue decreased by approximately JPY7,183.1 million, or 21.4%, from JPY33,622.9
million in FY2009 to JPY26,439.8 million in FY2010.
Gross profit and gross profit margin
Our cost of revenue decreased by JPY6,616.3 million, or 22.8%, from JPY28,983.8 million in
FY2009 to JPY22,367.5 million in FY2010. Our gross profit decreased by approximately JPY566.8
million, or 12.2% from JPY4,639.1 million in FY2009 to JPY4,072.2 million in FY2010. The
decrease in gross profit was as a result of a greater decrease in revenue as compared to thedecrease in the cost of revenue. This was because of the sale of a large development (Heiwajima
Tosei Building) in FY2009. In contrast, there was no similar sized disposal in FY2010.
Overall gross profit margin of our Group increased from 13.8% in FY2009 to 15.4% in FY2010,
which was due mainly to less inventory write-downs for properties under the revitalisation andalternative investment businesses in FY2010 as the property market recovered in 2010. This waspartially offset by more inventory write-downs for properties under the development business due
to lower rental rates as we attempted to increase the occupancy rates of our rental properties.
Other income
Other income decreased by approximately JPY46.8 million, or 61.9%, from JPY75.6 million in
FY2009 to JPY28.8 million in FY2010, due mainly to a one-off refund of insurance premium(insurance premium paid by us for our employees pursuant to a benefit plan) of approximately
JPY37.3 million in FY2009 and a decrease in interest income of approximately JPY5.0 million in
FY2010, which was due mainly to a JPY3.6 million reduction in interest income from our deposits
with various banks.
Other losses – net
Other losses decreased by JPY318.8 million or 98.9%, from JPY322.3 million in FY2009 to JPY3.5
million in FY2010 due mainly to a one-time payment of a cancellation penalty paid to a supplierfor the purchase of a property (and the design/planning costs relating to such property) of
JPY280.4 million in FY2009.
The decrease was also due to a decrease in property, plant and equipment written off of JPY37.0
million which was due mainly to a layout change conducted in FY2009. The layout change
involved the conversion of one floor of our office building into office space and meeting rooms.
Prior to the layout change, the space had previously been used for mock-up rooms in ourcondominium projects. The conversion of the space had resulted in the write-off of the cost of the
mock-up rooms.
95Administrative expenses
Administrative expenses marginally increased by approximately JPY25.5 million, or 1.0%, from
JPY2,657.0 million in FY2009 to JPY2,682.5 million in FY2010. The increase was due mainly to
an increase in tax and dues of JPY64.0 million, an increase in employee compensation of JPY41.8
million and an increase in commission fee of JPY20.1 million, partially offset by a decrease inadvertising expenses of JPY72.8 million.
The increase in tax and dues is due to an increase in non-deductible consumption tax which was
in line with the increase in the taxable purchase of inventory assets.
The increase in employee compensation was due mainly to salary increments.
The increase in commission fees were due mainly to the increase in the fees paid to recruitment
agents for longer contract periods for the same number of contract staff.
The decrease in advertising expenses was mainly because we reduced advertising activities after
the financial crisis in 2009.
Finance expenses
Finance expenses marginally increased by JPY20.9 million, or 2.6% from JPY805.8 million in
FY2009 to JPY826.7 million in FY2010, due mainly to a higher effective interest rate.
Income tax expenses
Our income tax expenses decreased by JPY169.9 million, or 37.7%, from JPY450.5 million for
FY2009 to JPY280.6 million for FY2010, representing a decrease in taxable income.
FY2010 compared to FY2011
Revenue(a)

Revenue from revitalisation businessOur revenue from our revitalisation business increased by approximately JPY3,891.5 million,or 47.8%, from JPY8,149.4 million in FY2010 to JPY12,040.9 million in FY2011. The increase
in revenue was mainly because we sold 204 “Restyling” units amounting to JPY6,414.8
million in FY2011, compared to 63 “Restyling” units amounting to JPY2,894.2 million in
FY2010. The increase in the number of sold “Restyling” units was due mainly to more
“Restyling” units being launched in FY2011. The average price per unit was lower comparedto FY2010 as a significant proportion of the revenue from our revitalisation business for
FY2011 was attributable to revenue from a large project outside of Tokyo – the Hilltop
Yokohama Negishi project in Yokohama. Prices per sq m in Tokyo are generally higher
compared to other localities outside of Tokyo. The average sale price per unit for our“Restyling” projects in FY2010 and FY2011 were as follows:
Location
FY2010FY2011

Average Unit Price (JPY)Tokyo

62,737,001

Outside Tokyo

27,463,590

Tokyo

34,372,073

Outside Tokyo

28,739,409

96

The decrease in average sale price per unit in Tokyo from FY2009 to FY2010 was because
the average size of the units sold in FY2011 in Tokyo was generally smaller. In FY2010 and
FY2011, the average price per sq m in Tokyo for our transactions was generally at least
1.5-2.5 times that of properties outside of Tokyo.
(b)

Revenue from development businessOur revenue from our development business decreased by approximately JPY6,426.3
million, or 55.0%, from JPY11,682.4 million in FY2010 to JPY5,256.1 million in FY2011. The
decrease in revenue was mainly because we sold one office building amounting to
JPY1,932.1 million, 65 condominium units amounting to JPY2,593.6 million and no land lots
in FY2011, compared to three office buildings amounting to JPY3,724.6 million, fivecondominium buildings amounting to JPY7,670.2 million and four land lots amounting to
JPY287.7 million in FY2010. This was due to the fact that we had reduced our inventory
levels in the early part of FY2009 and did not resume our acquisition activities until
September 2009. Accordingly, we did not have any completed condominium buildings readyfor sale in FY2011, as opposed to the five condominium buildings sold in FY2010. This waspartially offset by the revenue from sale of 12 detached houses amounting to JPY730.4
million in FY2011, while no detached houses were sold in FY2010.

(c)

Revenue from rental businessOur revenue from our rental business marginally decreased by approximately JPY57.5
million, or 2.2%, from JPY2,591.5 million in FY2010 to JPY2,534.0 million in FY2011. There
were no material changes in our rental property portfolio held as plant property andequipment and effective rental rates in FY2011 compared to FY2010. Nonetheless, it should
be noted that sources of our rental income change as we dispose of and acquire properties.
Whilst there was little change to our portfolio for rental properties held as plant, property andequipment (classified as rental business assets), there was also rental income generated
from properties held under our revitalisation and development segments. An example of suchrental income would be from tenants who have not moved out of properties undergoing“Restyling”. Such rental income is nonetheless booked as revenue under our rental business.
These assets typically change from year to year and two condominium buildings and two
office buildings were disposed off at various times in FY2010.

(d)

Revenue from fund businessOur revenue from our fund business increased by approximately JPY157.0 million, or 14.6%,
from JPY1,077.8 million in FY2010 to JPY1,234.8 million in FY2011. The increase in revenue
mainly comprised the increase in brokerage fees and acquisition fees of JPY236.1 million
and JPY98.1 million respectively, partially offset by the decrease in asset management feesof JPY247.7 million. The increase in brokerage fees and acquisition fees was due mainly toa few large scale transactions in FY2011. The decrease in asset management fees was dueto the decrease in asset management fee rate in line with the conditions in the industry in
FY2011.

(e)Revenue from property management businessOur revenue from our property management business increased by approximately JPY746.1
million, or 26.9%, from JPY2,768.5 million in FY2010 to JPY3,514.6 million in FY2011. The
increase in revenue was due mainly to one large-scale contract in FY2011. This large-scale
contract was entered into with a major electrical retail chain to provide comprehensive
property management services. The contract was terminated at the end of January 2012 andwas a one-off contract.

97

(f)

Revenue from alternative investment businessOur revenue from our alternative investment business increased by approximately JPY10.3
million, or 6.1%, from JPY170.2 million in FY2010 to JPY180.5 million in FY2011. The
increase in revenue was due mainly to the increase in rental income from properties held by
our alternative investment business, which was partially offset by the decrease in gains fromthe repayment of principal sums and interest payments in respect of non-performing loans.

In aggregate, our revenue decreased by JPY1,678.9 million, or 6.3%, from JPY26,439.8 million in
FY2010 to JPY24,760.9 million in FY2011.
Gross profit and gross profit margin
Our cost of revenue decreased by JPY2,786.9 million, or 12.5%, from JPY22,367.5 million in
FY2010 to JPY19,580.7 million in FY2011. Our gross profit increased by approximately
JPY1,108.0 million, or 27.2% from JPY4,072.2 million in FY2010 to JPY5,180.2 million in FY2011.
The increase in gross profit was due mainly to the decrease in the inventory write-downs of
JPY1,092 million from FY2010.
Overall gross profit margin of our Group increased from 15.4% in FY2010 to 20.9% in FY2011. The
increase was due mainly to the increased contribution from the “Restyling” business in FY2011,
which has a higher gross margin than our other businesses. The increase in overall gross profit
margin was also due to less inventory write-downs for properties under the revitalisation business
in FY2011 as a result of the property market recovery in 2011, partially offset by more inventory
write-downs for properties under the alternative investment business as a result of the decreasein the prices of land in locations where properties were held by our alternative investment
business.
Other income
Other income increased by approximately JPY33.9 million, or 117.6%, from JPY28.8 million in
FY2010 to JPY62.7 million in FY2011, due mainly to one-off forfeiture of a deposit received froma customer in respect of an option to purchase a land plot in Yatsuka in FY2011, amounting to
JPY34.0 million. This was partially offset by the decrease in the interest income of approximately
JPY6.8 million, which was due mainly to the decrease in balance of loans to a non-related party
which resulted in a decrease in interest income from this loan of JPY4.8 million. The loan wasmade to an asset management company who had appointed our Company as a sub-asset
manager. The purpose of the loan was to finance the asset management company’s operational
funding needs. This loan has been fully repaid.
Other losses – net
Other losses increased by JPY13.6 million or 389.7%, from JPY3.5 million in FY2010 to JPY17.2
million in FY2011, due mainly to impairment loss on the club membership compared to the market
value of the membership in FY2011. Our Company owns two country club memberships, which we
use for entertaining our clients. As these club memberships are tradable, the impairment wascalculated based on asking prices by membership brokers.
Administrative expenses
Administrative expenses increased by approximately JPY254.8 million, or 9.5%, from JPY2,682.5
million in FY2010 to JPY2,937.3 million in FY2011. The increase was due mainly to an increasein employee compensation of JPY156.9 million, an increase in commission fees of JPY47.4 million
and an increase in advertising expenses of JPY35.2 million. The increase in commission fees wasdue to an increase in due diligence costs which we had absorbed in respect of certain properties
98which we managed and which were in the process of being put up for sale by a fund. We hadabsorbed such costs out of goodwill and due to the existing client relationship between the fund(which is a non-related entity) and our Company. The increase in advertising expenses was in linewith the market’s recovery from the financial crisis. Additionally, the increase in advertising fees
in FY2011 was because we started to gradually resume our advertising activities. We had cut-backon advertising activities in FY2010 due to the fallout from the financial crisis.
The increase in employee compensation was due mainly to the increase in bonuses which was inline with higher profit achieved in FY2011.
The increase in commission fees and advertising expenses was mainly because we resumed
active marketing activities in FY2011.
Finance expenses
Finance expenses decreased by JPY47.9 million, or 5.8% from JPY826.7 million in FY2010 to
JPY778.9 million in FY2011, due mainly to a lower amount of bank borrowings.
Income tax expenses
Our income tax expenses increased by JPY488.7 million, or 174.2%, from JPY280.6 million for
FY2010 to JPY769.2 million for FY2011, representing an increase in taxable income. The effective
tax rate for FY2010 and FY2011 were 47.7% and 51.0% respectively.
9M2011 compared to 9M2012
Revenue(a)

Revenue from revitalisation businessOur revenue from our revitalisation business decreased by approximately JPY4,503.8
million, or 49.9%, from JPY9,033.6 million in 9M2011 to JPY4,529.8 million in 9M2012. The
decrease in revenue was mainly because we sold four revitalised buildings amounting to
JPY1,597.4 million in 9M2012, compared to nine revitalised buildings amounting to
JPY4,287.7 million in 9M2011, and we sold 80 “Restyling” units amounting to JPY2,932.4
million in 9M2012, compared to 152 “Restyling” units amounting to JPY4,745.9 million in
9M2011. The decrease in sales from both revitalised building and the “Restyling” units was
because fewer new revitalisation and “Restyling” projects were launched for sale in 9M2012
since we focused on selling existing revitalised buildings and units in our “Restyling”
business. Demand for such properties (especially for the Hilltop Yokohama Negishi project,a large “Restyling” project of our Company in Yokohama-shi, Kanagawa) was also lower in
9M2012, leading to a decrease in sales.

(b)

Revenue from development businessOur revenue from our development business increased by approximately JPY2,960.4 million,
or 178.5%, from JPY1,658.7 million in 9M2011 to JPY4,619.1 million in 9M2012. The
significant increase in revenue was mainly because we sold one office building amounting to
JPY1,718.3 million, 48 condominium units amounting to JPY2,034.3 million and one land lot
amounting to JPY772.0 million in 9M2012, compared to no sales of office buildings, 28
condominium units amounting to JPY1,028.6 million and no land lots in 9M2011 as few
properties were scheduled for completion and sale in 9M2011. The above increase waspartially offset by the decrease in revenue from detached houses. We sold three detachedhouses amounting to JPY94.6 million in 9M2012, compared to ten detached houses
amounting to JPY630.2 million in 9M2011.
99

(c)

Revenue from rental businessOur revenue from our rental business decreased by approximately JPY120.8 million, or6.4%, from JPY1,884.7 million in 9M2011 to JPY1,764.0 million in 9M2012. The decrease
was due both to the decrease in the rental rates of some rental properties and the marginal
decrease in the leased area. In addition, our “Restyling” business had revitalised certain
rental units and sold such units in FY2011 and at the beginning of FY2012. When we acquire
properties for “Restyling”, such properties are usually partially tenanted and we will continue
to receive rental income in respect of such tenanted units, whilst renovation of the common
areas and untenanted units takes place. Accordingly, a reduction in inventory held under our“Restyling” business generally results in a reduction in rental income as tenanted units arerenovated and re-sold once a tenant vacates the unit.

(d)Revenue from fund businessOur revenue from our fund business decreased by approximately JPY447.7 million, or
42.4%, from JPY1,055.1 million in 9M2011 to JPY607.4 million in 9M2012. The decrease inrevenue mainly comprised the decrease in brokerage fees, acquisition fees and asset
management fees of JPY326.8 million, JPY75.4 million and JPY54.7 million respectively. The
decrease in brokerage fees and acquisition fees in 9M2012 relative to that in 9M2011 wasbecause we had a few large scale transactions in 9M2011. Asset management fees
decreased mainly because a few large scale asset management contracts with higher fee
rates expired in the second half of FY2011 and newly acquired asset management contracts
were charged lower fee rates due to weaker industry conditions. We did not renew thoseasset management contracts in the second half of FY2011 due to poor fee payment trackrecords. The decrease in asset management fee rates was also attributable to a decline inrental rates, in line with industry conditions.

(e)

Revenue from property management businessOur revenue from our property management business increased by approximately JPY109.2
million, or 4.5%, from JPY2,442.9 million in 9M2011 to JPY2,552.1 million in 9M2012. The
increase in revenue was mainly due to our marketing efforts and the number of properties
managed by us increased by 36 from 504 to 540 at end of 9M2012.

(f)

Revenue from alternative investment businessOur revenue from our alternative investment business increased by approximately JPY557.5
million, or 410.7%, from JPY135.8 million in 9M2011 to JPY693.3 million in 9M2012. The
increase in revenue was mainly due to the sale of eight land lots amounting to JPY548.9
million. These eight land lots in the Ebisu area were owned by Green House, a distressedcompany which we had acquired. In contrast, we had not sold any properties or assets in
9M2011 and revenue was from the collection of rental income from properties held by ouralternative investment business as well as repayments and interest from non-performing
loans.

In total, our revenue decreased by JPY1,445.1 million, or 8.9%, from JPY16,210.8 million in
9M2011 to JPY14,765.7 million in 9M2012.
Gross profit and gross profit margin
Our cost of revenue decreased by JPY761.4 million, or 6.3%, from JPY11,966.2 million in 9M2011
to JPY11,234.8 million in 9M2012. Our gross profit decreased by approximately JPY683.7 million,
or 16.2% from JPY4,214.6 million in 9M2011 to JPY3,530.9 million in 9M2012. The decrease in100

gross profit was because we recorded lower revenue from our revitalisation, rental and fundbusinesses and a greater decrease in revenue as compared to the decrease in the cost ofrevenue.
Overall gross profit margin of our Group decreased from 26.0% in 9M2011 to 23.9% in 9M2012.
The decrease was due mainly to the decrease in profit margin of our revitalisation business andthe smaller portion of revenue contribution from our revitalisation business, which was partially
offset by the increase in profit margin of our development business and the bigger portion ofrevenue contribution from our development business.
The changes in profit margins of our revitalisation and development businesses were due mainly
to the fluctuation in inventory write-down. For 9M2011, there was an inventory write-down of
JPY420.2 million and a large portion of this amount was attributable to a vacant space of an officebuilding held by our development business whose expected rents had declined. For 9M2012,
there was an inventory write-down of JPY233.3 million. A large portion of this amount was
attributable to a vacant space of an office building held by our revitalisation business whose
expected rents had declined. Write-down of the properties in our inventory is booked as a cost of
sale. As we write down such assets, cost of sale increases and profitability declines.
Other income
Other income decreased by approximately JPY8.4 million, or 33.2%, from JPY25.2 million in
9M2011 to JPY16.9 million in 9M2012, due mainly to a decrease in the rental income of spaces
leased to vendors of vending machines. This was as a result of us selling properties at which such
spaces for vending machines were located.
Other losses – net
Other losses were nil and JPY21.2 million in 9M2011 and 9M2012, respectively. Other losses in
9M2012 mainly comprised the loss from the disposal of the Kamon Building.
Administrative expenses
Administrative expenses increased by approximately JPY130.2 million, or 6.1%, from JPY2,146.5
million in 9M2011 to JPY2,276.7 million in 9M2012. The increase was due mainly to the increases
in employee compensation of JPY88.3 million and other professional fees of JPY54.8 million,
partially offset by decreases in commission fees of JPY32.4 million.
The increase in employee compensation mainly comprised the increases in salaries and bonusesof JPY47.9 million and in other short-term benefits of JPY28.1 million. The increase in salaries andbonuses was due mainly to salary increments and the increase in employee numbers. The
increase in other short-term benefits was due mainly to a one-time staff trip to celebrate our
successful transfer to the First Section of the TSE.
The increase in other professional fees was due mainly to professional fees in connection with our
proposed secondary listing on the SGX-ST.
The decrease in commission fees was due mainly to a decrease in due diligence costs which we
had absorbed in respect of certain properties which we managed and which were in the processof being put up for sale by a fund.
Finance expenses
Finance expenses decreased by JPY117.6 million, or 19.9% from JPY590.7 million in 9M2011 to
JPY473.1 million in 9M2012, due mainly to the lower outstanding bank borrowings.
101

Income tax expenses
Our income tax expenses decreased by JPY318.1 million, or 49.2%, from JPY646.6 million for
9M2011 to JPY328.5 million for 9M2012, which was in line with the decrease in profit before
income tax.
REVIEW OF FINANCIAL POSITION
Summary
As at
30 November
2011

As at
31 August2012¥ million¥ million¥ million(%)

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

43,58545,8352,250

5.2

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

17,014

17,06955

0.3

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

60,59962,9042,305

3.8

Current liabilities . . . . . . . . . .

8,770

9,124

354

4.0

Non-current liabilities . . . . . .

26,521

28,251

1,730

6.5

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

35,29137,3762,085

5.9

Increase/Decrease

Current assets
Our current assets comprise cash and cash equivalents, financial assets at fair value throughprofit or loss, available-for-sale financial assets, trade and other receivables, inventories andother assets. Our current assets as at 30 November 2011 and 31 August 2012 amounted to
JPY43,585.1 million or 71.9% of our total assets and JPY45,835.4 million or 72.9% of our total
assets, respectively.
As at 30 November 2011, our cash and cash equivalents amounted to JPY8,381.7 million, of which
JPY8,341.7 million was cash at bank and on hand and JPY40.0 million was short-term bankdeposits. As at 31 August 2012, cash and cash equivalents amounted to JPY6,541.8 million,
including cash at bank and on hand of JPY6,351.8 million and short-term bank deposits of
JPY190.0 million.
Financial assets at fair value through profit or loss are financial assets held for trading andfinancial assets which do not have market value but are evaluated on a fair value basis. Ourfinancial assets at fair value through profit or loss, a specified equity investment in a real estate
fund (which owns Glen Park Komaba Building) to which we provided asset management services,
as at 30 November 2011 and 31 August 2012 amounted to JPY17.8 million and JPY17.9 million,
respectively.
Available-for-sale financial assets are financial assets held for long term investment, mainly
including unlisted securities such as fixed income securities. Available-for-sale financial assets
are presented as current assets if they are intended to be sold within 12 months after the balance
sheet date. Certain of these financial assets have maturity periods of one year and accordingly,
these are classified as current assets. Our current available-for-sale financial assets amounted to
JPY10.0 million as at both 30 November 2011 and 31 August 2012.

102

As at 30 November 2011, trade and other receivables amounted to JPY1,205.4 million, mainlycomprising trade receivables of JPY542.0 million, advance payment for deposits paid to ourproperty and land suppliers of JPY225.8 million and prepayments of JPY257.3 million. As at
31 August 2012, trade and other receivables amounted to JPY2,386.4 million, mainly comprisingtrade receivables of JPY491.9 million, advance payment of JPY141.5 million and prepayments of
JPY271.0 million. The prepayments mainly included the interest and rental expense paid to banks
and owners of properties leased by us in advance based on the loan agreements and leasing
agreements. Non-performing loans invested in our alternative investment business are recorded
and carried as the receivable purchased of trade and other receivables on the balance sheet attheir purchase prices without periodical revaluation.
As at 30 November 2011 and 31 August 2012, inventories amounted to JPY33,967.9 million and
JPY36,877.4 million, comprising real estate for sale of JPY27,674.0 million and JPY28,048.6
million and real estate for sale in progress of JPY6,294.0 million and JPY8,828.8 million,
respectively. The values of inventory are decided by comparing the purchase prices and the net
realisable value of such properties. Net realisable value is calculated taking into account theestimated selling price and deducting expenses arising from the sale of the property. The lowerof such figures is adopted as the value of the property in our inventory.
Non-current assets
Our non-current assets comprise mainly available-for-sale financial assets, trade and otherreceivables, investment properties, property, plant and equipment, intangible assets and deferredincome tax assets. Our non-current assets as at 30 November 2011 and 31 August 2012amounted to JPY17,014.7 million or 28.1% of our total assets and JPY17,069.4 million or 27.1%
of our total assets, respectively.
Non-current available-for-sale financial assets as at 30 November 2011 and 31 August 2012amounted to JPY369.9 million and JPY391.2 million, respectively. Available-for-sale financial
assets are presented as non-current assets if they are not intended to be sold within 12 months
after the balance sheet date. The details of non-current available-for-sale financial assets as at
31 August 2012 are set out below:

Issuer of Security

Nature ofSecurity

Listing
StatusBook Value(JPY)

Maturity Dates

10,000,000

27 September 2014

1

The Shoko Chukin Bank,Ltd.

Bank bonds–

2

Nippon Building Fund Inc.

REIT

Listed792,000–

3

Daiwa J-REIT OpenREIT

Listed

18,570,131–

4

J Real estate securities
investment corporation

REIT

–

38,414–

5

Jyutaku Sangyo
Shinyohosho Co.,Ltd.

Shares–1,200,000–

6Ginroku SPC

Bonds

–

1

16 March 2017

7

Ginroku SPC

Preferredshares–1–

8

Clover Shiba Koen TMK

Preferredshares–2–

9Japan Opportunity 1 SPC

Preferredshares–133,350,000–

10Meriken Park Limited
Liability Company

Preferredshares–200,000,000–103Issuer of Security

Nature ofSecurity

Listing
StatusBook Value(JPY)

Maturity Dates

11

Poseidon Capital Limited
Company

Shares–150,000–

12

The Kosan Shinkin Bank

Shares–5,000,000–

13

The Sawayaka Shinkin
Bank

Shares–2,000,000–

14

The Tokyo Realtor Cooperation

Equitycontribution–

60,000–15

Sannomiya Real Estate
Sales LLC 1

Shares–

20,000,000

–

Total

391,160,549

Note:
(1)

As at the date of this Prospectus, Sannomiya Real Estate Sales LLC has been renamed and converted into NAI
Tosei Japan, Inc., a subsidiary of our Company, and is no longer held as an available-for-sale financial asset.

Non-current trade and other receivables as at 30 November 2011 and 31 August 2012 amounted
to JPY125.6 million and JPY172.2 million, mainly comprising guarantee deposits paid forproperties leased from third parties by us of JPY115.4 million and JPY166.1 million, respectively.
Investment properties as at 30 November 2011 and 31 August 2012 amounted to JPY11,378.1
million and JPY11,714.7 million respectively. Our investment properties are held and leased forlong-term rental yields and/or for capital appreciation, and land under operating leases is held forlong-term capital appreciation.
Property, plant and equipment amounting to JPY3,341.3 million and JPY3,331.8 million as at
30 November 2011 and 31 August 2012 respectively mainly comprised our headquarters,
Toranomon Tosei Building.
Intangible assets, amounting to JPY66.9 million and JPY48.5 million as at 30 November 2011 and
31 August 2012 respectively, were mainly attributable to innovation expenses in customisingcomputer software for our businesses (in particular our accounting system and property
databases) and computer software licenses we had purchased.
Other assets, amounting to JPY8.4 million as at both 30 November 2011 and 31 August 2012
respectively, were the non-current portion of the two country club memberships.
Deferred income tax assets amounted to JPY1,724.7 million and JPY1,402.6 million as at
30 November 2011 and 31 August 2012 respectively.
Current liabilities
Our current liabilities comprise trade and other payables, current tax liabilities and borrowings,
amounting to JPY8,770.8 million or 24.9% of our total liabilities and JPY9,125.0 million or 24.4%
of our total liabilities as at 30 November 2011 and 31 August 2012 respectively.

104

As at 30 November 2011, current trade and other payables amounted to JPY2,517.7 million,
comprising mainly trade payables to construction companies of JPY820.7 million, deposits forpurchase of real estate received from customers of JPY545.5 million, other payables for deposits
received from our rental customers and for deposits received on behalf of our property
management customers of JPY290.7 million and accruals for operating expenses mainly to
subcontractors of JPY860.8 million. As at 31 August 2012, current trade and other payables
accounted for JPY2,438.1 million, comprising mainly trade payables to construction companies of
JPY908.7 million, deposits for purchase of real estate received from customers of JPY782.1
million, other payables for deposits received from our rental customers and for deposits ofadvance rentals collected on behalf of our property management customers of JPY244.3 million
and accruals for operating expenses mainly to subcontractors of JPY503.0 million.
The deposit paid by customers for the purchase of property is typically 10-20% of the purchaseprice, and is usually held by us until the delivery of such property.
Current income tax liabilities amounted to JPY81.3 million and JPY72.0 million as at 30 November
2011 and 31 August 2012 respectively.
Current borrowings amounting to JPY6,171.7 million and JPY6,614.9 million as at 30 November
2011 and 31 August 2012 respectively mainly comprised the current portion of bank borrowings.
The borrowings were used mainly for purchase of land and buildings.
Non-current liabilities
Our non-current liabilities comprise trade and other payables, borrowings, deferred income tax
liabilities and retirement benefits obligations, amounting to JPY26,521.1 million or 75.1% of our
total liabilities and JPY28,251.4 million or 75.6% of our total liabilities as at 30 November 2011 and
31 August 2012 respectively.
Non-current trade and other payables were mainly lease and guarantee deposits received fromour customers, amounting to JPY1,810.6 million and JPY2,087.8 million as at 30 November 2011
and 31 August 2012 respectively. For a typical two-year lease, the deposit received from our rental
customers is normally equivalent to one month’s rent for residential properties and eight months’
rent for office properties. The deposit is refundable immediately once the lease expires.
Non-current borrowings were the non-current portion of bank borrowings amounting to
JPY23,900.7 million and JPY25,413.6 million as at 30 November 2011 and 31 August 2012
respectively. The borrowings were used mainly for the purchase of land and buildings.
Retirement benefits obligations amounting to JPY504.7 million and JPY532.5 million as at
30 November 2011 and 31 August 2012 respectively were the amount to be paid to our Directors
and employees upon their retirement.
EquityAs at 30 November 2011, our total equity amounted to JPY25,308.0 million, comprising paid-in
capital of JPY5,454.7 million, retained earnings of JPY14,339.1 million and other reserves of
JPY5,514.1 million. As at 31 August 2012, our total equity amounted to JPY25,528.4 million,
comprising paid-in capital of JPY5,454.7 million, retained earnings of JPY14,559.0 million andother reserves of JPY5,514.8 million.

105

LIQUIDITY AND CAPITAL RESOURCES
Since our establishment, our business growth and operations have been funded by a combinationof shareholders’ equity, cash generated from operating activities as well as borrowings provided
by various financial institutions. Our principal uses of cash have mainly been for the acquisitionof land and buildings, working capital requirements, capital expenditures, operating expenses,
financial expenses as well as the purchase and upgrading of operation equipments for ourbusiness.
As at the Latest Practicable Date, we had cash and cash equivalents of JPY11,838.9 million.
Based on our shareholders’ equity of JPY27,258.7 million as at 31 December 2012, our gearing
ratio (defined as the ratio of total interest bearing borrowings divided by shareholders’ equity) wasapproximately 1.09 times.
We experienced net cash outflows from operating activities of approximately JPY3,148.1 million
for 9M2012 due mainly to the acquisitions of land and buildings during this period. The
acquisitions were financed by our cash and bank borrowings. Consideration paid for theseacquisitions was recorded as cash outflow from operating activities and the bank borrowings
drawn were classified as cash inflows from financing activities, which resulted in a negative cash
flow from operating activities for 9M2012.
Our Directors are of opinion that as at the date of the lodgment of the prospectus, after taking into
account the availability of land and building acquisition financing from financial institutions and our
cash and cash equivalents, our Group has sufficient funds for our present operation requirements
as well as for future business expansion.
We have been able to service our borrowings on a timely basis.
The following table sets out a summary of our cash flows for FY2009, FY2010, FY2011 and
9M2012:
JPY’000

FY2009Net cash provided by/(used in)operating activities . . . . . . . . . . . . . . . . . 13,610,527
Net cash (used in)/provided byinvesting activities . . . . . . . . . . . . . . . . .
(47,525)
Net cash (used in)/provided byfinancing activities . . . . . . . . . . . . . . . . . (12,922,057)

FY2010FY2011

9M2012(868,033)

7,134,191(3,148,097)(21,581)(438,693)

64,139(84,241)(5,191,991)

1,244,092

Net increase/(decrease) in cash andcash equivalents . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the
beginning of financial year/period . . . . .

640,945(973,855)

1,503,507(1,839,866)

7,191,092

7,832,037

6,858,182

8,361,689

Cash and cash equivalents at the endof the financial year/period. . . . . . . . . . .

7,832,037

6,858,182

8,361,689

6,521,823

106

Net cash provided by/(used in) operating activities
FY2009In FY2009, our net cash provided by operating activities was JPY13,610.5 million. This comprised
operating cash flow before working capital changes of approximately JPY1,935.1 million and net
working capital inflows of JPY14,842.5 million. Net working capital inflows were due mainly todecrease in inventories of JPY15,050.2 million, partially offset by a decrease of trade and otherpayables of JPY903.8 million. In addition, we received interest income of JPY15.0 million anddividends of JPY2.8 million, and paid income tax of JPY3,185.0 million. The decrease ininventories was as a result of us disposing of properties (and suspending new acquisitions) to pay
off debt (which was obtained on a project basis) as we had intended to reduce our exposure toexternal financing and on-balance sheet risk in an unstable financial environment. The decreasein trade and other payables was due mainly to the decrease in received lease and guarantee
deposits of JPY544.8 million which was in line with our property disposal strategy in the unstablefinancial environment.
FY2010In FY2010, our net cash used in operating activities was JPY868.0 million. This comprised
operating cash flow before working capital changes of approximately JPY1,562.2 million and net
working capital outflows of JPY2,396.5 million. Net working capital outflows were due mainly toincreases in inventories of JPY1,594.4 million, decrease in trade and other payables of JPY678.7
million and increase in fixed deposits of JPY286.1 million, partially offset by an increase in tradeand other receivables of JPY109.5 million. We also received interest income of JPY10.3 million
and dividends of JPY2.8 million and paid income tax of JPY46.9 million. The increase ininventories was mainly because we purchased more land and buildings at lower prices after thefinancial crisis in 2009. The decrease in trade and other payables was due mainly to the decreasein trade payables to sub-contractor for construction work of JPY362.7 million.
FY2011In FY2011, our net cash provided by operating activities was JPY7,134.2 million. This comprised
operating cash flow before working capital changes of approximately JPY2,472.2 million and net
working capital inflows of JPY4,684.6 million. Net working capital inflows were due mainly to an
decrease in inventories of JPY3,594.8 million and an increase in trade and other payables of
JPY1,014.3 million. In addition, we received interest income of JPY2.1 million and dividends of
JPY2.9 million, and paid income tax of JPY27.5 million. The decrease in inventories was mainly
because we purchased less land and buildings in FY2011 compared to FY2010 when the property
market started recovering in 2010. The increase in trade and other payables was due mainly tothe increase in trade payables to sub-contractors for construction of JPY478.1 million.
9M2012
In 9M2012, our net cash used in operating activities was JPY3,148.1 million. This comprised
operating cash flow before working capital changes of approximately JPY1,400.4 million, which
was offset by the net working capital outflows of JPY4,448.1 million. The net working capitaloutflows were due mainly to increases in inventories of JPY3,453.4 million and in trade and otherreceivables of JPY1,225.2 million. In addition, we received interest income of JPY1.5 million anddividend income of JPY2.2 million and paid income tax of JPY104.2 million.

107

Net cash (used in)/provided by investing activities
In FY2009, our net cash used in investing activities of JPY47.5 million mainly comprised additions
to investment properties and property, plant and equipment. The increases in investment
properties and in property, plant and equipment were due mainly to renovation costs.
In FY2010, our net cash used in investing activities of JPY21.6 million mainly comprised additions
to property, plant and equipment.
In FY2011, our net cash used in investing activities of JPY438.7 million mainly comprised thepurchase of available-for-sale financial assets for our fund business of JPY333.4 million, additions
to property, plant and equipment of JPY22.7 million, additions to investment properties of JPY45.6
million and additions to intangible assets of JPY37.0 million. The purchased available-for-salefinancial assets mainly comprised preferred stock.
In 9M2012, our net cash provided by investing activities of JPY64.1 million was due mainly to thedisposal of one investment property, Kamon Building, which amounted to JPY217.0 million. Thiswas partially offset by the addition of investment properties of JPY107.1 million.
Net cash (used in)/provided by financing activities
In FY2009, we recorded net cash used in financing activities of JPY12,922.1 million. This was due
mainly to repayment of borrowings of JPY21,567.0 million, interest payment of JPY833.5 million
and dividends paid to our shareholders of JPY376.8 million, partially offset by proceeds fromborrowings of JPY9,230 million and proceeds from issuing of shares of JPY625.8 million.
In FY2010, we recorded net cash used in financing activities of JPY84.2 million. This was due
mainly to the repayment of borrowings of JPY18,129.8 million, interest payments of JPY820.6
million and dividends paid to our shareholders of JPY197.9 million, partially offset by proceedsfrom borrowings of JPY17,099.9 million and proceeds from issuing of shares of JPY1,965.8
million.
In FY2011, we recorded net cash used in financing activities of JPY5,192.0 million. This was due
mainly to the repayment of borrowings of JPY15,661.4 million, interest payments of JPY744.7
million and dividends paid to our shareholders of JPY228.4 million, partially offset by proceedsfrom borrowings of JPY11,474.1 million.
In 9M2012, we recorded net cash provided by financing activities of JPY1,244.1 million. This wasdue mainly to the net increase of borrowings of JPY1,953.5 million.
CAPITAL EXPENDITURES, DIVESTMENTS AND COMMITMENTS
Capital Expenditures
Our capital expenditures generally comprise repair costs for our investment properties which
include the renovation/refurbishment of our headquarters (Toranomon Tosei Building) and themaintenance of our Company’s tools, equipment and fixtures. Our capital expenditure is financed
mainly by funds generated from shareholders’ contributions, operations and bank borrowings.
Details of our capital expenditures are set out below:

108

JPY’000
Addition – cost
Investment properties. . . . . . .
Property, plant andequipment. . . . . . . . . . . . . . . .

Disposals – cost
Investment properties. . . . . . .
Property, plant andequipment. . . . . . . . . . . . . . . .

Written-off – cost
Investment properties. . . . . . .
Property, plant andequipment. . . . . . . . . . . . . . . .

FY2009FY2010FY2011

9M2012

1 September
2012 to Latest
PracticableDate

20,275

8,895

45,623

107,110

17,64329,653

14,05522,704

24,735

12,16849,92822,95068,327

131,845

29,811–––

247,954

−

3,480

–

–

–

−

3,480

–

–

247,954

−

421

–

–

–

181

67,95819,3494,086

14,467

7,696

68,37919,3494,086

14,467

7,878

Commitments
We do not have any material capital commitments, operating lease commitments or finance leasecommitments as at the Latest Practicable Date.
FOREIGN EXCHANGE MANAGEMENT
Accounting treatment of foreign currencies
We currently operate in Japan. Accordingly, the functional reporting currency for our Company andour subsidiaries is JPY and we maintain our books and records in JPY. Foreign currency monetary
assets and liabilities at the balance sheet date, if any, will be translated into the functional
currency at the year ended exchange rates. All resultant exchange differences are dealt withthrough the income statements.
Foreign exchange exposure
All our revenue is generated in Japan and denominated in JPY, and our operating expenses andpurchases are mostly denominated in JPY. However, in the consolidated financial statements,
currency translation difference arising from net investment in foreign operations, is recognised inother comprehensive income and accumulated in the currency translation reserve.
Our currency translation for 9M2012 recorded in other comprehensive income and the income
from currency translation amounted to approximately JPY52,000.

109

INDUSTRY OVERVIEWDTZ Debenham Tie Leung K.K. (“Industry Expert”) has been commissioned by our Group toprovide this “Industry Overview”. This “Industry Overview” dated 22 February 2013 was preparedby the Industry Expert solely for the purpose of incorporation in this Prospectus. The Industry
Expert has advised that although it has made every reasonable effort to ensure that the
information in the following section is accurate, the Industry Expert does not accept any liability(save in respect of liability imposed by any applicable law, including, without limitation, the SFA)
for any loss of any nature suffered by any party in consequence of reliance on such information
or in any other manner. Investors should also be aware that since the preparation of this section
by the Industry Expert, there may have been changes in the economy in Tokyo and in Japangenerally, and there may also have been changes in the real estate market and the various sectors
therein which could affect the accuracy or completeness of information in this section.
Information contained herein should not, in whole or part, be published, reproduced or referred towithout prior approval. Any such reproduction should be credited to the Industry Expert.
The purpose of this “Industry Overview” is to provide an independent overview of Tokyo andcertain of the real estate sectors in which we are involved in. This “Industry Overview” section
contains certain statements that are “forward-looking” and are based on underlying assumptions
containing variables that may have been changed since the date of issue. By their nature,
forward-looking statements are subject to risks and uncertainties because they relate to eventsand depend on circumstances that will occur in the future. No forward-looking statements
contained herein should be relied upon as predictions of future events. No assurance can be giventhat the expectations expressed in these forward-looking statements will prove to be correct.
This “Industry Overview” includes market and industry data and forecasts that have been obtained
from the Industry Expert’s internal surveys, reports and studies, where appropriate, as well as
market research, publicly available information and industry publications. Industry publications,surveys and forecasts generally state that the information they contain has been obtained fromsources believed to be reliable, but there can be no assurance as to the accuracy or completenessof such information. While our Directors have taken reasonable steps to ensure that the
information is extracted accurately and in its proper context from a Industry Report dated 22
February 2013 produced by the Industry Expert for our Company, none of our Directors or the Sole
Global Coordinator, Issue Manager and Underwriter or their respective officers, agents,
employees and advisers have independently verified any of the data from third party sources orascertained the underlying economic assumptions relied upon therein. Consequently, none of our
Directors or the Sole Global Coordinator, Issue Manager and Underwriter or their respective
officers, agents, employees and advisers makes any representation as to the accuracy ofcompleteness of such information, and each of them shall not be held responsible in respect ofany such information and shall not be obliged to provide any updates on the same.

110

MACROECONOMIC AND DEMOGRAPHIC OVERVIEW
Macroeconomy
Overview 1
Japan’s economy remains relatively weak.
Exports and industrial production have decreased, mainly due to the fact that overseas economies
remain in a deceleration phase. Business fixed investment has shown some weakness on thewhole, although resilience has been observed in nonmanufacturing. In contrast, public investment
has continued to increase, and housing investment has generally been picking up. Private
consumption has remained resilient and the effects of the decline in car sales due to the endingof some measures to stimulate demand for automobiles have diminished.
With regards to outlook, Japan’s economy is expected to level off for the time being and return toa moderate recovery path thereafter as domestic demand remains resilient partly due to theeffects of various economic measures and overseas economies gradually emerging from thedeceleration phase.
On the price front, the three-month rate of change in domestic corporate goods 2 prices has been
more or less flat. The year-on-year rate of change in consumer prices (all items less fresh food)is currently around 0 percent.
The prices of domestic corporate goods are expected to move slightly upward for the time being,reflecting movements in foreign exchange rates. For the time being, the year-on-year rate ofchange in consumer prices is expected to turn negative due to the reversal of the previous year’s
movements in energy-related and durable consumer goods, and thereafter, it is likely to be around
0 percent again.
The weighted average of the overnight call rate has been below the 0.1 percent level, and interest
rates on term instruments have been more or less unchanged. In the meantime, compared with
December 2012, stock prices have risen, while the value of the yen against the U.S. dollar has
fallen. Long-term interest rates have remained at more or less the same level as December 2012.
Financial conditions are accommodative. The overnight call rate has remained at an extremely low
level, and firms’ funding costs have been hovering at low levels. Meanwhile, the year-on-year rateof change in the money stock has been positive within the range of 2-3 percent.

1

Source: Extracted and prepared by DTZ based on information from the Bank of Japan

2

Goods created by firms at the producer and wholesaler level in Japan111

GDP growth
The real GDP growth rate for the 3QCY2012 was negative growth of -0.9% quarter-on-quarter and-3.5% on an annualised basis. This was the first quarter of negative growth since 4QCY2011. The
main reason of the negative growth was a sharp drop in export amounts due to a global economic
slowdown and regression of consumer spending which makes up approximately 60% of Japan’sGDP. 1
According to the economic outlook approved by the Cabinet Office of the Government of Japanin January 2012, the rate of real GDP growth in CY2012 is projected to be 2.2%. The average ofthe research institutes’ forecasts is 1.1% for CY2012 and 1.3% for CY2013.
Real gross domestic product (year-on-year, seasonally adjusted)
3.0%

2.3%

2.5%
2.0%
1.5%

1.7%
1.3% 1.2%

1.3%

1.1%

1.4%
1.0%

1.0%
0.5%

0.1%

0.0%
-0.5%
-1.0%

-0.3%

-0.5%

-0.3%
-0.9%

-1.5%

Forecast*

-2.0%
-2.5%

-2.1%
4Q
1Q 2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
CY09 CY10 CY10 CY10 CY10 CY11 CY11 CY11 CY11 CY12 CY12 CY12

’12

’13

Source: Extracted and prepared by DTZ based on the forecast issued by various institutions.

Real GDP growth forecast issued by various institutions
CY2012

CY2013

Release date

Economic Outlook by the Government
NLI Research InstituteDai-ichi Life Research InstituteMitsubishi Research InstituteMitsubishi UFJ Research and Consulting
Norinchukin Research Institute Co., Ltd.
Mizuho Research Institute
The Japan Research InstituteJapan Center for Economic Research
Daiwa Institute of Research Ltd.

1.0%
0.9%
1.1%
1.0%
0.8%
1.3%
1.0%
1.0%
1.1%
1.0%

2.5%
1.7%
1.5%
1.5%
1.1%
0.7%
1.1%
1.3%
1.3%
1.0%

January 28, 2013
December 11, 2012
December 10, 2012
December 10, 2012
December 11, 2012
December 10, 2012
December 11, 2012
December 10, 2012
December 11, 2012
December 10, 2012

1.0%

1.4%

Average

Source: Extracted and prepared by DTZ based on each institution’s press release1

Extracted and prepared by DTZ based on information from the Cabinet Office, Government of Japan.

112

Major economic indicators
Item1.

Dec{11

Jan{12Feb{12Mar{12Apr{12 May{12Jun{12

93.1

94.3

96.0

96.3

95.6

95.4

93.9

Diffusion Index (2005=100) . . . . . . . . . . . . . .
CI Leading Index . . . . . . . . . . . . . . . . . . . .
CI Consistency Index . . . . . . . . . . . . . . . . . .

94.7

94.8

95.8

97.4

97.2

96.2

94.8

2.

Economy Watchers’ Index. . . . . . . . . . . . . . .

47.0

44.1

45.9

51.8

50.9

47.2

43.8

3.

Yen Exchange Rate . . . . . . . . . . . . . . . . . .
Yen/Dollar . . . . . . . . . . . . . . . . . . . . . . . . .

76.94

76.19

81.22

82.79

79.78

78.35

79.77

Yen/Euro . . . . . . . . . . . . . . . . . . . . . . . . .

99.59

99.64

108.21110.47105.6396.80

100.97

3.0

1.1

1.9

4.0

{0.1

{1.7

3.9

General Index . . . . . . . . . . . . . . . . . . . . . .

99.4

99.6

99.8

100.3

100.4

100.1

99.6

General Index II(1) . . . . . . . . . . . . . . . . . . .

98.6

98.3

98.5

98.8

98.9

98.8

98.6

6.

Discount rate(%) . . . . . . . . . . . . . . . . . . . .

0.30

0.30

0.30

0.30

0.30

0.30

0.30

7.

Unsecured Call Money Rate (%) . . . . . . . . . .
0.075

0.075

0.081

0.076

0.080

0.095

0.090

0.980

0.965

0.955

0.985

0.885

0.830

0.830

0.024

0.024

0.023

0.023

0.023

0.023

0.023

1.40

1.40

1.40

1.35

1.35

1.30

1.30

1.475

1.475

1.475

1.475

1.475

1.475

1.475

1.044

1.036

0.920

1.020

1.075

0.948

0.997

4.

Money Supply (Month{to{month(%)) . . . . . . . .
M2+CD . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

Consumer Price Index (2005=100) . . . . . . . . .

Overnight . . . . . . . . . . . . . . . . . . . . . . . . .
8.

Long{term Government Bonds (10 years) (%)
New Issued National Bond Distribution Ratio . . .

9.

Ordinary Deposit (%)
Average Interest Rates Posted at Financial
Institutions . . . . . . . . . . . . . . . . . . . . . . . .

10. Long{term Prime Rate (%) . . . . . . . . . . . . . .
Mizuho Corporate Bank . . . . . . . . . . . . . . . .
11. Short{term Prime Rate (%) . . . . . . . . . . . . . .
Mode . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Contracted Interest Rate on Loans (Domestic
Banks) (%) . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average(2). . . . . . . . . . . . . . . . . .

1.017

1.048

0.797

1.040

1.165

0.896

1.001

Rate of Long{term Loan on Deed . . . . . . . . . .

1.061

1.027

1.023

1.011

1.021

0.989

0.996

13. TOPIX (End of month) . . . . . . . . . . . . . . . . .

728.61755.27835.96854.35804.27719.49770.08

14. REIT Index (March 2003=1000) . . . . . . . . . . .
REIT Index . . . . . . . . . . . . . . . . . . . . . . . .

834

850

958

990

971

927

957

REIT Index including Dividend . . . . . . . . . . . .

1,269

1,298

1,470

1,526

1,502

1,440

1,497

Current Account . . . . . . . . . . . . . . . . . . . . .

2,657{4,556

12,026

13,074

3,735

3,421

4,221

Capital Account . . . . . . . . . . . . . . . . . . . . .

5,465{3,138{11,975 {15,843{1,462{9,037 {19,683

Rate of Change in Actual Expenditure of
All Households (Month{to{month (%)). . . . . . . .

0.5

{2.3

2.3

3.4

2.6

Rate of Change in Actual Income of Worker
Households (year{to{year (%)) . . . . . . . . . . . .

0.0

2.4

2.5

4.3

2.7

0.7

3.8

17. Unemployment Rate (%) . . . . . . . . . . . . . . .

4.5

4.6

4.5

4.5

4.6

4.4

4.3

18. Job{to{Applicants Ratio (Times) . . . . . . . . . . .

0.71

0.73

0.75

0.76

0.79

0.81

0.82

15. Balance of International Payments (100million)

16. Family Budget Survey . . . . . . . . . . . . . . . . .
4.0

1.6

19. Machinery Order Statistics . . . . . . . . . . . . . .

{2.7

13.4

{11.4

4.1

{4.0

{14.5

7.4

20. Industrial Production Index (2000=100) . . . . . .

95.0

95.9

94.4

95.6

95.4

92.2

92.6

(1)

General Index except Food (except alcohol) and Energy.

(2)

Weighted Average Interest Rates Posted at Financial Institutions.

113

Jul-12Aug-12

Sep-12Oct-12

Nov-12

Dec-12

Jan-13(3)Diffusion Index (2005=100)
CI Leading Index . . . . . . . . . . . . .
CI Consistency Index . . . . . . . . . .

92.9
93.6

93.2
93.2

91.8
91.3

92.5
90.7

92.0
90.2

93.4
92.7

–
–

2.

Economy Watchers’ Index . . . . . .

44.2

43.6

41.2

39.0

40.0

45.8

49.5

3.

Yen Exchange Rate
Yen/Dollar . . . . . . . . . . . . . . . . .
Yen/Euro. . . . . . . . . . . . . . . . . .

78.11
96.10

78.37
98.55

77.90
100.1679.76
103.3582.45
107.0586.74
114.4491.72
124.53

Money Supply (Month{to{month(%))
M2+CD . . . . . . . . . . . . . . . . . .

3.3

3.7

3.0

1.8

1.9

8.7

2.2

Consumer Price Index (2005=100)
General Index. . . . . . . . . . . . . . .
General Index II(1) . . . . . . . . . . . .

99.3
98.4

99.4
98.5

99.6
98.5

99.6
98.5

99.2
98.2

99.3
98.0

–
–

6.

Discount rate (%) . . . . . . . . . . . .

0.30

0.30

0.30

0.30

0.30

0.30

0.30

7.

Unsecured Call Money Rate (%)
Overnight . . . . . . . . . . . . . . . . .

0.090

0.093

0.078

0.089

0.091

0.076

0.082

8.

Long{term Government Bonds(10 years)(%) New Issued National
Bond Distribution Ratio . . . . . . . .

0.780

0.795

0.765

0.775

0.700

0.795

0.740

9.

Ordinary Deposit (%)
Average Interest Rates Posted at
Financial Institutions . . . . . . . . . . .

0.022

0.022

0.022

0.022

0.022

0.022

0.022

10. Long{term Prime Rate (%)
Mizuho Corporate Bank . . . . . . . . .

1.25

1.25

1.25

1.25

1.20

1.20

1.20

11. Short{term Prime Rate (%)
Mode. . . . . . . . . . . . . . . . . . . .

1.475

1.475

1.475

1.475

1.475

1.475

1.475

12. Contracted Interest Rate on Loans(Domestic Banks) (%)
General . . . . . . . . . . . . . . . . . .
Weighted Average (2) . . . . . . . . . . .
Rate of Long{term Loan on Deed . . .

1.068
1.104
1.043

0.954
0.902
0.989

0.982
0.944
0.999

1.031
1.098
0.989

0.929
0.867
0.975

1.005
1.085
0.966

–
–
–

13. TOPIX(End of month) . . . . . . . . .

736.31731.64737.42742.33781.46859.80940.25

14. REIT Index (March 2003=1000)
REIT Index . . . . . . . . . . . . . . . .
REIT Index including Dividend . . . . .

945
1,482

973
1,535

1,021
1,618

1,052.81
1,672.76

1,066
1,700

1,115
1,982

1,239
1,994

15. Balance of International Payments(100 million)
Current Account . . . . . . . . . . . . .
Capital Account . . . . . . . . . . . . . .

6,625{6,766

4,448{10,278

5,137{6,8603,769{5,920{2,224{3,274{2,641
9,134

–
–

Item
1.

4.
5.

16. Family Budget Survey
Rate of Change in Actual
Expenditure of All Households(Month{to{month (%)) . . . . . . . . .
Rate of Change in Actual Income ofWorker Households (year{to{year (%)).

1.7

1.8

{0.9

{0.1

0.2

{0.7

–

{2.2

1.8

0.1

0.9

2.1

1.1

–

17. Unemployment Rate (%) . . . . . . .

4.3

4.2

4.2

4.2

4.1

4.2

–

18. Job{to{Applicants Ratio (Times) . . .

0.83

0.83

0.81

0.80

0.80

0.82

–

19. Machinery Order Statistics . . . . . .

{2.6

{12.6

9.6

{1.6

5.3

{1.6

–

20. Industrial Production Index(2000=100) . . . . . . . . . . . . . . .

91.7

90.2

86.5

87.9

86.7

88.9

–

(1)

General Index except Food (except alcohol) and Energy(2)

Weighted Average Interest Rates Posted at Financial Institutions(3)

Certain information as at January 2013 is not available

Source: Extracted and prepared by DTZ based on information from various sources including the Japan Cabinet Office(No. 1, 2 and 19), Bank of Japan (No. 3, 4 and 6 to 12), Ministry of Internal Affairs and Communications, Japan (No. 5,
16 and 17), Tokyo Stock Exchange (No.13 and 14), Ministry of Finance, Japan (No.15), Ministry of Health, Labour andWelfare, Japan (No.18) and Ministry of Economy Trade and Industry, Japan (No. 20).

114

Demographic overview
Population of Japan, Tokyo and the 23 wards of Tokyo
The population of Japan has been falling continuously since 2009. On the contrary, Tokyo’s
population has continued to grow although the growth rate has been declining. The population is
expected to continue to fall in Japan, while Tokyo’s population is estimated to expand at least until
2015.
Population trends (year-on-year)

1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
-0.2%

Japan

Tokyo

12

11

20

20

10

09

20

08

20

07

20

20

06

05

20

04

20

20

03

02

20

01

20

00

20

20

99

98

19

19

19

97

-0.4%

Tokyo 23 wards

Population (’000s)

*

Japan

(y-on-y)Tokyo(y-on-y)

23 wards(y-on-y)1996

124,914–

11,542

–

7,817

–

1997

125,257

0.3%

11,575

0.3%

7,830

0.2%

1998

125,568

0.2%

11,625

0.4%

7,854

0.3%

1999

125,860

0.2%

11,680

0.5%

7,885

0.4%

2000

126,071

0.2%

11,743

0.5%

7,920

0.4%

2001

126,285

0.2%

11,819

0.6%

7,969

0.6%

2002

126,479

0.2%

11,906

0.7%

8,026

0.7%

2003

126,6880.2%

11,996

0.8%

8,084

0.7%

2004

126,8240.1%

12,082

0.7%

8,138

0.7%

2005

127,059

0.2%

12,184

0.8%

8,195

0.7%

2006

127,055

0.0%

12,273

0.7%

8,274

1.0%

2007

127,053

0.0%

12,362

0.7%

8,340

0.8%

2008

127,066

0.0%

12,462

0.8%

8,414

0.9%

2009

127,076

0.0%

12,548

0.7%

8,477

0.7%

2010

127,058

0.0%

12,610

0.5%

8,519

0.5%

2011

126,923-0.1%

12,662

0.4%

8,558

0.5%

2012

126,660-0.2%

12,699

0.3%

8,592

0.4%

Population excludes foreigners and is as of 31 March each year

Source: Extracted and prepared by DTZ based on information from the Japanese Ministry of Internal Affairs andCommunications

115

Households in Japan, Tokyo and the 23 wards of Tokyo
Along with population, the number of households has continued to increase in Tokyo although thegrowth rate has been declining. This was not only due to an increasing population but also adecline in household size. The size of households has been shrinking due to the increase in thenumber of nuclear families 1.
Change in number of households (year-on-year)

12

20

11

10

20

09

20

20

08

07

20

06

Tokyo

20

20

05

04

20

03

Japan

20

02

20

20

01

00

20

99

20

98

19

19

19

97

2.0%
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%

Tokyo 23 wards

Number of Households (unit: ’000s)
Japan

*

(y-on-y)Tokyo(y-on-y)

23 wards(y-on-y)1996

44,831

–

5,092

–

3,597

–

1997

45,498

1.5%

5,166

1.5%

3,646

1.4%

1998

46,157

1.4%

5,246

1.6%

3,698

1.4%

1999

46,812

1.4%

5,331

1.6%

3,753

1.5%

2000

47,420

1.3%

5,411

1.5%

3,808

1.5%

2001

48,015

1.3%

5,500

1.6%

3,871

1.6%

2002

48,638

1.3%

5,598

1.8%

3,939

1.8%

2003

49,261

1.3%

5,693

1.7%

4,005

1.7%

2004

49,838

1.2%

5,777

1.5%

4,062

1.4%

2005

50,456

1.2%

5,868

1.6%

4,122

1.5%

2006

51,102

1.3%

5,965

1.7%

4,198

1.9%

2007

51,713

1.2%

6,060

1.6%

4,269

1.7%

2008

52,325

1.2%

6,160

1.7%

4,343

1.7%

2009

52,878

1.1%

6,242

1.3%

4,402

1.4%

2010

53,363

0.9%

6,296

0.9%

4,439

0.8%

2011

53,783

0.8%

6,345

0.8%

4,473

0.8%

2012

54,171

0.7%

6,390

0.7%

4,508

0.8%

Population excludes foreigners and is as of 31 March each year

Source: Extracted and prepared by DTZ based on information from the Japanese Ministry of Internal Affairs andCommunications

1

Nuclear family refers to a family group consisting of a pair of adults and their children.

116

Household income
Average household income for workers in Tokyo has been relatively stable except in some years.
In 2011, there was a sharp fall of 8.2% due to the earthquake in March 2011 which affected theJapan’s economy for a period of time. Disposable income has typically accounted forapproximately 80% of total household income between 2001 and 2011.
As of October 2012, household income had increased by 4.9% year-on-year to JPY529,505, of
which disposal income increased by 3.0% year-on-year to JPY430,440 and accounted forapproximately 81.3% of total household income.
Worker’s household income in Tokyo (JPY/month, year-on-year)
10.0%

700,000
600,000

5.0%

500,000
400,000

0.0%
300,000
200,000-5.0%

100,000

0

Disposable income
y-on-y change (disposable income)

11
20

10
20

20

09

08
20

07
20

06
20

05
20

04
20

03
20

02
20

20

01

-10.0%

Non-disposable income

Source: Extracted and prepared by DTZ based on information from the Tokyo Metropolitan Government

Consumer expenditure
On the consumption side, consumer expenditure per household was also relatively stable in thepast decade with 2011 again an exception. Consumer expenditure increased in 2009 following afall in 2008 caused by the global economic crisis in 2008 and 2009. However, consumer
expenditure plunged sharply in 2011 due to the earthquake which led to a pull back in consumer
activities in the first half of the year.
As of October 2012, consumer expenditure had increased by 3.2% year-on-year to JPY352,841.
Consumer expenditure per household in Tokyo (JPY/month, year-on-year)
400,000

6.0%

350,000

4.0%

300,000

2.0%

250,000

0.0%

200,000-2.0%

150,000-4.0%

100,000

Consumer expenditure

11
20

10
20

09
20

08
20

07
20

06
20

05
20

20

20

20

20

04

-8.0%

03

0

02

-6.0%

01

50,000y-on-y change

Source: Extracted and prepared by DTZ based on information from the Tokyo Metropolitan Government

117

OFFICE AND RESIDENTIAL (CONDOMINIUM) REAL ESTATE MARKET
Office market in Tokyo
Overview
The historical trend of commencement of construction is shown below.
The total floor space of new non-residential buildings in 2011 was 39,987,000 sq m, up by 6.2
percent year-on-year for 2 consecutive years. The rate of change compared to the previous year
by use is as follows: Office: 14.5% decrease; Retail store: 9.3% decrease; Factory: 4.9% increase;
Warehouse: 30.7% increase.
Floor space of buildings which started construction (million sq m)

80
70
60

23

50
40

20

23

23

21

19

8

10

14

16

8

8

17
8

30

7

7

20

9

9

10

10

10

12

12

12

13

9

6

6

7

8

7

6

8

2002

2003

2004

2005

2006

2007

2008

0

Office12

Retail12

Factory

13

Warehouse

14

16

18

4
6
6
6

4
6
6
6

5
7
5
5

2009

2010

2011

Others

Source: Extracted and prepared by DTZ based on information from the Japanese Ministry of Land, Infrastructure andTourism

Office historical demand and historical/future supply
The Industry Expert has estimated that the amount of average large-scale office buildings supply
in the 23 wards of Tokyo will be 900,000 sq m per year for the upcoming five years (2012 to 2016)
and will be lower than the average of the 10 years from 2002 to 2011, which was 1,170,000 sq m
per year. On the other hand, the average supply for each of the four years between 2013 to 2016is expected to decrease to 670,000 sq m per year, especially in 2013 where the average supply
will be 570,000 sq m. This figure will be the fourth lowest level in the past 25 years.

118

Large-scale office buildings supply in the 23 wards of Tokyo (’000s sq m)

2,500
2,160

Forecast

2,000

1,810
1,540

1,500

1,250

1,210

1,000

1,190

1,170
870 900

860 850

770

650
570

500

340

16
20

15
20

20

14

13

12

20

20

11
20

20

10

09
20

08

07

20

20

20

06

05
20

04
20

03
20

20

02

0

Average supply in past 10 years: 1,170,000 sq m per year
Average supply forecast in next 4 years: 670,000 sq m per year
Source: Extracted and prepared by DTZ based on information from Mori Building Co., Ltd.

The Industry Expert has estimated that the number of large-scale office buildings net absorption
in the 23 wards of Tokyo in 2011 increased by 32% year-on-year to 910,000 sq m, and it hascontinued to increase for two consecutive years. It is lower than the supply in 2011, which was
1,170,000 sq m.
However, as mentioned in the section above, the supply of office space is on a downward trend,
and it is assumed that the office market will improve if this net absorption trend continues in the
future.
Large-scale office buildings net absorption in the 23 wards of Tokyo (’000s sq m)

2,500

2,240
2,160

2,000
1,500

1,570
1,540

1,420
1,250

1,210

1,000

1,220
1,190

1,150

1,170
860

770

910

850
690

650

480

500

340

310

Supply

20

11

10
20

09
20

08
20

07
20

06
20

05
20

04
20

03
20

20

02

0

Net absorption

Source: Extracted and prepared by DTZ based on information obtained from Mori Building Co., Ltd.

119

Office rent and vacancy rate
The Industry Expert has estimated that the average asking rent of office space in the Chiyoda-ku,
Chuo-ku, Minato-ku, Shinjuku-ku and Shibuya-ku (“Tokyo CBD”) increased for four consecutive
years from 2004. On the contrary, it decreased for three years from 2008 but the rate of decrement
has shrunk. The vacancy rate in Tokyo CBD is on an upward trend since its lowest peak in 2007,
but similarly, the rate of increment has shrunk. These trends are shown in the monthly data below:
2000 − 2011: Average monthly asking rent and vacancy rate

8,000

10.0%

7,000

9.0%
8.0%

6,000

7.0%

5,000

6.0%

4,000

5.0%

3,000

4.0%
3.0%

2,000

2.0%

1,000

1.0%

0

0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rent (JPY/sq m)

Vacancy Rate

January 2012 – December 2012: Average monthly asking rent and vacancy rate

5,000

10.0%

4,900

9.0%

4,800

8.0%

4,700

7.0%

4,600

6.0%

4,500

5.0%

12

Ju

-1

nJu

12
r-

ay
M

2

Ap

-1
ar

M

b-

Fe

nJa

l-1
Au 2
g12
Se
p12
O
ct
-1
N 2
ov
-1
D 2
ec
-1
2

11.0%

2

5,100

12

12.0%

12

5,200

Rent (JPY/sq m)

Vacancy Rate

120

Average Monthly Asking Rent (2000 −2011)*
Rent*
Vacancy(JPY/sq m)
Rate
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
*

5,976
6,049
5,841
5,431
5,317
5,398
5,870
6,654
6,711
5,741
5,319
5,122

Average Monthly Asking Rent (Jan ’12 −Dec ’12)*
Rent*
Vacancy(JPY/sq m)
Rate

3.17%
4.03%
7.36%
8.12%
6.10%
4.22%
2.89%
2.65%
4.72%
8.09%
8.91%
9.01%

Jan-12
Feb-12Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12Oct-12
Nov-12
Dec-12

5,118
5,096
5,057
5,055
5,061
5,071
5,064
5,062
5,044
5,030
5,018
5,013

9.23%
9.15%
9.04%
9.23%
9.40%
9.43%
9.30%
9.17%
8.90%
8.74%
8.76%
8.67%

Average asking rent excluding common area maintenance charges

Source: Extracted and prepared by DTZ based on information obtained from Miki Shoji Co., Ltd.

Tokyo yield gap and international yield gap comparison
The yield gap between Tokyo prime office and 10-year Japanese government bonds are shown
below. The yield gap was at its narrowest between 2006 and 2007. It has since continued to widen,
reflecting higher real estate yield and lower interest of 10-year Japanese government bonds. The
yield gap from 2006 to 2007 was in the range of 1.5% to 2%. However, the yield gap as of October
2012 was at around the same level as the yield gap in 2010, which was about 3%.
Tokyo prime office yield versus 10-year bond rate
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2003

2004

2005

2006

2007

Prime Tokyo Office Yield

2008

2009

2010

2011

2012

10-year Japanese Government Bond

Source: DTZ

The yield gap in Tokyo, which had been the highest of the surveyed markets in the table below since April
2010, was surpassed by Sydney and Berlin, for the first time in October 2012. As yields on government
bonds of each country have trended downward, the yield gaps have widened over the last one year.

121

Following these trends, the Industry Expert believes that some foreign investors have begun
looking for opportunities in Japan.
Yield gaps of prime office investment markets
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Apr-10

Oct-10

Apr-11

Oct-11

Apr-12Oct-12

Sydney CBD

Berlin CBDTokyo CBDNew York – Midtown

Seoul CBD

Paris QCA

Singapore CBD

London – West End

Hong Kong – Central

Shanghai – Lujiazui

Yield gaps of prime office investment markets
Apr-10
Oct-10

Apr-11

Oct-11

Apr-12Oct-12

Sydney CBD
Berlin CBD

2.5%
2.1%

1.8%
2.7%

1.6%
2.0%

2.8%
3.2%

3.2%
3.3%

4.0%
3.5%

Tokyo CBDNew York – Midtown
Seoul CBD
Paris QCA
Singapore CBD
London – West End
Hong Kong – Central
Shanghai – Lujiazui

2.9%
2.7%
1.5%
2.0%

3.3%
2.9%
1.4%
1.9%
2.0%
1.1%
1.3%
1.1%

3.1%
2.1%
1.6%
1.3%
1.7%
0.8%
0.5%
1.3%

3.2%
2.9%
1.6%
1.1%
2.4%
1.8%
1.6%
1.3%

3.3%
3.1%
2.2%
1.5%
2.4%
1.9%
1.9%
1.8%

3.4%
3.4%
3.0%
2.6%
2.3%
2.3%
2.0%
1.9%

1.3%
1.3%

Source: Extracted and prepared by DTZ based on information from Japan Real Estate Institute

Recent major supply
Recent major supplies which may affect the office market in Tokyo are shown below:

Building Name (Location)
Otemachi Financial City North Tower(Otemachi 1-chome, Chiyoda-ku)
Otemachi Financial City South Tower(Otemachi 1-chome, Chiyoda-ku)
Waterras Tower(Kanda-Awajicho 2-chome, Chiyoda-ku)
Ochanomizu Sola City
(Kanda-Surugadai 4-chome, Chiyoda-ku)
Tokyo Squire Garden(Kyobashi 3-chome, Chuo-ku)

Completion
StoreyStructure
GFA (sq m)

Oct-1230F/B4F
Oct-12
34F/B4F
Planned: Feb-13
41F/B3F
Planned: Mar-13
23F/B2F
Planned: Mar-13
24F/B4F

S/SRC
110,000
S/SRC
132,500
S/SRC
129,222
S/SRC
102,137
S/SRC
117,461

Source: DTZ

122

Core developer
Mitsubishi Estate Co., Ltd.
Mitsubishi Estate Co., Ltd.
Yasuda Real Estate Co., Ltd.
Taisei Corporation
Tokyo Tatemono Co., Ltd.

Office market outlook
The impact from the surge of supply in 2012 on the Tokyo tenant market appeared considerable.
Although the market had been approaching the cyclical bottom, the turnaround was slow in viewof the substantial new supply which took time to be absorbed.
Office demand remained limited. While new buildings completed in 2012 were gradually filled up,
existing buildings lost tenants to the new buildings. Offices with inferior specifications and lessaccessible locations in particular struggled to secure tenants and some landlords had to offer
attractive rental rates as incentives to potential tenants. In contrast, some landlords of prime
buildings with high occupancy rates asked for higher rents. As such, the leasing market has
become more competitive and polarised.
The Industry Expert believes that the office market will improve gradually in 2013. The decline ingrade A vacancy is expected to stabilise in the second half of 2013 as most of the new supply in2013 is expected to be concentrated in the first half of the year. The Industry Expert estimates thatthe rental increase will be 7% year-on-year in 2013, and accelerate in 2014 after vacancy rates
stabilise in the latter half of 2013.
Tokyo grade − A office rent (JPY/sq m, month), vacancy and outlook
14,000

Forecast

12,00010,000
8,000
6,000
4,000
2,000

Rent

14

15
20

12

13

20

20

11

20

10

20

08

09

20

20

07

20

06

20

05

20

04

20

03

20

01

02

20

20

20

20

00

0

10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

Vacancy

Source: DTZ

Residential (condominium) real estate market in Tokyo
Overview
According to the official listed prices surveyed by the government as at 1 January 2012 reviewed
and analysed by the Industry Expert, the average land prices in residential areas showed ayear-on-year decline of 2.3% for the whole of Japan, 1.0% for Tokyo and 1.0% for 23 wards ofTokyo, respectively.
Although land prices have declined for four straight years (between 2008 and 2012) after the
global economic crisis, the rate of decline of each area has shrunk and has shown signs ofimprovement.
Although the real estate market was relatively stagnant after the earthquake in March 2011, theIndustry Expert believes that there are early signs of recovery, except in disaster-stricken areas.
Meanwhile, land prices reflect the future economic capacity due to the Japanese Yen’s highappreciation and the European sovereign debt crisis.
123Official listed land price in residential areas (year-on-year)

15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Japan

Tokyo

Tokyo 23 wards

Source: Extracted and prepared by DTZ based on information from the Japanese Ministry of Land, Infrastructure andTourism

The Japanese Ministry of Internal Affairs releases the number of dwellings every five years toreveal stock of dwellings, including both houses and condominiums in Japan. According to thedata released, the number of dwellings in Tokyo has continued to grow. The growth rates from2003 to 2008 of Tokyo and the 23 wards of Tokyo were 9.6% and 8.9%, respectively. These figures
are higher than that for the whole of Japan, which was 6.9%.
Number of dwellings in Tokyo and the 23 wards of Tokyo (’000s)

8,000
6,781

7,000
6,000

5,300

5,670

Number of dwellings (’000s)
Japan
Tokyo

6,186

5,000
4,000
3,000

3,788

4,010

4,407

4,801

2,000

23 wards

1993

45,879

5,300

3,788

1998

50,246

5,670

4,010

2003

53,891

6,186

4,407

2008

57,586

6,781

4,801

1,000

0
1993
1998
2003
2008
Tokyo Tokyo 23 wards
Source: Extracted and prepared by DTZ based on information from the Japanese Ministry of Internal Affairs andCommunications

The historical trend of commencement of construction is shown below. The number ofcommencement of housing construction in 2011 was 834,117 units, up by 2.6 percent year-onyear for two consecutive years. Owned houses increased by 0.1 percent while rental houses
declined by 4.1 percent and houses for sale increased by 16.2 percent.

124

Number of new housing construction starts (’000s)

1,400
1,200
1,000

324

327

346

450

452

465

379

369

295

300

800
600

543

504

442

465

315

319

400
200

373

368

370

359

353

169

202

235

321

298

286

285

305

306

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Owned
RentedFor sale
Source: Extracted and prepared by DTZ based on information from the Japanese Ministry of Land, Infrastructure andTourismExisting condominium supply and demand
According to an analysis of the information obtained by the Industry Expert from the “Real Estate
Circulation Market Trend in Greater Tokyo” published by the Real Estate Information Network forEast Japan (“REINS”), existing condominiums in Tokyo registered with REINS increased by 25.4%
year-on-year to 87,911 in 2011. This figure was higher than the number in 2008.
Number of new registered existing condominiums in Tokyo (’000s)

110

101.6
94.8

100
86.4

90

81.6
87.9

80

82.6 68.3

70

61.9
56.5

60
50

75.2

60.1

70.1

51.2
58.1

42.7

40

51.8

47.6

50.4

42.4

30

34.8

Tokyo

11
20

10
20

09
20

08
20

07
20

06
20

05
20

04
20

03
20

20

02

20

Tokyo 23 wards

Source: Extracted and prepared by DTZ based on information from the Real Estate Information Network for East Japan

Based on information in the Monthly Market Watch released by REINS and extracted andanalysed by the Industry Expert, the average price per sq m of existing condominiums in Tokyoin December 2012 increased by 1.1% to JPY499,900 for the half-year period from June 2012.
Although the average price per sq m of existing condominiums had been trending downward after
a peak in December 2007, there are some signs of a bottoming-out these days.

125Average price per sq m of existing condominiums (JPY’000)

600
543.2

550
516.5

530.1
512.8

487.7

500

499.5

514.9 510.9 517.4

500.9 504.4 494.3 499.9

441.5 446.9

450
400

2
ec
D

n-

-1

12

1
Ju

D

ec

-1

11

0

nJu

-1
ec

D

n-

-0

10

9
Ju

ec
D

n-

-0

09

8
Ju

ec
D

n-

08

7
D

Ju

ec

nJu

D

-0

07

6
-0

06

ec

n-

Ju

D

ec

-0

5

350

Source: Extracted and prepared by DTZ based on information from the Real Estate Information Network for East Japan

Apartment rent and occupancy rate
The average rent in Tokyo has declined since its peak in 2008 due to the global financial crisis.
As of August 2012, the average rent in the 23 wards of Tokyo decreased by 0.9% year-on-year to
JPY3,949 per sq m, while it decreased by 1.9% to JPY4,149 per sq m in Chiyoda-ku, Chuo-ku andMinato-ku (“Tokyo 3 CBD”).
In addition, the average occupancy rate has risen since 2009 when it was at its lowest. As of
August 2012, the average occupancy rate in the 23 wards of Tokyo increased by 1.0% to 96.1%,
while it increased by 1.2% to 94.9% in Tokyo 3 CBD.
Average monthly rent (JPY/sq m)

5,500
5,000
4,500
4,000
3,500

0
Ju 8
l-0
8
Ja
n0
Ju 9
l-0
9
Ja
n10
Ju
l-1
0
Ja
n1
Ju 1
l-1
1
Ja
n12
Ju
l-1
2

Ja

n-

7
l-0

Ju

07

Ja

n-

6
l-0

Ju

Ja

n-

06

3,000

Tokyo 3 CBDs

126

Tokyo 23 wards

Average occupancy rate

Tokyo 3 CBD

12
n-

1
Ja

l-1

11
n-

Ja

Ju

0
l-1

10

Ju

9

n-

l-0

Ja

09

Ja

Ju

n-

8
l-0

08

Ju

7
Ja

n-

l-0

07
n-

Ja

Ju

6
l-0

Ju

Ja

n-

06

97.0%
96.0%
95.0%
94.0%
93.0%
92.0%
91.0%
90.0%
89.0%
88.0%
87.0%

Tokyo 23 wards

Source: Extracted and prepared by DTZ based on information from The Association for Real Estate Securitization

Yield gap and international capitalisation rate comparison
The yield gap between Japanese government bonds and market capitalisation rates for studio
type condominiums in Southern Tokyo are shown below. The yield gap was at its narrowest in
2007, then continued to widen, reflecting higher real estate yields and lower interests of 10-year
Japanese government bonds. The yield gap has stayed at around of 4% since 2009.
Yield gaps for studio type in Southern Tokyo

7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%

r-1
0
D
ec
-1
0
Au
g11
Ap
r-1
2

Ap

Au

g-

09

8
ec

-0

8
r-0

D

Ap

Au

g-

07

6

D

ec

-0

6
Ap

r-0

05
g-

Au

-0
ec

D

Ap

r-0

4

4

0.0%

Market Cap Rate for Studio Type Condominium in Southern Tokyo
10-year Japanese Government Bond
Source: DTZ

According to the Industry Expert based on its research, the average capitalisation rates in theworld for upper class and middle class residential areas are 4.5% and 4.6%, respectively. On theother hand, those of Tokyo are 4.5% and 5.5%, which rank higher than world average.

127

Condominium residential area
(Upper class)(Middle class)

0.0%

2.0%

4.0%

6.0%

8.0%

0.0%

2.0%

Beijing

6.0%

Beijing

6.0%

Shanghai

5.0%

Tokyo

5.5%

Seoul

5.0%

San Francisco

5.5%

San Francisco

4.8%

New York

5.5%

Tokyo

4.5%

London

5.3%

Average

4.5%

Shanghai

5.0%

New York

4.0%

Seoul

5.0%

London

3.8%

Average

4.6%

Paris

3.4%

Paris

3.5%

Hong Kong

3.0%

Hong Kong

3.2%

Singapore

2.3%

Singapore

2.4%

4.0%

6.0%

8.0%

Source: DTZ based on Japan Association of Real Estate Appraisers

Recent major investment transactions
Recent major transactions which may affect the residential market in Tokyo are shown below:
Transaction
Price (JPY M)

Completion
GFA (sq m)

Spacia Shinjuku(Shinjuku 1-chome, Shinjuku-ku)

Sep-12
2,525

Feb-03
4,171

Japan Rental Housing
Investments Inc.

Prime Maison Ginza East
(Tsukiji 1-chome, Chuo-ku)

Sep-12
5,205

Feb-06
8,724

Sekisui House SI Investment
Corporation

Belle Face Meguro(Nishi-Gotanda 3-chome, Shinagawa-ku)

Oct-12
3,330

Feb-104,643

ORIX JREIT Inc.

Castalia Nakameguro(Aobadai 1-chome, Meguro-ku)

Nov-12
3,800

Jan-083,436

Daiwa House Residential
Investment Corporation

Apartment Tower Meguro(Shitameguro 2-chome, Meguro-ku)

Nov-129,000

Feb-0818,602

Nippon Accommodation Fund

Building Name (Location)

Buyer, etc.

Source: DTZ

Residential market outlook
As the residential market is heavily supported by Japanese domestic demand, Japan’s economic
growth is the key to the growth of the market. Japan has faced many challenges in the past few
years: a natural disaster in 2011 and also several external problems such as the Japanese Yen’s
high appreciation caused by the global financial crisis and the European debt crisis. These events
have put downward pressure on the Japanese economy. However, in December 2012, the Liberal
Democratic Party returned to power in Japan and a new administration led by Shinzo Abe wasformed. The weak Japanese Yen began to appreciate and was seen as a positive response by themarket, which also saw an improvement in the price indices of the TSE.

128

In addition, at a monetary policy meeting on 22 January 2013, the Bank of Japan decided to
introduce (i) a “price stability target” of 2 percent with respect to the year-on-year rate of change
in the consumer price index, and (ii) an “open-ended asset purchasing method” under the Asset
Purchase Program. These easy money policies are expected to improve the Japanese economy
in the future and the improvement on corporate profits will lead to an increase in wages, thereby
increasing the disposable income for housing.
Despite the declining population in Japan, Tokyo itself is still expanding and stable housing
demand is expected for the Tokyo residential market. After the earthquake in 2011, the focus is on
quality residential properties in safer locations with solid foundations.
It is expected that there will be a surge in demand because of rising consumption tax rates. Given
the declining commencement of housing constructions, the new supply is not expected to lead toan oversupply problem.
Taking into account all of the above, the Industry Expert believes that the residential market inTokyo will stay firm.
REAL ESTATE INVESTMENT TRUST (REIT)
Size of the REIT market in Japan
According to Industry Expert based on its research, the aggregate size of the real estate private
funds and J-REITs in Japan is approximately JPY27.0 trillion (comprising (i) J-REITs – JPY8.7
trillion, (ii) Japanese private funds – JPY15.9 trillion, and (iii) Overseas private funds – JPY2.4
trillion. The size of the REIT market has remained relatively unchanged since its peak in the firsthalf of 2009, with slight improvements since the second half of 2012.
Market scale of private fund and J-REIT (JPY trillion)

30.0
25.0
3.4

20.0

3.8

4.0

2.4

2.9

2.6

3.0

2.0

3.2

4.3

15.0

13.7 13.6 14.0 13.8 14.9 14.7 14.8 14.9 15.9

3.5
6.7

5.4

6.1

5.0
4.5

6.8

7.4

7.4

-0

5.5

6.1

08

10.0

10.0

7.6

7.5

7.8

7.8

8.3

8.0

8.7

*

Private Fund (Domestic)

n-

12

1
-1
ec

Ju

11
D

nJu

ec

-1

0

10
D

nJu

ec

-0

9

09
D

n-

8
Ju

ec
D

n-

7
Ju

ec

-0

07

J-REIT

D

Ju

n-

-0
ec

D

Ju

n-

06

6

0.0

Private Fund (Overseas) *“Overseas private funds” are funds targeting real estate investments in various countries including Japan.

Source: Extracted and prepared by DTZ based on information from Sumitomo Mitsui Trust Research Institute129Market outlook
As the effects of the sub-prime loan crisis became increasingly severe, the expected dividend
yield rose between mid-2007 and 2009. However, after 2009, government support programs,
including funding assistance for J-REITs and improvement of the investment environment, such asformalisation of procedures for mergers between J-REITs, promoted reorganisation of investment
corporations. Consequently, the J-REIT market gradually stabilised and the expected dividend
yield dropped. Furthermore, the announcement in October 2010 by The Bank of Japan of plansto acquire investment equity in J-REITs triggered decline in the dividend yields. Although dividend
yields had been on a moderately increasing trend since the earthquake, the expected dividend
yield has shown a trend of decline at the beginning of 2012.
In the J-REIT market, Kenedix Residential Investment Corporation, which listed in May 2012 was
the first J-REIT-listing since October 2007. Activia Properties Inc., Daiwa House REIT Investment
Corporation and Global Logistic Properties Investment Corporation were also listed in June 2012,
November 2012, and December 2012, respectively. Daiwa House REIT Investment Corporation
and Global Logistic Properties Investment Corporation closed on the first day of public trading at
a higher price than the public offering price. The J-REIT market is re-emerging following thefinancial crisis in 2008, with J-REIT listings expected in 2013.
Expected dividend yield of J-REITs
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%

Se

p
M -01
ar
Se -02p
M -02
ar
Se -03p
M -03
ar
Se -04p
M -04
ar
Se -05p
M -05
ar
Se -06p
M -06
ar
Se -07p
M -07
ar
Se -08p
M -08
ar
Se -09p
M -09
ar
Se -10p
M -10
ar
Se -11p
M -11
ar
Se -12p12

0.0%

Total estimated dividend yield
Estimated dividend yield for office
Estimated dividend yield for residential
Source: Extracted and prepared by DTZ based on information from STBRI J-REIT Index® (STBRI J-REIT Index® changed
its name to SMTRI J-REIT Index (pending its trademark application) in April 2012. STBRI J-REIT Index® is a brand nameofficially registered by Sumitomo Mitsui Trust Research Institute Co., Ltd. (formerly known as STB Research Institute Co.,
Ltd.).)

130

BUSINESSINTRODUCTION
We are a company with diversified real estate businesses. We are active in the following realestate sectors:(a)Revitalisation;(b)

Development;(c)Rental;

(d)

Fund;

(e)

Property management; and(f)Alternative investment.

Our business activities and operations are primarily in Japan. Our revitalisation, development andrental businesses are conducted through Tosei Corporation. Our directly held and wholly-owned
subsidiaries are Tosei Community Co, Tosei Asset Advisors, Tosei Revival Investment and NAI
Tosei. Tosei Asset Advisors and NAI Tosei provides fund and asset management services and/or
consultancy services relating to real estate while the property management function of the Tosei
Group is performed through Tosei Community Co. Our alternative investment business isconducted through Tosei Revival Investment and its wholly-owned subsidiary, Hestia Capital.
Group Structure

Tosei

100%
Tosei Asset
Advisors

100%
Tosei
Community Co

100%
Tosei Revival
Investment

100%
NAI Tosei

100%

100%

Hestia CapitalGreen House(in liquidation)(1)100%
Tosei Singapore

Note:
(1)

Green House was a distressed company with real estate assets which we had acquired under our alternative investment
business in 2009. Following the completion of sale of all properties held by Green House (see “Business – Principal
Properties – Alternative Investment” for more information), Green House would be a company with no material assets.
We have accordingly placed Green House in voluntary liquidation.

131

BUSINESS OVERVIEW
Revitalisation
Our Group acquires office buildings, commercial facilities, condominiums and other properties ofa certain age profile (typically about 20 years old) and whose asset value has declined. Our focus
is on the 23 wards of Tokyo.
We aim to undertake the revival of such existing properties by:•commissioning the process of renewal to the exterior and interior through refurbishment andrenovation (in contrast to demolishing and rebuilding);•

undertaking technological improvements such as installing and/or upgrading IT infrastructure
to create smart buildings; and•attempting to improve the rental capabilities of properties by actively sourcing for tenants toincrease occupancy rates, collecting and settling all outstanding rent due and payable andincreasing rental rates generally.

We term these measures mentioned above as “value-up activities”. Together, these measuresform a “value-up plan” that we designate for each property undergoing revitalisation. The businessprocess of raising overall value, from the acquisition of the property to the sale of the property
after executing our “value-up plan” is what we refer to as “revitalisation”.
We focus on quality and detail in order to enhance the value of original and distinctive properties.
In addition, we implement redevelopment plans matched to the local characteristics and needs torestore the asset values of these properties. By tailoring our revitalisation of aging properties to
fit the local area’s characteristics and needs and profiles of tenants, we increase the value of suchproperties before we resell them to investors, real estate funds, and individual end-users.
Unless in exceptional circumstances, we do not, as a policy, acquire any property built under theold quake resistance standards which were changed in 1981.
Restyling
In 2009, we implemented a new “Restyling” business model as an arm of our revitalisation
business. Whilst the processes for both our revitalisation and “Restyling” businesses are similar,
we usually sell our revitalised projects to purchasers as a whole building. In contrast, as part ofour “Restyling” business model, we register the title to individual sub-divided units before sellingeach sub-divided unit rather than the building as a whole. Our “Restyling” business only targets
condominiums, while our revitalisation projects generally include condominiums and officebuildings.
Our financial position allows us to purchase whole condominium buildings/compounds rather than
individual units. Accordingly, this allows us to renovate common areas as well. We also apply theknow-how and expertise we have obtained from our property management business in our“Restyling” business. As part of the “Restyling” process, we also set up property management
associations and formulate maintenance and repair guidelines for ongoing maintenancepurposes.
Our revitalisation and “Restyling” businesses should be contrasted with our development business(see “Development” below), wherein we acquire land lots and develop office buildings,
condominiums and detached houses for sale from the ground up.

132Process
Revitalisation and “Restyling” of a property can take between six to 12 months from the acquisitionof the property to the commencement of sales. The sales process for our “Restyling” business cantake as long as four to five years depending on whether or not individual units are tenanted at thetime of our acquisition. If such units are tenanted, we generally only commence sales of such units
after such tenants vacate the units. Please also see “Risk Factors – Risks Relating to ourBusiness – We face risks arising from the use of Japanese standard lease agreements” for more
information.
Both our revitalisation and “Restyling” businesses involve similar processes. As a starting point,
we obtain information on properties for sale from our internal information network which contains
data from numerous external sources. After we have identified a suitable property, we planvalue-adding measures (a key feature of our revitalisation business) for that particular property.
With information on the amount of value we can add to a property through the revitalisation
process, we are able to simulate our potential sale price. Once we have the relevant financial dataon hand, we determine a sustainable purchase price for the property we intend to acquire andproceed to negotiate and/or bid for the relevant property on this basis. If we are successful inacquiring the property, we then commence the revitalisation process based on the value-adding
plans drawn up earlier. Upon completion of the revitalisation process, we then sell the property.
However, with our “Restyling” business model, we sub-divide each property and register title toeach individual unit before selling.
Although our focus is on selling the properties, we may lease out properties for both ourrevitalisation and “Restyling” businesses as and when needed.

133

The diagrammatic representation of our key processes for our revitalisation and “Restyling”
projects is as follows:
Revitalisation and “Restyling”(1) Obtaining information onproperties for sale(2) Planning of value-up activities(3) Simulation of sale price(4) Determination of purchase price(5) Acquisition(6) Commencement of restyling andvalue-up activities(7a) Revitalisation sales(7b) Registration of sub-division(7b) Restyling sales

Notes:(1)

We usually obtain information on properties from agents/brokers or source for information which may be available
as part of a tender process conducted by the local courts/government offices.

(2)

Basic due diligence is undertaken and we estimate the costs involved in the renovation/refurbishment works
required.

(3)

The price at which we can sell the property/each unit is simulated based on a number of factors, including, the size,
location and use of the property, as well as the target consumer of the revitalised property. Research is also
conducted in respect of neighbouring properties and the market rate of rentals.

(4)

The maximum purchase price we are willing to pay is fixed by deducting purchase-related expenses (including
brokerage, taxes etc.), renovation costs, sales-related expenses (including brokerage, advertising fees etc.), taking
into account the minimum gross profit margin acceptable to our Company.

(5)

Based on the pre-determined maximum purchase price payable by us, negotiations are conducted with vendors
and/or their agents and the acquisition is completed if the terms are acceptable to our Company.

(6)

Value-up activities commence, including renovation, refurbishment, and sourcing for tenants. For “Restyling”
properties, we will also set up property management associations for the properties.

(7a)

For our revitalisation business, sale of the entire property takes place when buyers are found.

(7b)

For our “Restyling” business, we sub-divide the property into individual condominium units for sale. In contrast to
the sale of entire buildings for our revitalisation business, units are sold individually. Units which are unoccupied andwhich have been renovated are available for sale, while we continue to earn rental income from units which were
tenanted when we acquired the property. For such units that were tenanted when we had acquired the entire
property, renovation of the interior will take place when the tenant moves out.

134

Examples of the Revitalisation Process
Kanda Ekimae Building, Chiyoda-ku, Tokyo (2002)

Before revitalisation

After revitalisation

Palms Gotanda, Shinagawa-ku, Tokyo (2005)

Before revitalisation

After revitalisation

135

Our Company regards our revitalisation business as a growth driver, where we display the
integration of our expertise, from development to management. For example, our property
management arm of our Company manages some of the properties that we have revitalised andsold.
In addition, we believe that the revitalisation of existing properties without demolishing andrebuilding is more cost-effective and environmentally friendly and in line with global trends. We
also believe that we have fewer competitors in the revitalisation market as most of the major
property developers in Japan manage and develop new properties or properties they had
previously developed, but generally do not undertake renovations and refurbishments in respectof small and medium sized properties which may have been developed by other developers. In
particular, for our “Restyling” business, while there are companies which acquire, refurbish andsell individual units, we believe that we have a significant advantage over such companies as wehave the ability to acquire entire properties. This allows us to renovate common areas in suchproperties and correspondingly increases the value of the properties in our “Restyling” business.
In 2009, our revitalisation business was awarded the “Business Innovation Plan” certification by
the Tokyo Metropolitan Government for our environmental efforts in planting trees on the rooftops
of most of our revitalised properties. In each of 2011 and 2012, our “Restyling” business was
singled out and awarded a “Good Design Award” by the Japan Institute of Design Promotion for
its business model.
Development
We develop office, commercial and residential properties with a focus on the 23 wards of Tokyo.
We believe that we develop competitively priced properties of good quality (on a small to medium
scale). We actively studying the characteristics of properties we purchase, including the local areaand site characteristics, end use, demand, rent levels and selling prices.
We extensively utilise the capabilities of our in-house Architecture Planning Department for ourdevelopment arm. Our Architecture Planning Department has been awarded the ISO 9001:2008,
and is registered as a First-Class Architect Office 1 by the Governor of the Tokyo Metropolitan
Government. Amongst other things, our Architecture Planning Department undertakesarchitecture planning, quality control, cost control and process control in respect of ourdevelopment projects. As at the Latest Practicable Date, our Architecture Planning Department
has eight members, including five architects. The Architecture Planning Department is headed by
Mr. Masahiro Uehara.
As with our revitalisation business, we manage several of the office, commercial and residential
properties that we have completed and sold, showcasing the integration and complementary
nature of our different businesses.
Buyers of the properties we develop include institutional investors, real estate funds, corporations,individuals and other end-users.
Development Branding
We develop our commercial properties under our “T’S BRIGHTIA” brand while our residential
properties are developed under our “THE Palms” and “Palms Court” brands for condominiums anddetached houses respectively.

1

A “First-Class Architect Office” is defined under the Act on Architects and Building Engineers of Japan as one which
has a first-class registered architect and which satisfies the pre-requisites for the submission of permit applications.

136

Funding for our Projects
We generally obtain financing from banks to fund both the costs of acquisition and occasionally,for part of the costs incurred for construction. Such financing generally accounts for approximately
20% of the construction cost. The remaining 80% of the construction costs is funded with ourCompany’s own cash. Where a particular financial institution has a policy of funding only
acquisition costs, our Company funds all construction costs through our own cash.
Process
Development of condominiums and office buildings usually takes up to 24 months from theacquisition of the property or land to the completion of sales.
As a starting point, we obtain information on land sites or properties for sale from our internal
information network (VIPMAP System) which contains and consolidates data from numerous
external sources. The VIPMAP System allows us an overview of a particular property and its
surrounding area. After we have identified a suitable land site or property, we plan for the type ofdevelopment project (e.g. office, commercial or residential) we can undertake on a particular landsite or property, taking into account local needs, location and permitted land use. Once we havedecided on the type of development project, we simulate specifics such as design andarchitectural specifications and the number of units. With information on the potential cost of adevelopment project, we are able to simulate our potential sale prices based on historical data andother factors. Once we have the relevant financial data on hand, we determine a sustainablepurchase price for the land site or property we intend to acquire and develop and proceed tonegotiate and/or bid for the relevant land site or property on this basis. If we are successful inacquiring the land site or property, we then commence the procedure for planning anddevelopment permission. Once these approvals have been obtained, our main contractors willcommence work on the project. At this juncture, we appoint agents who will commence
pre-completion sales. Upon completion of the development project, we deliver the completed
property to buyers. We rent out our properties which have not been sold as and when necessary.

137

The diagrammatic representation of our key processes for our development projects is as follows:(1) Obtaining information onproperties and land for sale(2) Planning(3) Simulation and potential returns(4) Determination of purchase price(5) Acquisition(6) Planning permission/Development permit/Appointment ofConstructing Contractor(7a) Agents appointed,
sales to customers
commence(7) Construction by Third Parties(8) Completion(9) Payment & delivery
Notes:(1)

We usually obtain information on properties from agents/brokers or source for information which may be available
as part of a tender process conducted by the local courts/government offices.

(2)

Basic due-diligence is undertaken and we estimate the costs involved in the development process.

(3)

The price at which we could sell the property/each unit is simulated based on a number of factors, including, the size,
location and use of the property, as well as the target consumer of the developed property. Research is also
conducted in respect of neighbouring properties and the selling prices of such properties.

(4)

The maximum purchase price we are willing to pay is fixed by deducting purchase-related expenses (including
brokerage, taxes etc.), development costs, sales-related expenses (including brokerage, advertising fees etc.),
taking into account the minimum gross profit margin acceptable to our Company.

(5)

Based on the pre-determined maximum purchase price payable by us, negotiations are conducted with vendors
and/or their agents and the acquisition is completed if the terms are acceptable to our Company.

(6)

Our Architecture Planning Department is usually assisted by an external building design firm in finalising building
plans. These external parties also assist in obtaining the relevant planning permissions and development permits.
At the same time, a tender process is conducted and the main contractor of the project will be appointed.

(7)

The main contractor undertakes the construction of the development. The process may take up to 24 months,
depending on whether the development is of an office building, condominium or detached housing project.

(7a)Pre-sales to customers will be undertaken concurrently with construction. We generally appoint third party sales
agents to market our condominium properties since these involve the sale of properties to a larger number ofcustomers.

(8)

Upon completion of the property by the contractor, the completed property is handed over to our Company and theremainder of the construction costs due to the contractor is paid by our Company.

(9)

The property is delivered to customers. Customers will pay the purchase price (less any deposit) at the time ofdelivery.

138

Examples of our Revitalisation and Development Properties
Selected Past Projects
THE Palms Setagaya Sakura

Segment:

Development – Residential

Location:

Setagaya-ku, Tokyo

No. of Units:

108

Date of Completion:

February 2007

Features:

Located in a quiet, low-rise residential district, THE Palms
Setagaya Sakura was primarily planned as an environmentallyconscious condominium complex. While retaining its
uniqueness, the overall structure has been harmonised with its
surroundings. We took an ecological approach, incorporating
greenery and other features aimed at minimising environmental
impact. The complex featured a rooftop garden covering over
350m 2, roadside planting and a bright, lush central garden.

Heiwajima Tosei Building

Segment:

Development – Office

Location:

Ota-ku, Tokyo

Date of Completion:

February 2009

Features:This property received an “A” rating under the Comprehensive
Assessment System for Built Environment Efficiency(“CASBEE”) for being environmentally-friendly.

139

T’S BRIGHTIA Kichijoji

Segment:

Development – Commercial

Location:

Musashino-shi, Tokyo

Date of Completion:

March 2008

Features:This property is located in a neighbourhood in close proximity to
the Kichijoji station on the JR-Chuo Railway Line. The building ischaracterised by its monotone walls, while the bright tenant
space utilises glass walls. This property was sold as an incomegenerating property as we had tenanted units in thedevelopment prior to its sale.

Selected Completed Projects
Hilltop Yokohama Negishi

Segment

Revitalisation

Location:

Yokohama-shi, Kanagawa

No. of Units:

279 (140 units available as at the Latest Practicable Date)

Date of Completion:

October 2010

Features:

One of our larger-scale projects which was designed to add
value by raising safety by implementing increased security
features, increasing convenience by offering a car-pooling andbicycle rental service as well as aiming to nurture community
living by creating new courts/terraces in common areas andsetting aside spaces for children.

140

THE Palms Tsukishima Luna Garden

Segment:

Development – Condominium

Location:

Chuo-ku, Tokyo

No. of Units:

122 (20 units available as at the Latest Practicable Date)

Date of Completion:

September 2012

Features:This environmentally-friendly property adopts bulk electricity
purchasing, a solar power generation system and energyefficient facilities. Rooftop gardens and a full range of services
including car-pooling aim to add to the residents’ quality of life.

141

Palms Court Koishikawa 3-chome*Artists Impression
Segment:

Development – Detached Houses

Location:

Bunkyo-ku, Tokyo

No. of Units:

15 (10 units available as at the Latest Practicable Date)

Date of Completion:

November 2012

Features:

The development is a 10-minute walk from the nearest train
station. It is located in a quiet, low-rise residential area of
Koishikawa, Bunkyo-ku, popularly known as Bunkyo District.
The development is equipped with the latest environmentallyfriendly technological and ecological facilities.

Palms Court Setagaya Okamoto*Artists Impression
Segment:

Development – Detached Houses

Location:

Setagaya-ku, Tokyo

No. of Units:

40 (33 units available as at the Latest Practicable Date)

Date of Completion:

November 2012

Planned Features:

Located in Okamoto, Setagaya-ku, a higher-end residential
area in Tokyo, each unit in this property has environmentallyfriendly features.

142

Selected Ongoing Projects
THE Palms Sendagaya*Artists Impression
Segment:

Development – Condominium

Location:

Shibuya-ku, Tokyo

No. of Units:

23

Expected Date ofCompletion:

April 2013

Planned Features:

Certain units in this property have roof-balconies and enjoy aview of the Shinjuku Gyoen National Garden. The property isdesigned in such a way to accommodate as many cornerunits as possible.

THE Palms Nishigahara*Artists Impression
Segment:

Development – Condominium

Location:

Kita-ku, Tokyo

Expected No. of Units:

40

Expected Date ofCompletion:

August 2013

Planned Features:

The south-east and south-west sides of the development
faces an open location which provides for natural light in thedining areas of units. Safety features include each unit being
equipped with a storage disaster-kit for use in the event of an
emergency.
143

We have not, in the past, experienced delays in respect of the revitalisation and development
projects we have undertaken which has resulted in liquidated damages having to be paid andadditional overheads having to be incurred (see also “Risk Factors – Risks Relating to ourBusiness – We are liable for delays in the completion of projects and any liquidated damages
arising from such delays could adversely affect our financial performance” for more information).
Rental
We own office buildings, residential and commercial properties primarily in the 23 wards of Tokyo.
Our rental properties are office buildings and condominiums typically in inner Tokyo and are allunder our direct management. Our rental business consists primarily of leasing out properties thathave been acquired and prepared for rental purposes. Our tenants benefit from our expertise in
the revitalisation sector, where they are able enjoy improvements to the properties in respect offunctionality, convenience and design at a reasonable cost as compared to purchasing or renting
a unit in a new development.
Our tenants for our office buildings have a variety of profiles, ranging from small-medium
enterprises to large listed companies while tenants for our condominium units are primarily
individuals.
Our expertise in our other business segments, especially revitalisation, “Restyling”, development
and property management enables us to offer comprehensive services and maintain or raise
property value whilst contributing to a comfortable and convenient living and businessenvironment. We aim to continue to achieve high occupancy rates by leveraging the talents of our
in-house specialists to provide comprehensive management that meets diverse real estate needs.
As at the Latest Practicable Date, the occupancy rate for properties in our rental business was
88.0%.
Fund
Our fund business is conducted through Tosei and our wholly-owned subsidiary, TAA.
Our Group services a wide array of clients and investors, including both private and institutional
investors (e.g. financial institutions and foreign-owned funds) that are mainly involved in the realestate market in Tokyo. Our fund business has two components. Whilst we structure and manage
private real-estate funds as an asset manager, we also provide asset management services andbrokerage services to private investors and other fund managers wherein we source for realestate suited to their needs. In addition, we provide asset management services and brokerage
services for real estate invested in or owned by our clients. From time to time, we also co-invest
with our clients in the funds that we set up or in funds where we manage the portfolio assets.
We aim to achieve an optimum balance of investments through the selection of profitable
investment properties suited to each client’s needs, raising the physical and intangible value of
properties purchased by clients through our “value-up” activities.
In sourcing for properties for our clients, we take into account a number of factors before
determining whether a property is suitable for injection into a fund. For example, properties whichhave not yet been refurbished or renovated and which have high vacancy rates may not besuitable for injection into funds. In addition, properties with a value of below JPY1 billion are also
usually not acquired by funds. The decision to invest in properties we have sourced ultimately lies
with the fund managers of these funds.

144

Licensing
We are registered under the FIEA as a Type II Financial Instruments Business Operator 1 and an
Investment Advisor and Agency Business and TAA is registered under the FIEA as an Investment
Management Business, a Type II Financial Instruments Business Operator and an Investment
Advisor and Agency Business. With these registrations, TAA provides asset management services
to private real estate funds established in Japan. Specifically, TAA conducts investment
management of private real estate funds with its registration as an Investment Management
Business and provide investment advisory services to equity-holders of funds with its registration
as an Investment Advisor and Agency Business. We also act as an intermediary of real estate trust
beneficiary rights with our registration as a Type II Financial Instruments Business Operator.
Our registrations under the FIEA are perpetual to the extent they are not revoked. Additionally,
under the FIEA, each of Tosei and TAA is required to, inter alia, maintain a minimum stated capitalof JPY10 million and sufficient human resources with the capability to undertake the activities
contemplated under the Type II Financial Instruments Business registration. In addition, TAA is
required to maintain both a stated capital and net assets of JPY50 million or more as well as havea board of directors under its Investment Management Business registration.
Assets under Management
As at 31 August 2012, we had assets under management (“AUM”) of more than ¥200,000 million.
Whilst we believe that we have built up good relationships with various investors because of ourservices and expertise in real estate asset management, we are striving to expand our asset
management business by deepening existing relationships and forging new relationships with
global investors.
Revenue from our fund business will include asset management fees, acquisition fees, disposition
fees, brokerage fees, incentive fees and distribution income.
Whilst we have been gradually transferring our funds business to TAA, certain of the contracts
entered into with our clients remain with Tosei for commercial reasons, including where clients
prefer the continuity of the business relationship with Tosei.
Co-investment in Funds
Our current target market for co-investments are funds with real estate assets in the areas inwhich we operate, specifically funds whose assets include office buildings and condominiums
located in the Tokyo area and other major cities. The quantum of our co-investment in a particularfund is decided on a case-by-case basis. Such investment is usually in the form of a minority
investment stake. Our management team is responsible for decisions on co-investments. The
authority to make such decisions also depends on the quantum of the co-investment:

1

Quantum of Investment

Co-investment Decision

More than JPY200 million

Board of Directors

More than JPY100 million to JPY200 million

PresidentMore than JPY50 million to JPY100 million

Chief Financial Officer and Chief Operating Officer

JPY50 million or less

Senior or Executive Officers in charge of the project

A Type II Financial Instruments Business Operator is allowed, after being registered as such with the FSA, toconduct what is known as “Type II Financial Instruments Business” under the FIEA, which mainly includes the sale,intermediary or solicitation of securities with relatively low liquidity, such as trust beneficial rights of real estates.

145

Certain of our asset management contracts are contingent upon our co-investments into suchfunds. Our co-investments accordingly enable us to expand our fund business by increasing ourasset management portfolio. In addition, we are able to participate in large projects through ourminority equity investment. Risks and returns in relation to our co-investments are naturally limited
to the size of our equity participation in such funds.
NAI Global
On 15 November 2012, we became a member of New America Network, Inc. (“NAI Global”). NAI
Global is a worldwide network of independent commercial real estate firms based in Princeton,
New Jersey, United States of America. As a member of the NAI Global network, we tend to therequests and/or assignments of the clients of NAI Global or clients of entities associated with NAI
Global and its network to provide real estate agency, brokerage and consulting services within theTokyo area and Chiba, Kanagawa and Saitama prefectures.
Our business as a member firm of the NAI Global network commenced on 1 February 2013 andis carried out by our subsidiary, NAI Tosei.
Property Management
We offer comprehensive property management services to meet a variety of real estate needs,
including administration, facility management, cleaning and security for condominium complexes
and office buildings and facilities. We also undertake utilities repair work for exclusive areas incondominiums complexes and office buildings, and undertake interior renovation contracting for
office properties.
We provide comprehensive property management services to over 500 condominium and officebuildings in the inner Tokyo area through our wholly-owned subsidiary, TCC. By grasping andanalysing trends in the demands of tenants and occupants, we ensure that our services focus on
suitability, functionality and efficiency.
In addition, we manage and maintain certain properties sold by our revitalisation and development
businesses and properties rented out by our rental business. As our fund business services funds
that invest in real estate assets, we also manage and maintain certain of these real estate assets
held by funds that use our real estate asset management advisory services.
The typical property management contract is for one year. Except in exceptional circumstances,most of our property management contracts are automatically renewable annually. We obtain suchcontracts either through a tender process or where we are appointed by the new owners of theproperties which we have developed or revitalised.

146

Alternative Investment
Tosei Corporation’s wholly-owned subsidiary, TRI, and its wholly-owned subsidiary, Hestia
Capital, invest in non-performing loans collateralised by real estate (including mortgage-backed
loans). As at the Latest Practicable Date, TRI has four directors, one statutory auditor and one
employee. Whilst Noboru Hirano, our CFO, is a director of TRI, the day-to-day operations of TRI
are managed by Kaname Wakabayashi, the representative director of TRI.
Historically, when TRI carried out its alternative investment business, it would incorporate a
special purpose company (“SPC”), especially when third parties co-invested in such alternative
investments. Such third parties would then invest directly into the SPC. At the end of such aninvestment (either through a disposal of assets or other divestments), the SPC would beliquidated. Hestia Capital is the only remaining SPC.
TRI purchases the rights to repayment in respect of non-performing loans from banks/licensed
financiers and looks to collect payments of the principal and interest of the loan from the debtors,
who could be either an individual or a company. On occasion, TRI may acquire the real estate fromthe debtor in consideration for the outstanding principal and interest due from the debtor. Suchdebtors will either consent to such transfers or be given notice of the assignment by the assignor
of such non-performing loans. As and when TRI decides to revitalise/develop properties for sale,
TRI will use our Group’s accumulated know-how to revitalise/develop such properties. TRI may on
occasion sell the rights to repayment in respect of non-performing loans to debt collecting
companies.
Additionally, TRI acquires properties through mergers and acquisitions of distressed companies
with real estate assets. Such acquisitions allow our Group to acquire real estate at prices weconsider to be more reasonable as compared to the purchase of real estate through auction ortender processes. After acquiring these distressed assets, TRI looks to revitalise such assets
before selling or leasing such properties by providing ancillary advisory and real estate asset
management services in respect of these properties.
TRI also provides turnaround assistance in the form of financial support and real estate
consultancy services to poorly performing businesses by deploying its accumulated know-how inthe real estate business to increase the added value of real estate. It is also working to innovateand expand its “turnaround business” by fusing real estate and financing to offer a form ofdebtor-in-possession (“DIP”) financing and other assistance. DIP financing is a form of postbankruptcy financing to a corporation where the pre-bankruptcy management is retained andcontinues to work on the turnaround of the business. Additionally, TRI may, from time to time, holdmortgages on properties for investment purposes. In respect of such investments, TRI will acquire
the loan, as well as the accompanying security interest in the underlying collateralised property.
While TRI makes use of the Group’s general know-how, all of its business activities, including
revitalisation, asset management and property management are carried out solely by TRI and its
subsidiaries.
Funding and Investment Decisions and Monitoring
TRI’s investments are funded either through loans from financial institutions or shareholder loans
from Tosei.
Investments which require external financing are evaluated by our Board since such financial
institutions will generally require us to guarantee loans to TRI. Our monthly management meeting
receives reports from each of our subsidiaries, including TRI, at least once a month. Management
is updated on the performance of each subsidiary through these monthly reports. Should such147monthly reports highlight any risks with regards to the subsidiaries including the performance of
the investments, we will then consult with our external advisers with a view to mitigating suchrisks.
Acquisitions and Boundary Confirmations
In the normal course of our revitalisation, development, rental and alternative investment
businesses, we undertake the acquisition of assets. Prior to the completion of any such assets
acquisition, we usually obtain boundary confirmations unless these are impractical from abusiness perspective (e.g. when property is under auction) as the process for boundary
confirmations can be lengthy and time consuming. We always undertake a risk assessment of theprobability and magnitude of the risks involved in such an acquisition, based on factors such as
the history on the land, the current use of the neighbouring land, the characteristics of theneighbouring owners, the degree of uncertainty on the boundary and the amount of land exposed
to risk of loss. A business judgment is made, on a case-by-case basis, whether the transaction
should proceed notwithstanding that boundary confirmations have not been obtained in relation to
the acquisition. In general, after such an acquisition, we would obtain boundary confirmations
before the properties are re-sold.
OUR HISTORY AND DEVELOPMENT
Our Company was established on 2 February 1950 by Junichi Noda and Kikue Tsuruta under thename Yukari Kogyo Co., Ltd as a restaurant business in Oita prefecture. In 1952, we moved ourhead office to Kameido, Koto Ward, Tokyo to expand our business to the Tokyo area. In June 1964,
we initiated our real estate sales, brokerage, rental and property management businesses and thismarked our first move into the real estate industry. Our Company’s name was changed to YukariCo., Ltd in 1969.
In 1973, our Company obtained its licence to act as a real estate agent. Following this, ourCompany was active in both the rental and restaurant businesses. In 1983, our Company’s namewas changed to Tosei Building Co., Ltd. In the same year, our Company started focusing on its realestate business (especially its rental business) and withdrew from the restaurant business. Ourcurrent President and CEO, Seiichiro Yamaguchi, was appointed as a director of our Company in
1990.
In June 1994, Mr. Yamaguchi undertook a management buy-out of our Company and acquired
100% of the issued share capital of our Company. He also assumed the role as our President, a
position he continues to hold till today.
The following sets out milestones in our Group’s recent history:
October 1994

We commenced our development business and started salesof our first condominium project “THE Palms Kugahara”. We
also registered our “THE Palms” trademark, which we
continue to use till today for the branding of our condominium
projects.

March 1996

Our Company changed its name to Tosei Fudosan Co., Ltd.

April 1996

We ventured into the revitalisation sector for the first time withthe revitalisation of an existing condominium which werebranded as “THE Palms Shirokane-dai”.

148

July 1999

We commenced sales of our “Palms Court” brand of detachedhouses. We continue to use the same branding for our
detached houses until today.

August 2002

We set up our first fund – “Argo Fund”, a private fund with atrust structure and a portfolio of condominium assets.

February 2004

Our Company registered with JSDA as an over-the-counter
traded company.

December 2004

We listed on the JASDAQ Stock Exchange.

March 2005

We incorporated Tosei Revival Investment to expand ourbusiness to include alternative investment.

April 2005

We acquired all the shares of TOSEI Community Co. Ltd (nowknown as Tosei Community Co., Ltd).

September 2005

We incorporated Tosei REIT Advisors Co., Ltd (now known as
Tosei Asset Advisors, Inc.) to further expand our fundbusiness.

October 2006

Our Company changed its name to its present name, Tosei
Corporation, and moved its operational headquarters toToranomon, Minato-ku, Tokyo.

November 2006

Listed on the Second Section of the Tokyo Stock
Exchange

September 2009

We launched our “Restyling” business with our first project“Renai Kamakura Ueki”.

September 2011

Listed on the First Section of the Tokyo Stock Exchange

January 2012

Incorporated Tosei Singapore Pte. Ltd., our wholly-owned
subsidiary in Singapore to kickstart our expansion plans in theSouth-east Asian region.

November 2012

We joined NAI Global (a worldwide network of independentcommercial real estate firms). On 1 February 2013, we
commenced the provision of real estate services within theTokyo area and Chiba, Kanagawa and Saitama prefectures toclients and affiliates of NAI Global through NAI Tosei Japan,
Inc.

MAJOR CUSTOMERSOur main customers are owners, buyers and tenants of properties as well as financial institutions
and funds. We do not have a recurring major customer base which accounts for more than 5.0%
of our revenue in consecutive years as our revenue is earned from projects and developments
which are non-recurrent in nature. We are not materially dependent on any contract with any of
our customers.

149

In FY2009, a Japanese engineering and systems solutions company accounted for 21.4% of ourrevenue while a special purpose company held by an asset manager accounted for 11.3% of ourrevenue. These customers each purchased a property from our Group.
In FY2010, a Japanese real estate residential fund accounted for 13.4% of our revenue, while aJapanese real estate company and a real estate financing company accounted for, respectively,
5.2% and 7.8% of our revenue. A games machine manufacturer also accounted for 8.5% of ourrevenue in FY2010. These customers each purchased a property from our Group.
In FY2011, the real estate arm of a Japanese cement company accounted for 7.8% of ourrevenue. A private individual accounted for a further 5.2% of our revenue. These customers eachpurchased a property from our Group.
As at the date of this Prospectus and to the best of our knowledge, none of our Directors, Statutory
Auditors or Controlling Shareholders of our Company have an interest, direct or indirect in any
major customers of the Group.
MAJOR SUPPLIERS
Our main suppliers are property owners and construction companies. We do not have a recurring
major supplier base of property owners from whom we purchase properties. Property owners arebusiness entities, individuals, funds and real estate firms from whom we purchase land, officebuildings and residential properties. We are not materially dependent on any contract with any of
our suppliers.
We may enter into recurrent transactions with construction companies to develop and/or revitalise
properties that we own. Four construction companies accounted for an aggregate of 52.6%,
10.5% and 5.4% of our purchases in FY2009, FY2010 and FY2011 respectively. Our contracts
with construction companies decreased from FY2009 to FY2011 in line with our decision to defer
the development of properties.
Two Japanese construction companies (one of which is listed on the TSE) accounted for 7.7% and9.2% of our purchases in FY2009. Another of our suppliers, a large Japanese construction
company and Nikkei 225 component company, accounted for 30.8% and 5.6% of our purchases
in FY2009 and FY2010 respectively. A TSE listed Japanese construction firm accounted for 4.8%,
3.2% and 5.4% of our purchases in FY2009, FY2010 and FY2011 respectively.
Generally, our Group’s purchases from suppliers are dependent on factors such as the purchaseterms, reputation and reliability of the supplier, delivery time and the quality of their products.
We generally do not enter into long-term or exclusive agreements with any of our suppliers.
To the best of our Directors’ knowledge, we are not aware of any information or arrangements
which would lead to a cessation or termination of our current relationship with any of our major
suppliers.
As at the date of this Prospectus and to the best of our knowledge, none of our Directors, Statutory
Auditors or Controlling Shareholders have any interest, direct or indirect, in any of our major
suppliers mentioned above.

150

CREDIT MANAGEMENT POLICY
Credit terms to our customers
For our revitalisation and development businesses, we do not offer our customers credit terms.
The purchase price of such properties (whether or not sub-divided units) is usually paid in fullupon delivery although some purchasers may place part of the purchase price as a deposit. For
our rental business, our tenants pay rental charges in advance. For our fund business, we usually
invoice our customers on a quarterly basis based on the terms of our asset managementagreements.
Credit terms extended to customers of our property management and alternative investment
businesses vary depending on length of the relationship, credit-worthiness of the customers andthe size of the contract. Typically, credit terms to customers of our property management businessare 30 days.
Our average trade receivables turnover days during the periods under review were as follows:

Average trade receivables turnover(days) (1)(2) . . . . . . . . . . . . . . . . . . . . . . . .

FY2009FY2010FY2011

9M2012

5.1

6.2

7.5

9.7

Notes:(1)

For FY2009, FY2010 and FY2011, average trade receivables turnover days = (Average trade receivables/revenue)
X 365 days. For 9M2012, average trade receivables turnover days = (Average trade receivables/revenue) X 275
days. The calculation of average trade receivables turnover is based on the date bills are issued to our customers.

(2)

Our Company’s trade receivables are mostly rent and fund and property related fee receivables and these amounts
remained relatively unchanged during the periods under review. On the contrary, our Company’s revenue, which
also includes revitalisation and development-related revenue, declined from FY2009 to 9M2012. As a result,average trade receivables turnover increased. There have not been any material changes in our Company’s
collection of receivables during the periods under review.

Our provision for impairment on trade receivables as well as bad debts written off for the periods
under review was as follows:(JPY ’million)

FY2009FY2010FY2011

9M2012

Provision for impairment on tradereceivables . . . . . . . . . . . . . . . . . . . . . . .

8.3

21.5

16.7

15.9

Bad debts written off . . . . . . . . . . . . . . .

2.07

3.55

1.98

Nil

The amount of bad debts written off for FY2009, FY2010 and FY2011 were in relation to certain
customers which had ceased business. No trade receivables accrue for our revitalisation anddevelopment businesses as these payments are made at the time of delivery. Provision for
impairment is thus not recorded for these businesses.
To the best of their knowledge, our Directors are not aware of any information or development
which may require us to make additional provisions for impairment on trade receivables. Our
Directors are of the view that our provision for impairment on trade receivables is adequate. As
at 31 December 2012, approximately 95.0% of our trade receivables outstanding as at 31 August2012 had been collected. Our Directors are of the opinion that the balance of the trade receivables
are collectable as there have not been any bad debts associated with any of these customers in
the last three financial years. In addition, our Company undertakes credit checks of customers
based on their corporate profile and history, financial statements, and other third party reports
which are available on the market.
151

Credit terms from our suppliers
The credit terms granted by our suppliers is usually about 30 days for our rental, property
management, funds and alternative investment businesses, depending on our relationship withthe suppliers and the size of the transactions.
For our revitalisation business, our suppliers are typically property owners and main contractors.
Where the supply involves the delivery of real estate, we generally pay 100% of the purchase priceon delivery of the real estate. On occasion, we may pay a 10% deposit in respect of the purchaseof such real estate. Where the supply is in relation to refurbishment and renovation of a property,
we pay the main contractor the contracted price on the hand-over of the property following thecompletion of the refurbishment/renovation process, the average length of which is approximately
two to three months.
For our development projects, our suppliers are typically also property owners and main
contractors. Where the supply involves the delivery of real estate, we pay all of the purchase priceon delivery of the real estate. We pay the main contractor of each project in stages. Generally, we
pay a portion of the contracted price (10%) at groundbreaking and a further sum upon completionof a pre-determined milestone (10%). The bulk of the construction costs (80%) are paid at final
completion and delivery of the development.
Our average trade payables turnover days for during the periods under review were as follows:

Average trade payables turnover(days) (1)(2) . . . . . . . . . . . . . . . . . . . . . . . .

FY2009FY2010FY2011

9M2012

8.7

8.5

10.8

21.2

Notes:(1)

For FY2009, FY2010 and FY2011, average trade payables turnover days = (Average trade payables/cost of sales)
X 365 days. For 9M2012, average trade payables turnover days = (Average trade payables/cost of sales) X 275
days.

(2)

Our Company’s trade payables relate to rents, other fee income and construction costs of our Company’s
revitalisation and development businesses, and payments relating to lands were not included. The decline inrevitalisation and development had less impact on the balance of trade payables, compared to that of the cost of
sales, which included the cost of land. There have not been any material changes in our Company’s payment terms
during the periods under review.

MARKETING AND SALES
Our President and CEO, Seiichiro Yamaguchi, heads our sales and marketing team. He is
assisted by our COO, Katsuhito Kosuge. Our COO oversees all five asset solutions departments.
We have one asset solutions department which specialises in business promotion and one asset
solutions department for each of our revitalisation, development, rental and fund businesses
which focuses on sales and which is responsible for formulating and planning marketing strategies
for that respective business segment. Our marketing strategies are formulated within thisframework and are tailored to suit each specific business segment. Whilst we have an in-housemarketing team, this in-house marketing team targets external property agents rather thanend-customers.
Our marketing activities are generally conducted by reputable external property agents in Japan.
These marketing agents are selected on the basis of their experience, extensive client base,proven track records and thorough understanding of the property market in Tokyo. Our external
agents are responsible for providing information on and advertising our properties and152

corresponding with potential purchasers and tenants of our properties. The business promotion
arm of our asset solutions departments is responsible for communication with these external
agents.
When we are looking to sell whole completed properties, we release information on the properties
to agents on a non-exclusive basis. These agents are paid on a commission basis if they find abuyer for the property. For our sub-divided condominiums, we generally appoint an exclusive
marketing agent to market sub-divided units in such condominiums. These exclusive marketing
agents are generally paid on a commission basis.
On occasion, where we have an established relationship with a particular customer, we may offer
properties we believe to be suitable to their needs to such customers directly.
For our property management business, TCC markets our services to property owners and lessors
directly.
QUALITY ASSURANCE
We have maintained strict quality control for safety, reliability and aesthetics by setting up our own
standard code named “TOSEI-QC-10” for the purposes of internal quality control. This function is
performed by our Architecture Planning Department.
The construction aspects of properties developed by us are supervised and inspected by theon-site architect and construction managers and us to ensure that they are safe and reliable. Our
focus during the inspection process centres on the internal structure of our properties as these are
not visible after a property is completed. We conduct inspections at every quality-control stage.
The whole inspection process consists of 10 different inspections (such as structure of thebuilding, interior, equipment and machinery amongst others) with over 80 items verified at eachstage. At each stage of the inspection process, we carry out an initial inspection, re-inspection andfinal inspection of all items to be checked.
Our Architecture Planning Department has been granted ISO 9001:2008 certification for its quality
control efforts for planning, design and construction processes as well as its periodical
maintenance services.
ISO 9001:2008 specifies requirements for a quality management system where an organisation:•needs to demonstrate its ability to consistently provide products that meets customer andapplicable statutory and regulatory requirements, and•aims to enhance customer satisfaction through the effective application of the system,
including processes for continual improvement of the system and the assurance ofconformity to customer and applicable statutory and regulatory requirements.

STAFF
As at 31 August 2012, we had 215 full-time employees (excluding Directors and Statutory Auditors
and the directors and statutory auditors of our subsidiaries). In addition to our full-time employees,
we employ a significant number of contract employees and part-time employees. As at 31 August
2012, we had 167 part-time and contract employees.
We do not experience any significant seasonal fluctuations in our number of full-time, contract andpart-time employees.

153

The number of employees of the Group at the end of each of FY2009, FY2010, FY2011 and
9M2012 are as follows:

Segmented by Job Function

As at
30 Nov
2009

Number of Employees (1)(2)
As at
As at
As at
30 Nov
30 Nov
31 August
2010
2011
2012

Sales and Marketing . . . . . . . . . . . . . . .

117

130

152

140

Design . . . . . . . . . . . . . . . . . . . . . . . . . .

5

5

5

7

Administrative (3) . . . . . . . . . . . . . . . . . . .

70

66

64

68

Total Full-time Staff: . . . . . . . . . . . . . .

192

201

221

215

Part-time Staff (4) . . . . . . . . . . . . . . . . . . .

110

128

162

164

4

4

5

3

Contract Staff(4)...................

Notes:(1)

All of our employees are based in Japan.

(2)This does not include our Directors and Statutory Auditors, and the directors and statutory auditors of our
subsidiaries.

(3)

This includes personnel from our Auditing Department and our Administrative Division and Business Division.

(4)

All of our operational employees are part-time and contract employees. Our part-time and contract operational
employees undertake the cleaning, maintenance and repair of our properties. In FY2009, we had two part-timeadministrative employees. In FY2010 and FY2011, we had three part-time and contract administrative employees
and 11 part-time and contract administrative employees respectively.

Collective Agreement with Employees
Under the Labour Standards Act of Japan and other related regulations thereunder, a company
can only request its employees to work overtime or on statutory rest days if it enters into acollective agreement with either a trade union whose members consists of a majority of theemployees in the company or an employees’ representative who represents a majority of theemployees in the company.
Our Company has entered into a collective agreement with an employees’ representative(representing a majority of our employees) on 22 November 2012. Under Japanese law, byentering into this collective agreement with such employees’ representative, the collective
agreement is binding on all our employees.
The collective agreement consists of terms primarily in relation to (a) overtime pay, (b) extensionof working hours and (c) working on statutory rest days. There are no terms on retrenchment
benefits and work stoppage. There have not been any incidences of work stoppages or labour
disputes that have affected our operations. Accordingly, we consider our relationship with our
employees to be good. We have no other arrangement or agreement with any other labour union.
Pensions and Retirement Plans
There is a provision of retirement benefits in the wage policy of the Group. The retirement benefits
are payable when an employee retires or resigns from the Group. Under the wage policies,
employees who are punitively dismissed are not eligible for retirement benefits. Retirement
benefits differ depending on the reason for resignation, years of service and seniority of theemployee.

154

In December 2010, our Company adopted a defined contribution pension plan (“DCP”) whereby
contributions to a pension plan are made by our Company in proportion to contributions made by
our employees. All employees who are involved in the corporate pension system of our Company
are eligible to participate in the DCP. Our employees are responsible for the investment decisions
under the DCP and we conduct regular investment education programs to educate our employees
on investments. As at 31 August 2012, our Group had set aside a total of ¥209.40 million forpension, retirement or similar benefits of our employees.
Tosei Employee Share Ownership Plan (Jugyoinmochikabukai)
Our Company has an existing employee share ownership scheme (“ESOP”). The rules of the
ESOP are set out in the Employee Share Ownership Rules our Company adopted on 1 September
2002.
The purpose of the ESOP is to enable our full-time employees to easily acquire our Shares andto accumulate such Shares by making frequent small contributions. Our Directors and Statutory
Auditors are not allowed to participate in the ESOP.
Under the ESOP, only full-time employees of our Company (excluding employees of our
subsidiaries) are entitled to participate in the ESOP. The participating employee (“Participating
Employee”) may contribute a certain portion of his monthly salary and biannual bonus topurchase shares of our Company. Contributions from Participating Employees are made in unitsof JPY1,000 each. Each Participating Employee is allowed to contribute a maximum of 20 units
from his monthly salary and 100 units from his annual bonus. Further, the dividends declared andpaid in respect of the Shares held by the Participating Employee will be contributed to the ESOP.
All Shares held under the ESOP will be held by the administrative director of the ESOP as
nominee of the Participating Employees. The ESOP is organised as a partnership pursuant to
Article 667(1) of the Civil Law of Japan.
The Participating Employees may not transfer or pledge the rights to their shares. When theParticipating Employee’s number of shares under the ESOP reaches one Share, the employee
may, at his/her option, transfer such Share into an account held in his/her own name. In the eventthat the Participating Employee withdraws from the ESOP, the vested ESOP Shares will betransferred to the securities account of the Participating Employee and the equivalent value incash for a fractional part of a Share (converted at the then market price) will be paid to theParticipating Employee. Alternatively, the Participating Employee may choose to make anextraordinary contribution to the ESOP such that the fractional part of a Share deemed to be heldby such Participating Employee becomes one whole Share.
There is no maximum limit for Shares acquired under the ESOP. Participating Employees
purchase Shares on a pre-determined date each month. Under the ESOP, the Participating
Employee contributes an amount equal to 95.0% of the acquisition cost of the Shares under while
our Company contributes the remaining 5.0%. For FY2009, FY2010, FY2011 and 9M2012, theaggregate contribution made by Company to the ESOP was ¥1,383,450.
INSURANCE
As at the Latest Practicable Date, our Group has in place the following insurance policies:(a)Directors and officers liability insurance;(b)

General comprehensive liability insurance;(c)Defect liability insurance;

155

(d)

Tenant accident insurance; and(e)Fire insurance.

As disclosed in “Risk Factors – Risk Relating to Japan – We may suffer substantial losses in theevent of a natural disaster such as an earthquake, terrorist attack or other casualty event inJapan”, we do not carry insurance that covers losses that are due to natural disasters such as
earthquakes as the cost of procuring such insurance coverage is prohibitive in Japan. In addition,
we are not insured against loss of key personnel and business interruption. Whilst none of ourproperties have been damaged by any natural disasters in the last three financial years and up to
the Latest Practicable Date, if such events were to occur in the future, our business may bematerially or adversely affected. Further, significant disruption to our operations, whether as aresult of fire or other causes, may still have a material adverse effect on our results of operations
or financial condition if our coverage is insufficient to cover losses arising from such causes.
To the best of our knowledge and in light of the prohibitive costs in procuring insurance coveragefor losses that are due to natural disasters such as earthquakes, our Directors are of the view thatthe above insurance policies are adequate for our existing operations.
MATERIAL LICENCES, PERMITS, REGISTRATIONS AND APPROVALS
As at the Latest Practicable Date, our Group has the following material licences permits,registrations and approvals:
Licence
Holder

Licence Name/Authority/Number

Effective Date

Expiry Date

Building Lots and Buildings Transaction
Business Licence(Governor of Tokyo Metropolitan Government
Licence (11) No. 24043)

Tosei

23 March
2012

23 March
2017

Real Estate Investment Consulting Registration(Minister of Land, Infrastructure, andTransportation Registration Ordinary No. 127)Tosei

28 February
2011

28 February
2016

Specified Construction Permit(Governor of Tokyo Metropolitan Government
Permit (Specified-24) No. 107905)

Tosei

10 December
2012

9 December
2017

First-Class Architect’s Office Registration(Governor of Tokyo Metropolitan Government
Registration No. 46219)

Tosei

10 April
2011

9 April
2016

Real Estate Specified Joint Enterprise Permit(Governor of Tokyo Metropolitan Government
Permit No. 58)

Tosei

8 September
2004

N/A(1)

Financial Instruments Business Registration(Type II Financial Instruments Business;
Investment Advisor and Agency Business)(Director General of the Kanto Local Finance
Bureau Registration (Kinsho) No. 898)

Tosei

30 September
2007

N/A (1)

Building Lots and Buildings Transaction
Business Licence(Governor of Tokyo Metropolitan Government
Licence (3) No. 80048)

TCC

29 September
2011

28 September
2016

156

Licence
Holder

Licence Name/Authority/Number

Effective Date

Expiry Date

Ordinary Construction Permit(Governor of Tokyo Metropolitan Government
Permit (Ordinary – 19) No. 119534)

TCC

11 March
2008

10 March
2013

Specified Construction Permit(Governor of Tokyo Metropolitan Government
Permit (Specified – 19) No. 119534)

TCC

11 March
2008

10 March
2013

First-Class Architect’s Office Registration(Governor of Tokyo Metropolitan Government
Registration First-Class No. 49526)

TCC

15 January
2009

14 January
2014

Condominium Management Business
Registration(Minister of Land, Infrastructure, and Transport
Registration (3) No. 030488)

TCC

22 May2012

21 May2017

Environmentally Hygienic General Building
Management Business Registration(Tokyo Metropolitan Government Registration 19
General No. 273)

TCC

4 October2007

3 October
2013

Security Services Certification(Tokyo Metropolitan Public Safety Commission
No. 30002591)

TCC

15 October
2011

14 October
2016

Building Lots and Buildings Transaction
Business Licence(Governor of Tokyo Metropolitan Government
Licence (2) No. 85736)

TAA

8 April
2011

7 April
2016

Discretionary Transaction Agency Business
Permit(Minister of Land, Infrastructure, and Transport
Licence No. 52)

TAA

24 January
2007

N/A(1)

Financial Instruments Business Registration(Type II Financial Instruments Business andInvestment Management Business)(Director General of Kanto Local Finance
Bureau Registration (Financial Instruments andExchange) No. 363)

TAA

30 September
2007

N/A (1)

Financial Instruments Business Registration(Investment Advisor and Agency Business)(Director General of Kanto Local Finance
Bureau Registration (Financial Instruments andExchange) No. 363)

TAA

19 May2008

N/A (1)

Building Lots and Buildings Transaction
Business Licence(Governor of Tokyo Metropolitan Government
Licence (1) No. 88903)

TRI

23 February
2008

22 February
2013

Money-Lending Business Registration(Governor of Tokyo Metropolitan Government
Registration (1) No. 31311)

TRI

16 March
2010

16 March
2013

157

Licence
Holder

Licence Name/Authority/Number
Building Lots and Buildings Transaction
Business Licence(Governor of Tokyo Metropolitan Government(1) No. 94116)

Effective Date

Expiry Date

14 April2012

13 April2017

NAI Tosei

Note:
(1)

These licences are issued in perpetuity. We are however obliged under applicable laws to report to the authorities
and cancel these perpetual permits/registrations in the event it discontinues the business in question. The remaining
licences set out in the table above are renewable and we usually make applications one to three months prior to the
expiry date of our renewable licences (see also “Risk Factors – Risks Relating to our Business – We will be affectedby changes in government regulations and suspension or revocation or non-renewal of our governmental licences
and approvals”).

As at the Latest Practicable Date, we have all necessary permits and licences required for ourbusiness and operations.
INTELLECTUAL PROPERTY
As at the Latest Practicable Date, the following trademarks have been registered by our Group:

TrademarkApplication/
Registration
NumberPlace ofRegistration

Registered
Owner

Class(1)Application/
Registration
Date

ExpiryDate

パームス

No. 2000120399/
No. 4534159

Japan

Tosei

36

7 November
2000 /
11 January 2002

11 January
2022

パームスコ
ート

No. 2000120400/
No. 4534160

Japan

Tosei

36

7 November
2000 /
11 January 2002

11 January
2022

ＴＨＥパー
ムス

No. 2001000406/
No. 4548518

Japan

Tosei

36

9 January
2001 /
1 March 2002

1 March2022

No. 2006065143/
No. 5053378

Japan

Tosei

36, 37,42, 4512 July 2006 /8 June 2007

8 June
2017

東誠コミュ
ニティ

No. 2006065144/
No. 5032844

Japan

Tosei

36, 37,39, 42,45

12 July 2006 /16 March 2007

16 March
2017

トーセイz
コミュニテ
ィ

No. 2006078778/
No. 5046404

Japan

Tosei

36, 37,39, 42,45

24 August2006 /
11 May 2007

11 May2017

東誠

No. 2006065141/
No. 5115601

Japan

Tosei

36, 37,42, 4512 July 2006 /29 February
2008

28 February
2018

TOSEI z トーセイ

No. 2006065142/
No. 5115602

Japan

Tosei

36, 37,42, 4512 July 2006 /29 February
2008

28 February
2018

トーセイ z
リート z アドバイザー
ズ

No. 2006065146/
No. 5115603

Japan

Tosei

35, 36,42

12 July 2006 /29 February
2008

28 February
2018

158

Application/
Registration
Number

Application/
Registration
Date

ExpiryDate

Place ofRegistration

Registered
Owner

No. 2006074314/
No. 5115604

Japan

Tosei

36, 37,42, 459 August
2006 / 29
February 200828 February
2018

トーセイ zリバイバル
z インベス
トメント

No. 2006078779/
No. 5115605

Japan

Tosei

35, 36,42

24 August2006 / 29
February 200828 February
2018

T’S
BRIGHTIA

No. 2008052004/
No. 5224792

Japan

Tosei

36

30 June 2008 /17 April 200917 April
2019

TOSEI z トーセイ

No. 2008070087/
No. 5249698

Japan

Tosei

41

26 August2008 /
17 July 200917 July
2019

VanillandNo. 2008070088/
No. 5249699

Japan

Tosei

41

26 August2008 /
17 July 200917 July
2019

RestylingNo. 2009096308/
No. 5318802

Japan

Tosei

36

21 December
2009 /
23 April 2010

23 April2020

トーセイ z
アセット zアドバイザーズ

No. 2010055500/
No. 5370228

Japan

Tosei

35, 36,45

14 July 2010 /19 November
2010

19
November
2020

ECOPAL/エコパル

No. 2010067186/
No. 5382318

Japan

Tosei

36

26 August2010 /
7 January 2011

7 January
2021

T1206857B

Singapore

N.A.

36

14 May 2012 /Pendingregistration

N.A.

TrademarkClass(1)

Note:
(1)

Class Headings: Class 35 (Advertising; business management; business administration; office functions); Class 36(Insurance; financial affairs; monetary affairs; real estate affairs); Class 37 (Building construction; repair; installation
services); Class 39 (Transport; packaging and storage of goods; travel arrangement); Class 41 (Education;
providing of training; entertainment; sporting and cultural activities); Class 42 (Scientific and technological services
and research and design relating thereto; industrial analysis and research services; design and development ofcomputer hardware and software); and Class 45 (Legal services; security services for the protection of property andindividuals; personal and social services rendered by others to meet the needs of individuals).

RESEARCH AND DEVELOPMENT
Due to the nature of our business, we do not undertake research and development activities andhave not incurred any research and development expenses.
AWARDSIn 2001, our condominium project “THE Palms Kiba-Park” received an award of excellence fromthe Japan Association of Home Suppliers due to the innovative design of the project including thatof the sky garden. Our Heiwajima Tosei Building and Kamata Tosei Building have also received an“A” rating under CASBEE for being environmentally friendly as a result of measures implemented159

to reduce carbon dioxide emissions, including the usage of natural ventilation systems, energy
saving lighting fixtures and roof-top gardens. Please see “Business – Corporate Social
Responsibility” for more details.

Heiwajima Tosei Building

Kamata Tosei Building

In each of 2011 and 2012, our “Restyling” business (see “Business – Business Overview –Revitalisation – Restyling”) was awarded a “Good Design Award” for our business concept ofrestyling buildings by the Japan Institute of Design Promotion.
In April 2012, our “Palms Court Mitaka Adagio” development of detached houses was awarded
with a “Good Business Award” by the Housing Construction Industry Association of Japan for goodproject content, which included (i) environmental features such as planters, (ii) community
features such as dedicated community spaces, and (iii) layout features such as the placement ofliving and dining spaces within each house.

Palms Court Mitaka Adagio

160

COMPETITION
We operate in a competitive environment and face keen competition from new and existing
competitors based in Japan.
We consider the following to be our main competitors:
Revitalisation

Development

RentalSun Frontier Fudosan Co., Ltd

Goldcrest Co., Ltd

Yasuda Real Estate Co., Ltd

Raysum Co., Ltd

Takara Leben Co., Ltd

Hulic Co., Ltd

Star Mica Co., Ltd

Morimoto Co., LtdIntellex Co., Ltd

Hoosiers Corporation

Fund

Property Management

Alternative Investment

Kenedix Inc.

Nihon Housing Co., Ltd

Secured Capital Investment
Management Co., Ltd

IDERA Capital Management Ltd.

Sanko Estate Co., Ltd

RISA Partners, Inc.

Ichigo Group Holdings Co., Ltd

Daiwa Lifenext Co., Ltd

Nissin Servicer Co., Ltd

Tokyo Biso K Corporation
To the best of our knowledge, none of our Directors, Statutory Auditors or Controlling
Shareholders has any interest, direct or indirect, in any of our competitors named above.
To the best of our knowledge, there are no published statistics that can provide an accurate
measure of our market share.
COMPETITIVE STRENGTHSWe believe our competitive strengths are as follows:
We centre our business operations in the Tokyo area
Our business is focused on the Tokyo area of Japan and this gives us the advantage of local
knowledge of the Greater Tokyo area. We only make investments in properties after stringently
verifying the profitability of each property. Our ability to make such judgment calls is backed up by
our investment track record. In particular, even during the recent financial crisis, the average rentin Tokyo remained stable compared to other major cities and prefectures in Japan. There has been
firm demand in the residential market in Tokyo, and the low vacancy rate of residential properties
reflects this trend. There has also been an increase in demand for purchases of office space within
Japan. We also expect that the population of Tokyo will grow in the future and that Tokyo will be
the first to recover from the effects of the financial crisis once foreign investors return to theproperty market in Tokyo. We believe that Tokyo is still a market with potential.
We have an experienced management and support team
Our management team, consisting of our President and CEO, Seiichiro Yamaguchi, our COO,
Katsuhito Kosuge, and our CFO, Noboru Hirano, has extensive experience in property
development and building construction. They each have extensive experience in the property
industry and have been instrumental to our business, providing our Group with their invaluablestrategic leadership. With their experience, our management team is able to source for suitablesites with potential for development and revitalisation, and to assess whether such sites offer goodinvestment returns or profitable development or revitalisation opportunities.

161

Our experienced management team and support staff also allows us to conduct the majority of ourpurchases through negotiations, as opposed to through a tender or auction process. We believethat we pay more competitive purchase prices than some of our competitors because of our
flexible business approaches, fast judgment and reputation. In general, properties purchased
through negotiations fetch better prices than if the property was purchased through bidding. Mostof our small and medium sized properties have been purchased through negotiations instead of
bidding. With our track record and reputation, we have built a relationship of trust amongst
investors of small and medium sized properties.
In addition, we believe that the heads of our various business divisions have the requisite skill-set
and potential to succeed our current management team.
Our diverse business gives us the flexibility to operate in varying market conditions
Our six varied businesses enable us to operate flexibly in accordance with varying market
conditions. For example, our revitalisation, development and alternative investment businesses
allow opportunity for high capital gain, while our rental, fund and property managementbusinesses provide stable income. The stable income from these latter three business segmentsof Tosei has contributed highly to the Group’s ability to ride out the financial crisis and begin
reinvesting in properties even during the crisis. Additionally, we do not limit our business to a
specific sector in the real estate market but have exposure to the residential, office andcommercial sectors. This diversity in our business allows us to reallocate our resources amongst
our different business segments according to the prevailing market conditions. Furthermore, we
believe that the business relationships we have developed through our diverse business activities
give us a variety of exit options, including selling assets to investors (corporations, funds,
individuals, REITs) and/or end-users (corporations and individuals), or, alternatively, keeping themon our books as income generating properties.
We are a diversified business and cater to various market needs
Our core businesses are interlinked and we have achieved substantial operational synergies
because of this. For example, in 2011, we set up a fund in conjunction with our “Restyling”
business. Our fund business provides asset management services to this fund, while our property
management and rental businesses, provide management, maintenance and leasing services tothe fund. Other divisions within the Group also provide support for the sale and purchase ofproperties.
We focus on the needs of our target customers and develop award-winning properties
We undertake all our revitalisation and development projects after considering the local
characteristics and demographic of each area to meet customer needs. We have an in-house
quality control system which allows us to develop award-winning and quality properties that caterto a wide consumer segment. Please see “Business – Quality Assurance” for more information on
our quality control system. Our revitalisation and development projects have won multiple awards
in recent years. We have also won an award for environmental sustainability and conformability
with environmental standards. Please see “Business – Awards” for more information on ouraward-winning properties.
SEASONALITY
Due to the nature of our business, we are not affected by seasonality.
MATERIAL LITIGATION
Save as disclosed in “General and Statutory Information − Litigation”, we are not a party to any
litigation or arbitration proceedings during the 12 months immediately preceding the date of thisProspectus which we believe would, individually or taken as a whole, have a material financial
effect on our Group, and as far as we are aware, no such litigation or arbitration proceedings are
pending or known to be contemplated.
162

163
Chiyoda-ku,
TokyoShibuya-ku,
Tokyo
Minato-ku,
TokyoNissei Building

Excel TY Building

Shinbashi Frontier Building

Chigasaki-shi,
Kanagawa

Minato-ku,
TokyoMinamiaoyama 7-chome Building

Kikumoto Plaza Building

Chiyoda-ku,
Tokyo

Akihabara Tosei Building(2)Taito-ku, Tokyo

Shinjuku-ku,
Tokyo

Rose-bay Shinjuku Building

Ueno Takeuchi Building

Chiyoda-ku,
Tokyo

Location

Ogawamachi Tosei Building

Name of Project (1)Revitalisation

430

334

191

1,247

650

235

301

645

175

Total Land Area(sq m)

2,536

771

1,024

5,360

3,845

700

2,092

1,849

1,385

Planned/Total GFA
(sq m)

OfficeOfficeOfficeOfficeOfficeOfficeOfficeOfficeOfficeUse ofProperty

Revitalisation
has notcommenced

Completion
expected in
April 2013

Completed

Completed

Completed

Completed

Completed

Completed

Completed

Project Status

The Tokyo
Tomin Bank,
LimitedShinsei Bank,
LimitedThe Shoko
Chukin Bank,
Ltd.

Mortgage

Mortgage

The Bank of
Yokohama, Ltd

Sumitomo Mitsui
Banking
Corporation

Higashi-Nippon
Bank, Ltd.

Aozora Bank,
Ltd.

Higashi-Nippon
Bank, Ltd.

Japan FinanceCorporation

Mortgagee

Mortgage

Mortgage

Mortgage

Mortgage

PledgeMortgage

Mortgage

Encumbrances

As at the Latest Practicable Date, we own the following properties, which we have grouped according to our business segments.

PRINCIPAL PROPERTIES164

The Bank ofFukuoka, Ltd.(3)Mortgage

Nil
Nil
Mortgage

Revitalisation
has notcommenced
− (4)
−(5)
−(4)

Held by Mitsui Sumitomo Trust and Banking Corporation as trustee of a trust account of which we are the sole beneficiary. The property is managed by TCC.

This name has been translated for convenience only and the financial institution in question has no official English name.

This land was acquired by us in a packaged transaction and we currently do not have any intention to develop this piece of land and will look to sell it if we receive an appropriate offer.

We have entered into a sales and purchase agreement for the sale of this piece of land to a third party. Delivery of the land is scheduled to take place in February 2013.

(4)

(5)

Higashi-Nippon
Bank, Ltd.

Nil

Nil

Yachiyo Bank,
Ltd.

Completion
expected in
February 2013

MortgageKansai Urban
Banking
Corporation
The Chiba
Kogyo Bank,
Ltd.

Mortgage

Mortgagee

MortgageCompleted

Completed

Encumbrances

(3)

–

–

–

Condo

Condo

Condo

Condo

Project Status

(2)

–

–

–

292

2,239

1,113

4,061

Use ofProperty

All properties are freehold properties.

325

135

166

178

510

487

897

Planned/Total GFA
(sq m)(1)

Notes:

Minato-ku,
TokyoKoto-ku, Tokyo

Land at Shinsuna 1-chomeLand at Akasaka 8-chome

Ota-ku, Tokyo

Est Life Sakurazaka

Chiyoda-ku,
TokyoMachida-shi,
Tokyo

Dormitory HaramachidaLand at Kanda Nishikicho 1-chome

Edogawa-ku,
Tokyo

Higashikurumeshi, Tokyo

Location

Clair Minamikasai Condominium

Selian City

Name of Project (1)Total Land Area(sq m)

165

Shinjuku-ku,
TokyoShinjuku-ku,
Tokyo

Minato-ku,
TokyoYokohama-shi,
Kanagawa

MaisonSaison Ochiai
Condominium

CloverRoppongi
Condominium

Hilltop
Yokohama
Negishi
Condominium

Shinjuku-ku,
TokyoConforYotsuya
Condominium

Ecology
Ochiai
Residence
I ▪ II
Condominium

Kamakura-shi,
Kanagawa

Location

Renai
Kamakura
Ueki
Condominium

Name of
Project (1)Revitalisation – “Restyling”

17,548

505

1,555

2,991

920

6,916

Total LandArea
(sq m)

31,181

2,005

2,131

4,424

2,221

9,762

Planned/Total GFA
(sq m)

279

37

18

56

24

83

Total No.
of Units in
Project

140

9

10

30

6

32

No. ofUnits inour
Inventory
as at theLatestPracticable
Date

Residential

Residential

Residential

Residential

Residential

Residential

Use ofProperty

Mortgage

In progress(2)Mortgage

In progress(2)Mortgage

Mortgage

In progress(2)CompletedMortgage

In progress(2)In progress

Mortgage

Encumbrances(4)(2)

Project Status

ORIX Bank
Corporation

The Kosan
Shinkin Bank(3)TheHyakujushi
Bank, Ltd.

The Bank ofTokyoMitsubishi UFJ,
Ltd.

Resona Bank
Ltd.

Aozora Bank,
Ltd.

Mortgagee

166

The Tokyo
Tomin Bank,
LimitedKansai Urban
Banking
Corporation

Mizuho Bank,Ltd.

The Chiba
Kogyo Bank,
Ltd.

Resona BankLtd.

A revolving mortgage refers to an encumbrance in respect of loans occurring (up to a pre-defined amount) over a certain period. In contrast, in a normal mortgage, the encumbrance
is linked to a predefined loan(s) and released when such loans are repaid.

Mortgage

Mortgage

Mortgage

Mortgage

Mortgage

Mortgagee(4)Completed

Completed

Completed

Completed

Completed

Encumbrances(4)This name has been translated for convenience only and the financial institution in question has no official English name.

Residential

Residential

Residential

Residential

Residential

Project Status

(3)

5

9

110

8

9

Use ofProperty

Revitalisation of the common areas has been completed in these properties. The revitalisation of individual units will occur as and when the leases of existing tenants expire, and suchtenants vacate the units. Please see “Business – Business Overview – Revitalisation – Restyling” for more information.

6

31

127

16

26

Total No.
of Units in
Project

(2)

1,069

1,644

15,730

1,684

3,664

Planned/Total GFA
(sq m)All properties are freehold properties.

688

405

8,620

1,347

1,300

Total LandArea
(sq m)(1)

Notes:

Shibuya-ku,
Tokyo

Yoyogiuehara
MansionYokohama-shi,
Kanagawa

Hill Top
Yokohama
Higashi-Terao
Condominium

Shinagawa-ku,
Tokyo

Minato-ku,
Tokyo

Isarago Place
Condominium

Glen Park
Ikedayama
Condominium

Setagaya-ku,
Tokyo

Location

EstageKaminoge
Condominium

Name of
Project (1)No. ofUnits inour
Inventory
as at theLatestPracticable
Date

167

Completion dates are based on our estimates only and actual completion dates may vary from those indicated above.

Planned figures.

This name has been translated for convenience only and the financial institution in question has no official English name.

(3)

(4)

33

–

40

Completion
expected in
April 2013
Completion
expected inJuly 2013
Completion
expected inAugust 2013
Completion
expected in
May 2014
Completion
expected in
January 2014

Completed

Project Status(2)Completed

(2)

33(3)

2,160(3)40(3)

3,901(3)

21

23

7

No. of Units in
our Inventory asat the Latest
Practicable Date
20

All properties are freehold properties.

300

21(3)

1,514(3)–23(3)

1,876(3)966.4952

Planned/Total
No. of Units
122

3,097

Planned/Total GFA
(sq m)
10,685(1)

Notes:THE Palms
Nihonbashi
Kodemmacho

Hasune 3-chome
Condominium

Chuo-ku, Tokyo

1,193

Kita-ku, Tokyo

604

442

Shibuya-ku,
Tokyo

THE Palms Shibuya
Tokiwamatsu

Itabashi-ku,
Tokyo

581

Shibuya-ku,
Tokyo

THE Palms
Nishigahara

698

Shinjuku-ku,
Tokyo

Location
Chuo-ku, Tokyo

Total LandArea
(sq m)
1,512

Name of Project (1)THE Palms
Tsukishima Luna
GardenTHE Palms
Takadanobaba
4-chome
THE Palms
Sendagaya

Condominiums

Development

The Hokuriku
Bank, Ltd.

The Kosan
Shinkin Bank(4)Mortgage

Mortgage

ORIX Bank
Corporation

Mizuho Bank,
Ltd.

Higashi-Nippon
Bank, Ltd.

Nil

Mortgagee
Japan Housing
Finance Agency

Mortgage

Mortgage

Mortgage

Nil

Encumbrances
RevolvingMortgage

168

1,254

4,696

1,314
340

Bunkyo-ku,
Tokyo

Setagaya-ku,
TokyoShibuya-ku,
Tokyo

Saitama-shi,
Saitama

Ota-ku, Tokyo

Ota-ku, Tokyo

Minato-ku,
TokyoItabashi-ku,
Tokyo

Ota-ku, Tokyo

Palms Court
Koishikawa

Palms Court
Setagaya Okamoto

Palms Court Hatsudai

Palms Court Yono
HonmachiLand for Nakaikegami
1-chome DetachedHouse

Land for Sannou
1-chome DetachedHouse3

Land for Motoazabu
3-chome DetachedHouse(3)Land for Wakagi
3-chome DetachedHouse(3)Land for
Higashiyukigaya
1-chome DetachedHouse(3)

467

1,387

594

564

1,106

2,044

Kamagaya-shi,
Chiba

Location

Total LandArea
(sq m)

Palms Court
KamagayaName of Project (1)Detached Houses

–

–

–

−

−

1,280

1,553

3,452

1,484

1,798

Planned/Total GFA
(sq m)

–

–

–

8

4

13

16

40

15

19

No. of Houses

–

–

–

8

4

13

6

33

10

4

No. of Houses in
our Inventory asat the Latest
Practicable Date

No development
plan

No development
plan

No development
plan

Completion
expected in June
2014

Completion
expected in
October 2013

Completed

Completed

Completed

Completed

Completed

Project Status(3)Mortgage

Mortgage

Mortgage

Resona BankLtd.

The Kosan
Shinkin Bank(4)The Bank of
Yokohama,Ltd.

Mizuho Bank,
Ltd.

Fuyo General
Lease Co., Ltd.

Mortgage

Mortgage

The Minato
Bank, Ltd.

The Minato
Bank, Ltd.

Sumitomo Mitsui
Trust Bank,
LimitedSumitomo Mitsui
Banking
Corporation

Nil

Mortgagee

Mortgage

Mortgage

Mortgage

Mortgage

Nil

Encumbrance

169

Plans for these sites have yet to be finalised.

This name has been translated for convenience only and the financial institution in question has no official English name.

(4)

No development
plan

No development
plan

No development
plan

No development
plan

No development
plan

No development
plan

No development
plan

(3)

–

–

–

–

–

–

–

Completion dates are based on our estimates only and actual completion dates may vary from those indicated above.

–

–

–

–

–

–

–

Project Status(3)

(2)

–

–

–

–

–

–

–

No. of Houses

No. of Houses in
our Inventory asat the Latest
Practicable Date

All properties are freehold properties.

6,916

268

467

1,706

589

188

380

Planned/Total GFA
(sq m)(1)

Notes:

Yokohama-shi,
Kanagawa

Land for Komaoka
1-chome DetachedHouse(3)

Yokohama-shi,
Kanagawa

Land for
Rokkakubashi
5-chome DetachedHouse(3)Shinagawa-ku,
Tokyo

Suginami-ku,
TokyoLand for
Naritahigashi
3-chome DetachedHouse(3)Land for Higashigotanda DetachedHouse(3)Ota-ku, Tokyo

Land forMinamiyukigaya
3-chome DetachedHouse(3)Kita-ku, Tokyo

Ota-ku, Tokyo

Land for Kamiikedai
3-chome DetachedHouse(3)Land for Akabane
Detached House (3)Location

Name of Project (1)Total LandArea
(sq m)

Mortgage

Mortgage

Mortgage

Mortgage

Mortgage

Mortgage

Mortgage

Encumbrance

The Bank of
Yokohama,Ltd.

Higashi-Nippon
Bank, Ltd.

AEON Bank,
Ltd.(4)

AEON Bank,
(4)
Ltd.

The Kosan
Shinkin Bank (4)AEON Bank,
(4)
Ltd.

Resona Bank
Ltd.

Mortgagee170Green-star Heights Condominium

Ralta Building

Koishikawa Tosei Building

Arakawa-ku, Tokyo

Ota-ku, Tokyo

Bunkyo-ku, Tokyo

Chuo-ku, Tokyo

Suginami-ku, Tokyo

Takaido Tosei Studio

Nihobashi-Hamacho Building

Adachi-ku, Tokyo

Shinden Warehouse

Chuo-ku, Tokyo

Ginza Premier Building

Nakano-ku, Tokyo

Chiyoda-ku, Tokyo

Awaji-cho Tosei Building

Nakano-Asahi Building (3)Shinjuku-ku, Tokyo

Edogawabashi Tosei Building

Minato-ku, Tokyo

Location

Minato-ku, Tokyo(2)

Takanawa Tosei Building

Toranomon Tosei Building

Name of Property(1)

453

592

717

860

475

4,138

261

100

281

189

1,983

628

Total Land Area(sq m)

1,809

1,492

3,275

4,583

1,437

5,965

975

549

1,546

1,046

4,176

4,213

Planned/Total GFA
(sq m)

Residential

OfficeOfficeOfficeOfficeWarehouse

OfficeOfficeOfficeOfficeOfficeOfficeUse of Property

RevolvingMortgage

Mortgage

RevolvingMortgage

RevolvingMortgage

Mortgage

RevolvingMortgage

Nil

RevolvingMortgage

RevolvingMortgage

Mortgage

Nil

RevolvingMortgage

Encumbrances

Mizuho Bank, Ltd.

Kansai Urban
Banking
Corporation

The Shoko Chukin
Bank, Ltd.

The Bank of TokyoMitsubishi UFJ,Ltd.

Higashi-Nippon
Bank, Ltd.

Yachiyo Bank, Ltd.

Nil

The Chiba Bank,
Ltd.

Sumitomo Mitsui
Trust Bank, Limited

Japan FinanceCorporation

Nil

The Shoko Chukin
Bank, Ltd.

Mortgagee

As at the Latest Practicable Date, we had an occupancy rate of 88.0% in respect of the properties which we hold for the purposes of our rental business.

Rental171

OfficeCommercial

Warehouse

Residential

Residential

Mortgage

Mortgage

Nil

Nil

Nil

The Shoko Chukin
Bank, Ltd.

The Chiba Bank,
Ltd.

Nil

Nil

Nil

Mortgagee

Leasehold property, 50 years commencing 1 April 1985.

The house situated on the land we own is owned by the tenant and not by our Company. Accordingly, information on the GFA is not available.

We own only one unit in this condominium, the size of which is 163 sq m.

Leasehold property, 30 years commencing 29 February 2008.

(3)

(4)

(5)

(6)

Toranomon Tosei Building is our principal place of business. This is not a material rental property as the significant part of the building is for our own use with only a small portion
amounting to 496 sq m (out of a total of 4,214 sq m) used for rental.

1,867

2,533

719

163

(5)

Encumbrances

(2)

261

1,960

1,460

78

–

Use of Property

All properties are freehold properties, unless otherwise stated. We own the entire property, unless otherwise stated.

Arakawa-ku, Tokyo

Funabashi-shi, Chiba

Togane-shi, Chiba

Shibuya-ku, Tokyo

243

Planned/Total GFA
(sq m)(1)

Notes:NN Building (6)Plaza Nakayama Building

Togane Warehouse

Uehara Diamond Condominium

Kita-ku, Tokyo

Nishigaoka Land(4)(5)

Location

Name of Property(1)Total Land Area(sq m)

172

Shibuya-ku, Tokyo

Arakawa-ku, Tokyo

Ebisu Green House Land(2)Ebisu Detached House(2)(3)

Nippori Community Building(2)(5)Mortgagee

Minato-ku, Tokyo

Toranomon 3-chome

119

575

154

Gross Leased Area (sq m)

1 May 2012 − 30 April 2014

11 May 2012 – 10 May 2014

31 March 2009 – 30 March
2014

Lease Period

Office and Warehouse

OfficeOfficeUse of Property

Save as disclosed in “Risk Factors” and “Overview of Relevant Laws and Regulations in Japan”, there are no regulatory requirements or environmental
issues that may materially affect our utilisation of our properties and fixed assets.

(1)

We sub-lease areas in these leased properties to third parties.

Chuo-ku, Tokyo

Nihonbashi Honkokucho Tosei
Building

Note:

Chiyoda-ku, Tokyo

Location

Ogawamachi Tosei Building II

Name of Property

As at the Latest Practicable Date, we have also leased the following properties from third parties (1):Leasehold property, 30 years commencing 30 January 2007.

This name has been translated for convenience only and the financial institution in question has no official English name.

(4)

(5)

The land for the Ebisu Detached House development is owned by Green House while the building is owned by TRI.

Mizuho Bank, Ltd.

Nil

The Kosan Shinkin
Bank (4)(3)

RevolvingMortgage

Nil

Mortgage

Encumbrances

The Ebisu Green House Land and the land for the Ebisu Detached House development are both owned by Green House, a company acquired by TRI and in a process of liquidation,and do not relate to any non-performing loans. In the case of Nippori Community Building, TRI initially acquired debt collateralised by this property (a building and a 30-year ground lease)and later acquired the property as in-kind repayment of the debt.

OfficeResidentialLand

Use of Property

All properties are freehold properties, unless otherwise stated.

1,587

95

–

Planned/Total GFA
(sq m)

(2)

238

79

1,045

Total Land Area(sq m)(1)

Notes:

Location

Shibuya-ku, Tokyo

Name of Property/Project (1)Alternative Investment

ENVIRONMENT, HEALTH AND SAFETY
Environment
Our Group’s operations are subject to a variety of environmental laws and regulations thatprimarily relate to soil contamination of lands on which our buildings are or will be built and which
may affect our ability to dispose of the property or borrow using the property as collateral. Pleasesee “Overview of Relevant Laws and Regulations in Japan” for information on the laws affecting
our Group’s operations.
We have made “creating new value and inspiration in everything involving real estate” ourcorporate philosophy, and we are actively engaged in initiatives that will lead to reducing theburden placed on the environment.
Our Group’s environmental policy is as follows:(i)

Strengthening the Group’s system for promoting environmental activities
In undertaking real estate revitalisation and development, we promote the conservation ofnatural resources and the conservation of energy and strive to reduce the burden on theenvironment and strengthen the introduction and management of various energy
conservation measures.

(ii)

Complying with environmental law and educating our employees on the environment
We are committed to complying stringently with environmental laws, ordinances, andregulations and strive to preserve the environment. We also educate our employees on theenvironment and carry out activities that promote an understanding of the environment withthe aim of improving environmental awareness amongst employees.

Health and Safety
We place significant emphasis on the health and safety of our employees and are required tocomply with a range of health and safety laws and regulations including the Industrial Safety and
Health Act (roudou-anzen-eisei-hou) (Act No. 57 of 1972, as amended). We review our health andsafety standards on an ongoing basis. Our employees undergo periodic health check-ups.
CORPORATE SOCIAL RESPONSIBILITY
We are committed to enhancing the well-being of the community and maintaining anenvironmentally sustainable way of conducting our business. We actively carry out activities toencourage community development and also closely monitor the impact of our activities andproperties on the environment.
Our Group’s approach to corporate social responsibility is focused on five main areas, namely,
human resource, environmental initiatives, fostering good relations with the community, quality
assurance and corporate governance.
Human Resource
We aim to attract, hire, develop and retain talented people as employees and are committed toenhancing their career development and fostering a corporate culture that respects and stimulates
diversity and encourages individual employees to realise their potential. Attracting talented
employees and enhancing the development of our employees is important to us and we set aside
resources each year for the education and training of our employees. We provide certain key
173employees with the opportunity for self-development by offering to send them on externalbusiness and management courses. In line with our expansion and globalisation plans, we also
conduct English lessons on a weekly basis. All of our employees are invited to attend theseEnglish lessons. We also conduct frequent seminars relating to occupational safety, health andmental health.
Environment
In our development business, we are committed to reducing carbon dioxide emissions from ourcompleted properties through the use of environmentally-friendly building materials. Two of ourproperties, the Heiwajima Tosei Building and the Kamata Tosei Building, have been given an “A”
rating under CASBEE. CASBEE is an evaluation system jointly developed by the Japan Green
Building Council and the Japan Sustainable Building Consortium with the support of the Ministryof Land, Infrastructure, Transport and Tourism in Japan.
To ease the heat-island phenomenon, we plant trees on almost all of the rooftops of the projects
we undertake in our revitalisation business. As at the Latest Practicable Date, the aggregate
rooftop greenery area in our properties was approximately 3,500 sq m in 70 properties.
In our revitalisation and “Restyling” businesses, we are committed to being environmentallyfriendly and sustainable by using building materials such as tile carpets and eco-decks. Tile
carpets are considered as environmentally friendly when compared to larger carpets as they canbe partially replaced. The eco-decks we use are also made of wood powder and acrylonitrile
butadiene styrene resin which are more resistant to different climates and allow for a longer periodof use.
We have implemented energy-saving measures in the buildings that we use for our business
operations. In our rental properties, we distribute posters and leaflets to our tenants, providingthem with information on energy-saving measures.
Community Development
We partake in an annual tree-planting event (uminomori) organised by the Tokyo Metropolitan
Government. This event is targeted at revitalising the reclaimed area in Tokyo Bay with theeventual aim of creating a forest.
After the recent large earthquake in Japan in 2011, we had also assembled and sent a volunteer
team comprising our employees to certain quake-affected areas.
Quality Assurance Initiatives
Please see “Business – Quality Assurance” for more information.
Corporate Governance
Our Group aspires to become one that makes a meaningful contribution to our shareholders,
employees, business partners, and other stakeholders by promptly and accurately responding tochanges in the management environment and to continually carry out business activities thatenable the Group to achieve sound growth. Please see “Management and Corporate Governance”
for more information.

174

PROSPECTS, BUSINESS STRATEGIES AND FUTURE PLANS
Prospects
Our Directors are of the view that the domestic real estate market in Japan, especially in the Tokyo
area, is about to bottom-out, even in light of the 2008 and 2009 financial crisis and the large
earthquake in 2011. For office properties, the decrease in rental asking prices has gradually
begun to stabilise (see “Industry Overview – Office and Residential (Condominium) Real Estate
Market” for more information). The prices of condominium projects and the rates of sales
completion of individual units for the Greater Tokyo area are at similar levels to 2011. JapaneseReal Estate Investment Trusts (“J-REITs”) have also restarted fund-raising and acquisition
activities. Our Directors also believe that foreign funds which pulled out of the real estate market
in Japan following the financial crisis in 2008 and 2009 are also gearing up for opportunities toresume investment in the Japanese real estate market.
Our Directors believe that the market for condominium and detached housing projects has
become more active in recent months. Tokyo’s increasing population is also a contributing factorof the market recovery.
Our Directors believe that since the beginning of 2012, there has been a higher purchase demandfor office buildings and due to this increase in demand, we expect that the purchase prices of suchoffice buildings will increase correspondingly. We will pay attention to this development and may
put additional emphasis on this business segment.
Our Directors also believe that the commercial property sector may become a growth area and will
pay closer attention to opportunities in this sector for our development business.
Our Directors also believe that there will be increased opportunities for us in our revitalisation
business because of the Japanese government’s policy of promoting the renewal of older
developments. This is in line with the “Strategy for Rebirth of Japan” adopted by the Japanese
government on 31 July 2012 to promote the market for existing residential properties andrenovation works, including plans to generate real estate investment through the revitalisation ofolder properties.
Business Strategies and Future Plans
Our corporate philosophy is “To create new value and inspiration in all aspects of real estate asa global-minded group of seasoned professionals”. To achieve this philosophy, our mid-term
management plan, dubbed “Next Stage 2014” which commenced in December 2011, sees us
strive for the further growth of our Company and our business. A key objective of our mid-term
management plan is to expand and reinforce our six core businesses. The revitalisation,
development and fund businesses have been identified as key growth drivers, and additional
emphasis will be place on these three business segments. As part of this expansion, our Company
has started to undertake larger projects (in excess of JPY1 billion), including the revitalisation of
the Meguro Ekimae Tosei Building (which was then sold in December 2012). Net proceeds fromthe Offering will be used to partially fund our expansion plans in these three business segments,
as discussed below. Please also see “Use of Proceeds” for more information.
Revitalisation
In our revitalisation business, we aim to seize on the opportunities which may be presented to us
in this market, and to capitalise on our “value-up” know-how and niche product development
capabilities and we have begun expanding our investments in both office buildings andcondominiums.

175

In addition, we believe Japanese society is paying increasing attention to the reusability of vacantand existing properties and environmental sustainability. End-users are also increasingly
considering revitalised properties alongside newly built homes. This trend draws focus on one of
our core strengths – our revitalisation business and gives us an opportunity to showcase ourexpertise in this area. In particular, “Restyling” has proved popular amongst end-users and it is anarea which we will continue to focus our efforts on.
Based on our internal market research, since the global financial crisis in 2008 and 2009, thedemand for residential property has been stable and there has been an increase in the numberof transactions for office buildings valued at under JPY1 billion. We expect mid-sized officebuildings valued at between JPY1 billion to JPY2 billion to follow suit, in particular, taking into
account the recent recommencement of overseas investment and the improving overall market for
office buildings. We are accordingly refocusing our efforts from residential and other segments of
the office building market to the segment of the office building market of mainly between JPY1
billion to JPY2 billion, and larger properties if the opportunity arises. Nevertheless, we willcontinue to look for opportunities in the residential segment.
We intend to use approximately S$[●] million (based on the Maximum Offering Price) from the net
proceeds from the Offering to partially fund the acquisition and revitalisation of office buildings andresidential properties in Japan.
Development
The market for condominiums and detached houses for sale in the Tokyo region have shownstable progress in 2011 and 2012. We are making a concerted effort to expand our developmentof detached houses whilst continuing our development of condominiums. Development of
detached houses requires a shorter development period of six to 12 months as compared to up
to 24 months for the development of condominiums. This allows us to lower the market risks, lower
our financing costs and improve our cash flow significantly. Our development business, throughits diversified product lines of condominiums and detached houses will continue to meet the varied
needs of end customers. In addition, given that we believe the demand for offices has been
recovering, we may also start looking for opportunities to develop office properties.
In particular, we have identified two areas of Tokyo with potential for acquisition of residential land,
namely, in the Ikebukuro and Kichijoji areas. These areas contain middle to high-end detachedand condominium housing and are located within Tokyo in close proximity to the major train
stations. Accordingly, in July 2012, we set up an office in each of these areas in order to be closer
to the local property agents/brokers and to be able to respond to opportunities for acquisition inthese areas quickly.
We intend to use approximately S$[●] (based on the Maximum Offering Price) from the net
proceeds from the Offering to partially fund the acquisition and development of land for office,residential and commercial properties in Japan.
Fund
As for our fund business, we believe the period of stagnation of foreign investment from the global
financial crisis in 2008 and 2009 is over as we have in 2012 begun to see renewed investment
activity in Tokyo from overseas investors. In particular, we believe that our fund business is astable source of income with a lower risk profile and as such plays a significant role in the growthof the Group because of its off balance-sheet nature, which allows us to participate in larger-scale
projects which we may not be able to execute on our own. The fund business also enables us toestablish channels of communications with various investors including domestic and foreign
institutional investors/pension funds, and these parties may potentially transact with us in the
future, whether as vendor or buyer.
176

Between FY2009 and FY2011, we have seen a steady increase in our AUM and there has beenstable AUM for 9M2012 (see “Management’s Discussion And Analysis of Financial Condition and
Results of Operations – Factors Affecting our Results of Operation – Revenue – Revenue fromfund business” for more information). We believe that we have in recent years reinforced our
position in the fund and real estate asset management industry.
There has been a decline in fees from our asset management contracts due to difficult market
conditions. Accordingly, to maintain our revenue from this business segment, we are actively
seeking to expand the number of our asset management contracts. We will endeavour to obtainnew contracts by pro-actively marketing ourselves to lenders (in respect of their existing asset
portfolios) and REIT managers (in respect of properties not yet injected into REITs) to engage us
as asset managers. We also intend to reach out to securities firms and the pension divisions oftrust banks to set up private funds. In addition, we also plan to start investing in minority stakes
in funds as we believe such investments may make it easier for us to obtain new asset
management contracts. We will further leverage on our strength as a one-stop real estate service
provider, which is made possible by the synergies across our various businesses and our trackrecord in the Tokyo area. Furthermore, a strengthening of relationships with foreign investors(including through Tosei Singapore) will also provide us with the foundation for a firm framework
to cope with the expected increased volume of acquisitions of properties.
We intend to use approximately S$[●] (based on the Maximum Offering Price) from the net
proceeds from the Offering as co-equity investment in real-estate funds (a) where we manage theportfolio assets, or (b) which we plan to set up and manage, in Japan.
Rental/Property Management/Alternative Investment
Notwithstanding our emphasis on the three business segments above, we will nevertheless seek
to enhance our rental, property management and alternative investment businesses.
For our rental business, we intend to increase our rental income by increasing our rental
properties through acquisitions of office buildings and condominiums. We also intend toconcentrate on increasing occupancy rates and attracting more tenants for our properties throughan efficient management and control system of the properties in our portfolio. We believe thatrental revenue will increase when the real estate market improves.
For our property management business, we intend to strengthen our management and control
systems to increase efficiency. We aim to establish a stable base for profits through a strategy ofactively bidding for property management contracts for larger properties.
For our alternative investment business, we will continue to source for investment opportunities.
Expanding outside of Japan
We aim to achieve recognition of the Tosei brand outside of Japan. Our Group has plans toestablish a regional presence in South-east Asia, and to this end, we incorporated our Singapore
subsidiary, Tosei Singapore, in January 2012. We intend, in the near future, to use our newly
established presence in South-east Asia to attract investors in the region to the Japanese realestate market. In the medium term, we may also set up funds and invest in property in South-east
Asia. We believe that establishing an operating presence in Singapore can contribute to ourexisting businesses and provide the foundations for diversifying our business portfolio and wehave plans to hire employees for Tosei Singapore, conduct market research and source forinvestors.

177

TRENDS AND ORDER BOOK
Save as disclosed above, in “Risk Factors”, “Capitalisation and Indebtedness”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, “Industry Overview”,“Business – Prospects, Business Strategies and Future Plans” and “General and Statutory
Information − Litigation” of this Prospectus and barring any unforeseen circumstances, ourDirectors believe that there are no other significant recent known trends in production, sales andinventory, and in the costs and selling prices of our products and services, or any other known
trends, uncertainties, demands, commitments or events that are reasonably likely to have amaterial effect on our revenue, profitability, liquidity and capital resources in the current financial
year. They are also not aware of any such trends that would cause the financial information
disclosed in this Prospectus to be not necessarily indicative of our future operating results orfinancial condition. Please also see “Cautionary Note Regarding Forward-Looking Statements”.
Due to the nature of our business, we do not have an order book.

178

179

Asset
Solutions
Departments
1-4

Board of Directors

Architectural
Planning
Department

Finance andAccounting
Department

Administration &Human
Resource
Department

Administrative
Division

Business
Division

Asset Solutions
Business
Promotion
Department

Chief Financial Officer
Noboru Hirano

Corporate
Planning
Department

Auditing
Department

Board of Statutory Auditors

Chief Operating Officer
Katsuhito Kosuge

Chief Executive Officer
Seiichiro Yamaguchi

The following chart shows our management reporting structure:

MANAGEMENTMANAGEMENT AND CORPORATE GOVERNANCE

BOARD OF DIRECTORS
Our Board of Directors is the primary decision making body of our Company and consists of five
Directors, three of whom have executive positions and two are Outside Directors. Shareholders
elect our Directors at our general meeting of shareholders, usually based on an elective list of
persons recommended by the Board of Directors.
Under our Articles of Incorporation, a Director’s term of office expires at the close of our AGM,
convened in respect of the financial year ending two years from such Director’s appointment.
Directors may serve any number of consecutive terms.
At least one representative director is required to be elected by the Board of Directors fromamongst our Directors. Our current representative director is Seiichiro Yamaguchi. Ourrepresentative director has the authority to do all acts pertaining to the business of our Company
on behalf of and in the name of our Company. Our Board of Directors may by resolution of theBoard appoint or remove a representative director. A representative director who has been
removed from his position will remain as a Director of our Company. As a general rule, there is norequirement for companies to appoint a representative director from amongst its directors.
However, if a joint-stock company has a board of directors, the board of directors of such a
company must appoint at least one representative director from amongst its directors. Since listedcompanies on the TSE all require a board of directors, all listed companies on the TSE will haveat least one representative director.
Our Directors are entrusted with the responsibility for the overall management of our Company.
We currently have two Outside Directors. Although the role and responsibilities of an Outside
Director are not materially different from Directors under the Japanese Companies Act, in practice,
the role and responsibilities of Outside Directors include monitoring management and ensuringthat the management runs the company in a way that serves the interests of shareholders rather
than their own, and Outside Directors are generally not directly involved in the management oroperations of our Company. In addition, under the Japanese Companies Act, a company can enter
into agreements with its outside directors to limit their liability towards our Company for damages
to a company where a breach of duty has occurred, except in cases of willful misconduct or grossnegligence, if the relevant provision is included in the articles of incorporation of such a company.
The relevant provision is Article 27(2) of our Articles of Incorporation. Pursuant to this, we haveentered into such agreements with each of our Outside Directors, Goro Kamino and Kenichi
Shotoku, to limit their respective liabilities towards our Company to the statutory minimum of twice
the current annual remuneration received or receivable by each Outside Director as calculated inaccordance with the relevant provisions under the Japanese Companies Act. Such limitation of
liability will also apply in respect of derivative actions brought against such Outside Directors by
Shareholders on behalf of our Company.

180

The following table set forth certain information in respect of the current members of our Board asat the Latest Practicable Date:
Name

Age

Address

Position

Seiichiro Yamaguchi . . . . .

52

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

President and CEO

Katsuhito Kosuge . . . . . . .

52

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Director and COO

Noboru Hirano . . . . . . . . . .

53

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Director and CFO

Goro Kamino . . . . . . . . . . .

52

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Outside Director

Kenichi Shotoku . . . . . . . .

42

c/o 10 Anson Road
#14-06 International Plaza
Singapore 079903

Outside Director

Information on the areas of responsibility, the business and working experience of each of our
Directors is set out below:
Seiichiro Yamaguchi is our Company’s President and CEO. Mr. Yamaguchi oversees all aspectsof our Company’s operations, including making major corporate decisions. He is also responsible
for the formulation of the overall business and corporate policies and strategy of our Group. Mr.
Yamaguchi joined our Company as a part-time director in August 1990 and undertook amanagement buy-out of our Company in 1994.
In April 1983, Mr. Yamaguchi joined Mitsui Real Estate Sales Co., Ltd. as a fresh graduate inproperty sales where he worked for approximately three years. Mitsui Real Estate Sales Co., Ltd.
is part of the larger Mitsui Fudosan Group that is listed on both the Tokyo and Osaka Stock
Exchange. He joined Tosei-Shoji Corporation (“Tosei-Shoji”) in April 1986 as a director where he
was responsible for the overall management of the company. In August 1990, Mr. Yamaguchi was
appointed as a director of Tosei. In this role, he began to manage all aspects of our Company’s
operations. He assumed his current role as President of Tosei in June 1994 and began working
in our Company full-time after undertaking the management buy-out. He also continued working
at Tosei-Shoji on a part-time basis and resigned in January 1996. From December 1995 to May
2003, Mr. Yamaguchi was also the representative director of Palms Community Management Co.,
Ltd. (now known as Tosei Community Co), one of our Company’s wholly-owned subsidiaries. Mr.
Yamaguchi assumed the additional title of CEO of Tosei in 2004.
Mr. Yamaguchi graduated with a Bachelor’s degree in Law from Keio University in March 1983.
Katsuhito Kosuge is a Director and the COO of our Company. He is also the senior executive
officer in charge of our Company’s Business Division. Mr. Kosuge oversees the operational
aspects relating to our Company’s real estate related businesses, including the acquisition,
development and disposal of properties. He has been with Tosei since January 1996.
Mr. Kosuge worked in the Kounan architectural office (Yokohama branch) of Tokyu Construction
Corporation (“Tokyu”) from April 1983 to March 1986, where he was an architectural businessadministrator. He was involved the administration, labour management and cash management for181the various construction projects undertaken by Tokyu. He joined Tosei-Shoji in April 1986 andwas responsible for sale and purchase of properties, before assuming the role as the chief of thepresident’s office, where he worked closely with the president of Tosei-Shoji and reported on thecompany’s financial and accounting matters to him. He resigned from Tosei-Shoji in August 1994.
From August 1994 to January 1996, Mr. Kosuge was a director in Nihonbashi Realty Co., Ltd
where he was in charge of real estate brokerage.
In January 1996, Mr. Kosuge joined Tosei as a director. From December 2000 to July 2004, he was
the managing director of our Company’s Business Division. In July 2004, Mr. Kosuge assumed therole as one of two managing executive officers. From September 2005 to December 2007, he wasrepresentative director of Tosei Revival Investment, one of our Company’s subsidiaries. He began
his current role as COO and senior executive officer of Tosei in February 2006. From October2007 to February 2009, he was also appointed as representative director of Tosei AssetManagement, Corp. In April 2008, he was appointed as a director of Tosei Asset Advisors, one of
our Company’s wholly-owned subsidiaries. Mr. Kosuge assumed the additional responsibilities ofsenior executive officer of our Company’s Business Division in December 2010.
Mr. Kosuge holds a Bachelor’s degree in Economics from Keio University where he graduated in
March 1983.
Noboru Hirano is a Director and the CFO of our Company. He is also the senior executive officer
in charge of our Administrative Division. Mr. Hirano oversees the administrative aspects of ourCompany, including finance and accounting, human resources and corporate planning. He has
been with Tosei since March 2001.
Mr. Hirano accumulated nine years of experience in the accounting and financing fields during histime in the accounting department at Kokubu & Co., Ltd (“Kokubu”) from April 1982 to March
1991. He was an assistant manager of a unit within the accounting department and mainly
undertook accounting related work during his time at Kokubu. Kokubu is a leading Japanese food
distribution company with an international presence. He joined Tosei-Shoji in April 1991 as thehead of the accounting section where he handled the accounting matters of the company as wellas matters related to bank financing. In May 1995, he was appointed as a director of theaccounting section of Tosei-Shoji. He resigned from Tosei-Shoji in February 2001.
In March 2001, Mr. Hirano joined Tosei as the general manager of the Finance and Accounting
Department. He became the managing director of the Administrative Division in October 2002. In
July 2004, Mr. Hirano assumed the role as one of two managing executive officers. In March 2005,
he was appointed as a statutory auditor of Tosei Revival Investment, one of our Company’s
wholly-owned subsidiaries and stayed on in this capacity till December 2007. He was also
appointed as statutory auditor for another of our Company’s wholly-owned subsidiaries, Tosei
Community Co, and still retains this position. In September 2005, he was appointed as therepresentative director of Tosei REIT Advisors, Inc., (now known as Tosei Asset Advisors, awholly-owned subsidiary of Tosei) and stayed on in this role till March 2006. He assumed his
current role as CFO and senior executive officer of Tosei in February 2006. In December 2007, heassumed the additional responsibilities as senior executive officer of Tosei’s Administrative
Division and representative director of Tosei Revival Investment. In January 2013, Mr. Hirano
relinquished his role as representative director of Tosei Revival Investment, but continued in his
capacity as a director.
Mr. Hirano graduated with a Bachelor’s degree in Business and Commerce from Keio University
March 1982.

182

Goro Kamino has been an Outside Director of our Company since 2007.
In April 1983, Mr. Kamino began his career at Mitsui Trust and Banking Co., Ltd. (“Mitsui Trust”)(now known as Sumitomo Mitsui Trust Bank, Limited) as a sales and marketing representative.
During his time with Mitsui Trust, he was involved in sales and marketing in various divisions in
the central branch of Mitsui Trust. He was eventually transferred to Mitsui Trust’s New York branch
in August 1987. Sumitomo Mitsui Trust Bank, Limited is one of Japan’s major trust banks and ispart of the Sumitomo Mitsui Trust Holdings Inc., which is listed on the Tokyo, Osaka and Nagoya
Stock Exchanges. Mr. Kamino then joined Chubu Gas Co., Ltd in August 1990 as the groupmanager of their planning department and worked there until he joined Gastec Service Inc. in May
1995 and was appointed the head of their corporate planning department.
Mr. Kamino currently holds several other directorships. Most notably, he sits on the board of Japan
Post Holdings Co., Ltd., Sala House Co., Ltd., Musashi Seimitsu Industry Co., Ltd and Toyohashi
Cable Network Inc. Japan Post Holdings Co., Ltd. is the largest provider of postal services inJapan. Sala House Co., Ltd. is engaged in the housing property development business and listedon the Tokyo Stock Exchange. Musashi Seimitsu Industry Co., Ltd manufactures and sells
transportation equipment and is also listed on the First Section of the Tokyo Stock Exchange. He
is also the president and representative director of Gastec Service Inc., Sala Corporation andChubu Gas Co., Ltd.
Mr. Kamino is concurrently also the administration officer of the Chubu Association of Corporate
Executives and the vice-president of The Toyohashi Chamber of Commerce and Industry. He is
also the administrative director of both the Toyohashi Youth Orchestra and the NPO Honokuni
Forestry Association and the administration officer of the Chubu Economic Federation.
Mr. Kamino graduated from Keio University in March 1983 with a Bachelor’s degree in Business
and Commerce.
Kenichi Shotoku has been an Outside Director of our Company since February 2012.
From October 1995 to September 1999, Mr. Shotoku worked for Asahi & Co., Ltd., a member firmof Arthur Andersen & Co. (now known as KPMG AZSA LLC) in Tokyo where he was involved instatutory and voluntary audits, and other consulting works.
From September 1999 to November 2001, Mr. Shotoku was seconded by Asahi & Co. to Arthur
Andersen in Kuala Lumpur as a manager and assisted Japanese corporations in auditing,taxation, labour, and legal government compliance.
In September 2002, Mr. Shotoku co-founded SCS Global Consulting. Pursuant to a restructuring,
SCS Global Consulting was acquired by SCS Global, of which Mr. Shotoku is currently the GroupManaging Director. SCS Global provides consulting and compliance services such as audit, tax,
accounting, corporate finance and various business consulting services in Asia.
Mr. Shotoku was an Outside Director of O-RID Co. Ltd. from September 2005 to October 2012 andhas been a Statutory Auditor of Roki Techno Co., Ltd. since December 2010. Roki Techno Co., Ltd
has offices in Japan, Singapore and the United States of America.
Mr. Shotoku is a Certified Public Accountant in the United States of America, Japan andSingapore.
Mr. Shotoku graduated with a Bachelor’s degree in Economics from the Keio University in March
1993.

183

Other Principal Directorships of our Directors
The list of present and past directorships held by our Directors in the last five years preceding thedate of this Prospectus, excluding those held in our Company, is set out in Appendix H – “List of
Past and Present Principal Directorships – Directors”.
Our Outside Directors, namely Goro Kamino and Kenichi Shotoku, do not sit on the board of
directors of any of our principal subsidiaries.
STATUTORY AUDITORS
Shareholders elect our Statutory Auditors at our general meeting of shareholders, usually basedon a list of persons recommended by the Board of Directors and approved by the incumbent Boardof Statutory Auditors. As a company with a Board of Statutory Auditors, our company must appoint
more than one full-time Statutory Auditor from its Board of Statutory Auditors under the JapaneseCompanies Act.
Under our Articles of Incorporation, a Statutory Auditor’s term of office expires at the close of ourAGM, convened in respect of the financial year ending four years from such Statutory Auditor’s
appointment. Statutory Auditors may serve any number of consecutive terms.
The following table presents certain information concerning the Statutory Auditors of our Company
as at the Latest Practicable Date:
Name

Age

Yasuhiro Honda . . . . . .

72

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Full-time Statutory Auditor

Masao Harada 1 . . . . . .

70

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Full-time Statutory Auditor

Yutaka Kitamura 1 . . . . .

63

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Full-time Statutory Auditor

Shigeru Yamagishi 1 . . .

70

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Part-time Statutory Auditor

Tatsuki Nagano . . . . . .

53

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Part-time Statutory Auditor

Osamu Doi 1 . . . . . . . . .

49

c/o 4-2-3 Toranomon
Minato-ku, Tokyo
105-0001 Japan

Part-time Statutory Auditor

1

Address

Position

Note: As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and notseeking re-election as Statutory Auditors of our Company at our AGM on 26 February 2013. Yutaka Kitamura andOsamu Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which
will be before the registration of the Prospectus.

184

Yasuhiro Honda has been a full-time Statutory Auditor of our Company since April 2003.
He began his career at Taisei Corporation (“Taisei”), a company in the construction industry, in
April 1963. Prior to 1991, Mr. Honda held various positions, including as general manager of thebusiness administration department of Taisei. In June 1991, he was appointed as the generalmanager of the machinery and material department of Taisei where he was in charge of planningand management. He became the managing director of Taisei Tourist Agency Ltd., a travel agency,
in June 1995 and left this position in June 2001.
He has been a member of the Japan Corporate Auditors Association since 2003.
Mr. Honda graduated with a Bachelor’s degree in Economics from Kwansei Gakuin University in
1963.
Masao Harada 1 has been a full-time Statutory Auditor of our Company since May 2003. Mr.
Harada is not seeking re-election and will retire from his position as a full-time Statutory Auditorof our Company on 26 February 2013.
Mr. Harada began his career at Kumagai Gumi Co., Ltd (“Kumagai”), a company in theconstruction industry, in April 1964. In November 2000, he was appointed as general manager ofthe building department at Kumagai. He was, from January 2001 to March 2002, appointed as the
managing director and executive officer of Kumagai. He also assumed the role of generalmanager of the purchasing department in the head office of Kumagai at the same time. He
supervised the operations of the various departments that he was in charge of during his time in
Kumagai.
Mr. Harada has been a fully-qualified architect since 1972 and has also been a member of theJapan Corporate Auditors Association since 2005.
Mr. Harada graduated with a Bachelor’s degree in Science and Technology from the College of
Science and Technology, Nihon University in 1964.
Yutaka Kitamura 1 is standing for election as a Statutory Auditor at our AGM on 26 February 2013.
Mr. Kitamura began his career at Yasuda Trust And Banking Company, Limited (now known as
Mizuho Trust & Banking Co., Ltd.) (“Yasuda”) in April 1972 where he worked in internal
administration and domestic lending operations at the Ikebukuro and Bakuro-cho branches of
Yasuda. From May 1980 to May 1981, he was sent by Yasuda to study at the Ibero-American
Institute, Universidad Iberoamericana in Mexico. From November 1986 to May 1990, Mr. Kitamura
served as representative and chief representative in the Melbourne branch of Yasuda, where he
was involved in providing assistance on loan business for local entities and public institutes. From
May 1996 to September 1998, Mr. Kitamura served as the general manager of the Singapore
branch of Yasuda, presiding over the bank’s loan business for ASEAN and India as well as overfund and securities trading operations.
In October 1998, Mr. Kitamura became the joint general manager of a credit division of Yasuda,and subsequently became the manager of the pension sales division in April 1999 where hepresided over the sales of pension products. He was appointed as branch chief and division
manager of Niigata pension sales in October 1999, where he presided over, inter alia, the sale of1

Note: As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and notseeking re-election as Statutory Auditors of our Company at our AGM on 26 February 2013. Yutaka Kitamura andOsamu Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which
will be before the registration of the Prospectus.

185pension products in Niigata prefecture. From June 2003 to October 2004, Mr. Kitamura served as
division manager of Osaka pension sales, where he presided over the sale of pension products
for seven prefectures.
From March 2005 to March 2010, Mr. Kitamura assumed the role of a full-time statutory auditor
at Nippon Carbon Co., Ltd., a carbon product manufacturer listed on the First Section of the TSE.
Mr. Kitamura joined J-COACH Corporation (“J-COACH”) in May 2010 and served as a full-timeadviser for one month. From June 2010 to May 2012, Mr. Kitamura served as full-time statutory
auditor of J-COACH, where he was involved in the preparation and introduction of a new audit
system.
Mr. Kitamura is a Certified Internal Auditor in Japan and holds Certification in Control SelfAssessment from the Institute of Internal Auditors. He is also a member of The Institute of Internal
Auditors, Japan.
Mr. Kitamura graduated with a Bachelor’s degree in Economics from Gakushuin University in
1972.
Shigeru Yamagishi 1 has been a part-time Statutory Auditor of our Company since February 2005.
Mr. Yamagishi is not seeking re-election and will retire from his position as a part-time Statutory
Auditor of our Company on 26 February 2013.
Mr. Yamagishi began his career at Mitsubishi Trust and Banking Corporation (“Mitsubishi Trust”)
in April 1965. In February 1990, he was appointed as the branch manager of the Mitsubishi Trust’s
Takatsuki branch. He was later appointed as the head of Mitsubishi Trust’s auditing department in
February 1992. During his time at Mitsubishi Trust, he accumulated significant audit experience.
In August 1994, he was appointed as a director of Ryoshin Hosho Co., Ltd (now known as
Mitsubishi UFJ Trust Hosho Co., Ltd) (“Ryoshin”), part of the larger Mitsubishi UFJ Financial
Group, Inc. that is listed on the Tokyo, Osaka, Nagoya and New York Stock Exchanges. From June
1995 to February 2000, Mr. Yamagishi was the managing director of Ryoshin. He wassubsequently appointed as a full-time statutory auditor of Ryoshin from March 2000 to February
2003. From March 2003 to September 2003, Mr. Yamagishi was a corporate advisor to Ryoshin.
Mr. Yamagishi graduated with a Bachelor’s degree in Economics from Keio University in 1965.
Tatsuki Nagano has been a part-time Statutory Auditor of our Company since February 2012.
Mr. Nagano began his career at The Chuo Trust & Banking Co., Ltd. (“Chuo Trust”) (now known
as Sumitomo Mitsui Trust and Banking Company Limited) in April 1983 as an assistant manager
of a local branch. Between July 1995 and June 2000, Mr. Nagano assumed the position of senior
manager, chief of financial planning section of the Corporate Planning Department of Chuo Trust.
In July 2000, Mr. Nagano was appointed as the managing director (overseeing the marketing
functions) of RG Asset Management Co., Ltd., an asset management company. He is also thepresident of the board of directors of RG Asset Management K.K., an investment advisory andconsulting firm. Mr. Nagano remains in both of these positions.

1

Note: As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and notseeking re-election as Statutory Auditors of our Company at our AGM on 26 February 2013. Yutaka Kitamura andOsamu Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which
will be before the registration of the Prospectus.

186

Mr. Nagano also currently holds a controlling interest and is a director of Reference Group
Holdings Ltd. Both RG Asset Management Co., Ltd and RG Asset Management K.K. arewholly-owned subsidiaries of Reference Group Holdings Ltd.
Mr. Nagano graduated with a Bachelor’s degree in Commerce from Keio University in 1983. Healso holds a Masters in Business Administration in Finance from the Columbia Business School,
Columbia University.
Osamu Doi 1 is standing for election as a Statutory Auditor at our AGM on 26 February 2013.
Mr. Doi began his career at Nikko Securities Co. (now known as SMBC Nikko Securities Inc.)(“Nikko Securities”) in April 1987. He was seconded to Nikko Europe Plc. in London in July 1993,
where he worked in the European equity and Europe control divisions. Between February 1998
and March 2002, Mr. Doi worked at a personnel division department of Nikko Securities, where he
was involved in the revision of pay structure, human resources systems and labour management.
From April 2002 to September 2004, Mr. Doi was involved in the securitisation of financial assets
at Fintech Global Incorporated (“Fintech”), an investment banking business. In October 2004, he
was appointed senior vice president of the structured finance division of Fintech. He was involvedin the securitisation of real estate development from October 2004 to September 2005, and was
subsequently involved in overall structured finance and equity and mezzanine financing from
October 2005 to September 2006. From October 2006 to March 2007, Mr. Doi was the deputy
head of investment banking of Fintech. He was subsequently appointed the head of theinvestment department of Fintech in April 2007. Mr. Doi retired from his full-time job in July 2007.
Mr. Doi graduated with a Bachelor of Laws degree from Keio University in 1987.
Other Principal Directorships of our Statutory Auditors
The list of present and past directorships held by our Statutory Auditors in the last five years
preceding the date of this Prospectus, excluding those held in our Company, is set out in Appendix
H – “List of Past and Present Principal Directorships – Statutory Auditors”.
CORPORATE GOVERNANCE
In accordance with Articles 327 and 328 of the Japanese Companies Act, we are required to adopt
either (a) statutory auditors and a board of statutory auditors; or (b) three committees, being anominating committee, a compensation committee and an audit committee (“Three Committees”)
with a majority of each committee comprising outside directors. Similarly, Rule 437 of the TSE
Securities Listing Regulations provides that a domestic company listed on the TSE (as applicable)
must set up either a board of statutory auditors or Three Committees.
The Japanese Companies Act requires at least three statutory auditors to form a board of statutory
auditors. Our Articles of Incorporation have stipulated a limit of no more than four statutory
auditors. Under the Japanese Companies Act, statutory auditors cannot be current directors or
employees of a company or its subsidiary. There are no professional qualification requirements fora statutory auditor.

1

Note: As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and notseeking re-election as Statutory Auditors of our Company at our AGM on 26 February 2013. Yutaka Kitamura andOsamu Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which
will be before the registration of the Prospectus.

187Consistent with the majority of listed companies in Japan, we have adopted a board of statutory
auditors.
Under this regime, the primary decision making body of our Company is our Board of Directors,
which is monitored by the Statutory Auditors, each of whom independently monitors the executive
actions of our Directors in the proper execution of their duties.
Role of our Board of Directors
The role of our Board of Directors includes, inter alia, nominating candidates as directors of ourCompany for approval by our Shareholders in general meeting. Our Board of Directors also
proposes the aggregate amounts of remuneration of our Directors for approval by our
Shareholders in general meeting. Our Board of Directors also reviews and determines the termsof remuneration packages, bonuses and other compensation payable to each of our Directors,
within the aggregate amount approved by our Shareholders.
Role of our Statutory Auditors
The four members of our Board of Statutory Auditors are all proficient in financial affairs, and are
all Outside Statutory Auditors. Of the four Statutory Auditors, two are full-time Statutory Auditors
and two are part-time Statutory Auditors. Statutory Auditors are appointed by our Shareholders
and are not salaried employees of our Company. Notwithstanding this, full-time Statutory Auditorsof our Company cannot engage in any other full-time employment.
The Board of Statutory Auditors coordinates the audits performed by each Statutory Auditor, theauditing department and our Japanese Accounting Auditor in an effort to maintain an appropriate
standard of corporate governance. Shinsoh Audit Corporation is presently our appointed
Japanese Accounting Auditor, pursuant to the approval of our Shareholders. Our Japanese
Accounting Auditor assists the Statutory Auditors in reviewing the financial and accounting
arrangements activities conducted by our Board of Directors.
The constitution and operation of our Board of Statutory Auditors are set out in our Articles ofIncorporation and Japanese Companies Act while the roles and responsibilities of our Board of
Statutory Auditors are set out in the Japanese Companies Act. Each of the Statutory Auditors andthe Board of Statutory Auditors as a whole are only accountable to our Shareholders. The
Statutory Auditors will each prepare an annual Statutory Auditors Report, based on which a Boardof Statutory Auditors Report is prepared. The Board of Statutory Auditors Report is attached to the
convocation notice to our Shareholders in respect of our AGM.
The Board of Statutory Auditors are responsible for auditing the executive actions of our Directors,
including ensuring the continuance of a sound corporate governance system, and it has a broad
authority to oversee our Company’s audit functions, including:•

independently reviewing corporate documentation and financial statements;•

sharing information with, co-ordinating with and interviewing the Japanese Accounting
Auditor; and•dealing with any issues arising from our Company’s audit.

In order to fulfill such responsibilities, the Statutory Auditors are given various powers, such as theright to:•request Directors and employees of our Auditing Department or other relevant persons toreport to them regarding our Company’s business;188

•

investigate our Company’s business and assets (Article 381 of the Japanese CompaniesAct); and•demand that Directors cease certain acts which are outside the scope or the purpose of ourCompany or in violation of laws and regulations or the Articles where such an act is likely tocause substantial detriment to the Company (Article 385 of the Japanese Companies Act).

Further, pursuant to Article 390 of the Japanese Companies Act, the Board of Statutory Auditors
has the power to request our Statutory Auditors to provide it with reports on the status of their
execution of duties. A Statutory Auditor can also request that any Director suspend or cease his
action if such action is not in compliance with applicable law or our Articles of Incorporation andmay seriously harm us. If our Directors ignore such a request, the Statutory Auditor may go tocourt for enforcement of such a request.
The Statutory Auditors have an obligation to attend meetings of the Board of Directors and to state
their opinions if they find it necessary. Such meetings of the Board of Directors take place at least
once a month and are also attended by the Outside Directors. Whilst Statutory Auditors are unable
to vote on resolutions of the Board of Directors, they attend such meetings of the Board of
Directors to provide their views. In addition, they attend other meetings, including monthly
management meetings (with our executive and senior officers, including our CEO, COO andCFO), monthly meetings of the Board of Statutory Auditors and corporate governance meetings.
The Board of Statutory Auditors also review key decisions of the Board of Directors and observe
the proper execution of any duties by Directors. The Statutory Auditors must also:•

exchange opinions with the Representative Director, Directors and other members of senior
management;•

formulate and develop audit policies and plans;•monitor transactions between our Company and our Directors;•

monitor transactions whereby there is a potential conflict of interest;•

review business reports;•

review and audit financial statements;•

review procedures for deciding remuneration and bonuses for Directors, Statutory Auditorsand employees;•

review and agree to the remuneration of our Japanese Accounting Auditor;•

co-ordinate with our Auditing Department and Japanese Accounting Auditor;•

review the system of internal controls established by the Board of Directors; and•prepare audit reports and submit these to the Board of Statutory Auditors in accordance with
the Japanese Companies Act.

To enhance management transparency and corporate governance, our Company recognises that
one of the most crucial management issues is to build, maintain and improve upon anorganisational structure capable of responding quickly to changes in the business environment, as
well as a shareholder-oriented and fair management system.

189

In addition to the Board of Directors and the Board of Statutory Auditors, we have certain
non-statutory committees or departments which we have put in place, namely the Auditing
Department, Compliance Committee, Disclosure Committee and the Risk Management
Committee.
Our Company also holds a monthly corporate governance meeting attended by our Directors withexecutive positions and the full-time Statutory Auditors. At such corporate governance meetings,
the attendees discuss, inter alia, the internal controls of our Company.
Auditing Department
Our Company has established an Auditing Department, independent from our Business Division
and Administrative Division. Our Auditing Department’s independence allows it tocomprehensively and objectively evaluate, inter alia, the appropriateness of our Company’s
internal management structure. In addition, our Auditing Department implements, manages andmonitors a system of internal controls necessary to ensure that the execution of the duties by our
Directors complies with laws and regulations and our Articles of Incorporation, as well as othersystems such as quality controls or information security controls.
Our Auditing Department, which at the Latest Practicable Date consists of four members, works
in conjunction with the Statutory Auditors as well as the Japanese Accounting Auditor in the auditof our Group and its subsidiaries. The audit reports and recommendations prepared by the
Auditing Department are approved by the President and such reports are submitted to the Boardof Statutory Auditors on a regular basis.
From time to time, our Auditing Department also engages external professionals to conductbusiness and risk audits.
Compliance Committee
Our Company has established a Compliance Committee to ensure that our Group complies withapplicable laws and regulations in our business activities. In addition, the Compliance Committeemonitors our business practices and policies to ensure that they are in line with our social
responsibility, as well as social ethics and norms. The Compliance Committee is chaired by our
CFO and comprises officers in charge of compliance matters (or someone of a similar
responsibility and standing) from each subsidiary and the heads of all of our divisions.
Our Compliance Committee also assists in promulgating annual compliance plans and facilitates
the conduct of compliance training for our employees.
Disclosure Committee
Our Company has established a Disclosure Committee to ensure and manage the timely,
appropriate and continuous disclosure of information concerning our Company and our Group as
well as to ensure compliance with the applicable laws and regulations to which we are subject.
The Disclosure Committee is chaired by our CFO and comprises all senior officers of ourCompany.
The Disclosure Committee garners and shares information of our Group and discusses what todisclose and whether information is considered as material which requires disclosure under the
FIEA and/or the TSE Securities Listing Regulations. If information is considered to be material
following discussions amongst the committee, it will immediately report the same to the Board of
Directors. Disclosure is decided by the CEO or director in charge of disclosure if necessity of
disclosure is apparent and urgent. The Board of Directors takes ultimate responsibility for any
disclosure made.
190

The Disclosure Committee also assists in the monitoring and operation of an internal information
reporting system to ensure that necessary disclosures are made. Our Disclosure Committee
reports to our Board of Directors on a monthly basis.
Risk Management Committee
Our Company has established a Risk Management Committee to manage risks that may impede
the execution of our business operations. The Risk Management Committee is chaired by thesenior officer in charge of our finance and accounting department and comprises officers in chargeof risk management (or someone of a similar responsibility and standing) from each of our
subsidiaries and the heads of all of our divisions.
The Risk Management Committee was established to identify, properly evaluate and manage risks
for the entire Group, including our Company. In the event of any potential or actual issue arisingthat would have a major impact on our Company’s business operations, the Risk Management
Committee will consider and implement measures and counter-measures to prevent suchoccurrences or reoccurrences. In addition, our Risk Management Committee promulgates annual
risk management plans and facilitates the conduct of risk management training for our employees.
As at the Latest Practicable Date, the members of our Compliance Committee, Disclosure
Committee and Risk Management Committee are as follows:

Name

Position

Department

Compliance
Committee

Disclosure
Committee

Risk
Management
Committee

NoboruHiranoCFO–

Chairman

Chairmanu

Katsuhito
Kosuge

COO

–

u

u

u

Tadahiro
Adachi

Head

Auditing
Department

u

X

u

NobutoFujiwara

Head

Corporate
Planning
Department

u

X

u

Shunsuke
Yamaguchi

HeadAdministration& HR
Department

u

X

u

IchiroKawabata

Head andsenior officer

Finance &Accounting
Departmentuu

Chairman

HidekiNakanishi

Head

Asset
Solutions 1
Department

u

X

u

Hidekazu
Egoshi

Head

Asset
Solutions 2
Department

u

X

u

MasaakiWatanabe

Head andsenior officer

Asset
Solutions 3
Department

u

u

u

191

Name

Compliance
Committee

Disclosure
Committee

Risk
Management
Committee

Position

Department

Kenji
Komiyama

Head

Asset
Solutions 4
Department

u

X

u

Tetsuji
Komiyama

Head

Asset
Solutions
Business
Promotion
Department

u

X

u

Masahiro
UeharaHead andsenior officer

Architecture
Planning
Department

u

u

u

Junji Murata

ChiefCompliance
Officer

TAA

u

X

u

Hiroyasu
YonedaDirector in
charge ofCompliance& RiskManagement

TRI

u

X

u

Katsuei Ito

Director in
charge ofCompliance& RiskManagement

TCC

u

X

u

15

5

15

Total members

OPINION OF THE BOARD AND THE BOARD OF STATUTORY AUDITORS PURSUANT TO
RULE 610(5) OF THE LISTING MANUALAs set out in the preceding section, our Company does not have an Audit Committee and instead
has a Board of Statutory Auditors. The Board of Directors, with the concurrence of the Board of
Statutory Auditors, is of the opinion that our Company has adequate internal controls to address
financial, operational and compliance risks based on our Company having in place an Auditing
Department to carry out a continuous review of the internal controls of our Company.
OPINION OF THE BOARD OF STATUTORY AUDITORS IN RELATION TO THE CFO
The Board of Statutory Auditors has evaluated Noboru Hirano’s on-the-job performance for the
past 11 years in our Company. In this regard, it has noted that Mr. Hirano has accumulated
approximately 30 years of accounting experience in his career and he has been with the Groupfor more than 11 years. Since joining the Group in 2001, Mr. Hirano has been instrumental in our
Company’s growth and its successful listing on the TSE. He has demonstrated his knowledge andexperience in accounting, financial reporting, the business of the Group and the industry theGroup operates in. Based on the factors as aforesaid and through their dealings with Mr. Hirano
to date, the Board of Statutory Auditors believes that Mr. Hirano has the appropriate knowledge,
experience, character and integrity to act as the CFO of the Group.

192

Nothing has come to the attention of the Board of the Statutory Auditors to cause them to believethat Noboru Hirano does not have the competence, character and integrity expected of a chief
financial officer of a listed company in Japan.
COMPENSATIONThe compensation paid by our Company and our subsidiaries to each of our Directors and eachof our Statutory Auditors for services rendered by them in all capacities to our Company and our
subsidiaries for FY2010 and FY2011 and expected to be payable by our Company and our
subsidiaries to each of these Directors and Statutory Auditors for services rendered by them in all
capacities to our Company and our related corporations for FY2012, in remuneration bands (1), areas follows:

FY2011 (2)FY2012 (2)FY2013(estimated) (3)Seiichiro Yamaguchi . . . . . . . . . . . . . . . . . .

D

D

D

Katsuhito Kosuge . . . . . . . . . . . . . . . . . . . .

B

B

B

Noboru Hirano . . . . . . . . . . . . . . . . . . . . . .

B

B

B

Goro Kamino . . . . . . . . . . . . . . . . . . . . . . .

A

A

A

Kenichi Shotoku (4) . . . . . . . . . . . . . . . . . . .

n/a

A

A

Yasuhiro Honda . . . . . . . . . . . . . . . . . . . . .

A

A

A

Masao Harada . . . . . . . . . . . . . . . . . . . . . .

A

A

A (5)

Shigeru Yamagishi . . . . . . . . . . . . . . . . . . .

A

A

A (5)

Tatsuki Nagano (4) . . . . . . . . . . . . . . . . . . . .

n/a

A

A

Yutaka Kitamura . . . . . . . . . . . . . . . . . . . . .

n/a

n/a

A (6)

Osamu Doi . . . . . . . . . . . . . . . . . . . . . . . . .

n/a

n/a

A (6)

Name
Directors

Statutory Auditors

Notes:(1)

Remuneration bands:
Band A means between S$1 and S$250,000.
Band B means between S$250,001 and S$500,000.
Band C means between S$500,001 and S$750,000.
Band D means between S$750,001 and S$1,000,000.

(2)

Remuneration bands for FY2011 and FY2012 are based on the average exchange rate for FY2011 andFY2012, respectively, while the remuneration band for FY2013 was calculated based on the exchange rate
as at the Latest Practicable Date.

(3)

The estimated amount of remuneration excludes any bonus or profit-sharing plan or any other profit-linked
agreement or arrangement payable for the financial year ended 30 November 2013 as such bonuses are
discretionary in nature.

(4)

Kenichi Shotoku and Tatsuki Nagano joined our Company in FY2012.

(5)

Masao Harada and Shigeru Yamagishi are expected to retire as Statutory Auditors of our Company at our
AGM on 26 February 2013. Their estimated remuneration for FY2013 is based on the annualised
remuneration they are expected to receive from 1 December 2012 to 26 February 2013.

(6)

Yutaka Kitamura and Osamu Doi will be proposed at our AGM on 26 February 2013 as new Statutory Auditorsof our Company. If appointed, their estimated remuneration is based on the annualised remuneration they are
expected to receive from 26 February 2013 to 30 November 2013.

193

Past compensation figures include benefits-in-kind and any deferred compensation accrued forthe financial year in question and payable at a later date. The estimated amount of compensation
payable in the current financial year excludes any bonus or profit-sharing plan or any otherprofit-linked agreement or arrangement as such bonuses are discretionary in nature and aredetermined by our Board at the end of each financial year, taking into account our Company’s
performance for that financial year. The maximum aggregate compensation package of our
Directors and Statutory Auditors is subject to the approval at a general meeting of our
Shareholders. This maximum aggregate compensation package figure approved by our
Shareholders includes any discretionary bonuses approved by our Board to be paid to our
Directors and Statutory Auditors.
Save as disclosed in this Prospectus, we do not have in place any formal bonus or profit-sharing
plan or any other profit-linked agreement or arrangement with any of our employees and bonus
is expected to be paid on a discretionary basis.
OFFICERS RETIREMENT BONUS SCHEME
Directors and Statutory Auditors (each an “Officer”) of our Company are entitled to certain
bonuses upon retirement. An Officer of our Company may be paid a retirement bonus when heretires from our Company, subject to the approval of our Shareholders in general meeting. Under
our Company’s Officer’s Retirement Bonus Regulations (“ORB Regulations”), retirement isdeemed to occur in the following circumstances:(a)resignation;(b)

expiration of the term of office;(c)dismissal; or(d)death.

Our Board will calculate the amount of retirement bonus payable to Officers in accordance with our
ORB Regulations. Where the retirement bonus is payable to a Statutory Auditor of our Company,
the opinion of our Board of Statutory Auditors will be sought. Such retirement bonus will be paid
after the approval of our general Shareholders’ meeting. As at 31 August 2012, our Group has set
aside a total of ¥323.06 million for the Officers Retirement Bonus Scheme.
Calculation of Retirement Bonus
The retirement bonus will be calculated by multiplying (i) the monthly compensation of the Officer
at the time of retirement, (ii) the number of years the position is held for and (iii) the multiplier forthat position. This will be done in respect of each position held by the Officer in our Company(“Calculated Bonus”).
The multipliers for each position held by an Officer of our Company are set out in Table 1 below
while the multipliers for Directors who concurrently serve in an executive position are set out inTable 2 below. For the avoidance of doubt, the multipliers in Table 1 and Table 2 below are notcumulative, and only Table 2 will be applicable in respect of Directors who serve concurrently inan executive position.

194

Table 1: Multipliers for Officers
Position

MultiplierPresident and Director

3.0

Vice-President and Director

2.0

Senior Managing Director

1.5Managing Director

1.2

Director

1.0

Director (part-time)

0.8

Statutory Auditor (full-time)

1.0

Statutory Auditor (part-time)

0.8

Table 2: Multipliers for Directors Concurrently Serving in an Executive Position
Position

MultiplierPresident and Executive Officer

3.0

Vice President and Executive Officer

2.0

Senior Managing Executive Officer

1.5Managing Executive Officer

1.2

Executive Officer

1.0

If the amount of monthly compensation at the time of retirement of the Officer is significantly lessthan that of the immediately preceding year, our Board may review such Officer’s retirement
bonus. However, such alternative figure that may be suggested by our Board will still be subject
to the approval of our Shareholders.
Increased or Reduced Retirement Bonus
Where our Board considers that an Officer has had remarkable achievements (i) while in his
position at our Company, (ii) during the founding of our Company, or (iii) for any other reason, ourBoard may recommend an increased retirement bonus for such Officer. Such increased retirement
bonus shall not exceed 30.0% of the Calculated Bonus.
In addition, our Board may also recommend that an Officer’s Calculated Bonus be reduced if hehas caused significant detriment to our Company or if our Company’s performance at the time ofretirement of such Officer is poor.
Death of an Officer
Where the retirement bonus is payable as a result of the death of an Officer of our Company, theretirement bonus will be paid to the legal heir of that Officer or such other person with the authority
to receive such bonus, unless the Officer had given our Company prior notification in writing as
to the person who should be entitled to such retirement bonus.

195

FAMILY RELATIONSHIPS
There are no family relationships between any of our Directors, Statutory Auditors, Large Volume
Holders and Controlling Shareholders. There are no employees upon whose work we are
dependent.
ARRANGEMENT OR UNDERSTANDING
None of our Directors or Statutory Auditors has any arrangement or understanding with any of our
Shareholders, customers or suppliers or other persons, pursuant to which he or she wasappointed as our Director or Statutory Auditor, as the case may be.
TERMS OF OFFICE
Under our Company’s Articles of Incorporation, a Director’s term of office expires at the close of
our AGM, convened in respect of the financial year ending two years from such Director’s
appointment. Directors may serve any number of consecutive terms. Directors will be eligible forre-election upon the expiry of their two-year term by a resolution of Shareholders in general
meeting. All of our Directors were appointed/re-appointed with effect from 24 February 2012. With
respect to the appointment of Outside Directors, Shareholders will need to be provided withadditional information in the supplementary materials to the convocation notice with respect to theelection of Outside Directors, including (i) the reason for nominating such a person as an Outside
Director, (ii) information on the past experience of the candidate in the monitoring of managementand (iii) information on any potential limitation of liability agreements to be entered into or renewedwith our Company.
Under our Company’s Articles of Incorporation, a Statutory Auditor’s term of office expires at theclose of our AGM, convened in respect of the financial year ending four years from such Statutory
Auditor’s appointment. Statutory Auditors will be eligible for re-election upon the expiry of theirfour-year term by a resolution of Shareholders in general meeting. The term of office for a
substitute statutory auditor elected in place of a statutory auditor who has resigned before his/herterm of office has expired will be the same as that of the statutory auditor who has resigned.
At our AGM scheduled on 26 February 2013, Yasuhiro Honda and Tatsuki Nagano are seeking
re-election as our Statutory Auditors for a four-year term. In addition, Yutaka Kitamura and Osamu
Doi are standing for election as Statutory Auditors of our Company as Masao Harada and Shigeru
Yamagishi are retiring on 26 February 2013 and will not be seeking re-election as Statutory
Auditors.
Following our listing on the SGX-ST, we will make announcements on the SGXNET and TDNet on
any appointment or cessation of service of a Director or Statutory Auditor.
SERVICE AGREEMENTS
There is no existing or proposed service contract entered or to be entered into by our Directors
with our Company or any of our subsidiaries which provide for benefits upon termination of
employment. However, please see “Management and Corporate Governance – Officers
Retirement Bonus Scheme” for retirement bonuses payable to our Directors and Statutory
Auditors.

196

197

1,580
–
–

Noboru Hirano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goro Kamino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Kenichi Shotoku . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

––..................................

1

1

–

–

–

–

–

–

–

–

0.35

0.44

30.39 (4)

%

–

–

–

–

–

–

–

–

[1,580][2,000][138,855]

No. of Shares

–

–

–

–

–

–

–

–

[●]

[●]

[●]

%

Direct Shareholdings immediately
after completion of the Offering

Note: As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and not seeking re-election as Statutory Auditors of our Company at our AGM
on 26 February 2013. Yutaka Kitamura and Osamu Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which will be before theregistration of the Prospectus.

Osamu Doi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

––Tatsuki Nagano. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1–

Shigeru Yamagishi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Yutaka Kitamura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Masao Harada

1

Yasuhiro Honda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–

2,000

Katsuhito Kosuge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statutory Auditors

138,855

No. of Shares

Seiichiro Yamaguchi (3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Directors

Name

Direct Shareholdings as atthe Latest Practicable Date

As at the Latest Practicable Date, our Company only has one class of issued shares. Our Company has [456,840] issued Shares, all of which are fully
paid-up in cash and which are listed on the TSE. The following table sets forth the direct shareholdings of our Directors, Statutory Auditors and certain
other Shareholders (2) based on information available to us as at the Latest Practicable Date.

DIRECT SHAREHOLDERS (1)SHAREHOLDERS AND LARGE VOLUME HOLDERS

198–
456,840

Tosei CDP Depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

We have considered Zeus Capital Limited to fall under the category of “Certain Other Shareholders” solely because of the ability of our President and CEO to exercise the voting rights
of Zeus Capital Limited in our Company.

Seiichiro Yamaguchi is the President and CEO of our Company.

Seiichiro Yamaguchi is also the representative director of Zeus Capital Limited, which owns 60,000 shares (approximately 13.13%) in our Company. He is entitled to exercise the voting
rights of Zeus Capital Limited in Tosei without prior shareholder approval from the shareholders of Zeus Capital Limited. Under the FIEA, any person holding more than 5% of the issued
shares shall be disclosed as a “Large Volume Holder” to the local finance bureau branch. This disclosure is made to the local finance bureau branch by such Large Volume Holders intheir personal capacity. In his disclosure to the relevant local finance bureau branch, Seiichiro Yamaguchi and Zeus Capital Limited are considered “Joint Holders” of their shares in Toseias they have an agreement to exercise their voting rights in tandem with one another.

(3)

(4)

[●]

[●]

[●]

[●]

%

(2)

[●]

[●]

[●]

[60,000]

No. of Shares

Direct Shareholders are persons recorded in the JASDEC Record of Depositors and our Register of Members. Please refer to “Description of Share Capital” and “Shareholding Reporting
Obligations” for further information.

100

–

55.69

13.13 (2)%Direct Shareholdings immediately
after completion of the Offering(1)

Notes:

254,405

Other Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No. of Shares
60,000(3)

Direct Shareholdings as atthe Latest Practicable Date

Zeus Capital Limited (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certain Other Shareholders

Name

199

(1)(2)

Seiichiro Yamaguchi is also the representative director of Zeus Capital Limited, which owns 60,000 shares (approximately 13.13%) in our Company. He is entitled to exercise the voting
rights of Zeus Capital Limited in our Company without prior shareholder approval from the shareholders of Zeus Capital Limited. Under the FIEA, any person holding more than 5% of
the issued shares shall be disclosed as a “Large Volume Holder” to the local finance bureau branch. This disclosure is made to the local finance bureau branch by such Large Volume
Holders in their personal capacity. In his disclosure to the relevant local finance bureau branch, Seiichiro Yamaguchi and Zeus Capital Limited are considered “Joint Holders” of theirshares in Tosei as they have an agreement to exercise their voting rights in tandem with one another.

Seiichiro Yamaguchi is the President and CEO of our Company.

Note: Prior to the registration of this Prospectus, this information will be updated to that available as at 25 February 2013.

(3)

(4)

1

[●]
[●]
[●]
[●]
[●]

Under the TSE Securities Listing Regulations, a listed Company must make timely disclosure in the event of a change in a Major Shareholder or a change in top shareholder amongst
the Major Shareholders. A listed Company must make also timely disclosure in the event of a change in its parent company, controlling shareholder or similar (each as defined under
the TSE Securities Listing Regulations). Such disclosure will be made on SGXNET concurrently.

[●]
[●]
[●]
[●]
[●]

[●]
[●]
[●]
[●]
[●]

%

(2)

2.25
1.67
0.91
0.88
0.87

10,297
7,630
4,176
4,053
3,976

[●]
[●]
[●]
[●]
[●]

No. of Shares

Direct Shareholdings immediately
after completion of the Offering

This information is extracted from the JASDEC Record of Depositors and our Register of Members.

30.39 (2)13.13 (2)
8.85
2.95
2.52

%

138,855
60,00040,446
13,482
11,527

No. of Shares

Direct Shareholdings as atthe 30 November 2012(1)

Notes:Top Ten Direct Shareholders
Seiichiro Yamaguchi (3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Zeus Capital Limited (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd (Trust Account) . . . . . . .
The Master Trust Bank of Japan, Ltd (Trust Account) . . . . .
BNY FOR GCM Client Accounts JPRD ISG FE-AC . . . . . . .
The Chase Manhattan Bank, N.A London Secs Lending
Omnibus Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State Street Bank and Trust Company 505104 . . . . . . . . . .
RBC ISB A/C LUX Non Resident/Domestic Rate . . . . . . . . .
SBI Securities Co., Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sumitomo Life Insurance Company (Special Account) . . . .

Name

The following table sets forth the direct shareholdings of our Top Ten Direct Shareholders based on information available to us as at 30 November 2012.

TOP TEN DIRECT SHAREHOLDERS 1

200

Seiichiro Yamaguchi is also the representative director of Zeus Capital Limited, which owns 60,000 shares (approximately 13.13%) in our Company. He is entitled to exercise the voting
rights of Zeus Capital Limited in our Company without prior shareholder approval from the shareholders of Zeus Capital Limited. Under the FIEA, any person holding more than 5% of
the issued shares shall be disclosed as a “Large Volume Holder” to the local finance bureau branch. This disclosure is made to the local finance bureau branch by such Large Volume
Holders in their personal capacity. In his disclosure to the relevant local finance bureau branch, Seiichiro Yamaguchi and Zeus Capital Limited are considered “Joint Holders” of theirshares in Tosei as they have an agreement to exercise their voting rights in tandem with one another.

Zeus Capital Limited exercised share options of our Company and acquired Shares in March 2004.

JPMorgan Asset Management (Japan) Limited and JF Asset Management Limited are not direct shareholders of our Company. JPMorgan Asset Management (Japan) Limited and JF
Asset Management Limited submitted a joint Large Volume Holding Report to EDINET on 7 February 2013. JF Asset Management Limited is part of the JPMorgan Asset Management
group.

(3)

(4)

(5)

[4,479]Seiichiro Yamaguchi is the President and CEO of our Company.

0.98

[●]

[●]

[●]

%

(2)

4,479

[35,247][60,000][138,855]

No. of Shares

Please refer to “Shareholding Reporting Obligations – Large Volume Holding Reporting” for more information on Large Volume Holding Reports.

.....................

7.72

13.13

30.39

%

Large Volume Holdings immediately
after completion of the Offering(1)

Notes:JF Asset Management Limited

38,747

JPMorgan Asset Management (Japan) Limited (5). . . . . . . . .

(5)60,000138,855

No. of Shares

Large Volume Holdings as atthe Latest Practicable Date...........................

Zeus Capital Limited(3)(4)

Seiichiro Yamaguchi (2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Large Volume Holders (1)Name

The following persons have filed Large Volume Holding Reports via EDINET and the following table sets forth the information available on EDINET as
at the Latest Practicable Date:

LARGE VOLUME HOLDERS

201

0.41%

15.92%

Noboru Hirano(7) . . .

Zeus Capital
Limited(7) . . . . . . . . .

On 19 April 2010, 29,000 new Shares were issued in the capital of our Company, bringing the total issued share capital from 403,840 to 432,840.

On 6 May 2010, 24,000 new Shares were issued in the capital of our Company, bringing the total issued share capital from 432,840 to 456,840.

The number of Shares held by these Shareholders of our Company did not change as a result of the new shares issued in the capital of our Company.

(6)

(7)

13.13%

0.35%

0.44%

30.39%(5)

13.86%

0.37%

0.46%

32.08%

On 15 April 2010, 8,000 new Shares were issued in the capital of our Company, bringing the total issued share capital from 395,840 to 403,840.

13.86%

0.37%

0.46%

32.08%(4)

14.86%

0.39%

0.50%

34.38%After

On 15 October 2009, 7,700 new Shares were issued in the capital of our Company, bringing the total issued share capital from 388,140 to 395,840.

14.86%

0.39%

0.50%

34.38%

Before(3)

15.16%

0.40%

0.51%

35.08%

After

On 14 October 2009, 11,300 new Shares were issued in the capital of our Company, bringing the total issued share capital from 376,840 to 388,140.

15.16%

0.40%

0.51%

35.08%

BeforeChanges in %Shareholding on
6 May 2010
pursuant to an issueof new Shares in thecapital of theCompany(6)(2)

15.46%

0.41%

0.52%

35.77%

After

Changes in %Shareholding on
19 April 2010
pursuant to an issueof new Shares in thecapital of theCompany(5)We have considered Zeus Capital Limited to fall under the category of “Certain Other Shareholders” solely because of the ability of our President and CEO to exercise the voting rights
of Zeus Capital Limited in Tosei.

15.46%

0.41%

0.52%

35.77%

BeforeChanges in %Shareholding on
15 April 2010
pursuant to an issueof new Shares in thecapital of theCompany(4)(1)

Notes:

Katsuhito Kosuge

0.53%

36.84%

After

BeforeAfter

Before.

(7)

Seiichiro
Yamaguchi (7) . . . . . .

NameChanges in %Shareholding on
15 October 2009
pursuant to an issueof new Shares in thecapital of theCompany(3)Changes in %Shareholding on
14 October 2009
pursuant to an issueof new Shares in thecapital of theCompany(2)SIGNIFICANT CHANGES IN SHAREHOLDINGS OF DIRECTORS, STATUTORY AUDITORS AND CERTAIN OTHER SHAREHOLDERS (1)202

Merrill Lynch, Pierce,
Fenner & Smith Incorporated

Merrill Lynch International

Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Merrill Lynch Japan Securities
Co., Ltd

Merrill Lynch International

Merrill Lynch Japan Securities
Co., Ltd (3)Merrill Lynch Japan Securities
Co., Ltd
Merrill Lynch Japan Securities
Co., Ltd
Merrill Lynch Japan Securities
Co., LtdName of (Joint)
Large Volume Holder(s)22 April 2010 (4)0.00% (6)0.00% (6)

0.97%

5.72%

11.81%
1.18%

0.00% (6)

1.18%

–

–

11.81%

13.93%
22 April 2010 (4)13.93%

15.42%

21 October 200915.42%

17.51%

21 October 200917.51%

After–

Before28 September 2009

Date of Filing ofLarge Volume Holding Report(or amendment)

Exercise of stock acquisition rights andoff-market disposal of Shares (5)Off-market acquisition andboth on-market andoff-market disposal of Shares
Off-market acquisition anddisposal of Shares

Borrowing of Shares

Allotment of stock acquisition rights
by our Company
Exercise of stock acquisition rights andoff-market disposal of Shares (5)Exercise of stock acquisition rights andoff-market disposal of Shares (5)Exercise of stock acquisition rights andoff-market disposal of Shares (5)Off-market acquisition andborrowing of Shares

Reason for the Change

SIGNIFICANT CHANGES IN HOLDINGS OF LARGE VOLUME HOLDERS (EXCEPT DIRECTORS, STATUTORY AUDITORS AND CERTAIN OTHERSHAREHOLDERS (1)) (BASED ON THE INFORMATION AVAILABLE TO OUR COMPANY ON EDINET (2) IN THE 3 YEARS PRIOR TO THE LATEST
PRACTICABLE DATE)

203
11 January 2011

Invesco Asset Management(Japan) Limited

SPARX Asset Management
Co., Ltd

Fund Equities Retirement
College
LLC Management,
Investment TIAA-CREF
Fund Equities Retirement
College
LLC Management, Investment
TIAA-CREF

22 December 2010

Bridge Capital Investments
Pte Ltd–

5.02%

28 September 2011 (4)19 December 2011–12 July 2011 (4)

–

7.24%

–

21 May 2010

Bridge Capital Investments
Pte Ltd

0.97%

5.72%

Before0.00% (6)21 May 2010 (4)Date of Filing ofLarge Volume Holding Report(or amendment)

Merrill Lynch, Pierce,
Fenner & Smith Incorporated

Merrill Lynch International

Merrill Lynch Japan Securities
Co., LtdName of (Joint)
Large Volume Holder(s)

5.07%

4.02%

5.02%

5.08%

4.47%

7.24%

0.00% (6)

0.31%

0.00%

After

Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed

Market disposal of shares

Market acquisition of shares

Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed

Reason for the Change

204
21 January 2013

7 February 2013 (4)JPMorgan Asset Management(Japan) Limited

JPMorgan Asset Management(Japan) Limited
JF Asset Management Limited

All of the above data has been obtained from disclosure made on EDINET by our Large Volume Holders. EDINET disclosure is not proof of accuracy and correctness and our Company
has no way of verifying the information disclosed by our Large Volume Holders on EDINET. In addition, certain Large Volume Holding Reports do not contain disclosure on the reason
for the change in Large Volume Holdings.

Merrill Lynch Japan Securities Co., Ltd was allotted stock acquisition rights in our Company as part of an equity financing scheme.

Large Volume Holding Report was filed by Joint Holders.

Sale of the shares issued pursuant to the exercise of stock acquisition rights by Merrill Lynch Japan Securities Co., Ltd, immediately following the issue of such shares.

Figure has been rounded to two decimal places.

(2)

(3)

(4)

(5)

(6)

0.98%

−

Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed
Unknown – cannot be verified fromdisclosure in the Large Volume
Holding Report filed

Reason for the Change

We have considered Zeus Capital Limited to fall under the category of “Certain Other Shareholders” solely because of the ability of our President and CEO to exercise the voting rights
of Zeus Capital Limited in Tosei.

8.48%

7.72%

4.11%

6.07%

5.16%

3.81%

5.52%

After

7.72%

6.07%

5.16%

–

5.07%

5.52%

5.08%

Before(1)

Notes:

15 January 2013

SPARX Asset Management
Co., Ltd

17 May 2012

SPARX Asset Management
Co., Ltd
9 January 2013

7 February 2012

Invesco Asset Management(Japan) Limited

JPMorgan Asset Management(Japan) Limited

7 February 2012

Date of Filing ofLarge Volume Holding Report(or amendment)

Invesco Asset Management(Japan) Limited

Name of (Joint)
Large Volume Holder(s)To the best of our knowledge, and except as disclosed above, there are no trust arrangements
among our Directors, Statutory Auditors or Large Volume Holders, or with any other third party asat the date of this Prospectus.
To the best of our knowledge, there are no employees holding 5.0% or more of our Shares.
There are no Shares in our Company that are held by or on behalf of our Company or by our
subsidiaries.
To the best of our knowledge, there are no arrangements the operation of which may, at a
subsequent date, result in a change in control of our Company.
To the best of our knowledge and save as disclosed above, our Company is not directly or
indirectly owned or controlled by another corporation, any government or other natural or legal
person whether severally or jointly.
The Shares held by our Directors and Large Volume Holders described above do not have any
interests or carry any different voting rights from the Shares of our Company held by the public.

205

INTERESTED PERSON TRANSACTIONS AND
POTENTIAL CONFLICTS OF INTEREST
INTERESTED PERSON TRANSACTIONS
In general, transactions between (i) our Company or our Subsidiaries, and (ii) any of our interested
persons (namely, our Directors, Statutory Auditors or Controlling Shareholders or the associatesof such Directors, Statutory Auditors or Controlling Shareholders) would constitute interested
person transactions.
Certain terms such as “associate”, “control”, “controlling shareholder”, “entity at risk” and“interested person” used in this section have the meanings as provided in the Listing Manual andin the SFR, unless the context specifically requires the application of the definitions in one or theother as the case may be.
The following represents transactions undertaken by us with our interested persons and theirrespective associates within the last three financial years ended 30 November 2009, 2010 and2011 and for the period from 1 December 2011 up to the Latest Practicable Date.
Save as disclosed below, our Group does not have any other material transactions with any of its
interested persons within the last three financial years ended 30 November 2009, 2010 and 2011
and for the period from 1 December 2011 up to the Latest Practicable Date. Investors, uponpurchase of the Offering Shares, are deemed to have specifically approved these transactions
with our interested persons and as such these transactions are not subject to Rules 905 and 906(to the extent applicable to us) of the Listing Manual to the extent that there are no subsequentchanges to the terms of the relevant agreements. For information on our continuing obligations inrelation to Chapter 9 of the Listing Manual, please see “Our Listing on the SGX-ST − Conditionsof our Listing on the SGX-ST” for more information.
PAST INTERESTED PERSON TRANSACTIONS
Details of the past transactions between our Group and interested persons for the past threefinancial years ended 30 November 2009, 2010 and 2011 and for the period from 1 December
2011 up to the Latest Practicable Date are as follows:(a)Brokerage Agreement between our Company and our President
On 28 June 2010, our President appointed our Company as his sales agent for the sale ofa detached house in Shibuya-ku, Tokyo. We concluded the sale of the detached house on
behalf of our President in April 2012. Under the brokerage agreement, our Company received
a brokerage fee of ¥9,513,000 (S$125,237) (including tax), the maximum payable under afee schedule prescribed and issued by public notification under the Building Lots andBuildings Transaction Business Law. The brokerage agreement was entered into in theordinary course of business and was carried out on an arm’s length basis.

(b)

Residential Repair Agreements between TCC and our President(i)

On 6 April 2010, TCC entered into a residential repair agreement with our President (forthe period commencing 26 April 2010 and ending on 31 May 2010) for services to beprovided in respect of a detached house in Shibuya-ku, Tokyo. Under the residential
repair agreement, TCC undertook certain repair, waterproofing and disposal works andwas paid a total consideration of ¥2,100,000 (S$27,646) (including tax). The residential
repair agreement was entered into in the ordinary course of business and was carriedout on an arm’s length basis.

206

(ii)

(c)

On 26 March 2012, TCC entered into a residential repair agreement with our President(for the period commencing 1 December 2011 and ending on 31 March 2012) for
services to be provided in respect of a detached house in Shibuya-ku, Tokyo. Under the
residential repair agreement, TCC undertook certain repair works and leakage
inspection and was paid a total consideration of ¥651,000 (S$8,570) (including tax).
The residential repair agreement was entered into in the ordinary course of business
and was carried out on an arm’s length basis.

Brokerage Agreement between our Company and our President
On 6 July 2012, our President and certain members of his family appointed our Company as
his sales agent for the sale of a residential and commercial building in Toshima-ku, Tokyo.
We concluded the sale of the residential and commercial building on behalf of our President
in July 2012. Under the brokerage agreement, our Company received a brokerage fee of¥6,309,450 (S$83,063) (including tax), the maximum payable under a fee scheduleprescribed by the public notification, issued under the Building Lots and Buildings
Transaction Business Law, by the then Ministry of Construction (now the Ministry of Land,
Infrastructure, Transport and Tourism), as amended. The brokerage agreement was enteredinto in the ordinary course of business and was carried out on an arm’s length basis.

PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS
Details of the present and on-going transactions between our Group and interested persons forthe past three financial years ended 30 November 2009, 2010 and 2011 and for the period from
1 December 2011 up to the Latest Practicable Date are as follows:(a)Consultancy Agreements between our Company and SCS Global Consulting
On 1 April 2011, our Company entered into a consultancy agreement with SCS Global
Consulting for a duration of 12 months until 31 March 2012. A supplemental consultancy
agreement for the same duration was entered into between the parties on 1 August 2011. The
consultancy agreement and the supplemental consultancy agreement were terminated by
our Company on 29 February 2012. On the same day, we entered into a new consultancy
agreement with SCS Global Consulting for the period from 1 March 2012 to 31 August 2012,
which has been automatically renewed until 28 February 2013 under the same terms andconditions. SCS Global Consulting is an interested person by virtue of it being an associateof our Outside Director, Kenichi Shotoku, who is the group managing director and controllingshareholder of SCS Global. SCS Global Consulting is a subsidiary of SCS Global.
Under the agreements above, SCS Global Consulting had provided and provides, amongst
others, advisory and translation services for our Company’s business expansion in Asia. The
consultancy agreement provides for a monthly fee of ¥300,000 (S$3,949) in respect ofadvisory and consultancy services in relation to our Company’s expansion plans and an
additional hourly rate of between ¥14,000 (S$184) to ¥17,000 (S$224) for coordination with
Nexia TS on the preparation of our Company’s financial statements in IFRS, and translation
where necessary. In FY2011, the total amount of fees paid by our Company to SCS Global
Consulting was ¥5,154,702 (S$67,861). In FY2012, the total amount of fees paid by ourCompany to SCS Global Consulting was ¥6,067,000 (S$79,871). From 1 December 2012 to
the Latest Practicable Date, the total amount of fees paid by our Company to SCS Global
Consulting was ¥1,107,900 (S$14,585).
The consultancy agreement was entered into on an arm’s length basis and on normal
commercial terms, taking into account the prevailing market rate for similar services.

207

(b)

Arrangement between our Group and SCS Global Professionals
Our Group has an ongoing arrangement with SCS Global Professionals for the period
commencing 10 January 2012 and scheduled to end on 31 March 2013, subject to automatic
renewal.
SCS Global Professionals had assisted us in the incorporation of Tosei Singapore at the costof S$3,200.
Under the ongoing arrangement, SCS Global Professionals provides Tosei Singapore, interalia, with the following services:
Service

Fee

Preparation of corporate income
tax returns

S$2,500/year

Preparation of individual income
tax returns

S$700/year/person

Company Secretary from January
2012 to December 2012

S$1,600/year (exclusive of fees for capitalincrease subsequent to the first time, sharetransfer, dividend, change of company nameamounting to S$500, S$500, S$500 and S$900
respectively)

Usage of registered office from
April 2012 to March 2013

S$1,200/year

Provision of a registered director
from April 2012 to March 2013

S$3,000/year

Review of bookkeeping

S$250/hour

Correspondence with audit firm

S$250/hour

Other advisory services relating toaccounting and tax

S$250/hour

For FY2012, the total amount of fees paid by our Group to SCS Global Professionals was
S$9,000 (including the one-off fee of S$3,200 for the incorporation of Tosei Singapore). No
fees were paid by our Group to SCS Global Professionals from 1 December 2012 to theLatest Practicable Date.
The above arrangements were entered into on an arm’s length basis and on normal
commercial terms, taking into account the prevailing market rate for similar services.

208

FUTURE INTERESTED PERSON TRANSACTIONS
We are subject to certain requirements of Chapter 9 of the Listing Manual on an ongoing basis.
Please refer to “Our Listing on the SGX-ST – Conditions of our Listing on the SGX-ST” for more
information.
In addition, under the FIEA and the Regulation for Terminology, Forms and Preparation ofConsolidated Financial Statements (the Ordinance of the Ministry of Finance No. 28 of 1976), thenotes to financial statements which are disclosed pursuant to the FIEA, must include the detailsof “material” transactions with related parties (“Related Party Transactions”), including any
Controlling Shareholder.
POTENTIAL CONFLICTS OF INTEREST
Our Directors, Controlling Shareholders or any of their Associates may from time to time
undertake investments in property and/or real estate in their personal capacity. Given the natureof our business, such investments in personal capacity of the aforementioned persons may
constitute a conflict of interest.
All such acquisitions and disposals of investment properties by our Directors will have to beapproved by our Board of Directors.
Our President and COO, in their personal capacity, currently own a number of investment
properties, the acquisition of which has been approved by our Board of Directors. Futureacquisitions and subsequent disposals will also have to be approved by our Board of Directors.
Furthermore, one of our Outside Directors, Goro Kamino, is a director and minority shareholder
of Sala House Co., Ltd, which undertakes real estate business, specifically the development ofresidential property, in Chubu, Aichi prefecture. Whilst our Company and Sala House Co., Ltd
currently operate in different geographic locations, there may be a conflict of interest in the future
should we operate in the same area.
The Japanese Companies Act also provides that disclosure to the Board of Directors of thecompany must be made by a director of any transaction which may result in a conflict of interest
between the director and the company. Under the Japanese Companies Act, a director must
disclose the material facts on the relevant transactions at a board of directors’ meeting and obtain
the approval of the board of directors if (i) he intends to carry out, for himself or for a third party,
any transaction in the line of the business of the company; (ii) if he intends to carry out any
transaction with the company for himself or for a third party; or (iii) if the company intends toguarantee his debts or otherwise carry out any transaction with a person other than the director
in question that results in a conflict of interests between the company and such director. The
director in question is required to abstain from deliberation and voting at the relevant board of
directors meeting on the subject matter in which he is interested.
Our Company has complied with and will continue to comply with this procedure as required under
the Japanese Companies Act.
As at the date of this Prospectus, to the best of our knowledge and save as set out above, noneof our Directors, Statutory Auditors or any of their Associates has an interest in any entity carrying
on the same business or dealing in similar products as our Group.

209

DESCRIPTION OF SHARE CAPITALOur Company was converted from a non-public company into a public company in February 2004
and listed on the JSDA Over-the-Counter Trading Securities Market, before being listed on the
JASDAQ Stock Exchange (now the JASDAQ Section of the Osaka Stock Exchange) in December
2004. We subsequently listed our shares on the Second Section of the TSE in November 2006 anddelisted from the JASDAQ Stock Exchange in January 2008, before applying for and receiving
approval to list on the First Section of the TSE in September 2011. Our corporate affairs aregoverned by our Articles of Incorporation and the Japanese Companies Act. The following is asummary of the material provisions of our Articles of Incorporation insofar as they relate to thematerial terms of our share capital. The Japanese Companies Act differs from laws applicable toSingapore companies and their shareholders. A comparison of certain aspects of the JapaneseCompanies Act applicable to us and the Singapore Companies Act applicable to Singapore
companies is set forth at Appendix D − “Comparison of Singapore Corporate Law with JapaneseCorporate Law” to this Prospectus. The summary below does not purport to be complete and isqualified in its entirety by reference to our Articles of Incorporation and the applicable provisionsof the Japanese Companies Act.
OUR SHARE CAPITAL
The following is a description of the authorised and issued share capital of our Company as at thedate of this Prospectus and immediately after completion of the Offering:
Authorised Share Capital
Our Company does not have an authorised capital amount as the concept of shares with par value
was abolished when the Japanese Commercial Code was amended in 2001. Under our Articles ofIncorporation, the total number of Shares authorised to be issued by our Company is 1,500,000.
Shares issued and to be issued
As at the date of this Prospectus, the total paid-up capital of our Company is ¥5,454,674,000
comprising 456,840 issued and paid-up Shares. Upon the issue of the Offering Shares and thecompletion of the Offering, the issued and paid-up share capital of our Company will increase to[●] Shares, all of which will be fully paid. All issued Shares are in registered form and are recordedin our Register of Members. No Shares are held by, or on behalf of, us or our subsidiaries.
TRANSFER OF SHARES
There are no specific provisions in our Articles of Incorporation relating to transfers of Shares.
Shares issued by our Company are freely transferable. A transfer of Shares in our Company will
only become effective through a book-entry transfer in accordance with the Book Entry Act.
LIMITATION ON FOREIGN OWNERSHIP OF SHARES
There are no specific provisions in our Articles of Incorporation relating to limitation on foreign
ownership of Shares. Save as disclosed in “Exchange Rates and Exchange Controls − Exchange
Controls − Japan”, there are no legal or regulatory restrictions on foreign investment or foreign
ownership of our Shares.
SUBSTANTIAL SHAREHOLDING REPORTING OBLIGATIONS – SINGAPORE
We are not a “corporation” as defined in Section 130 of the SFA. Accordingly, our Company andTosei CDP Depositors will not be subject to the provisions of Division 1 of Part VII of the SFA
regulating substantial shareholding reporting obligations.
210

LARGE VOLUME HOLDINGS AND DISCLOSURE NOTIFICATIONS – JAPAN
Whilst Tosei CDP Depositors are not considered Shareholders of our Company, Tosei Depositors
should note that they may be considered Large Volume Holders of our Company. The concept ofLarge Volume Holdings is a Japanese legal concept and differs in certain respects from theconcept of “interest in securities” under Section 4 of the SFA. Please see “Shareholding Reporting
Obligations – Large Volume Holding Reporting” and Appendix D – “Comparison of Singapore
Corporate Law with Japanese Corporate Law” for more information.
DIVIDENDS
In accordance with the Japanese Companies Act and our Articles of Incorporation, through a
resolution of our Shareholders in general meeting, we may declare dividends to our Shareholders
subject to a limit equal to the Distributable Amount then existing. As set out in our Articles ofIncorporation, the record date to determine dividend entitlement is 30 November for full-year
dividends and 31 May for half-yearly interim dividends.
Where dividends are declared and paid by our Company in cash, our Articles of Incorporation
provide that such dividend obligations will expire after three years from the initial date of payment.
Once the period of three years has lapsed and such dividends remain unclaimed, our obligation
to pay the dividend ceases and the Shareholder who has not claimed such dividend will have norecourse to the same.
If a company paid dividends while it did not have a Distributable Amount, the company’s directors
and others responsible for the payment are under an obligation to reimburse the company theamount paid out, unless the person liable proves that he was not negligent in carrying out his
duties.
GENERAL MEETINGS OF THE SHAREHOLDERS
In accordance with our Articles of Incorporation and the Japanese Companies Act, we are required
to convene our AGM in Tokyo within three months after the end of our financial year.
Our AGM shall be convened in February of each year by a resolution of our Board of Directors inaccordance with our Articles of Incorporation. The record date for determining the eligibility of
Shareholders to attend and vote (if necessary) at our AGM is 30 November each year.
As stipulated under our Articles of Incorporation, in general, our Company’s president and director
shall convene the shareholders’ meeting and act as the Chairperson at that meeting. Our
Company must send notices of all shareholders’ meetings to all registered shareholders no later
than 14 days prior to the meeting.
In general, a Shareholders’ resolution must be passed by a majority of the votes of the
Shareholders at the general meeting where Shareholders holding a majority of the votes ofShareholders (and entitled to exercise such votes) are present. However, certain prescribedmatters under applicable Japanese laws, require resolutions to be passed by a majority of
two-thirds or more of the votes of the Shareholders at the general meeting where Shareholders
holding one-third or more of the votes of Shareholders (and entitled to exercise such votes) arepresent.
VOTING RIGHTS
There are no specific provisions in our Articles of Incorporation relating to voting rights other thanpermitting the exercise of voting rights by a proxy. Under our Articles of Incorporation, a proxymust be someone who is a Shareholder. Each Shareholder may only appoint one proxy to attend
211

a shareholders’ meeting on his/her behalf. Shareholders have, as a rule, one vote per shareaccording to the Japanese Companies Act. For the avoidance of doubt, Tosei CDP Depositors
cannot be proxies, unless they also hold Shares directly and their names appear on (a) the
JASDEC Record of Depositors, and (b) the Register of Members kept in Japan.
The method of voting at a general meeting of shareholders is not restricted under the JapaneseCompanies Act, and the chairperson generally may decide the voting method, which may include
a vote by a show of hands, a standing or a poll, unless a resolution to adopt another voting method
is made at the shareholders’ meeting.
Shareholders (excluding (i) a shareholder who is prescribed as an entity in a relationship that may
allow the company to have substantial control of such entity through the holding of one quarter ormore of the votes of all shareholders of such entity or other reasons, (ii) the company itself inrespect of treasury stock, (iii) a shareholder who has less than one share, (iv) a class shareholder
whose class shares do not carry voting rights and (v) a shareholder whose shares are to be
repurchased pursuant to Paragraph 3 of Article 140, Paragraph 4 of Article 160 and Paragraph 2
of Article 175 of the Japanese Companies Act) have one vote per share under the JapaneseCompanies Act and our Articles of Incorporation.
Tosei CDP Depositors who subscribe for Shares in the Offering and those who trade Shares listedon the SGX-ST will hold their Shares through the CDP Depository system. Under Japanese law
and our Articles of Incorporation, persons holding our Shares in a Securities Account with CDP
and whose names appear in the depository register of CDP will not be regarded as our
Shareholders as long as CDP is not a system participant of JASDEC. Only Shareholders whosenames appear on (a) the JASDEC Record of Depositors, and (b) the Register of Members kept inJapan are entitled to attend meetings of Shareholders and exercise their voting rights under theirnames with regard to Shares directly owned by them. As such, CDP will be the only holder onrecord of the Shares held by the Tosei CDP Depositors through CDP and, accordingly, the only
person or entity recognised as a Shareholder and legally entitled to vote on any matter to besubmitted to the vote of our Shareholders at a general meeting of Shareholders. Tosei CDP
Depositors will not be able to attend such shareholders’ meeting in their own names. Please see“Clearance and Settlement – Voting Instructions” for more information.
PRE-EMPTIVE RIGHTS
There are no specific provisions in our Articles of Incorporation relating to pre-emptive rights. If anoffering is made granting pre-emptive rights to each existing shareholder, a statement to the effectthat shareholders are entitled to the pre-emptive rights and the due date of application forsubscription must be decided by the resolution of the board of directors under the JapaneseCompanies Act. Our Company must notify each shareholder of (i) the terms of offering, (ii) the
number of shares to be allotted to the shareholder, and (iii) the due date of application forsubscription, two weeks or more prior to the due date of application for subscription. None of our
Shareholders currently have any pre-emptive rights in relation to our Shares.
ISSUANCE OF NEW SHARES
An issue of new shares can, in general, take place by way of (i) a public offering, (ii) a pro-rataoffering of rights to receive allotment to current shareholders, (iii) a third-party allotment, or (iv) a
combination of these three methods. As a listed public company, we may, under the JapaneseCompanies Act, issue new shares by a resolution of our Board of Directors, unless the Shares areto be issued at a “particularly favourable price” in which case a special resolution of a general
meeting of our Shareholders would be required and our Directors will have to explain the necessity
for issuing new Shares at such a particularly favourable price at this general meeting of
Shareholders (except for an issue by way of a pro-rata offering of rights to receive allotment tocurrent Shareholders, whereby such rule on “particularly favourable price” is not applicable).
212

There is no limit to the number of Shares which may be issued, as long as this number is within
the total number of Shares authorised to be issued, as set out in our Articles of Incorporation andremaining unissued. The matters to be determined by a resolution of the Board of Directors (orgeneral meeting of Shareholders, if applicable) would include, inter alia, the number of Shares tobe issued, the issue price, the payment date or payment period, and the increase to our statedcapital and capital reserves from such issuance. Any Shareholder or person who intends tosubscribe for newly issued Shares must contribute the issue price on the payment date or within
the payment period specified, otherwise such part of the issue where contribution was not
performed in time would be automatically considered void.
In addition to the Japanese Companies Act, disclosure obligations under the FIEA and the TSE
Securities Listing Regulations will need to be strictly observed, including the filing of the relevant
securities registration statement, preparation of a prospectus (if applicable) and publication of apress release with the required information. Further, the TSE Securities Listing Regulations
stipulate certain restrictions with regard to issuance by way of third-party allotment, whereby (i) in
the case where the dilution ratio (defined as the percentage of voting rights resultant from suchallotment as compared against current voting rights before allotment) is 25% or more or if there
is a change in the controlling shareholder 1 due to such allotment, either an opinion on thenecessity and appropriateness of the allotment from someone who is independent frommanagement, such as a third-party independent committee, or confirmation from the shareholders
approving the allotment, such as a resolution of the general meeting of shareholders, would be
required by the TSE for the allotment, and (ii) in the case where the dilution ratio is 300% or more,
the allotment would, in principle, be a delisting event.
PREFERRED SHARES
Under the Japanese Companies Act, a company can issue two or more classes of shares. Suchshares may have differing terms. For example, preferred shares may have differences withrespect to the right to dividends, voting rights, transfers, put/call options, the company’s right toacquire all shares from shareholders and veto rights. The terms and number of shares in eachclass that are authorised to be issued must be set out in a company’s articles of incorporation andmust be recorded at the commercial registry. Further, the total number of authorised shares insuch class of shares cannot be exceeded. However, under the Japanese Companies Act, anyvariation or abrogation of the rights attached to any class of shares in issue in a company that willor is likely to cause detriment to that class of shareholders shall not take effect unless a special
resolution of that class of shareholders is passed at a meeting constituted by that class ofshareholders. As at the date of this Prospectus, our Company’s Articles of Incorporation do notprovide for another class of shares. Accordingly, as at the date of this Prospectus, we do not haveany preference shares in issue.
LIQUIDATION RIGHTS
There are no specific provisions in our Articles of Incorporation concerning liquidation.
Once a company is dissolved, it will proceed into liquidation. Liquidation is a procedure for thecompany to wind up its affairs and eventually cease to be a corporate entity. During this process,liquidators will act as representatives of the company, replacing such representatives who werethe company’s representative directors before the dissolution.

1

A “controlling shareholder” in this context refers to a “controlling shareholder” as defined in Rule 2 Item (42)-2 of the
TSE Securities Listing Regulations. In this context, a “controlling shareholder” means a parent company or an entity
specified by the TSE Enforcement Rules for Securities Listing Regulations as an entity which directly or indirectly
holds a majority of the voting rights of a listed company.

213

If a liquidating company intends to distribute its residual assets, it must prescribe (i) the kind ofresidual assets, and (ii) the matters regarding the allotment of residual assets to shareholders, bya decision of the liquidators (or, for a company with a board of liquidators, by resolution of suchboard of liquidators). In addition, if the residual assets to be distributed consist of property otherthan monies, shareholders shall have the right to demand for the distribution of monies (in placeof such property). In such cases, the liquidating company must prescribe, in addition to the above
items, (i) the period during which the right to demand distribution of monies can be exercised, and(ii) if there is an arrangement that no residual assets shall be allotted to shareholders who holdless than certain number of shares, a statement to that effect and such certain number, by adecision of its liquidators (or, for a company with a board of liquidators, by resolution of such boardof liquidators).
ACQUISITION BY US OF OUR SHARESIn accordance with our Articles of Incorporation, the Japanese Companies Act and the FIEA, ourCompany may repurchase our Shares by a resolution of the general meeting of our Shareholders.
In certain cases, our Company may do so by way of a resolution of the Board of Directors
according to the Articles of Incorporation.
Shares can be purchased from Shareholders with their consent (i) from the market, (ii) via thetake-over bid procedure as provided by the FIEA, (iii) from all Shareholders, or (iv) from a specificShareholder.
With respect to cases (i) and (ii) above, companies with a board of directors may, by the decisionof the board of directors if the articles of incorporation allow, repurchase shares from the market
or via the take-over bid procedure as provided by the FIEA. If the shares are repurchased fromall shareholders (case (iii) above), an ordinary resolution of a shareholders’ meeting is sufficient(listed companies however may not use this method of repurchase according to the FIEA and are
required to conduct the take-over bid procedure). If the purchase is from a specific shareholder(case (iv) above), a special resolution of a shareholders’ meeting is required. In case (iv) above,
the name of this shareholder needs to be disclosed and approved at a general shareholders’meeting. Other shareholders are entitled to ask the company to include them as a seller, withcertain exceptions. Whilst the Japanese Companies Act does not place a limit on the aggregate
number of shares we may repurchase, the maximum amount for carrying out the share repurchaseis restricted to the Distributable Amount.
Shares acquired by us may be held by us as treasury stock for any period or may be cancelled
by a resolution of the Board of Directors. We may also transfer the shares held by us to any
person, subject to a resolution of the Board of Directors, and subject also to other requirements
similar to those applicable to the issuance of new shares. We may also utilise our treasury stock(i) for the purpose of transfer to any person upon exercise of stock acquisition rights or (ii) for the
purpose of acquiring another company by way of merger, share exchange, or corporate split
through exchange of treasury stock for shares or assets of the acquired company.
TAKE-OVERSAs our Company is incorporated outside Singapore and does not maintain a primary listing in
Singapore, we are not subject to the provisions of the Singapore Code on Take-overs andMergers. However, our Company is subject to take-over provisions under Japanese law.

214Compulsory Take-over Bid
A take-over bid (koukai kaitsuke) is regulated by the FIEA. Under the FIEA, if a party intends topurchase shares of companies that are required to submit annual securities reports (including
listed companies and over-the-counter companies) or that issue specified listed securities, thismust be done by way of a take-over bid (as described below) in the following cases (with several
exceptions):(i)

if the purchase is made outside the stock exchange market (excluding the over-the-countersecurity market) and, after the purchase, the aggregate voting rights held by a purchaser
making a take-over bid (the “take-over bidder”) and the certain related persons of the
take-over bidder divided by the total voting rights of the target company (“Total Voting
Ratio”) exceeds 5.0%. An exception applies if the aggregate number of sellers in thecontemplated share purchase and the sellers of shares to the take-over bidder outside thestock exchange market (“Total Sellers”) equals ten or less in the 60 days before the day thepurchase is made;(ii)

if the purchase is made outside the stock exchange market (excluding the over-the-countersecurity market), the number of Total Sellers is 10 or less and the Total Voting Ratio exceeds
one-third after the purchase;(iii) if the Total Voting Ratio exceeds one-third after the purchase, and the purchase is made by
the methods of purchase prescribed by the Prime Minister (including purchasing throughcertain off-floor trading methods at a stock exchange);(iv) if, within three months:(v)•

over 5.0% of the voting shares are purchased outside the stock exchange market(excluding the over-the-counter security market) or by the methods of purchaseprescribed by the Prime Minister mentioned above;•a total of over 10.0% of the voting shares are obtained through the purchase (including
purchases described in the preceding bullet point) or the issuance of new shares; and•the Total Voting Ratio exceeds one-third after the purchase or the issuance;

if, during the period in which another party’s take-over bid is made, a party, whose Total
Voting Ratio before the purchase exceeds one-third, purchases over 5.0% of the voting
shares; or(vi) in other specified cases set out in the relevant cabinet order.
Notwithstanding the foregoing, whether, and to what extent, a foreign shareholder of a Japanese
corporation which does not have Japan as its primary jurisdiction would be obliged to follow
additional rules, regulations and laws under the jurisdiction of Japan is not definitively stated inregulatory or statutory provisions or guidelines issued by the relevant authorities, nor is it
explained by judicial precedents. The relevant Japanese laws and regulations relating to our
Shares on the SGX-ST are complex, often ambiguous and may be subject to different
interpretations as to their applicability to foreign shareholders of our Company who only trade via
the SGX-ST. As these relevant provisions remain vague and their interpretation can involve a
degree of uncertainty, foreign shareholders of our Shares, including the Offering Shares, may
therefore be subject to additional obligations under the rules, regulations and laws of Japan,
including the take-over bid provisions described hereunder.

215

Procedures for Take-over Bid
The take-over bidder commences the take-over bid procedures by first providing public notice ofthe commencement of the take-over bid (koukai kaitsuke kaishi koukoku) and then filing the
take-over bid registration statement (koukai kaitsuke todokedesho). The take-over bid registration
statement sets forth, inter alia, each of the following: (i) the purpose of the acquisition, (ii) a
description of negotiations related to the take-over bid, (iii) the floor offer price, (iv) an agreementwith the target company and its directors, if any, (v) information about the take-over bidder and thetarget company and (vi) any other information which would have a material effect on ashareholder’s decision.
The take-over bidder solicits tenders from shareholders by delivering the take-over bid
explanation statement (koukai kaitsuke setsumeisho) to them. On the other hand, the target
company is required to publicly announce its position on the take-over bid by filing the position
statement report (iken hyoumei houkokusho) within 10 business days from the public notice forcommencement of the take-over bid. When the target company puts questions to the take-overbidder in such position statement report, the take-over bidder must file the report for responding
to the questions (tai shitsumon kaitou houkokusho) within five business days from the receipt of
the position statement report. The take-over bidder makes a public announcement of the resultsof the take-over bid on the day following the end of the offering period, files the take-over bid
report (koukai kaitsuke houkokusho) and notifies the shareholders who tendered their shares forthe take-over bid of such results. Finally, the take-over bid is completed by exchanging the sharesand the consideration on the settlement date.
Regulations of terms of take-over bid(i)Offer priceAs a general rule, the terms and conditions of a take-over bid (including the offer price) must
be uniform for all shareholders (in the case of the offer price, uniform for all shareholders of
the same class of shares) of the target company. Other than this general rule, no pricerestrictions are imposed under the FIEA. In particular, there is no requirement to offer a
premium over the market price (a discounted take-over bid is also possible).

(ii)

Offering period
An offering period must not be less than 20 business days or more than 60 business days.
Within this range, the take-over bidder may extend the initial offering period but may notshorten the initial offering period. The target company may request to extend the offering
period if the initial period is less than 30 business days, and if it does so, the offering period
will automatically become 30 business days.

(iii) Cap and floor on the number of Shares
The take-over bidder may put a cap and/or a floor on the number of shares to be purchasedin a take-over bid. If the number of shares tendered exceeds the cap, a pro-rata purchasefrom the tendered shareholders is required. However, if the Total Voting Ratio of the
take-over bidder including related parties becomes two-thirds or more after the completionof the take-over bid, the take-over bidder may not set a cap and must purchase all the sharestendered.

216

(iv) Withdrawal of take-over bid
The take-over bidder is generally prohibited from withdrawing a take-over bid. However, if the
take-over bidder stipulates in the public notice for commencement of the take-over bid andthe take-over bid registration statement that it may withdraw the take-over bid if any materialchanges occur to the business or property of the target company or its subsidiary, or any
other circumstances occur that would materially impede the achievement of the purpose of
the take-over bid, it may withdraw the take-over bid when such matters actually occur.
(v)

Change in terms of a take-over bid
Generally, the take-over bidder may only change the terms and conditions of a take-over bid
when such changes are not unfavourable to shareholders of the target company. Reducing
an offer price, increasing a floor on the number of shares to be purchased, lowering a capon the number of shares to be purchased and shortening an offer period are all deemed to
be changes that are unfavourable to shareholders and are therefore generally prohibited.
However, for example, if the take-over bidder stipulates in the public notice forcommencement of the take-over bid and the take-over bid registration statement that it may
reduce the offer price when the target company conducts a share split or issues shares orstock acquisition rights to the existing shareholders for no value, it may reduce the offer pricewhen such matters actually occur.

(vi) Prohibition of purchase outside a take-over bid
Generally, certain parties, including the take-over bidder, certain related persons of the
take-over bidder and the securities company handling procedural matters for the take-overbid may not purchase shares of the target company outside the take-over bid during theoffering period. However, for example, they may purchase the shares if the agreement forsuch purchase has already been disclosed in the public notice for commencement of the
take-over bid and the take-over bid registration statement or if such purchase is made by theexercise of stock acquisition rights.
If a person (including Shareholders and Tosei CDP Depositors) has failed to submit atake-over bid registration statement, such person shall be punished by imprisonment for not
more than five years or by a fine of not more than ¥5 million, or both, and in the case of acompany, if the representative person of the company such as a director, or an agent,employee, or other worker of the company has failed to submit a take-over bid registration
statement, the offender shall be punished by imprisonment for not more than five years or bya fine of not more than ¥5 million, or both, and the company is liable to be punished by a fineof not more than ¥500 million. Also, if a person (including Shareholders and Tosei CDP
Depositors) submits a take-over bid registration statement containing a misstatement, theperson shall be punished by imprisonment for not more than 10 years or by a fine of not morethan ¥10 million, or both, and in the case of a company, if the representative person of thecompany such as a director, or an agent, employee, or other worker of the company submits
a take-over bid registration statement containing a misstatement with regard to the businessor property of the company, the offender shall be punished by imprisonment for not more than
10 years or by a fine of not more than ¥10 million, or both, and the company is liable to bepunished by a fine of not more than ¥700 million.
In addition, they will be liable to pay to the Japanese National Treasury an administrative
monetary penalty equivalent to 25.0% of the total purchase price of acquired shares outside
a take-over bid (in the case of failure to submit a take-over bid registration statement or to
publicise a take-over bid announcement), or 25.0% of the value of acquired shares through217

a take-over bid based on the market value of such shares at the end of the day which is one
business day prior to the announcement of a take-over bid (in the case of misstatement ina take-over bid registration statement or in a take-over bid announcement).
(vii) Tosei CDP Depositors
In the event that a take-over bid is made by a person (“Offeror”) for our Shares, each of our
Shareholders (as defined in the Japanese Companies Act and the Book Entry Act) will beentitled to exercise their rights as Shareholders in respect of the take-over bid under the
FIEA. As Tosei CDP Depositors are not Shareholders, they will not be entitled to receive thenecessary documents, materials and instruction forms (“Offer Documents”) from theOfferor. Whilst we will communicate to any Offeror the fact that we are listed on the SGX-ST
and that there may be Tosei CDP Depositors who hold Shares through CDP, such an Offeror
will not be within the control of our Company and there is no assurance that the Offeror will
extend the offer to Tosei CDP Depositors by preparing the Offer Documents in English anddispatching them to Tosei CDP Depositors (see “Risk Factors − Risks Relating to an
Investment in our Shares − Tosei CDP Depositors will not be considered as Shareholders of
our Company” for more information). If the Offeror dispatches the Offer Documents to Tosei
CDP Depositors, then upon receipt of the Offer Documents, Tosei CDP Depositors will beentitled to exercise rights in respect of the take-over bid. CDP would instruct its custodian inJapan, as the holder of the Shares, to act in accordance with the instructions of such Tosei
CDP Depositors.
TRADING SUSPENSIONThe TSE may suspend trading of shares as prescribed by the TSE in the following circumstances:•where information on the shares or issuer that may have a significant effect on investors’
investment decisions is revealed and details of such information are not clear and/or the TSE
deems it necessary to make details aware to the public;•

where the TSE deems that the state of trading in the shares is abnormal or that this is likely
or where the TSE deems that continuing trading is not appropriate from the viewpoint of the
management of trading;•where a malfunction occurs to the trading system, or where the TSE deems that continuing
trading is difficult due to a failure of the facilities of the TSE pertaining to trading of theshares, and other cases; and•where the TSE deems it necessary to make it aware to the public that it may cancel a trade.

As soon as practicable after we are aware that a suspension in trading of our Shares on the TSE
has occurred, we will request for a trading suspension on the SGX-ST. As soon as practicable after
we are aware that the suspension in trading of our Shares on the TSE has been lifted, we will
request for a resumption of trading on the SGX-ST.
DELISTING FROM THE SGX-ST
If we are delisted from the SGX-ST only, we will be unable to make an exit offer to Tosei CDP
Depositors. Instead, we will make an announcement on SGXNET at the relevant time informing
Tosei CDP Depositors on how they can transfer their Shares held through CDP to a broker inJapan or a JASDEC participant for trading on the TSE.

218

SHAREHOLDING REPORTING OBLIGATIONS
Whether, and to what extent, a foreign shareholder of a Japanese corporation which does nothave Japan as its primary jurisdiction would be obliged to follow additional rules, regulations andlaws under the jurisdiction of Japan is not definitively stated in regulatory or statutory provisions
or guidelines issued by the relevant authorities, nor is it explained by judicial precedents. The
relevant Japanese laws and regulations relating to our Shares on the SGX-ST are complex, often
ambiguous and may be subject to different interpretations as to their applicability to foreign
shareholders of our Company who only trade via the SGX-ST. As these relevant provisions remainvague and their interpretation can involve a degree of uncertainty, foreign shareholders of our
Shares, including the Offering Shares, may therefore be subject to additional obligations under therules, regulations and laws of Japan, including the shareholding reporting obligations describedhereunder.
SHAREHOLDERS AND LARGE VOLUME HOLDERS
Investors should note that the concept of Shareholders and Large Volume Holders are different
concepts under Japanese law. “Direct Shareholders” and “Shareholders” refer to persons whosenames appear on (a) the JASDEC Record of Depositors, and (b) the Register of Members kept inJapan.
In contrast, Large Volume Holders of our Company would be persons who are “in possession” ofmore than 5.0% in aggregate of the voting securities of our Company. Such Large Volume Holders
are required to file large volume holding reports via EDINET. Please see “Large Volume Holding
Reporting” below for more information.
Investors should also note that the concept of “interest in securities” under Section 4 of the SFA
is different in certain respects from the concept of Large Volume Holders under the FIEA. Please
see Appendix D – “Comparison of Singapore Corporate Law with Japanese Corporate Law” formore information. Investors should also note that we are not a “corporation” as defined in Section
130 of the SFA. Accordingly, our Company and Tosei CDP Depositors will not be subject to theprovisions of Division 1 of Part VII of the SFA regulating substantial shareholding reporting
obligations.
LARGE VOLUME HOLDING REPORTING
Persons who acquire title, or a call option, to equity securities including shares, stock acquisitionrights (“SARs”), bonds with SARs and similar securities issued or to be issued by a listed company(equity securities) representing more than 5.0% in aggregate (whether traded on the TSE or the
SGX-ST) of the outstanding voting rights (“Large Volume Holders”), are required to submit alarge volume holding report (“Large Volume Holding Report”) in the form provided by the
Cabinet Office Ordinance concerning Disclosure of Status of Large Volume Holding of Share
Certificates (Ordinance of the Ministry of Finance No. 36 of 1990, as amended), to thedirector-general of the local finance bureau, and a copy thereof to the issuer of such equity
securities and stock exchanges on which such shares are listed, within five business days fromthe date on which such person has come to be a Large Volume Holder, pursuant to Article 27-23of the FIEA. The Large Volume Holding Report submitted by such Large Volume Holder must
include (a) the identity of the Large Volume Holder and its joint holders (together, “Disclosing
Parties”); (b) the purpose for acquiring such equity securities; (c) the number and ratio of equity
securities held by the Disclosing Parties; (d) details of the transactions (if any) regarding equity
securities by the Disclosing Parties within a 60 day period; (e) material contracts (if any) regarding
equity securities; and (f) details of the funds used by the Disclosing Parties to acquire such equity
securities.

219

Large Volume Holder
The Large Volume Holding Report referred to above has to be filed by those who are “inpossession” (hoyuu) of voting securities, which includes, but is not limited to, “owners”(shoyuu-sha) of such voting securities. Under Article 27-23 of the FIEA and related provisions, thefollowing persons are deemed to possess the voting securities and would be required to make a
Large Volume Holding Report where the 5.0% threshold is crossed:(i)persons who own voting securities or have contractual rights to own such voting securities
whether or not such voting securities/contractual rights are held in their own name or thename of another person or a fictitious name (e.g. a purchaser of the voting securities or apurchaser of a call option for the voting securities 1);(ii)

persons who:(a)

are authorised by contract or law to exercise, or direct the exercise of, the voting rights
pertaining to the voting securities as shareholders of the issuer of such voting
securities;(b)

are aware of having such authority as described in (ii)(a) above; and(c)have an intention to control the business of such issuer (exclusive of those who fallunder item (iii) below); 2 and(iii) persons who are authorised by a discretionary investment contract or any other contract or
law to invest in the voting securities 3 (e.g. (i) a trustee with a discretion to acquire or disposeof voting securities in respect of trust assets, (ii) an asset management company authorised
to make investment decisions pursuant to a discretionary investment management contract).
Changes in Large Volume Holding
If a material change in any of the matters disclosed in a Large Volume Holding Report occurs or
holdings of equity securities increase or decrease by 1.0% or more, the Large Volume Holder must
submit an amendment to the Large Volume Holding Report within five business days of suchchange to the director-general of the local finance bureau, and a copy thereof to the issuer of such
equity securities and the stock exchanges in Japan on which such shares are listed and which has
been licensed pursuant to the FIEA.
EDINET Submission of Large Volume Holding Report
Under the FIEA, submission of the Large Volume Holding Report or any amendment thereto must
be made electronically via EDINET. Such submission will require an account with EDINET, which
can be applied for regardless of whether the applicant has or may have an obligation to submit theLarge Volume Holding Report or other reports pursuant to the FIEA. An application for an accountwith EDINET will typically take around one week to process, and longer if the necessary
supporting documents for application require correction due to comments from the authorities. It
is therefore prudent for an investor to begin preparation for applying for an account with EDINET
at least one month in advance if there is a possibility that such an investor expects that he may
be required to submit reports via EDINET in the future. In addition, applicants who are
non-residents of Japan, including corporations and entities organised under laws other than1

Article 27-23, Paragraph 3 of the FIEA and Article 14-6 of the FIEA Enforcement Ordinance2

Article 27-23, Paragraph 3, Item 1 of the FIEA and Article 3-3 of the Large Shareholding Disclosure Ordinance3

Article 27-23, Paragraph 3, Item 2220

Japanese laws, will require an attorney-in-fact who has an address in Japan to make suchapplication for an EDINET account on their behalf. Further, it is necessary to state a contact
person with an address in Japan for the purpose of the submission of a Large Volume Holding
Report or any amendment thereto and therefore it is common for an attorney-in-fact to beappointed by a non-resident of Japan for such submission.
If a person has failed to submit a Large Volume Holding Report or amendment thereto or submits
such report or amendment containing a misstatement of material matters, that person is liable tobe punished by imprisonment for not more than five years or issued a fine of not more than ¥5
million, or both, and in the case of a company, if the representative person of the company suchas a director, or an agent, employee, or other worker of the company has failed to submit a Large
Volume Holding Report or amendment thereto or submits such report or amendment containing a
misstatement of material matters, the offender shall be punished by imprisonment for not morethan five years or by a fine of not more than ¥5 million, or both, and the company is liable to bepunished by a fine of not more than ¥500 million. In addition, they will be liable to pay to theJapanese National Treasury an administrative monetary penalty equivalent to 1/100,000 of thetotal market value of the shares on the next business day after the due date to submit such reportor the date on which they have submitted such report.
SALE PURCHASE REPORT AND SHORT SWING REGULATION
Under the FIEA, each shareholder of a company having 10.0% or more of outstanding voting
rights (“Major Shareholder”), is subject to the following requirements and obligations:Sale-purchase Report (Article 163)
If a Major Shareholder sells or purchases (including derivative transactions with physicalsettlement or cash settlement) shares of a company, he/she is obliged to file a Sale-purchase
Report setting forth details of such sale or purchase with the Financial Services Agency of Japan(“FSA”) by the 15th day of the month immediately following such sale or purchase. If a Major
Shareholder (which may include a Tosei CDP Depositor) fails to submit a report or submits a reportcontaining a misstatement, the Major Shareholder shall be punished by imprisonment for not morethan six months or by a fine of not more than ¥500,000, or both. Also, in the case of a company,
if the representative person of the company such as a director, or an agent, employee, or otherworker of the company has failed to submit a Large Volume Holding Report or amendment thereto
or submits such report or amendment containing a misstatement of material matters, the offendershall be punished by imprisonment for not more than five years or by a fine of not more than ¥5
million, or both, and the company is liable to be punished by a fine of not more than ¥500 million.
Short-swing Regulation (Article 164)
If a Major Shareholder earns profits from either (i) purchase of the shares and sale of the sharesconducted (including derivative transactions with physical settlement or cash settlement) within asix-month period, or (ii) sale of the shares and purchase of the shares conducted within asix-month period, the company is entitled to make a claim for the profits from such purchase andsale or sale and purchase (“Profits”), as the case may be, against the Major Shareholder.
Moreover, if the company does not make a claim for the Profits within 60 days after receipt ofdemand by a shareholder of the company, the shareholder may make a claim for the Profits
against the Major Shareholder, as the case may be, on behalf of the company. If the FSA
considers that a Major Shareholder earned the Profits based on the Sale-purchase Report, the
FSA will deliver the portion of the Sale-purchase Report, relevant to the Profits (“Profit-related
Document”), to the Major Shareholder, and if he/she does not raise any objections on the basisof lack of sale or purchase as described in the Profit-related Document within 20 days, it will
deliver the Profit-related Document to the company. The FSA will publicise the Profit-related
Document 20 days after the delivery to the company.
221

Short-selling Regulation (Article 165)
A Major Shareholder is prohibited from short-selling of the shares beyond the amount of theshares owned by such Major Shareholder.
ANTI-MONOPOLY ACT
Under the Anti-Monopoly Act, a corporation (provided certain criteria is satisfied, e.g. domestic
turnover) is required to submit a prior notification to the Japan Fair Trade Commission for shareacquisitions of 20% and 50% on the basis of voting rights held by “the corporate group” as awhole – comprising the ultimate parent company of the acquiring corporation and its subsidiaries.
The minimum JPY threshold of the acquiring company is ¥20 billion on the basis of the total
domestic turnover of the corporate group and that of the acquired company and its subsidiaries
being ¥5 billion. If a person has failed to submit a prior notification or submits a prior notification
containing a misstatement, the person shall be punished by a fine of not more than ¥2 million.
Also, if a person made a share acquisition before 30 days have passed from the date ofacceptance of a prior notification, the person shall be punished by a fine of not more than ¥2
million. In the case of a company, if the representative person of the company such as a director,
or an agent, employee, or other worker of the company has failed to submit a prior notification or
submits a prior notification containing a misstatement with regard to the business or property of
the company, the offender shall be punished by a fine of not more than ¥2 million, and thecompany is liable to be punished by a fine of not more than ¥2 million. Also, if the representative
person of the company such as a director, or an agent, employee, or other worker of the company
made a share acquisition with regard to the business or property of the company before 30 days
have passed from the date of acceptance of a prior notification, the offender shall be punished bya fine of not more than ¥2 million, and the company is liable to be punished by a fine of not morethan ¥2 million.

222

OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN JAPANOur Group’s businesses are subject to various Japanese laws and regulations. The major laws
and regulations applicable to the Group’s businesses are summarised below.
BUILDING LOTS AND BUILDINGS TRANSACTION BUSINESS LAW
Sale, purchase and exchange, and brokerage of sale, purchase, exchange and lease of building
lots and buildings are, if conducted as business activities, subject to the Building Lots andBuildings Transaction Business Law. This law requires an operator of such business to obtain alicence from the prefectural governor where the offices are located (if the operator has offices in
only one prefecture) or from the Minister of Land, Infrastructure, Transport and Tourism (if theoperator has offices in two or more prefectures), and to conduct such business in a prescribedmanner. This law also requires the operator to employ and allocate to each office a certain numberof qualified and registered real estate business specialists. The Minister or the prefectural
governor may revoke such a licence or suspend it for a period of up to one year in certain
circumstances prescribed by this law, for instance, if the operator violates laws and regulations orotherwise conducts its business in a substantially inappropriate manner. Under this law, there isa restriction on excluding or reducing statutory warranty obligations under the Japanese Civil
Code beyond the general statutory requirement in the case where the counterparty to thesale-purchase transaction is not a real estate business operator, i.e., a normal consumer, with thenotable exception that restricting the effective warranty period to two years or more from the pointof delivery (as opposed to the date on which the purchaser becomes aware of the existence of thelatent defect) will be considered acceptable.
CONSTRUCTION BUSINESS LAW
The Construction Business Law (kensetsugyou-hou) (Act No. 100 of 1949, as amended) requires
a contractor to obtain and maintain a governmental licence from the prefectural governor where
the offices are located (if the operator has offices in only one prefecture) or from the Minister ofLand, Infrastructure, Transport and Tourism (if the operator has offices in two or more
prefectures), and comply with certain prescribed standards. The Minister or the prefectural
governor may revoke the licence or suspend it for a period of up to one year in certain
circumstances prescribed under this law, for instance, if the contractor violates laws andregulations or otherwise conducts its business in bad faith or in a substantially inappropriatemanner.
BUILDING STANDARDS ACT
Construction, repair and remodeling of large-scale buildings are subject to the Building Standards
Act. Under this law, any entity that constructs, substantially repairs or remodels, whether by itself
or through a third party contractor, any building that is larger than a certain scale, or any entity that
constructs any building that is located in certain designated areas must obtain a certificate of priorconfirmation for the planned construction, repair or remodeling as well as a certificate ofcompletion thereof from an inspector appointed by local authorities. Such certificates confirm thatthe building, repair or remodeling conforms to the standards prescribed by this law and relevant
regulations. Local authorities may order the suspension of construction or the demolition,
reconstruction, remodeling or repair of the building, or may prohibit or limit the use of the building,if the building does not conform to the relevant building standards. Such standards include thoserelating to the use, height and structure of buildings, the building-to-land area ratio, and fire
prevention, security and sanitation requirements.
In the event that potential non-compliance with the Building Standards Act is identified as aconcern at any time, the relevant administrative agency normally will take preliminary actions toassess the building in question. If non-compliance is found and not cured upon informal223

discussion, the agency may issue a written notice setting forth the desired actions to beundertaken to effect cure on the part of the owner of the building. If the non-compliance is still not
cured, the relevant administrative agency may then issue a corrective order, requiring the ownerof the building to take corrective action. Corrective orders may include, among others, an orderof demolition, reconstruction, removal of affected parts, or restriction of use, of the noncompliant
building. The timing of issuance of corrective orders and their content, as well as the decision as
to whether such corrective orders should be issued in the first place, are entrusted to theprofessional and technical discretion of the relevant administrative agency. Therefore, even if theconstruction of the building is determined to be illegal in any respect, such illegality will notnecessarily result in immediate issuance of a corrective order. In addition, generally speaking, theadministrative agency is required to adopt the method of rectifying the illegality that will be theleast burdensome for the party to whom the order is issued. Accordingly, if the removal of illegal
components of a construction project is found to be relatively easy, a more onerous order, suchas one for demolition of the building, can be expected not to be issued, and if issued may be found
an abuse of the discretion allowed to the administrative agency and held void by a competentcourt of law.
CITY PLANNING ACT
All construction in Japan is also regulated by the City Planning Act (toshi-keikakuhou) (Act No. 100
of 1968, as amended). The main objective of the City Planning Act is to ensure balanced landdevelopment and promote public welfare. Under the City Planning Act, developers must obtain
permission from the prefectural governor (or the mayor, if the construction is planned in adesignated city) prior to beginning any development action (as defined in the City Planning Act)on land that has been designated as a city planning area or a quasi-city planning area by theprefecture in which such land is situated (or the Minister of Land, Infrastructure, Transport andTourism if such land is spread over two or more prefectures). The permitted use of buildings thatare constructed in each use zone is designated pursuant to the Building Standards Act.
LAW CONCERNING THE PROMOTION OF CONTROL OF HOUSING QUALITY
The Law Concerning the Promotion of Control of Housing Quality of Japan provides standards forthe indication of, and a framework for the evaluation of, the quality of housing. The Minister ofLand, Infrastructure, Transport and Tourism is responsible for prescribing the relevant standards
under this law. The institution designated by the Minister to evaluate the quality of housing
conducts such evaluation, upon application by the seller or any other person, and issues anevaluation report. The seller is deemed to undertake to sell the housing with the level of quality
indicated in the evaluation report if a copy of the report is attached to the sales contract or isdelivered to the purchaser. When a seller sells new housing within one year of completion of
construction, this law requires the seller to repair the house and/or indemnify any loss of thepurchaser for a period of ten years after the sale of the house if there is any latent defect regarding
the main structural components of the housing.
LAW CONCERNING PROMOTION OF ADEQUATE MANAGEMENT OF CONDOMINIUMSThe property management business of condominiums which is entrusted by condominium
associations is subject to the Law Concerning Promotion of Adequate Management of
Condominiums (manshon-no-kanri-no-tekiseika-no-suishin-ni-kansuru-houritsu) (Act No. 149 of
2000, as amended), under which registration is required to conduct such property managementbusiness. This law also requires the operator to employ and allocate to each office a certain
number of qualified and registered condominium managers. The registration may be revoked orsuspended for up to one year under certain circumstances prescribed under the law, for instance,
if the operator violates applicable laws or regulations or conducts its property managementbusiness in a substantially inappropriate manner.

224

SOIL CONTAMINATION CONTROL LAW
Under the Soil Contamination Control Law, if a governor in a prefecture finds that the level ofpollution in a given area exceeds the standards prescribed by the Ministry of the Environment due
to hazardous or toxic substances, the governor must designate the area as a polluted area. If thelocal governor determines that land located in the designated area is polluted to such an extent
that it has caused or may cause harm to human health, the governor may order the current ownerof such land to remove or decontaminate hazardous or toxic substances on or under the land,
whether or not the current owner knew of, or was responsible for, the presence of such hazardous
or toxic substances. If the pollution is attributable to any other person, the owner of the land may
demand reimbursement from such other person for the cost of removal and decontamination. Thislaw subjects the current owner of real estate to strict liability with respect to the removal ordecontamination of hazardous or toxic substances on, or under, such real estate, whether or not
the current owner knew of, or was responsible for, the presence of such hazardous or toxic
substances.
DESIGNATED REAL ESTATE JOINT VENTURE BUSINESS ACTThe Designated Real Estate Joint Venture Business Act governs the joint venture business inconnection with sale, purchase, exchange or lease of building lots and buildings (collectively the“Real Estate Transaction”) in which revenues and profits from the Real Estate Transaction are
distributed to members of such joint venture. An operator of such joint venture must obtain agovernmental licence from the prefectural governor where the offices are located (if the operator
has offices in only one prefecture) or from the Minister of Land, Infrastructure, Transport andTourism (if the operator has offices in two or more prefectures) in advance and conduct the joint
venture business in compliance with the standards stipulated by this law. The governor or the
Minister may revoke such licence or suspend it for a period of up to one year in certain
circumstances prescribed by this law, for instance, if the contractor violates laws and regulations
or otherwise conducts its business in a substantially inappropriate manner. The Designated Real
Estate Joint Venture Business Act does not apply to investments in real estate trust beneficial
interests or investments through a tokutei mokuteki kaisha, a special purpose company
incorporated under the Asset Securitization Law of Japan (shisan-no-ryudouka-ni-kansuruhouritsu) (Act No. 105 of 1998, as amended). Under current market practice, transactions areusually structured so that the Designated Real Estate Joint Venture Business Act will not apply.
CONSUMER CONTRACT LAW
The Consumer Contract Law of Japan (shouhisha-keiyakuhou) (Act No. 61 of 2000, as amended)
is applicable to consumer contract executed by and between consumers and business entities.
This law sets forth certain circumstances under which consumers may deny the validity of suchcontracts in consideration of the disparity between consumers and business entities in information
and bargaining power.
FINANCIAL INSTRUMENTS AND EXCHANGE ACTThe FIEA governs various matters related to securities business and operators of such business.
Under the FIEA, registration is required to conduct management businesses on securities,
advisory business on securities investment and the dealing and brokerage of securities. The
definition of “securities” for the purpose of the FIEA includes, among other things, investment ina silent partnership (tokumei kumiai), and real estate trust beneficiary interests which substantiallyinvolve management of real estate investment funds in Japan. The investment adviser and the
securities broker/dealer so registered must conduct its business in compliance with the FIEA. The
Commissioner of the Financial Services Agency (“FSA”) has the authority to investigate theinvestment manager, the investment adviser and the securities broker/dealer. Employees of ourGroup operate under our registration as a Type II Financial Instruments Business, an Investment
225

Management Business and an Investment Advisor and Agency Business. Individual employees do
not need to be registered under the FIEA so long as they are operating under the name of and on
behalf of the holder of the requisite registration.
Also, a special purpose company, which invests funds raised through a silent partnership or othersimilar arrangement in real estate trust beneficial interests is required to qualify as a discretionary
investment manager under the FIEA unless certain exemptions are applicable (which includes,
among others, (1) the silent partnership whose silent partners include at least one Qualified
Institutional Investor (“QII”) and less than 50 non-QII investors, and do not include any
disqualifying investor as defined in the FIEA and regulations thereunder, and (2) the silent
partnership investment decisions of which are entrusted with a third party qualified as adiscretionary investment manager under FIEA). The special purpose company operating the silent
partnership under the exemption must file a notification of the fund operation business conductedunder the exemption with the FSA. If any violation of the applicable laws or regulations is
discovered, various types of administrative sanctions, including revocation of the registration andsuspension of business may be imposed. Our Group currently does not operate any silent
partnerships.
LAW CONCERNING SALES OF FINANCIAL PRODUCTS
In order to protect investors of financial products, the Law Concerning Sales of Financial Productsof Japan (kinyushouhin-no-hanbaitou-ni-kansuruhouritsu) (Act No. 101 of 2000, as amended)
requires financial service providers to provide adequate explanations to customers, make suchfinancial service providers liable for any losses incurred by customers due to a breach of suchduty, and also prescribes certain actions to be taken by such financial service providers in orderto ensure that solicitations by financial service providers of offers of financial products are fair.
MONEY LENDING BUSINESS ACTThe mere making of a loan in Japan will not trigger any licensing requirements. However, a lender
who repeatedly makes loans to residents of Japan or an investor who repeatedly makes loanarrangements for residents of Japan or acquiring loans to residents of Japan may be found to beengaging in the business of money-lending and, thus, would be required to register as amoney-lending business operator under the Money Lending Business Act.
TRI engages in alternative property investment business and primarily purchases real estatecollateralised loans, and is thus registered as a money-lending business operator and is required
to comply with the Money Lending Business Act. Under the applicable laws and the registration
requirements, TRI is required to employ at least one qualified money-lending business specialist
on a full-time basis for each office, maintain net assets of at least JPY50,000,000, and have atleast one full-time officer, such as a director, who has been engaged in money-lending businessfor three years or more (who may act concurrently as the money-lending business specialist
mentioned above). TRI has a stated capital of JPY50,000,000 as of the Latest Practicable Dateand one of the current directors of TRI, Hitoshi Ohshima, fulfills the requirements of being (i) aqualified money-lending business specialist and (ii) a full-time officer engaged in the moneylending business for three years or more. As a registered money-lending business operator, TRI
will also be required to comply with an extensive list of continuing obligations, including, (i) yearlyreports to the authorities regarding its money-lending business activities, (ii) establishment ofinternal rules on the handling of personal information obtained in the course of such business andother matters relating to such a business and (iii) prohibition from lending over statutory maximum
amounts based on the income of the borrower.

226

THE LAND SYSTEMThe Civil Code of Japan governs real property rights. Japanese law recognises a number ofinterests in land. In particular, Japanese law allows for separate ownership (Shoyuuken) of a pieceof land and the building thereon. The Chijou-ken (Superficies) is an in rem interest in land that
permits the holder to use the surface of another person’s land to build structures, undergroundinstallations, or plant trees. In general, the Chinshaku-ken (Leasehold) is a contractual interest
that permits the holder to use the leased asset in return for payment of rent. A leasehold interest
that qualifies for mandatory statutory protection under the Land and Building Lease Law, however,gains legal rights that are similar to in rem interests. The Chieki-ken (Easement) is an in rem
interest that permits the holder of the land to use another person’s land for the benefit of theholder, such as a right to access the land.
REAL ESTATE REGISTRATION SYSTEM
There is a real estate registration system in Japan under which ownership of real estate as wellas certain other real estate-related rights, such as the right to use real estate or security rights
over real estate is registered. An owner of an unregistered real estate property or a holder of otherunregistered rights cannot assert its title or rights against a third party except for the immediate
party to which titles or rights are succeeded or granted from. The real estate register is publicly
available for inspection.
The real estate register, however, is not conclusive evidence and does not necessarily reflect thetrue holder of the title or right. In practice, parties who plan to enter into a real estate transaction
usually rely upon the register, as it is generally the best indication of the true owner of the realestate-related title or right. However, a party has no recourse to anyone but the seller if, relying
on the register, it purchases real estate or a related right from a seller and the information
contained in the register turns out to be incorrect. The purchaser may seek indemnification fromthe seller pursuant to statutory warranties or contractual warranties, but in general cannot acquire
the ownership of or title to the real estate.
LIABILITIES OF THE OWNER OF REAL ESTATE PROPERTIES
Under the Civil Code of Japan, if any damage has been caused to another person by reason ofany defect in the construction or maintenance of a structure on land, the person in possession of
the structure is liable in tort to compensate the injured person for damages it suffers; provided,
however, that if the person in possession has exercised due care in order to prevent theoccurrence of such damage, the owner of the structure will be liable in tort for such damage
instead.
It is customary to obtain third-party liability insurance over real property. However, in certain
circumstances, insurance may not be available, or even if obtained, the insurance may not covera liability in relation to the property due to the terms and conditions of the policy.
A purchaser of real estate may in some instances seek indemnification from the seller pursuant
to statutory or contract-based warranties for liability to a third party that was caused by a defectin the property existing at the time of the sale. However, these warranties are sometimes limited
or excluded from coverage of such third-party liabilities, or even if covered, may prove insufficientif the seller lacks funds to compensate the purchaser for its incurred losses.
Under the Japanese Civil Code, unless contractually excluded, a seller of real estate property
owes statutory warranty obligations to a purchaser for any latent defect in the real estate property.
Statutory warranties are generally effective for one year from the date on which the purchaser
becomes aware of the existence of the latent defect and can be enforced during this period by acancellation of the underlying sale or by requesting damages from the seller. In principle, these227statutory warranty obligations may be contractually excluded or substantially reduced in the saleand purchase agreement under which the real property is purchased. However, real estatebusiness operators under the Building Lots and Buildings Transaction Business Law, such as ourCompany, are restricted from excluding or reducing such statutory warranty obligations beyond
the general statutory requirement in the case where the counterparty to the sale-purchasetransaction is not a real estate business operator, i.e., a normal consumer, with the notable
exception that restricting the effective warranty period to two years or more from the point ofdelivery (as opposed to the date on which the purchaser becomes aware of the existence of thelatent defect) will be considered acceptable. In line with such regulation, our warranty for latent
defects in real estate property, from which the purchaser can enforce a cancellation of the sale orrequest damages from us, is for two years from the point of delivery.
Further, under the Law Concerning the Promotion of Control of Housing Quality, when a seller(including a real estate business operator) sells new housing within one year of completion of
construction, if there is any latent defect regarding the main structural components of the housing,
the seller is statutorily obliged to repair the house or indemnify any loss of the purchaser or thepurchaser can enforce a cancellation of the sale, for a period of ten years after the sale of thehouse and any exclusion or restriction unfavourable to the purchaser is deemed void.
Our Group is in compliance in all material respects with the applicable regulations. To date, there
has been no material breach of any of the above regulations by our Group.

228

TAXATION
The following discussion is limited to a general description of certain tax consequences in thejurisdictions described below with respect to the ownership of the Shares. It does not purport tobe comprehensive nor exhaustive and is not intended to be and does not constitute legal or tax
advice. This summary is based on current tax laws in Japan and Singapore and is subject tochanges in such laws, or in the interpretation thereof. Such changes may be retrospective. Whilethe comments are considered to be a correct interpretation of existing laws in force as at theLatest Practicable Date, no assurance can be given that courts or fiscal authorities responsible forthe administration of such laws will agree with this interpretation or that changes in such laws will
not occur.
The discussion below is not intended to constitute a complete analysis of all the tax consequences
relating to the acquisition, ownership and disposal of the Shares by any person. Each prospective
investor in the Shares should therefore consult its own tax advisers concerning the tax
consequences of an investment in the Shares.
JAPANESE TAXATIONThe statements made herein regarding Japanese taxation are based on the laws in force as at thedate of this Prospectus and are subject to any changes in law occurring after such date, whichchanges could be made on a retrospective basis. The following summary does not purport to be
a comprehensive description of all of the Japanese tax considerations that may be relevant to adecision to purchase, own or dispose of the Shares and does not purport to deal with the tax
consequences applicable to all categories of investors, some of which (such as dealers insecurities or commodities) may be subject to special rules. Prospective purchasers of Shares areadvised to consult their own tax advisers concerning the overall tax consequences of theirdecision to purchase, own and dispose of the Shares.
A non-resident shareholder is generally subject to a Japanese withholding tax on cash dividends.
Split-up of shares and allotment of shares without consideration, in general, are not subject toJapanese withholding tax since they are characterised merely as an increase in the number ofshares (as opposed to an increase in the value of the shares) from a Japanese tax perspective.
In the absence of any applicable treaty or agreement reducing the maximum rate of withholding
tax, the standard rate of Japanese withholding tax applicable to dividends paid by Japanese
corporations to non-resident shareholders (inclusive of individuals and entities) is generally
20.0%. However, with respect to dividends paid on shares issued by a Japanese corporation to
non-resident shareholders, except for any individual shareholder who holds 3.0% or more of theshares issued by the relevant Japanese corporation, the aforementioned standard 20.0%
withholding tax rate is reduced to 7.0%, and such reduced rate is expected to be effective until
31 December 2013.
Japan has income tax treaties, conventions or agreements whereby the above-mentioned withholding
tax rate is reduced. For Japanese tax purposes, a treaty rate generally supersedes the tax rate underdomestic tax law. However, due to the so-called “preservation doctrine” under the respective tax
treaties, and/or due to the Act on Special Measurement for the Income Tax Act, Corporation Tax Act
and Local Taxes Act with respect to the Implementation of Tax Treaties (sozei-jouyaku-no-jisshi-nitomonau-shotokuzeihou, houjinzeihou-oyobi-chihouzeihou-no-tokureitou-ni-kansuru-houritsu) (ActNo. 46 of 1969, as amended), if the tax rate under domestic tax law is lower than the treaty rate (which
is currently the case with respect to the respective tax treaties), the domestic tax rate applies. An“Agreement between the Government of the Republic of Singapore and the Government of Japan for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on
Income” (“Treaty”) became effective on 1 January 1996 and was revised on 14 July 2010.

229

Under the Treaty, dividends paid by our Company to our Shareholders (other than Shareholders
holding 3% or greater of our Shares) who are non-resident individuals of Japan or that are
non-Japanese corporations without a permanent establishment in Japan were generally subject toa withholding tax in Japan of 7.0% until 31 December 2012. This tax rate was further qualified by
the Special Measures Tax for Reconstruction, which introduced, amongst other measures, asurplus tax of 2.1% on current income tax rates. This surplus tax took effect on 1 January 2013
and will be effective till 31 December 2037. As a result of this surplus tax, for the period between
1 January 2013 and 31 December 2037, dividends payable to a beneficial owner of shares who
is a Singapore resident will be subject to a withholding tax rate of 7.147% (being 102.1% of 7.0%).
If the beneficial owner is a company that has directly or indirectly owned, for the six-month period
ending on the date on which entitlement to the dividend is determined, at least 25.0% of theoutstanding voting shares of the Japanese company that is paying the dividends, the tax rate will
be reduced to 5.0%. As a general rule, a beneficial owner who is entitled to a reduced rate ofJapanese withholding tax on payments of dividends is required to submit an Application Form for
Income Tax Convention Regarding Relief from Japanese Income Tax on Dividends (together withother required forms and documents) in advance, through the withholding agent to the relevant tax
authority before the payment of dividends. A beneficial owner who does not submit an applicationin advance will be entitled to claim a refund of withholding taxes withheld in excess of the rate
under an applicable tax treaty, from the relevant Japanese tax authority by complying with certain
subsequent filing procedures. A standing proxy for the beneficial owner may provide theapplication. The Treaty applies to a non-resident shareholder who is a resident of Singapore.
Gains derived from the sale outside Japan of Shares of our Company by a non-resident
Shareholder are in general not subject to Japanese income or corporation taxes, except for any
Shareholder who substantially holds (i) 25.0% or more of the shares issued by the relevantJapanese corporation at any time during the taxable year of the sale or during two preceding years
and (ii) transfers of 5.0% or more of the outstanding Shares within one taxable year. Japanese
inheritance and gift taxes at progressive rates may be payable by an individual who has acquired
Shares as a legatee, heir or donee even though neither the individual nor the deceased nor thedonor is a resident of Japan.

230

SINGAPORE TAXATION
The discussion is limited to a general description of income tax, stamp duty and goods andservices tax consequences in Singapore with respect to the purchase, holding or disposal ofshares by Singapore investors, and does not purport to be a comprehensive nor exhaustive
description of all of the tax considerations that may be relevant to a decision to purchase, hold anddispose of the shares. Prospective investors should consult their tax advisers regarding
Singapore tax and other tax consequences of purchasing, holding and disposing of the shares. It
is emphasised that neither our Company, our directors nor any other persons involved in theOffering accepts responsibility for any tax effects or liabilities resulting from the subscription for,purchase, holding or disposal of the shares.
Singapore Income Tax(i)Individual Taxpayers
An individual is regarded as a tax resident in Singapore in a year of assessment (“YA”) if, in
the preceding calendar year, he was physically present in Singapore or exercised an
employment in Singapore (other than as a director of a company) for 183 days or more, or
if he resides in Singapore except for such temporary absences therefrom as may bereasonable and not inconsistent with a claim by such person to be resident in Singapore.
Individual taxpayers who are Singapore tax residents are subject to Singapore income tax onincome accruing in or derived from Singapore, unless the income is specifically exempt fromtax in Singapore. All foreign-sourced income received or deemed received (except forincome received through a partnership in Singapore) in Singapore on or after 1 January 2004
by a Singapore tax resident individual is generally exempted from Singapore income tax.
A Singapore tax resident individual is subject to tax at progressive rates, ranging from 0% to
20.0%.
Non-resident individuals are also subject to Singapore income tax on income accruing in orderived from Singapore, unless the income is specifically exempt from tax in Singapore.
Non-resident individuals are not taxed on foreign-sourced income received in Singapore.
Non-resident individuals receiving Singapore employment income are taxed at a flat rate of
15.0% or resident rates whichever gives rise to a higher tax payable. Any other Singaporesourced income (e.g. directors’ fees, consultancy fee, etc.) is taxed at a flat rate of 20.0%.

(ii)

Corporate Taxpayers
A company is tax resident in Singapore if the control and management of its business is
exercised in Singapore.
Corporate taxpayers are subject to Singapore income tax on income accruing in or derived
from Singapore or received in Singapore from outside Singapore, unless the income isspecifically exempt from tax in Singapore. One of these exemptions is with regard toforeign-sourced dividends, branch profits and service income received in Singapore by
Singapore tax resident companies on or after 1 June 2003, subject to conditions.
The prevailing corporate tax rate with effect from the YA2010 is 17.0% of chargeable income
after allowing for full or partial tax exemption (where applicable).

231

The full tax exemption scheme introduced in the YA2005 and further enhanced in the YA2008
is meant for newly incorporated entities. Under this scheme, a tax exemption on the first
S$100,000 and a further 50% exemption on the next S$200,000 of the normal chargeable
income (excluding Singapore franked dividends) are available to Singapore resident
start-ups for each of the first 3 consecutive YAs upon incorporation, subject to conditions.
Companies which do not qualify for the above full tax exemption scheme can claim for partial
tax exemption on their normal chargeable income (excluding Singapore franked dividends)
of up to S$300,000 – 75.0% of the first S$10,000 and 50.0% of the next S$290,000 (i.e.
maximum partial tax exemption claimable = S$152,500). Unlike the full tax exemption
scheme, there are no conditions attached for partial tax exemption.
(iii) Dividend Distributions
Dividends payable by our Company on our Shares will be declared in Japanese Yen and paid
to Tosei CDP Depositors in Singapore dollars.
As our Company is incorporated in Japan and the control and management of the businessis exercised outside of Singapore, our Company is not a tax resident of Singapore. Dividends
paid by our Company would be considered as income sourced outside Singapore. To theextent that these foreign sourced dividends are received by an individual in Singapore, they
will generally be exempt from Singapore tax.
Dividends paid by our Company, if received by a Singapore tax resident company may be
exempt from Singapore income tax if the following conditions are satisfied:•

The highest corporate tax rate (headline tax rate) of Japan from which the dividend
income is received is at least 15.0% at the time the foreign dividend income is received
in Singapore;•

The dividend income had been subjected to tax in Japan from which they were received;
and•

The Singapore Comptroller is satisfied that the tax exemption would be beneficial to theSingapore tax resident recipient.

In practice, dividends received in Singapore by non-resident companies should not be
subject to tax in Singapore if the recipient company is not operating in or from Singapore.
The ability of a Singapore taxpayer to receive a foreign tax credit for Japanese withholding
tax will depend upon the precise circumstances. No such credit will be available where thedividend is itself exempt from tax in Singapore.
(iv) Gains on Disposal of Shares
Singapore does not impose tax on capital gains. There are no specific laws or regulations
which deal with the characterisation of capital gains. Hence, gains arising from the disposalof shares are not taxable in Singapore unless the Inland Revenue Authority of Singapore
regards the seller as carrying on a trade of buying and selling shares, in which case, theprofits on disposal will be construed to be of an income nature and taxable.

232

Based on the IRAS e-Tax Guide on “Income Tax: Certainty of Non-taxation of Companies’
Gains on Disposal of Equity Investments” dated 30 May 2012, the gains derived from thedisposal of ordinary shares in an investee company (whether incorporated in Singapore orelsewhere, and whether listed or not listed) during the period 1 June 2012 to 31 May 2017
(both dates inclusive) are not taxable if immediately prior to the date of the share disposal,
the divesting company had held at least 20% of the ordinary shares in the investee company
for a continuous period of at least 24 months. This rule does not apply to a divesting company
whose gains or profits from the disposal of shares are included as part of its income basedon the provisions of Section 26 of the Income Tax Act, Chapter 134 of Singapore, or to thedisposal of shares in an unlisted investee company that is in the business of trading or
holding Singapore immovable properties (other than the business of property development).
Section 13Z of the Income Tax Act, Chapter 134 of Singapore provides for this.
Stamp Duty
There is no stamp duty payable on the subscription, allotment or holding of our shares.
Stamp duty is payable on the instrument of transfer of shares at the rate of S$0.20 for every
S$100.00 or any part thereof, computed on the consideration paid or market value of the shares,
whichever is higher. The purchaser is liable for stamp duty unless there is an agreement to thecontrary. No stamp duty is payable if no instrument of transfer is executed or the instrument oftransfer is executed outside Singapore. If the instrument of transfer is executed outside
Singapore, stamp duty is payable if such instrument is subsequently is received in Singapore.
The above stamp duty is not applicable to scripless transfer of shares through the CDP system.
Goods and Services Tax (“GST”)
Sale of shares by a GST-registered investor belonging in Singapore to another person belonging
in Singapore is an exempt supply for GST purposes.
Where the shares are sold by a GST-registered investor in the course of business to a person
belonging outside Singapore, and that person is outside Singapore when the sale is executed, thesale would generally be regarded as a taxable supply subject to GST at zero rate if certain
conditions are satisfied. Any GST incurred by a GST-registered investor in the making of this
supply in the course of or furtherance of a business carried on by him is recoverable from theComptroller of GST.
Services such as brokerage, handling and clearing services rendered by a GST-registered person
to an investor belonging in Singapore in connection with the investor’s purchase, sale or holdingof the shares will be subject to GST at the prevailing rate of 7.0%. Similar services rendered to
an investor belonging outside Singapore is generally subject to GST at zero rate, provided that theinvestor is outside Singapore when the services are performed and the services provided do notbenefit any Singapore persons.

233

PLAN OF DISTRIBUTION
THE OFFERINGThe Offering is for [●] Offering Shares offered in Singapore by way of public offer and placement
comprising [●] Public Offer Shares and [●] Placement Shares.
The Offering Price will be determined following a book-building process by agreement between
ourselves and the Sole Global Coordinator, Issue Manager and Underwriter on the Price
Determination Date, which date is subject to change, and will be announced through anannouncement on SGXNET to be posted on the Internet at the SGX-ST website at
http://www.sgx.com. Among the factors that will be taken into account in determining the Offering
Price are the demand for the Offering Shares, the prevailing market conditions and our historicalperformance.
The Offering Price will not be more than S$[●] per Offering Share and is expected to be not lessthan the Discounted TSE Market Price unless otherwise announced through a SGXNET
announcement to be posted on the Internet at the SGX-ST website at http://www.sgx.com.
Pursuant to the Management and Underwriting Agreement, the Sole Global Coordinator, Issue
Manager and Underwriter will manage the Offering and underwrite the Public Offer. Pursuant to
the Placement Agreement, the Sole Global Coordinator, Issue Manager and Underwriter will
underwrite the Placement. [Each of the Management and Underwriting Agreement and Placement
Agreement may be terminated at any time by the Sole Global Coordinator, Issue Manager andUnderwriter before or on the date of the closing of the Application List for the Offering Shares on
the occurrence of certain events including, inter alia:(i)

any change, or any development or event involving a prospective change, in the condition(financial or other), business, properties, prospects or results of operations of our Grouptaken as a whole which, in the judgment of the Sole Global Coordinator, Issue Manager andUnderwriter, is material and adverse and makes it impractical or inadvisable to proceed withcompletion of the offering or the sale of and payment for the Offering Shares;(ii)

any change in the United States of America, the United Kingdom, Japan, Singapore orinternational financial, political or economic conditions or currency exchange rates or
exchange controls as would, in the judgment of Sole Global Coordinator, Issue Manager andUnderwriter, be likely to prejudice materially the success of the proposed issue, sale or
distribution of the Offering Shares, whether in the primary market or in respect of dealings in
the secondary market;(iii) any material suspension or material limitation of trading in securities generally on the New
York Stock Exchange, the TSE, the SGX-ST, or any setting of minimum prices for trading onsuch exchange;(iv) any suspension of trading of any securities of the Company on any exchange or in theover-the-counter market (other than for the purpose of making announcements);(v)

any major disruption of settlements of securities or clearance services in the United Statesof America, United Kingdom, Japan or Singapore.

THE PLACEMENT
We and the Sole Global Coordinator, Issue Manager and Underwriter are expected, upon
agreement of the Offering Price, to enter into the Placement Agreement, on or about the Price
Determination Date. Subject to the terms and conditions to be contained in the Placement234

Agreement, the Sole Global Coordinator, Issue Manager and Underwriter is expected to agree tosubscribe for and/or procure the subscribers for the Placement Shares for a placement
commission of [●]% of the TSE Market Price for each Placement Share, payable by our Company.
The Sole Global Coordinator, Issue Manager and Underwriter may, at its absolute discretion,
appoint one or more sub-placement agents for the Placement Shares.
The Placement Shares are reserved for placement to members of the public and institutional
investors in Singapore.
Application for the Placement Shares may only be made by way of application forms. The terms,
conditions and procedures for application and acceptance are described in Appendix I – “Terms,
Conditions and Procedures for Application and Acceptance”.
Subscribers of Placement Shares may be required to pay brokerage of up to [●]% of the Offering
Price to the Sole Global Coordinator, Issue Manager and Underwriter (and the prevailing GST
thereon, if applicable).
In the event of an under-subscription for the Placement Shares as at the close of the Application
List, that number of Placement Shares not subscribed for shall be made available to satisfy excess
applications for the Public Offer Shares to the extent that there is an over-subscription for the
Public Offer Shares as at the close of the Application List.
THE PUBLIC OFFER
Pursuant to the terms and conditions contained in the Management and Underwriting Agreement,
the Sole Global Coordinator, Issue Manager and Underwriter has agreed to underwrite our offer
of the Public Offer Shares for a commission of [●]% of the TSE Market Price for each Offer Share,payable by our Company pursuant to the Offering. The Sole Global Coordinator, Issue Manager
and Underwriter may, at its absolute liberty, appoint one or more sub underwriters for the Public
Offer Shares.
The Public Offer Shares are made available to the members of the public in Singapore forsubscription at the Offering Price. The terms, conditions and procedures for application andacceptance are described in Appendix I – “Terms, Conditions and Procedures for Application andAcceptance”.
An applicant who has made an application for Public Offer Shares by way of an Application Formmay not make another separate application for Public Offer Shares by way of an Electronic
Application and vice versa. Such separate applications shall be deemed to be multiple
applications and shall be rejected.
Brokerage will be paid to members of the SGX-ST, merchant banks and members of the
Association of Banks in Singapore in respect of successful applications made on Application
Forms bearing their respective stamps, or to Participating Banks in respect of successful
applications made through Electronic Applications at their respective ATMs or internet banking
websites at the rate of [●]% of the Issue Price for each Offer Share. This brokerage has alreadybeen included in the Underwriting Commission stated above.
In the event of an under-subscription for the Public Offer Shares as at the close of the Application
List, that number of Public Offer Shares not subscribed for shall be made available to satisfy
excess applications for the Placement Shares to the extent there is an over-subscription for thePlacement Shares as at the close of the Application List.

235

In the event of an over-subscription for the Public Offer Shares as at the close of the Application
List and where the Placement Shares are fully subscribed as at the close of the Application List,
the successful applications for the Public Offer Shares will be determined by ballot or otherwise
as determined by our Directors after consultation with the Sole Global Coordinator, Issue Manager
and Underwriter and approved by the SGX-ST.
RESTRICTIONS ON DISPOSALS AND ISSUES OF SHARES
Seiichiro Yamaguchi
Seiichiro Yamaguchi has agreed with the Sole Global Coordinator, Issue Manager and Underwriterthat he will not, without the prior written consent of the Sole Global Coordinator, Issue Manager
and Underwriter (a) sell, dispose of, transfer or enter into any agreement that will directly or
indirectly constitute or will be deemed as a disposal of any of the Promoter Lock-up Shares or (b)otherwise encumber any part of the Promoter Lock-up Shares whether by way of a share pledge
arrangement or otherwise, during the Lock-up Period.
If, for any reason, the Offering is not completed by [●], the lock-up arrangement described above
will be terminated.
Zeus Capital Limited
Zeus Capital Limited has agreed with the Sole Global Coordinator, Issue Manager andUnderwriter that it will not, without the prior written consent of the Sole Global Coordinator, Issue
Manager and Underwriter (a) sell, dispose of, transfer or enter into any agreement that will directly
or indirectly constitute or will be deemed as a disposal of any of the Zeus Lock-up Shares or (b)otherwise encumber any part of the Zeus Lock-up Shares whether by way of a share pledge
arrangement or otherwise, during the Lock-up Period.
If, for any reason, the Offering is not completed by [●], the lock-up arrangement described above
will be terminated.
Our Company
We have also agreed that we will not, subject to certain exceptions, for the Lock-up Period, directly
or indirectly, without the prior written consent of the Sole Global Coordinator, Issue Manager andUnderwriter, among others, offer, issue, sell, contract to issue or sell, grant any option or warrant
to purchase, grant security over, encumber or otherwise dispose of or otherwise dispose of any
Shares or securities convertible into or exercisable or exchangeable for Shares or any security
that constitutes the right to subscribe for, purchase or receive Shares or part thereof, or publicly
announce any such intention.
If, for any reason, the Offering is not completed by [●], the lock-up arrangement described above
will be terminated.
PERSONS INTENDING TO PURCHASE IN THE OFFERING
To the best of our knowledge, none of our Directors, Statutory Auditors or Large Volume Holders
intend to subscribe for the Offering Shares. To the best of our knowledge and belief, none of ourCompany’s management staff or our employees intends to subscribe for 5.0% or more of theOffering Shares.
To the best of our knowledge and belief, we are not aware of any person who intends to subscribe
for 5.0% or more of the Offering Shares. However, through a book-building process to assessmarket demand for our Shares, there may be persons who may indicate an interest to subscribe236

for 5.0% or more of the Offering Shares. If such persons were to make an application for 5.0% ormore of the Offering Shares pursuant to the Offering and subsequently be allotted such numberof Shares, we will make the necessary announcements at an appropriate time.
Further, no Shares shall be allotted on the basis of this Prospectus later than six months after thedate of registration of this Prospectus by the Authority.
DISTRIBUTION AND SELLING RESTRICTIONS
No action has been or will be taken in any jurisdiction that would permit a public offering of the
Shares or the possession, circulation or distribution of this Prospectus or any other offering or
publicity material relating to our Company or the Shares in any country or jurisdiction (other thanSingapore), where action for the purpose is required. Accordingly, the Shares may not be offeredor sold, directly or indirectly, and neither this Prospectus nor any other offering material, circular,
form of application or advertisement in connection with the Shares may be distributed or
published, in or from any country or jurisdiction, except under circumstances that will result incompliance with all applicable rules and regulations of any such country or jurisdiction.
United States
The Offering Shares have not been and will not be registered under the U.S. Securities Act or withany securities regulatory authority of any state or jurisdiction in the United States, and may not be
offered or sold within the United States except in certain transactions exempt from or not subject
to the registration requirements of the U.S. Securities Act and state securities laws of the UnitedStates. Terms used in this paragraph have the meanings given to them by Regulation S under the
U.S. Securities Act.
If you purchase the Offering Shares in the Offering, you will be deemed to have maderepresentations and agreements as described under the section entitled “Notice to Investors” inthis Prospectus.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented theProspectus Directive (each, a “Relevant Member State”), an offer to the public of any of ourshares may not be made in that Relevant Member State, except that an offer to the public in that
Relevant Member State of any of our shares may be made at any time under the following
exemptions under the Prospectus Directive, if they have been implemented in that Relevant
Member State:•

to any legal entity which is a qualified investor as defined in the Prospectus Directive;•

to fewer than 100 or, if the Relevant Member State has implemented the relevant provisionof the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive), as permitted under the Prospectus
Directive, subject to obtaining the prior consent of the representatives for any such offer; or•in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided
that no such offer of our shares shall result in a requirement for the publication by us or any
underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

Each person in a Relevant Member State who receives any communication in respect of, or who
acquires any shares under, the offer of shares contemplated by this prospectus will be deemed tohave represented, warranted and agreed to and with us and the Sole Global Coordinator, Issue
Manager and Underwriter that:237

•

it is a qualified investor within the meaning of the law in that Relevant Member State
implementing Article 2(1)(e) of the Prospectus Directive; and•in the case of any shares acquired by it as a financial intermediary, as that term is used in
Article 3(2) of the Prospectus Directive, (i) the shares acquired by it in the offering have notbeen acquired on behalf of, nor have they been acquired with a view to their offer or resale
to, persons in any Relevant Member State other than qualified investors (as defined in the
Prospectus Directive), or in circumstances in which the prior consent of the representatives
has been given to the offer or resale; or (ii) where shares have been acquired by it on behalfof persons in any Relevant Member State other than qualified investors, the offer of thoseshares to it is not treated under the Prospectus Directive as having been made to such
persons.

For the purposes of this provision, the expression an “offer to the public” in relation to any of ourshares in any Relevant Member State means the communication in any form and by any meansof sufficient information on the terms of the offer and any of our shares to be offered so as toenable an investor to decide to purchase or subscribe to any of our shares, as the same may bevaried in that Relevant Member State by any measure implementing the Prospectus Directive inthat Relevant Member State, the expression “Prospectus Directive” means Directive 2003/71/EC(and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented
in the Relevant Member State) and includes any relevant implementing measure in the Relevant
Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United Kingdom
This prospectus and any other material in relation to any shares described herein is only being
distributed to, and is only directed at, persons in the United Kingdom that are qualified investors
within the meaning of Article 2(1)(e) of the Prospective Directive that also (i) have professional
experience in matters relating to investments falling within Article 19(5) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), (ii) who fallwithin Article 49(2)(a) to (d) of the Order or (iii) to whom it may otherwise lawfully be
communicated (all such persons together being referred to as “relevant persons”). The shares
are only available to, and any invitation, offer or agreement to purchase or otherwise acquire suchshares will be engaged in only with, relevant persons. This prospectus and its contents are
confidential and should not be distributed, published or reproduced (in whole or in part) or
disclosed by recipients to any other person in the United Kingdom. Any person in the United
Kingdom that is not a relevant person should not act or rely on this prospectus or any of its
contents.
Japan
The Offering Shares offered hereby have not been and will not be registered under the FIEA.
Accordingly, Daiwa Capital Markets has represented, warranted and agreed that the Offering
Shares which it subscribes will be subscribed by it as principal and that, in connection with theoffering made hereby, it will not, directly or indirectly, offer or sell any Offering Shares in Japan orto, or for the benefit of, any resident of Japan (which term as used herein means any person
resident in Japan, including any corporation or other entity organised under the laws of Japan) or
to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any
resident of Japan, except pursuant to an exemption from the registration requirements of, andotherwise in compliance with, the FIEA and other relevant laws and regulations of Japan.

238

Hong Kong
The Offering Shares may not be offered or sold in Hong Kong, by means of any document, otherthan (a) to “professional investors” as defined in the Securities and Futures Ordinance (Chapter
571 of the Laws of Hong Kong) (the “SFO”) and any rules made thereunder; or (b) in othercircumstances which do not result in the document being a “prospectus” as defined in the
Companies Ordinance (Chapter 32 of the Laws of Hong Kong) or which do not constitute an offerto the public within the meaning of that Ordinance. No person may issue or, have in its possession
for the purposes of issue (in each case whether in Hong Kong or elsewhere), any advertisement,
invitation or document relating to the Offering Shares which is directed at or the contents of which
are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under
the securities laws of Hong Kong) other than with respect to the Offering Shares which are or are
intended to be disposed of only (a) to persons outside Hong Kong or (b) to “professional investors”
as defined in the SFO and any rules made thereunder.
OTHER RELATIONSHIPS
Daiwa Capital Markets and certain of its affiliates may have performed, or will perform investmentbanking and/or advisory, escrow or other banking-related services for us and our affiliates fromtime to time for which they received customary fees and expenses.
In addition, Daiwa Capital Markets and its affiliates may, from time to time, trade in our securities,
engage in transactions with, and perform services for us and our affiliates in the ordinary courseof their business.

239

CLEARANCE AND SETTLEMENT
A letter of eligibility has been obtained from the SGX-ST for the listing of and quotation for our
Shares. Upon admission to the Official List of the SGX-ST, we will be listed on both the SGX-ST
and the TSE, with the TSE being the primary exchange and the SGX-ST being the secondary
exchange on which our Shares may be traded. Our Shares are quoted in Japanese Yen on theTSE, and will be quoted in Singapore Dollars on the SGX-ST. For the purpose of trading on the
SGX-ST, a board lot for our Shares will comprise one Share.
CDP, a wholly-owned subsidiary of Singapore Exchange Limited, is incorporated under the lawsof Singapore and acts as a depository and clearing organisation. CDP holds securities for its
account-holders and facilitates the clearance and settlement of securities transactions between
account-holders through electronic book-entry changes in the Securities Accounts maintained bysuch account-holders with CDP.
TRADING, SETTLEMENT AND REGISTRATION OF SHARES
Upon listing and quotation on the SGX-ST, our Shares will be traded on the TSE and the SGX-ST.
The principal register of our Shareholders will be maintained in Japan. There will not be a branchregister in Singapore.
The transfers of our Shares between the SGX-ST and the TSE will be carried out on a scriplessbasis. The procedure for the transfer of our Shares between the TSE and the SGX-ST and for thedeposition and withdrawal of our shares in the CDP system to facilitate trading on the TSE and the
SGX-ST are set out in the following paragraphs.
CLEARANCE AND SETTLEMENT ON THE SGX-ST
Upon listing and quotation on the SGX-ST, Shares that are traded on the SGX-ST will be cleared
and settled under the book-entry settlement system of the CDP, and all dealings in andtransactions of the Shares through the SGX-ST will be effected in accordance with the terms andconditions for the operation of securities accounts with the CDP and the terms and conditions for
CDP to act as depository for foreign securities, as amended from time to time.
Under Japanese law and our Articles of Incorporation, persons holding our Shares in a Securities
Account with CDP and whose names appear in the depository register of CDP will not be regarded
as our Shareholders. CDP, as the registered holder of our Shares, will be regarded as a
Shareholder of our Company. The Shares that are traded on the SGX-ST will be scripless shares
held by CDP’s custodian in Japan, for and on behalf of persons who maintain, either directly or
through a Depository Agent, securities accounts with CDP.
For the avoidance of doubt, CDP or its nominees, as bare trustees, will not be regarded as having
an interest in our Shares in respect of the Shares registered in their respective names. All Sharesdeposited with CDP, for purposes of determining our foreign shareholding levels, will be regarded
as being held by non-Japanese entities.
All Japanese listed companies, including our Company, are unable to issue physical certificateswith respect to the listed shares and all transfers of listed shares of Japanese listed companies
must be made through the JASDEC book-entry settlement system. Accordingly, persons holding
our Shares in a Securities Account with CDP will not be able to withdraw the number of Shares
they own from either the JASDEC or CDP book-entry settlement system in the form of physicalshare certificates.

240

Transactions in our Shares under the CDP book-entry settlement system will be reflected by theseller’s Securities Account being debited with the number of Shares sold and the buyer’s
Securities Account being credited with the number of Shares acquired and no transfer stamp duty
is currently payable for the transfer of Shares that are settled on a book-entry basis.
CLEARING FEES
A clearing fee for the trading of Shares on the SGX-ST is payable at the rate of 0.04% of thetransaction value, subject to a maximum of S$600 per transaction. The clearing fee, instrumentsof transfer deposit fees and share withdrawal fee may be subject to GST at the prevailing rate
(currently 7.0%).
Dealings in our Shares will be carried out in Singapore Dollars and will be effected for settlementin CDP on a scripless basis. Settlement of trades on a normal “ready” basis on the SGX-ST
generally takes place on the third Market Day following the transaction date. CDP holds securities
on behalf of Depositors in Securities Accounts. An investor may open a direct account with CDP
or a sub-account with any Depository Agent. A Depository Agent may be a member company of
the SGX-ST, bank, merchant bank or trust company.
DEALING OF SHARES ON THE SGX-ST
Dealing of Shares on the SGX-ST should be conducted with member companies of the SGX-ST
by Tosei CDP Depositors who hold direct securities accounts with CDP or a sub-account with a
Depository Agent.
Dealings in, and transactions of, Shares on the SGX-ST will be due for settlement on the third
Market Day following the date of transaction (T+3 or the “Settlement Date”). Shareholders should
ensure that there are sufficient Shares in their direct securities account with CDP or theirsub-account with a Depository Agent on the Settlement Date. Settlement of dealings through the
CDP direct securities account or sub-account with a Depository Agent shall be made inaccordance with CDP’s “Terms and Conditions for Operation of Securities Accounts with CDP”,
and the “Terms and Conditions for CDP to Act as Depository for Foreign Securities”, as amended
from time to time.
MECHANISM FOR TRANSMISSION OF SHARES FROM CDP FOR TRADING ON THE TSE
Please note that in all cases of transmissions referred to in this section, there should not be anychange or difference, or purported change or difference, in the beneficial owner of the Shares
before and after transmission.
Please note that the transmission process and/or fees payable are subject to change. For further
information or copies of the relevant transmission forms, please contact CDP (or your Depository
Agent, as the case may be). For the avoidance of doubt, all fees and taxes (including stamp
duties) incurred during the transmission process shall be borne by the relevant Tosei CDP
Depositor.

241

Transfer of Shares for trading on the TSE will only be carried out on a scripless basis. A Tosei CDP
Depositor whose Shares are held through CDP and wishes to trade his Shares on the TSE mustfirst arrange to transfer his Shares into his securities account opened with a Japanese broker ormake other arrangements to hold and trade the Shares through a JASDEC participant. The
following sets out the procedures for effecting such transfer of Shares:
(a)

(b)

the Tosei CDP Depositor must contact his Singapore broker or CDP in the following manner:(i)

where the Tosei CDP Depositor holds a direct securities account with CDP, theShareholder shall complete a “Request for Transfer of Securities out of CDP’s AccountForm” as prescribed by CDP and submit the completed form together with the relevant
supporting documents and fees to CDP directly or via his Singapore broker; or(ii)

where the Tosei CDP Depositor holds a securities sub-account with a Singapore broker,
the Singapore broker shall complete and deliver the “Request for Transfer of Securities
out of CDP’s Account Form” and supporting documents to CDP; andthe Tosei CDP Depositor shall contact his broker in Japan or the relevant JASDEC participant
to instruct that party to receive the Shares from CDP’s account with its Japanese custodianin JASDEC.

Barring unforeseen circumstances, the transfer of Shares from CDP into the Tosei CDP
Depositors’ securities account opened with his Japanese broker would normally be completed
within several days from the time CDP and the Japanese broker receive such transfer request.
MECHANISM FOR TRANSMISSION OF SHARES TO CDP FOR TRADING ON THE SGX-ST
Please note that in all cases of transmissions referred to in this section, there should not be anychange or difference, or purported change or difference, in the beneficial owner of the Shares
before and after transmission.
Please note that the transmission process and/or fees payable are subject to change. For further
information or copies of the relevant transmission forms, please contact your broker or the
relevant JASDEC participant. For the avoidance of doubt, all fees and taxes (including stamp
duties) incurred during the transmission process shall be borne by the relevant Shareholder.
Transfer of Shares for trading on the SGX-ST will only be carried out on a scripless basis. A
Shareholder whose Shares are not held through CDP and wishes to trade his Shares on the
SGX-ST must first arrange to transfer his Shares into his Singapore securities account with CDP.
Such Singapore securities account can be held by the Shareholder either directly with CDP or
indirectly through a Depository Agent.
The following sets out the procedures for effecting such transfer of Shares:(a)the Shareholder shall contact his Japanese broker or the JASDEC participant through which
the Shareholder holds the Shares in JASDEC in order to instruct that party to arrange for thetransfer of his Shares to CDP’s account with its Japanese custodian in JASDEC; and(b)

the Shareholder shall contact CDP or his Singapore broker in the following manner:(i)

where the Shareholder holds a direct securities account with CDP, the Shareholder
shall complete a “Request for Transfer of Securities into CDP’s Account Form” asprescribed by CDP, and submit the completed form with the relevant payment to CDP
directly or via his Singapore broker; or

242

(ii)

where the Shareholder holds a securities sub-account with a Singapore broker, theSingapore broker shall complete and deliver the “Request for Transfer of Securities into
CDP’s Account Form” to CDP.

Barring unforeseen circumstances, CDP will normally credit the Shareholder’s Singapore
securities account within several days from the time CDP and the Japanese broker receive suchtransfer request. If a Shareholder decides to transfer his Shares into CDP for trading on the
SGX-ST, his name may no longer appear on (a) the JASDEC Record of Depositors, or (b) the
Register of Members kept in Japan and he will be considered a Tosei CDP Depositor instead ofa Shareholder in respect of his Shares held through CDP.
Shareholders and Tosei CDP Depositors, as the case may be, are advised to ensure thattransmissions of Shares to and from CDP are completed before they trade in our Shares.
VOTING INSTRUCTIONS
Under Japanese law and our Articles of Incorporation, persons holding our Shares in a Securities
Account with CDP and whose names appear in the depository register of CDP will not be regarded
as our Shareholders as long as CDP is not a system participant of JASDEC. Only Shareholders
whose names appear on (a) the JASDEC Record of Depositors, and (b) the Register of Members
kept in Japan are entitled to attend meetings of Shareholders and exercise their voting rights
under their names with regard to Shares directly owned by them. Tosei CDP Depositors who
subscribe for Shares in the Offering and those who trade Shares listed on the SGX-ST would holdtheir Shares through the CDP system. Accordingly, CDP will be the only holder on record of the
Shares held by the Tosei CDP Depositors through CDP and, accordingly, the only person or entity
recognised as a Shareholder and legally entitled to vote on any matter to be submitted to the voteof our Shareholders at a general meeting of Shareholders. Tosei CDP Depositors will not be able
to attend such Shareholders’ meeting in their own names.
Nonetheless, we will mail to Tosei CDP Depositors, in English, any notice of Shareholders’meetings, together with a voting instruction form. Tosei CDP Depositors will, indirectly, be able tovote on such matters to be decided by the Shareholders’ meeting by returning the voting
instruction form by the relevant deadline to our Singapore Collation Agent. Our Singapore
Collation Agent will, after the collation of valid voting instructions from Tosei CDP Depositors,
furnish CDP, as a Shareholder of our Company, such voting instructions on behalf of all Tosei CDP
Depositors. If our Singapore Collation Agent receives no voting instructions from Tosei CDP
Depositors by the relevant deadline, CDP will not vote at the relevant Shareholders’ meeting.
Tosei CDP Depositors who wish to attend Shareholders’ meetings and exercise their voting rights
under their names with regard to Shares beneficially owned by them will be required to transfer
their Shares out of the CDP system and have the Shares transferred into a securities accountopened with a Japanese broker or make other appropriate arrangements to hold the Shares
directly through a JASDEC participant prior to the record date for the relevant Shareholders’meeting.

243

LEGAL MATTERS
Certain legal matters in connection with this Offering will be passed upon for us by Rajah & Tann
LLP with respect to matters of Singapore law and Mori Hamada & Matsumoto with respect tomatters of Japanese law. Certain legal matters in connection with this Offering will be passed upon
for the Sole Global Coordinator, Issue Manager and Underwriter by ATMD Bird & Bird LLP withrespect to Singapore law.
Each of Rajah & Tann LLP, Mori Hamada & Matsumoto and ATMD Bird & Bird LLP does not make,or purport to make, any statement in this Prospectus and is not aware of any statement in thisProspectus which purports to be based on a statement made by it, and it makes no representation,
express or implied, regarding, and takes no responsibility for, any statement in or omission fromthis Prospectus.

244

GENERAL AND STATUTORY INFORMATIONSTATUTORY MATTERS(1)

As at the date of this Prospectus, none of our Directors and Statutory Auditors have:(a)at any time during the last 10 years, had an application or a petition under any
bankruptcy laws of any jurisdiction filed against him or against a partnership of which
he was a partner at the time when he was a partner or at any time within two years fromthe date he ceased to be a partner;(b)at any time during the last 10 years, had an application or a petition under any law ofany jurisdiction filed against an entity (not being a partnership) of which he was a
director or an equivalent person or a key executive, at the time when he was a director
or an equivalent person or a key executive of that entity or at any time within two years
from the date he ceased to be a director or an equivalent person or a key executive ofthat entity, for the winding-up or dissolution of that entity, or where that entity is thetrustee of a business trust, that business trust, on the ground of insolvency;(c)

any unsatisfied judgments against him;(d)ever been convicted of any offence, in Singapore or elsewhere, involving fraud or
dishonesty which is punishable with imprisonment, or has been the subject of any
criminal proceedings (including any pending criminal proceedings of which he is aware)
for such purpose;(e)ever been convicted of any offence, in Singapore or elsewhere, involving a breach of
any law or regulatory requirement that relates to the securities or futures industry in
Singapore or elsewhere, or has been the subject of any criminal proceedings (including
any pending criminal proceedings of which he is aware) for such breach;(f)at any time during the last 10 years, had judgment entered against him in any civil
proceedings in Singapore or elsewhere involving a breach of any law or regulatory
requirement that relates to the securities or futures industry in Singapore or elsewhere,
or a finding of fraud, misrepresentation or dishonesty on his part, or has been thesubject of any civil proceedings (including any pending civil proceedings of which he isaware) involving an allegation of fraud, misrepresentation or dishonesty on his part;(g)ever been convicted in Singapore or elsewhere of any offence in connection with theformation or management of any entity or business trust;(h)ever been disqualified from acting as a director or an equivalent person of any entity(including the trustee of a business trust), or from taking part directly or indirectly in the
management of any entity or business trust;(i)ever been the subject of any order, judgment or ruling of any court, tribunal or
governmental body permanently or temporarily enjoining him from engaging in any typeof business practice or activity;(j)ever, to his knowledge, been concerned with the management or conduct, in Singapore
or elsewhere, of the affairs of:(i)any corporation which has been investigated for a breach of any law or regulatory
requirement governing corporations in Singapore or elsewhere;

245

(ii)

any entity (not being a corporation) which has been investigated for a breach of
any law or regulatory requirement governing such entities in Singapore orelsewhere;(iii) any business trust which has been investigated for a breach of any law or
regulatory requirement governing business trusts in Singapore or elsewhere; or(iv) any entity or business trust which has been investigated for a breach of any law
or regulatory requirement that relates to the securities or futures industry in
Singapore or elsewhere,
in connection with any matter occurring or arising during the period when he was soconcerned with the entity or business trust; or(k)ever been the subject of any current or past investigation or disciplinary proceedings,
or has ever been reprimanded or issued any warning, by the Authority or any otherregulatory authority, exchange, professional body or government agency, whether in
Singapore or elsewhere.

LITIGATION(2)In December 2010, TCC had entered into service agreements for the (i) provision, and (ii)
receipt, of emergency building maintenance services. In March 2012, in spite of TCC fulfillingits payment obligations to the party supplying services (“Provider”), the party receiving
services (“Recipient”) had defaulted on its monthly service fee payments to TCC. As a resultof negotiations with the Recipient, TCC, the Recipient and the Provider had entered into a
tripartite termination agreement (“Termination Agreement”) retrospectively terminatingeach service agreement as at 31 January 2012. Under the Termination Agreement, theProvider would have to refund service fees paid by TCC to it in respect of periods after 31
January 2012, which amounted to JPY80,115,000 (S$1.05 million) (“Outstanding Amount”).
The Recipient would have no further obligations in respect of fees owing to TCC for periods
owing after 31 January 2012, on the condition that the Provider had refunded theOutstanding Amount. TCC has thus far received a sum of JPY2,465,000 (S$32,333) from theProvider.
On 31 October 2012, TCC commenced separate civil suits against:(i)the Provider for JPY77,650,000 (S$1.02 million) (being the Outstanding Amount lessthe JPY2,465,000 paid) and late payment interest of 6% per annum commencing from17 October 2012; and(ii)

the Recipient for JPY81,535,000 (S$1.07 million) (being the aggregate amount of
unpaid service fees owed to TCC) and late payment interest of 6% per annum
commencing from 1 March 2012.

Our Company had already made provision for all of the Outstanding Amount in FY2012.
WORKING CAPITAL(3)

Our Directors believe that, after taking into account the present banking facilities and cash
flows from our operations and barring any unforeseen circumstances beyond our control, we
will have sufficient working capital available for our present requirements. For a further
description of our working capital, please see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Liquidity and Capital Resources”.

246

OUR SUBSIDIARIES(4)

The following is a list of our subsidiaries:

Principal
Activities

Representative
Director

Effective
Ownership
Interest/
VotingRights

Japan

Asset
Management

Ryohei Yasuda

100%

21 December 1995
Japan

Japan

Property
Management

Tsugio Uchida

100%

Tosei
RevivalInvestment

11 March 2005
Japan

Japan

Alternative
Investment

KanameWakabayashi

100%

Tosei
Singapore

10 January 2012
Singapore

Singapore

Real EstateManagement(2)

Nil

100%

HestiaCapital17 August 2005
Japan

Japan

Alternative
Investment

Nil

100%

NAI
Tosei(1)20 January 2012
Japan

Japan

Real Estate
Agency andConsultancy

Tetsuji
Komiyama

100%

Green
House (inliquidation)

12 April 1967
Japan

Japan

Currently involuntaryliquidation

Nil

100%

Name

Date and Countryof Incorporation

Tosei Asset
Advisors

28 September 2005
Japan

Tosei
Community
Co

Principal
Place ofBusiness

Notes:(1)

NAI Tosei Japan, Inc was incorporated as Sannomiya Real Estate Sales LLC and was an unconsolidated
subsidiary (accounted for as a “financial asset available for sale”) of our Company up until 30 November 2012as it was immaterial in terms of its effect on our Group’s financial performance and operations. It was
renamed, converted into a joint stock company and consolidated into the financial statements of our Company
with effect from 1 December 2012.

(2)

This is the intended activity of the subsidiary. As at the Latest Practicable Date, operations have notcommenced.

CHANGES IN ISSUED SHARE CAPITAL(5)

Save as disclosed below and as set out in “Dilution”, there were no changes in the issued andpaid-up share capital of our Company and our subsidiaries within the three years preceding
the Latest Practicable Date:

247

Tosei Corporation
Resultingpaid-in
capital (1)(2)

Number ofshares issued

Price
per share

14 October
2009

11,300¥31,500

Exercise ofstock
acquisitionrights by
Merrill Lynch
Japan
Securities
Company¥4,328,464,050

15 October
2009

7,700

¥31,860

Exercise ofstock
acquisitionrights by
Merrill Lynch
Japan
Securities
Company¥4,452,807,500

15 April 2010

8,000

¥31,500

Exercise ofstock
acquisitionrights by
Merrill Lynch
Japan
Securities
Company¥4,580,555,500

19 April 2010

29,000¥31,815

Exercise ofstock
acquisitionrights by
Merrill Lynch
Japan
Securities
Company¥5,048,209,500

6 May 2010

24,000¥33,435

Exercise ofstock
acquisitionrights by
Merrill Lynch
Japan
Securities
Company¥5,454,673,500

Date

PurposeNotes:(1)

Japan has no concept of par value of shares. Under the Japanese Companies Act, at least 50% of the theamount contributed as consideration for the securities must be accounted for as the paid-in capital (shihonkin)of a company. The remainder of the contributed amount not accounted for as the paid-in capital will be applied
towards a company’s capital reserve.

(2)

Increase in paid-in capital includes not only contribution from consideration paid directly for share (equal tothe price per share), but also contribution from consideration paid for share options (equal to the price pershare option divided by number of shares issued upon exercise of such share option).

248

NAI Tosei Japan, Inc.

Date

Number ofshares issued

Price per
share

400

¥50,000

1 December
2012

PurposeConversion intoa Kabushiki
KaishaResultingissued sharecapital¥20,000,000

Tosei Singapore Pte. Ltd.
Resultingissued sharecapital

Number ofshares issued

Price pershare

Purpose

10 January
2012

1

S$1.00

Incorporation

S$1.0026 January
2012

299,999

S$1.00

Allotment to
Tosei
Corporation

S$300,000.00

Date

Metis Capital, previously a wholly-owned subsidiary of our Group, was acquired andabsorbed by our wholly-owned subsidiary, Tosei Revival Investment, on 31 May 2012.
MATERIAL CONTRACTS(6)

We have not entered into any material contracts, being contracts entered into outside theordinary course of business, during the two years preceding the date of lodgment of thisProspectus with the Authority.

MISCELLANEOUS(7)

As at the date of this Prospectus, no person has been, or is entitled to be, given an option
to subscribe for or purchase any securities of our Company and our subsidiaries.

(8)

There was no public take-over offer by a third party in respect of our Shares or by ourCompany in respect of the shares of another corporation or the units of a business trust
between 1 December 2011 and the Latest Practicable Date.

(9)

We did not employ any expert on a contingent basis or who has a material interest, whether
direct or indirect, in our Shares or the shares of our subsidiaries, or has a material economic
interest, whether direct or indirect, in our Company including an interest in the success of theOffering.

(10) Save as disclosed in this Prospectus, the business or profitability of our Group is notmaterially dependent on any patent or licence, industrial, commercial or financial contract(including a contract with a customer or supplier) or new manufacturing process.
(11) Save as disclosed in this Prospectus, our Directors are not aware of any event which has
occurred since 31 August 2012 which may have a material effect on the financial information
provided in Appendix C – “Independent Auditor’s Report On The Unaudited Consolidated
Financial Statements Of Tosei Corporation And Its Subsidiaries For The Three-Month andNine-Month Periods Ended 31 August 2012”.

249

RESPONSIBILITY STATEMENT BY OUR DIRECTORS(12) Our Directors collectively and individually accept full responsibility for the accuracy of theinformation given in this Prospectus and confirm after making all reasonable enquiries that,to the best of their knowledge and belief, this Prospectus constitutes full and true disclosureof all material facts about the Offering, our Company and its subsidiaries, and our Directors
are not aware of any facts the omission of which would make any statement in thisProspectus misleading. Where information in the Prospectus has been extracted frompublished or otherwise publicly available sources or obtained from a named source, the sole
responsibility of our Directors has been to ensure that such information has been accurately
and correctly extracted from those sources and/or reproduced in the Prospectus in its proper
form and context.
CONSENTS(13) Nexia TS Public Accounting Corporation, named as the Independent Auditor, has given andhas not withdrawn its written consent to the issue of this Prospectus with the inclusion of thefollowing:(a)

its name;(b)

the Independent Auditor’s Report On The Consolidated Financial Statements Of Tosei
Corporation And Its Subsidiaries For The Financial Years Ended 30 November 2009,2010 and 2011 set out in Appendix A to this Prospectus;(c)the Independent Auditor’s Report On The Consolidated Financial Statements Of Tosei
Corporation And Its Subsidiaries For The Six-Month Period Ended 31 May 2012 set out
in Appendix B to this Prospectus; and(d)the Independent Auditor’s Report On The Unaudited Consolidated Financial Statements
Of Tosei Corporation And Its Subsidiaries For The Three-Month and Nine-Month
Periods Ended 31 August 2012 set out in Appendix C to this Prospectus,

in the form and context in which they are included and appear in this Prospectus, and to act
in such capacity in relation to this Prospectus.
(14) DTZ Debenham Tie Leung K.K., named as the Industry Expert, has given and has notwithdrawn its written consent to the issue of this Prospectus with the inclusion of thefollowing:(a)

its name; and(b)the section entitled “Industry Overview” set out in this Prospectus,

in the form and context in which they are included and appear in this Prospectus, and to act
in such capacity in relation to this Prospectus.
(15) Daiwa Capital Markets, the Sole Global Coordinator, Issue Manager and Underwriter, hasgiven, and has not withdrawn, its written consent to the issue of this Prospectus with theinclusion herein of, and all references to, its name in the form and context in which they
appear in this Prospectus, and to act in such capacity in relation to this Prospectus.

250

DOCUMENTS AVAILABLE FOR INSPECTION(16) Copies of the following documents may be inspected in Japan at our registered office at
4-2-3 Toranomon, Minato-ku, Tokyo, 105-0001 Japan, or in Singapore at 9 Battery Road,#15-01, Singapore 049910 during normal business hours for a period of six months from thedate of registration of this Prospectus by the Authority:(a)our Articles of Incorporation;(b)

the industry report prepared by the Industry Expert;(c)the letters of consent referred to in this Prospectus;(d)

IFRS Consolidated Financial Statements; and(e)the audited consolidated financial statements of our Group for the financial years ended
30 November 2009, 2010 and 2011, the unaudited consolidated financial statements of
our Group for the six months ended 31 May 2012 and the unaudited consolidated
financial statements of our Group for the three month and nine month periods ended 31
August 2012, together with the related notes thereto, each of which has been preparedin accordance with JGAAP.

251

This page has been intentionally left blank.

APPENDIX A

INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS OF TOSEI CORPORATION AND ITS SUBSIDIARIESFOR THE FINANCIAL YEARS ENDED 30 NOVEMBER 2009, 2010 AND 2011
INDEPENDENT AUDITOR’S REPORT
22 February 2013
The Board of Directors
Tosei Corporation
Toranomon Tosei Building
4-2-3 Toranomon
Minato-ku, Tokyo,
Japan
Dear Sirs
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Tosei Corporation (the“Company”) and its subsidiaries (collectively, the “Group”), which comprise the consolidatedbalance sheets of the Group as at 30 November 2009, 2010 and 2011, and the consolidated
statements of comprehensive income, the consolidated statements of changes in equity and theconsolidated statements of cash flows of the Group for each of the financial years then ended, anda summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fairview in accordance with International Financial Reporting Standards, and for devising andmaintaining a system of internal accounting controls sufficient to provide a reasonable assurance
that assets are safeguarded against loss from unauthorised use or disposition; and transactions
are properly authorised and that they are recorded as necessary to permit the preparation of trueand fair profit and loss accounts and balance sheets and to maintain accountability of assets.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material
misstatement.

A-1

INDEPENDENT AUDITOR’S REPORT (continued)
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity’s preparation of financial statements that give atrue and fair view in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
controls. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements of the Group are properly drawn up inaccordance with International Financial Reporting Standards so as to give a true and fair view ofthe state of affairs of the Group as at 30 November 2009, 2010 and 2011, and the results, changes
in equity and cash flows of the Group for each of the financial years ended on 30 November 2009,2010 and 2011.
Report on Other Legal and Regulatory Requirements
This report has been prepared in accordance with the Singapore Securities and Futures (Offersof Investments) (Shares and Debentures) Regulations 2009 for the purpose of inclusion in fillings
associated with a proposed secondary listing of the Company’s shares on the Mainboard of theSingapore Exchange Securities Trading Limited (“SGX-ST”).

Nexia TS Public Accounting Corporation
Public Accountants and Certified Public Accountants
SingaporeDirector-in-charge: Loh Hui Nee

A-2

Tosei Corporation and Its Subsidiaries
Consolidated Statements of Comprehensive Income
For the Financial Years ended 30 November 2009, 2010 and 2011
Financial years ended 30 November
2009
2010
2011

Note

¥’000

¥’000

¥’000

33,622,879

26,439,782

24,760,909

Cost of revenue . . . . . . . . . . . . . . . .

(28,983,821)(22,367,548)(19,580,688)

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

4,639,058

4,072,234

5,180,221

Revenue . . . . . . . . . . . . . . . . . . . . . .

5

Other income . . . . . . . . . . . . . . . . . .

875,566

28,79262,655

Other losses – net . . . . . . . . . . . . . .

9(322,286)(3,503)(17,155)(2,656,989)(2,682,504)(2,937,343)(805,826)(826,734)(778,868)

929,523588,285

1,509,510(450,514)(280,584)(769,243)

479,009

307,701

740,267(1,183)

1,162(3,143)

Other comprehensive(losses)/income, net of tax . . . . . . . .

(1,183)

1,162(3,143)

Total comprehensive income . . . .

477,826

308,863

737,124

479,009

307,701

740,267

477,826

308,863

737,124

1,262.82

711.31

1,620.41

Expenses− Administrative . . . . . . . . . . . . . . . .
− Finance . . . . . . . . . . . . . . . . . . . . .

10Profit before income tax . . . . . . . . . .
Income tax expense . . . . . . . . . . . . .

11(a)Net profit . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (losses)/
income:Available-for-sale financial assets− Fair value (losses)/gains . . . . . . . .

11(b)Profit attributable to:Equity holders of the Company . . . .
Total comprehensive income
attributable to:Equity holders of the Company . . . .
Earnings per share attributable toequity holders of the Company(¥ per share)− Basic and diluted . . . . . . . . . . . . .

12

The accompanying notes form an integral part of these financial statements.
A-3

Tosei Corporation and Its Subsidiaries
Consolidated Balance Sheets
As at 30 November 2009, 2010 and 2011
Note

2009

2010

2011

¥’000

¥’000

¥’000

13

7,852,037

7,164,318

8,381,689

14
15
16
17
22

14,66910,0001,033,430
37,981,749
1,325

14,62010,000975,404
37,835,218
1,673

17,805
10,0001,205,353
33,967,938
2,335

46,893,210

46,001,233

43,585,120

43,639162,405
9,483,341
3,398,024
92,75725,3572,716,302

41,845
111,874
11,161,447
3,355,937
63,41725,3572,449,313

369,867
125,635
11,378,055
3,341,262
66,8568,380
1,724,661

15,921,825

17,209,190

17,014,716

62,815,035

63,210,423

60,599,836

1,873,916
55,164
16,186,371

1,453,173
39,092
10,825,128

2,517,703
81,331
6,171,720

18,115,451

12,317,393

8,770,754

2,137,128
19,106,428
324,192
409,346

1,886,914
23,436,182
307,734
462,953

1,835,279
23,900,745
280,380
504,727

21,977,094

26,093,783

26,521,131

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

40,092,545

38,411,176

35,291,885

NET ASSETS . . . . . . . . . . . . . . . . . . .

22,722,490

24,799,247

25,307,951

4,452,807
13,717,521
4,552,162

5,454,673
13,827,302
5,517,272

5,454,673
14,339,149
5,514,129

22,722,490

24,799,247

25,307,951

ASSETS
Current assets
Cash and cash equivalents . . . . . . . . .
Financial assets, at fair value throughprofit or loss . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . .
Trade and other receivables . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . .

Non-current assets
Available-for-sale financial assets . . . . .
Trade and other receivables . . . . . . . . .
Investment properties . . . . . . . . . . . . .
Property, plant and equipment . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets . . . . . . . . .

15
18
19
20
21
22
27

Total assets . . . . . . . . . . . . . . . . . . . .
LIABILITIESCurrent liabilities
Trade and other payables . . . . . . . . . .
Current income tax liabilities . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . .

Non-current liabilities
Trade and other payables . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities. . . . . . . .
Retirement benefits obligations . . . . . . .

EQUITY
Capital and reserve attributable toequity holders of the Company
Share capital . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . .
Other reserves . . . . . . . . . . . . . . . . . .

23
24

23
24
27
26

28
29
30

Total equity . . . . . . . . . . . . . . . . . . . .

The accompanying notes form an integral part of these financial statements.
A-4

Tosei Corporation and Its Subsidiaries
Consolidated Statements of Changes in Equity
For the Financial Years ended 2009, 2010 and 2011
Attributable to equity holders of the Company
Accumulated
othercomprehensive Retained
Total
Share
Capitalincome/(losses) earnings
equitycapitalreserve
¥’000

¥’000

¥’000

¥’000

¥’000

Beginning of financial year . . . . .

4,148,020

4,231,495

794

Issuance of ordinary shares(Notes 28 and 30) . . . . . . . . . . . .

304,787

321,056––

625,843

Dividend relating to 2008 paid
(Note 31) . . . . . . . . . . . . . . . . . . .

–

–

–

(376,840)(376,840)

Total comprehensive (losses)/
income for the financial year . . . . .

––(1,183)

479,009477,826

End of financial year . . . . . . . . . .

4,452,807

4,552,551(389)

13,717,521 22,722,490

Beginning of financial year . . . . .

4,452,807

4,552,551(389)

13,717,521 22,722,490

Issuance of ordinary shares(Notes 28 and 30) . . . . . . . . . . . .

1,001,866

963,948––

1,965,814

Dividend relating to 2009 paid
(Note 31) . . . . . . . . . . . . . . . . . . .

–

–

–

(197,920)(197,920)

Total comprehensive income forthe financial year . . . . . . . . . . . . .

–

–

1,162

307,701

308,863

End of financial year . . . . . . . . . .

5,454,673

5,516,499

773

13,827,302 24,799,247

Beginning of financial year . . . . .

5,454,673

5,516,499

773

13,827,302 24,799,247

Dividend relating to 2010 paid
(Note 31) . . . . . . . . . . . . . . . . . . .

–

–

–

(228,420)(228,420)

Total comprehensive (losses)/
income for the financial year . . . . .

––(3,143)740,267

737,124

End of financial year . . . . . . . . . .

5,454,673

5,516,499(2,370)2009
13,615,352 21,995,661

2010

2011

14,339,149 25,307,951

The accompanying notes form an integral part of these financial statements.
A-5

Tosei Corporation and Its Subsidiaries
Consolidated Statement of Cash Flows
For the Financial Years ended 30 November 2009, 2010 and 2011
Note

2009

2010

2011

¥’000

¥’000

¥’000

479,009

307,701

740,2679450,514
175,370–

280,584
156,141–

769,243
172,284
16,977

9

456

–

–

9
9
8
8
10

(308)
41,700(14,610)(2,832)805,826(1,184)
4,687(9,612)(2,814)
826,734–
178(2,796)(2,861)
778,868

1,935,125

1,562,237

2,472,160

15,050,168
331,469(1,594,447)
109,4693,594,789(248,546)92
167
330,000(903,757)
34,40249(348)(286,136)(678,678)
53,607(3,185)(662)
286,136
1,014,322
41,774

Cash generated from/(used in) operations . .
Interest received . . . . . . . . . . . . . . . . . .
Dividend received. . . . . . . . . . . . . . . . . .
Income tax paid . . . . . . . . . . . . . . . . . . .

16,777,666
15,0392,832(3,185,010)(834,247)
10,3332,814(46,933)

7,156,788
2,063
2,861
(27,521)

Net cash provided by/(used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . .

13,610,527(868,033)

7,134,191

20
19
21

(29,653)(20,275)(1,766)(14,055)(8,895)(3,579)(22,704)(45,623)(37,016)

15

(20)
3,480

–
–

(333,350)
–

709

4,948

–

(47,525)(21,581)(438,693)

625,843
9,230,000(21,566,988)(559)(833,513)

1,965,814
17,099,900(18,129,820)(1,569)(820,646)–
11,474,100(15,661,378)(1,567)(774,726)(376,840)(197,920)(228,420)

Net cash used in financing activities . . . .

(12,922,057)(84,241)(5,191,991)

Net increase/(decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . .

640,945(973,855)

1,503,507

Cash and cash equivalents
Beginning of financial year . . . . . . . . . . . .

7,191,092

7,832,037

6,858,182

7,832,037

6,858,182

8,361,689

Cash flows from operating activities
Net profit . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:– Income tax expense . . . . . . . . . . . . . . .
– Amortisation and depreciation . . . . . . . . .
– Impairment loss on membership . . . . . . .
− Impairment loss on available-for-salefinancial assets . . . . . . . . . . . . . . . . . .
− Net gain on disposal of available-for-salefinancial assets . . . . . . . . . . . . . . . . . .
− Write off of property, plant and equipment .
− Interest income . . . . . . . . . . . . . . . . . .
− Dividend income . . . . . . . . . . . . . . . . .
− Interest expense . . . . . . . . . . . . . . . . .
Change in working capital:− Inventories. . . . . . . . . . . . . . . . . . . . .
− Trade and other receivables . . . . . . . . . .
− Financial assets, at fair value throughprofit or loss. . . . . . . . . . . . . . . . . . . .
− Other assets . . . . . . . . . . . . . . . . . . .
− Cash restricted in use over 3 months . . . .
− Trade and other payables . . . . . . . . . . .
− Retirement benefits obligations . . . . . . . .

Cash flows from investing activities
Additions to property, plant and equipment . .
Additions to investment properties . . . . . . .
Additions of intangible assets . . . . . . . . . .
Purchases of available-for-salefinancial assets . . . . . . . . . . . . . . . . . . .
Disposal of property, plant and equipment . .
Disposal of available-for-salefinancial assets . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . .
Cash flows from financing activities
Proceeds from issuing of ordinary shares . . .
Proceeds from borrowings . . . . . . . . . . . .
Repayment of borrowings . . . . . . . . . . . . .
Repayment of lease liabilities . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . .
Dividends paid to equity holders of
the Company . . . . . . . . . . . . . . . . . . . .

End of financial year . . . . . . . . . . . . . . .

31

13

The accompanying notes form an integral part of these financial statements.
A-6

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011
These notes form an integral part of and should be read in conjunction with the accompanying
consolidated financial statements.
1.

General information
1.1

Introduction
The consolidated financial statements of Tosei Corporation (the “Company”) and its
subsidiaries (collectively, the “Group”) have been prepared for the purpose of inclusionin filings associated with a proposed secondary listing of the Company’s shares on the
Mainboard of the Singapore Exchange Securities Trading Limited (“SGX-ST”).
These consolidated financial statements were authorised for issue in accordance witha resolution of the Board of Directors of Tosei Corporation on 22 February 2013.

1.2

Corporate information
Tosei Corporation is listed on the Tokyo Stock Exchange, First Section andincorporated and domiciled in Japan. The address of its registered office is Toranomon
Tosei Building, 4-2-3 Toranomon, Minato-ku, Tokyo.
The principal activities of the Company are those of real estate revitalisation,
development and rental property management, investment in real estate funds,
financial products and assets, as well as advisory and asset management services.
The Group comprises the Company and the following subsidiaries:

Name of companies

Principal activities

Country ofbusiness/incorporation

Equity Holding
2009

2010

2011

%

%

%

Significant subsidiaries held by the Company
Tosei Community
Co., Ltd.

Property
management

Japan

100

100

100

Tosei Revival
Investment
Co., Ltd.

Alternative
investment

Japan

100

100

100

Tosei Asset Advisors,
Inc.

Fund

Japan

100

100

100

Tosei AssetManagement
Co., Ltd.

Fund

Japan

100

–

–

A-7

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

1.

General information (continued)
1.2

Corporate information (continued)

Name of companies

Principal activities

Country ofbusiness/incorporation

Equity Holding
2009

2010

2011

%

%

%

Significant subsidiaries held by Tosei Revival Investment Co., Ltd

2.

Hestia Capital
Limited Company

Alternative
investment

Japan

100

100

100

Metis CapitalCo., Ltd.

Alternative
investment

Japan

100

100

100

Green House Limited
Company

Alternative
investment

Japan

100

100

100

Hestia General
Incorporated
Foundation

Alternative
investment

Japan

100

–

–

Atlas Capital
Consolidated
Company

Alternative
investment

Japan

100

–

–

Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below.
2.1

Basis of preparation
These consolidated financial statements of the Group have been prepared for the
purpose of inclusion in filings associated with a proposed secondary listing of theCompany’s shares on the Mainboard of Singapore Exchange Securities Trading
Limited (“SGX-ST”).
These financial statements have been prepared in accordance with the International
Financial Reporting Standards (“IFRS”) issued and effective for annual periods
beginning on or after 1 December 2008. IFRS 1 (revised) First-time adoption ofInternational Financial Reporting Standards, has been applied in preparing thesefinancial statements. These consolidated financial statements are the first Groupfinancial statements to be prepared in accordance with IFRS.
The policies set out below have been consistently applied to all the years presented,
except where the Group has applied certain accounting policies and exemptions upontransitions to IFRS. The exemptions applied by the Group and the effects of transition
to IFRS are presented in Note 4. As the exemptions applied by the Group are
permitted by IFRS 1 (revised) First-time adoption of International Financial ReportingStandards, the comparative figures presented in these consolidated financial
statements have been prepared in accordance with IFRS.
A-8

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)
For the local statutory reporting purposes, consolidated financial statements of theGroup have been prepared in accordance with Japanese Generally Accepted
Accounting Principles (“JGAAP”). JGAAP differs in certain respects from IFRS.
Reconciliations and descriptions of the effects of the transition from JGAAP to IFRS on
the Group’s equity and net income are presented in Note 4.
These financial statements have been prepared under historical cost convention, as
modified by the fair value adjustment of available-for-sale financial assets throughequity, financial assets and financial liabilities (including derivative instruments) at fairvalue through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use ofcertain critical accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions andestimates are significant to the consolidated financial statements, are disclosed in
Note 3.
Standards, amendments and interpretation to existing standards that are not yet
effective and have not yet been early adopted by the Group.
The following standards and amendments to existing standards which are relevant to
the Group have been published and are mandatory for the Group’s accounting periods
beginning on or after 1 December 2011 or later periods, but the Group has not adopted
them earlier:(a)Standards and amendments to existing standards and interpretations effectiveon or after 1 January 2011 relevant to the Group

Standard/
Interpretation

Applicable forfinancial years
beginning on/
afterContent

IAS* 1‘Presentation of financial statement’(amendment relating to the statement ofchanges in equity and the disclosuresof other comprehensive income)1 January 2011

IFRS 1‘Limited exemptions from comparative
IFRS 7, Disclosures for first-time
adopters’

1 January 2011

IFRS 7‘Financial instruments: Disclosures(amendments to the credit risk
disclosures)

1 January 2011*

International Accounting Standard

A-9

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)
(a)

(b)

Standards and amendments to existing standards and interpretations effectiveon or after 1 January 2011 relevant to the Group (continued)•

IAS 1, ‘Presentation of financial statements’
The amendment clarifies which items should be included in the statement ofchanges in equity. The amendment also clarifies that, for each componentof equity, the analysis of other comprehensive income by item may bepresented either in the statement of changes in equity or disclosed within
the notes. In addition, the amount of dividend recognised as distributions toowners during the period and the related amount per share are now
disclosed either in the statement of changes in equity or in the notes andcan no longer be presented in the income statement. The Group presents
the amount per share in Note 12.

•

IFRS 1, “First-time adoption of International Financial ReportingStandards”
IFRS 1 clarifies the limited exceptions from comparative IFRS 7 andnecessary disclosures for first-time adopters. Adoption of IFRS 1 did nothave a significant impact on the financial statements of the Group.

•

IFRS 7, ‘Financial instruments: Disclosures’
The amendments of IFRS 7 emphasises the interaction between
quantitative and qualitative disclosures about the nature and extent of risks
associated with the financial instruments. Adoption of this amendment did
not have a significant impact on the financial statements of the Group.

New standards, amendments and interpretations to existing standards effectiveon or after 1 January 2011, but not relevant to the Group

Standard/
Interpretation

Content

Applicable forfinancial years
beginning on/
after

IAS 24‘Related party disclosures’1 January 2011

IAS 32‘Classification of right issues’

1 February 2010

IFRIC** 14‘Pre-payment of a minimum funding
requirement’

1 January 2011

IFRIC 19

‘Extinguishing financial liabilities withequity instruments’

1 July 2010**

International Financial Reporting Standards Interpretations Committee

A-10

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)(b)

New standards, amendments and interpretations to existing standards effectiveon or after 1 January 2011, but not relevant to the Group (continued)•(c)‘Improvements to IFRS’ (issued in May 2010)
The improvements project contains numerous amendments to IFRS that theInternational Accounting Standards Board (“IASB”) considers non-urgent
but necessary. ‘Improvements to IFRS’ comprise amendments that result inaccounting changes for presentation, recognition or measurement
purposes, as well as terminology or editorial amendments related to avariety of individual IFRS standards. Most of the amendments are effective
for annual periods beginning on or after 1 January 2011. No materialchanges to accounting policies arose as a result of these amendments.

New standards, amendments and interpretations issued, but not yet effective
The following new and amended standards and interpretations have been issued
and are mandatory for the Group’s accounting periods beginning on or after
1 January 2012 or later periods and are expected to be relevant to the Group:Standard/
Interpretation

Applicable forfinancial years
beginning on/
afterContent

IAS 1

Presentation to items of othercomprehensive income

1 July 2012

IAS 12

Deferred tax: recovery of underlying
assets

1 January 2012

IAS 19Amendments to IAS 19, ‘Employee
benefits’

1 January 2013

IFRS 7

Disclosure: transfer of financial assets

1 July 2011

IFRS 9Financial instruments: Classificationand measurement

1 January 2013

Deferral of mandatory effective date of
IFRS 9 and amendments to transition
disclosure

1 January 2015

Consolidated financial statements

1 January 2013

Amendments for investment entities

1 January 2014

Disclosure of interests in other entities

1 January 2013

Amendments for investment entities

1 January 2014

Fair value measurement

1 January 2013

IFRS 10IFRS 12IFRS 13

A-11

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)(c)New standards, amendments and interpretations issued, but not yet effective(continued)•

Amendment to IAS 1, ‘Presentation of items of other comprehensive
income’In June 2011, the IASB issued ‘Presentation of items of othercomprehensive income’ (amendments to IAS 1). The amendments improved
the consistency and clarity of the presentation of items of othercomprehensive income (‘OCI’). The amendments also highlighted theimportance that the Board places on presenting profit or loss and OCI
together and with equal prominence. The amendments issued in June 2011
retain the requirement to present profit and loss and OCI together, but focus
on improving how items of OCI are presented. The main change resulting
from the amendments was a requirement for entities to group items
presented in OCI on the basis of whether they are potentially reclassifiable
to profit or loss subsequently (reclassification adjustments). The
amendments did not address which items are presented in OCI. The Group
is yet to assess the full impact of the IAS 1 amendments and intends toadopt the amendments to IAS 1 no later than the accounting period
beginning on or after 1 July 2012.

•

Amendment to IAS 12, ‘Deferred tax – recovery of underlying assets’
The IASB has amended IAS 12, ‘Income taxes’ to introduce an exception to
the existing principles for the measurement of deferred tax assets or
liabilities arising on investment property measured at fair value. IAS 12
currently requires an entity to measure the deferred tax relating to an asset
depending on whether the entity expects to recover the carrying amount of
the asset through use or sale. The IASB believes that entities holding
investment properties that are measured at fair value sometimes find it
difficult or subjective to estimate how much of the carrying amount will berecovered through rental income and how much will be recovered throughsale. This amendment therefore introduces an exception to the existing
principle for the measurement of deferred tax assets or liabilities arising on
the investment property measured at fair value. The IASB has added therebuttable presumption that the carrying amount of an investment property
measured at fair value is entirely recovered through sale. The Groupestimates that, due to this change, which will be applied for accounting
period beginning on or after 1 January 2012, there would not be any
significant impact to Group’s financial results as all the investment
properties were carried at cost.

A-12

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)(c)New standards, amendments and interpretations issued, but not yet effective(continued)•

Amendment to IAS 19, ‘Employee benefits’
The amendments to IAS 19 ‘Employee benefits’, will provide investors andother users of financial statements with a much clearer picture of acompany’s current and future obligations resulting from the provision ofdefined benefit plans, and how these obligations will effect a company’s
financial position, financial performance and cash flows. The Group does
not expect the standard to have a major impact on the financial statements
and disclosure required.

•

Amendment to IFRS 7, ‘Disclosure: Transfer of financial assets’
The amendments to IFRS 7 result from proposals that were set out in the
exposure draft ‘Derecognition’ published in March 2009. The amendments
will promote transparency in the reporting of transfer transactions andimprove users’ understanding of the risk exposures relating to transfer offinancial assets and the effect of those risks on an entity’s financial position,
particularly those involving securitisation of financial assets. Entities are
required to apply the amendments for accounting period beginning on orafter 1 July 2011. In the first year of application, an entity need not provide
comparative information for the disclosures required. The Group does notexpect the standard to have a major impact on the disclosure required.

•

IFRS 9, ‘Financial instruments’ – classification and measurement
IFRS 9 addresses the classification, measurement and recognition offinancial assets and financial liabilities. IFRS 9 was issued in November
2009 and October 2010. It replaces the parts of IAS 39 that relate to theclassification and measurement of financial instruments. IFRS 9 requires
financial assets to be classified into two measurement categories: thosemeasured as at fair value and those measured at amortised cost. The
determination is made at initial recognition. The classification depends onthe entity’s business model for managing its financial instruments and thecontractual cash flow characteristics of the instrument. For financial
liabilities, the standard retains most of the IAS 39 requirements. The mainchange is that, in cases where the fair value option is taken for financial
liabilities, the part of a fair value change due to an entity’s own credit risk isrecorded in other comprehensive income rather than the income statement,
unless this creates an accounting mismatch. The standard also results in
one important method replacing the numerous impairment methods in IAS
39 that arise from the different classification categories. The Group is yet toassess IFRS 9’s full impact and intends to adopt IFRS 9 no later than theaccounting period beginning on or after 1 January 2013.

A-13

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)(c)New standards, amendments and interpretations issued, but not yet effective(continued)•

IFRS 9, ‘Financial instruments’ – classification and measurement(continued)
IFRS 9, as issued, reflects the first phase of the IASB’s work on thereplacement of IAS 39 and applies to classification and measurement offinancial assets and financial liabilities as defined in IAS 39. The standard
was initially effective for accounting periods on or after 1 January 2013, but
Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition
Disclosures, issued in December 2011, moved the mandatory effective dateto 1 January 2015. In subsequent phases, the IASB will address hedge
accounting and impairment of financial assets. The adoption of the firstphase of IFRS 9 will have an effect on the classification and measurementof the Group’s financial assets, but will not have an impact on theclassification and measurement of financial liabilities. The Group willquantify the effect in conjunction with the other phases, when the final
standard including all phases is issued.

•

IFRS 10, ‘Consolidated financial statements’
IFRS 10 builds on existing principles by identifying the concept of control as
the determining factor in whether an entity should be included within the
consolidated financial statements of the parent company. The standard
provides additional guidance to assist in the determination of control where
this is difficult to assess. The Group is yet to assess IFRS 10’s full impact
and intends to adopt IFRS 10 no later than the accounting period beginningon or after 1 January 2013.

•

IFRS 12, ‘Disclosure of interests in other entities’
IFRS 12 includes the disclosure requirements for all forms of interests inother entities, including joint arrangements, associates, special purpose
vehicles and other off balance sheet vehicles. The Group is yet to assess
IFRS 12’s full impact and intends to adopt IFRS 12 no later than theaccounting period on or after 1 January 2013.

•

IFRS 13, ‘Fair value measurement’
IFRS 13 aims to improve consistency and reduce complexity by providing aprecise definition of fair value and a single source of fair value measurementand disclosure requirements for use across IFRSs. The requirements, which
are largely aligned between IFRSs and US GAAP, do not extend the use offair value accounting but provide guidance on how it should be applied
where its use is already required or permitted by other standards within
IFRSs or US GAAP. The Group is yet to assess IFRS 13’s full impact andintends to adopt IFRS 12 no later than the accounting period on or after
1 January 2013.

A-14

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.1

Basis of preparation (continued)(c)New standards, amendments and interpretations issued, but not yet effective(continued)
The IASB and IFRIC have published the following standards and interpretations,which were not yet effective. The standards, amendments and interpretations are
not expected to be relevant to the Group’s operations:(d)Standard/
Interpretation

Content

Applicable forfinancial years
beginning on/
after

IAS 27

Separate financial statements

1 January 2013

Amendments for investment entities

1 January 2014

IAS 28Investments in associates and joint
venture1 January 2013

IAS 32

Amendments relating to the offsetting ofassets and liabilities

1 January 2014

IFRS 1

Amendments for government loan with abelow-market rate of interests whentransitioning to IFRSs

1 January 2013

Amendments resulting from Annual
Improvements 2009-2011 Cycle(repeat application, borrowing costs)

1 January 2013

IFRS 7

Amendments related to the offsetting ofassets and liabilities

1 January 2013

IFRS 11

Joint arrangements

1 January 2013

IFRIC 20

Shipping costs in the production phase ofa surface mine

1 January 2013

Early adoption of standards
The Group did not early adopt any new or amended standards or interpretations
in financial year 2011.

A-15

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.2

Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for saleof goods and rendering of services in the ordinary course of the Group’s activities.
Revenue is presented, net of value-added tax, rebates and discounts, and after
eliminating sales within the Group.
The Group recognises revenue when the amount of revenue and related cost can bereliably measured, it is probable that the collectibility of the related receivables isreasonably assured and when the specific criteria for each of the Group’s activities are
met as follows:(a)

Properties for sale
The Group recognises income on property when the risks and rewards ofownership have been transferred to the buyer. Depending on the selling
conditions associated with each property, revenue is generally not recognised if
the Group provides various guarantees and other financial support to the buyers(“continuing involvement”). Such continuing involvement by the Group would
then require revenue to be deferred until the Group’s continuing involvementceases. No revenue is recognised if there are significant uncertainties regarding
recovery of the consideration due, associated costs or the possible return of unit
sold.

(b)

Rental income
Rental income from operating lease (net of any incentives given to the lessee) is
recognised on a straight-line basis over the lease term except where analternative basis is more representative of the pattern of benefits to be derived
from the leased assets.

(c)

Financial advisory and management fee
Financial advisory and management fee is recognised as and when services are
rendered.

(d)Interest income
Interest income, including income arising from finance leases and other financial
instruments, is recognised using the effective interest method.

(e)

Dividend income
Dividend income is recognised when the right to receive payment is established.

(f)Other income
Other income is recognised at the point of entitlement of income.
A-16

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.3

Group accounting(a)Subsidiaries(i)

Consolidation
Subsidiaries are entities (including special purpose entities) over which theGroup has power to govern the financial and operating policies so as toobtain benefits from its activities, generally accompanied by a shareholding
giving rise to a majority of the voting rights. The existence and effect ofpotential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Group controls another entity.
Subsidiaries are consolidated from the date on which control is transferredto the Group. They are de-consolidated from the date on which control
ceases.
In preparing the consolidated financial statements, transactions, balances
and unrealised gains on transactions between group entities are eliminated.
Unrealised losses are also eliminated but are considered an impairment
indicator of the asset transferred. Accounting policies of subsidiaries havebeen changed where necessary to ensure consistency with the policies
adopted by the Group.

(ii)

Acquisitions
The acquisition method of accounting is used to account for businesscombinations by the Group.
The consideration transferred for the acquisition of a subsidiary or businesscomprises the fair value of the assets transferred, the liabilities incurred andthe equity interests issued by the Group. The consideration transferred also
includes the fair value of any contingent consideration arrangement and thefair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are, with limited exceptions, measured initially attheir fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any noncontrolling interest in the acquiree at the date of acquisition either at fairvalue or at the non-controlling interest’s proportionate share of theacquiree’s net identifiable assets.

A-17

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.3

Group accounting (continued)(a)Subsidiaries (continued)(ii)

Acquisitions (continued)
The excess of the (i) consideration transferred, the amount of any noncontrolling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the (ii) fair value of the net
identifiable assets acquired is recorded as goodwill. If those amounts areless than the fair value of the net identifiable assets of the subsidiaryacquired and the measurement of all amounts has been reviewed, thedifference is recognised directly in profit or loss as bargain purchase.

(iii) Disposals
When a change in the Group’s ownership interest in a subsidiary results ina loss of control over the subsidiary, the assets and liabilities of thesubsidiary including any goodwill are derecognised. Amounts recognised inother comprehensive income in respect of that entity are also reclassified to
profit or loss or transferred directly to retained earnings if required by aspecific Standard.
Any retained interest in the entity is remeasured at fair value. The difference
between the carrying amount of the retained investment at the date whencontrol is lost and its fair value is recognised in profit or loss.
(b)Transactions with non-controlling interests
Changes in the Group’s ownership interest in a subsidiary that do not result in aloss of control over the subsidiary are accounted for as transactions with equity
owners of the Company. Any difference between the change in the carrying
amounts of the non-controlling interest and the fair value of the consideration
paid or received is recognised within equity attributable to the equity holders of
the Company.

2.4

Property, plant and equipment(a)Measurement(i)Land and buildings
Land and buildings are initially recognised at cost. Freehold land is
subsequently carried at cost less accumulated impairment losses. Buildings
are subsequently carried at cost less accumulated depreciation andaccumulated impairment losses.

A-18

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.4

Property, plant and equipment (continued)(a)Measurement (continued)(ii)

Other property, plant and equipment
All other items of property, plant and equipment are initially recognised atcost and subsequently carried at cost less accumulated depreciation andaccumulated impairment losses.

(iii) Components of costs
The cost of an item of property, plant and equipment initially recognised
includes its purchase price and any cost that is directly attributable tobringing the asset to the location and condition necessary for it to becapable of operating in the manner intended by management. Cost also
includes borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset (refer to Note 2.7 onborrowing costs).
(b)

Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plantand equipment is calculated using the straight-line method. If the depreciation
based on the reducing balance method has better reflects the pattern in which theasset’s future economic benefits are expected to be consumed, this method isapplied. The depreciable amounts of other items of property, plant and equipment
over their estimated useful lives are allocated as follows:
Useful lives
Buildings and structures

3–50 years

Tools, equipment and fixtures

3–20 years

The residual values, and estimated useful lives and depreciation method of
property, plant and equipment are reviewed, and adjusted as appropriate, at eachbalance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
Fully depreciated assets still in use are retained in the financial statements.
(c)

Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has
already been recognised is added to the carrying amount of the asset only when
it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repair andmaintenance expenses are recognised in profit or loss when incurred.
A-19

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.4

Property, plant and equipment (continued)(d)DisposalOn disposal of an item of property, plant and equipment, the difference between
the disposal proceeds and its carrying amount is recognised in profit or loss
within “Other (losses)/gains – net”.

2.5

Intangible assets(a)Acquired licenses
Licences acquired are initially recognised at cost. Acquired licenses with anindefinite useful life are subjected to impairment assessment by comparing its
recoverable amount with its carrying amount on an annual basis and whenever
there is an indication that the intangible asset may be impaired. The useful life ofacquired licenses is reviewed and assessed at the end of each balance sheet
date.

(b)

Acquired computer software licenses
Acquired computer software licences are initially capitalised at cost which
includes the purchase price (net of any discounts and rebates) and other directly
attributable cost of preparing the asset for its intended use. Direct expenditure
including employee costs, which enhances or extends the performance ofcomputer software beyond its specifications and which can be reliably measured,is added to the original cost of the software. Costs associated with maintaining
the computer software are recognised as an expense when incurred.
Computer software licences are subsequently carried at cost less accumulated
amortisation and accumulated impairment losses. These costs are amortised to
profit or loss using the straight-line method over their estimated useful lives ofthree to five years.

The amortisation period and amortisation method of intangible assets are reviewed atleast at each balance sheet date. The effects of any revision are recognised in profit
or loss when the changes arise.
2.6

Club memberships
Club memberships are stated at cost less impairment loss.

2.7

Borrowing costs
Borrowing costs are recognised in profit or loss using the effective interest method
except for those costs that are directly attributable to the construction or developmentof properties and assets under construction. This includes those costs on borrowings
acquired specifically for the construction or development of properties and assets
under construction, as well as those in relation to general borrowings used to financethe construction or development of properties and assets under constructions.
A-20

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.7

Borrowing costs (continued)
The actual borrowing costs incurred during the period up to the issuance of thetemporary occupation permit less any investment income on temporary investment ofthese borrowings, are capitalised in the cost of the property under development orassets under construction. Borrowing costs on general borrowings are capitalised byapplying a capitalisation rate to construction or development expenditures that are
financed by general borrowings.

2.8

Investment properties(a)

Investment properties include those portions of commercial and residentialbuildings that are held for long-term rental yields and/or for capital appreciationand land under operating leases that is held for long-term capital appreciation or
for a currently indeterminate use.
Investment properties are initially recognised at cost and subsequently carried atcost less accumulated depreciation and accumulated impairment loss.
Depreciation of investment properties is calculated using the straight-line
method. If the depreciation based on the reducing balance method has betterreflects the pattern in which the asset’s future economic benefits are expected tobe consumed, this method is applied. The allocated depreciable amounts of theinvestment properties over the estimated useful lives ranges between 3 to 50
years. Freehold land included in the investment properties is not depreciated.
The residual values, and estimated useful lives and depreciation method ofinvestment properties are reviewed, and adjusted as appropriate, at eachbalance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
Investment properties are subject to renovations or improvements at regularintervals. The cost of major renovations and improvements is capitalised and thecarrying amounts of the replaced components are recognised in profit or loss.
The cost of maintenance, repairs and minor improvements is recognised in profit
or loss when incurred.
On disposal of an investment property, the difference between the disposal
proceeds and the carrying amount is recognised in profit or loss within “Other(losses)/gains – net”.

A-21

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.8

Investment properties (continued)(b)Transfer
Transfers to, or from, investment properties are made when there is a change inuse, evidenced by:

2.9

(i)

commencement of development with a view to sell, for a transfer frominvestment properties to inventories; and(ii)

commencement of an operating lease to another party, for a transfer frominventories to investment properties.

Impairment of non-financial assets(a)Intangible assets
Property, plant and equipment
Investment properties
Intangible assets, property, plant and equipment and investment properties aretested for impairment whenever there is any objective evidence or indication thatthese assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher ofthe fair value less cost to sell and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash inflows that are largely
independent of those from other assets. If this is the case, the recoverable
amount is determined for the CGU to which the asset belongs. If the recoverable
amount of the asset (or CGU) is estimated to be less than its carrying amount, thecarrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount isrecognised as an impairment loss in profit or loss.
An impairment loss for an asset is reversed if, and only if, there has been achange in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. The carrying amount of this asset isincreased to its revised recoverable amount, provided that this amount does notexceed the carrying amount that would have been determined (net of any
accumulated amortisation or depreciation) had no impairment loss beenrecognised for the asset in prior years.
A reversal of impairment loss for an asset is recognised in profit or loss, unlessthe asset is carried at revalued amount, in which case, such reversal is treatedas a revaluation increase. However, to the extent that an impairment loss on thesame revalued asset was previously recognised as an expense, a reversal of that
impairment is also credited to profit or loss.

A-22

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.10 Financial assets(a)Classification
The Group classifies its financial assets in the following categories: at fair value
through profit or loss, loans and receivables and available-for-sale. The
classification depends on the nature of the assets and the purpose for which theassets were acquired. Management determines the classification of its financial
assets at initial recognition.
(i)

Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, andthose designated at fair value through profit or loss at the date of inception.
Financial assets designated at fair value through profit or loss at inception
are those that are managed and their performances are evaluated on a fairvalue basis, in accordance with a documented Group investment strategy.
Assets in this category are presented as current assets if they are expected
to be realised within 12 months after the balance sheet date.

(ii)

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arepresented as current assets, except for those expected to be realised later
than 12 months after the balance sheet date or over its normal operating
cycle which are presented as non-current assets. Loans and receivables arepresented as “trade and other receivables” (Notes 16 and 18) and “cash andcash equivalents” (Note 13) on the balance sheet.

(iii) Available-for-sale financial assets
Available-for-sale financial assets, are non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are presented as non-current assets unless the investment matures ormanagement intends to dispose of the assets within 12 months after thebalance sheet date.
(b)

Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on tradedate – the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from thefinancial assets have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership. On disposal of afinancial asset, the difference between the carrying amount and the saleproceeds is recognised in profit or loss. Any amount in the other comprehensive
income relating to that asset is reclassified to profit or loss.
A-23

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.10 Financial assets (continued)(c)Initial measurement
Financial assets are initially recognised at fair value plus transaction costs
except for financial assets at fair value through profit or loss, which arerecognised at fair value. Transaction costs for financial assets at fair value
through profit or loss are recognised immediately as expenses.

(d)Subsequent measurement
Available-for-sale financial assets are subsequently carried at fair value. Loans
and receivables are subsequently carried at amortised cost using the effective
interest method.
Interest and dividend income on available-for-sale financial assets arerecognised separately in profit or loss. Changes in fair values of available-forsale equity securities (i.e. non-monetary items) are recognised in the fair value
reserve, together with the related currency translation differences.

(e)

Impairment
The Group assesses at each balance sheet date whether there is objective
evidence that a financial asset or a group of financial assets is impaired andrecognises an allowance for impairment when such evidence exists.
(i)

Loans and receivables
Significant financial difficulties of the debtor, probability that the debtor willenter bankruptcy, and default or significant delay in payments are objective
evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an
impairment allowance account for which is calculated as the difference
between the carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. When the asset
becomes uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are recognised
against the same line item in profit or loss.
The impairment allowance is reduced through profit or loss in a subsequent
period when the amount of impairment loss decreases and the related
decrease can be objectively measured. The carrying amount of the asset
previously impaired is increased to the extent that the new carrying amount
does not exceed the amortised cost had no impairment been recognised inprior periods.

A-24

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.10 Financial assets (continued)(e)Impairment (continued)(ii)

Available-for-sale financial assets
In addition to the objective evidence of impairment described in Note
2.10(e)(i), a significant or prolonged decline in the fair value of an equity
security below its cost is considered as an indicator that the available-forsale financial assets are impaired.
If any evidence of impairment exists, the cumulative loss that wasrecognised in other comprehensive income is reclassified to profit or loss.
The cumulative loss is measured as the difference between the acquisition
cost (net of any principal repayments and amortisation) and the current fairvalue, less any impairment loss previously recognised as an expense. The
impairment losses recognised as an expense on equity securities are notreversed through profit or loss.

(f)

Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in thebalance sheet when there is a legally enforceable right to offset and there is anintention to settle on a net basis or realise the asset and settle the liability
simultaneously.

2.11

Financial guarantees
The Company has issued corporate guarantees to banks for borrowings of its
subsidiaries. These guarantees are financial guarantees as they require the Company
to reimburse the banks if the subsidiaries fail to make principal or interest payments
when due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costsin the Company’s balance sheet.
Financial guarantees are subsequently amortised to profit or loss over the period of
the subsidiaries’ borrowings, unless it is probable that the Company will reimburse thebank for an amount higher than the unamortised amount. In this case, the financial
guarantees shall be carried at the expected amount payable to the bank in the
Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.

A-25

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.12 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditionalright to defer settlement for at least 12 months after the balance sheet date, in whichcase they are presented as non-current liabilities.
Borrowings are initially recognised at fair value (net of transaction costs) andsubsequently carried at amortised cost. Any difference between the proceeds (net oftransaction costs) and the redemption value is recognised in profit or loss over theperiod of the borrowings using the effective interest method.
2.13 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to theGroup prior to the end of financial year which are unpaid. They are classified as
current liabilities if payment is due within a year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently
carried at amortised cost using the effective interest method.
2.14 Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchangetraded and over-the-counter securities and derivatives) are based on quoted market
prices at the balance sheet date. The quoted market prices used for financial assets
are the current market prices; the appropriate quoted market prices for financial
liabilities are the current market prices.
The fair values of financial instruments that are not traded in an active market are
determined by using valuation techniques. The Group uses a variety of methods andmakes assumptions that are based on market conditions existing at each balance
sheet date. When appropriate, quoted market prices or dealer quotes for similar
instruments are used. Valuation techniques, such as discounted cash flow analyses,
are also used to determine the fair values of the financial instruments.
The fair values of current financial assets and liabilities carried at amortised cost
approximate their carrying amounts.
2.15 Leases(a)When the Group is the lessee:
The Group leases office equipment under finance leases and operating leases
from non-related parties.
(i)

Lessee – Finance leases
Leases where the Group assumes substantially all risks and rewards
incidental to ownership of the leased assets are classified as financeleases.
A-26

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.15 Leases (continued)(a)When the Group is the lessee: (continued)(i)Lessee – Finance leases (continued)
The leased assets and the corresponding lease liabilities (net of financecharges) under finance leases are recognised on the balance sheet as plantand equipment and borrowings respectively, at the inception of the leases
based on the lower of the fair value of the leased assets and the present
value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the
reduction of the outstanding lease liability. The finance expense isrecognised in profit or loss on a basis that reflects a constant periodic rateof interest on the finance lease liability.

(ii)

Lessee – Operating leases
Leases where substantially all risks and rewards incidental to ownership are
retained by the lessors are classified as operating leases. Payments madeunder operating leases (net of any incentives received from the lessors) arerecognised in profit or loss on a straight-line basis over the period of thelease.
Contingent rents are recognised as an expense in profit or loss whenincurred.

(b)

When the Group is the lessor:
The Group leases investment properties under operating lease to non-relatedparties.
(i)

Lessor – Operating leases
Leases of investment properties where the Group retains substantially all
risks and rewards incidental to ownership are classified as operating leases.
Rental income from operating leases (net of any incentives given to thelessees) is recognised in profit or loss on a straight-line basis over the lease
term.
Initial direct costs incurred by the Group in negotiating and arranging
operating leases are added to the carrying amount of the leased assets andrecognised as an expense in profit or loss over the lease term on the same
basis as the lease income.
Contingent rents are recognised as income in profit or loss when earned.

A-27

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.16 Inventories
Inventories consist of real estate for sale and real estate for sale in-progress. They arestated at the lower of cost plus, where appropriate, a portion of attributable profit, andestimated net realisable value. Net realisable value represents the estimated selling
price less costs to be incurred in selling the property.
The cost of inventories comprise specifically identified costs, including acquisition
costs, development expenditure, borrowing costs and other related expenditure.
Borrowing costs payable on loans funding a development property are also
capitalised, on a specific identification basis, as part of the cost of the development
property until the completion of development.
2.17 Income taxes
Current income tax for current and prior periods is recognised at the amount expected
to be paid to or recovered from the tax authorities, using the tax rates and tax laws thathave been enacted or substantially enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the financial
statements except when the deferred income tax arises from the initial recognition ofan asset or liability in a transaction that is not a business combination and affects
neither accounting nor taxable profit or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on
investments in subsidiaries, except where the Group is able to control the timing of thereversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that futuretaxable profit will be available against which the deductible temporary differences andtax losses can be utilised.
Deferred income tax is measured:(i)at the tax rates that are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled, based on tax rates
and tax laws that have been enacted or substantially enacted by the balance
sheet date; and(ii)

based on the tax consequence that will follow from the manner in which theGroup expects, at the balance sheet date, to recover or settle the carrying
amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expense in profit or
loss.

A-28

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.18 Provisions for other liabilities and charges
Provision for other liabilities and charges are recognised when the Group has apresent legal or constructive obligation as a result of past events, and it is more likely
than not that an outflow of resources will be required to settle the obligation and theamount has been reliably estimated.
2.19 Employee compensation
Employee benefits are recognised as an expense, unless the cost qualifies to becapitalised as an asset.
(a)Defined contribution plans
Defined contribution plans are post-employment benefit plans which the Grouppays fixed contributions into separate entities such as the Pension Scheme on a
mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid.

(b)

Post employment benefit obligations
Post employment benefit obligations are defined benefit plans which define theamount of benefit where employee will receive on retirement according to laws
depending on age and years of service.
The liability recognised in the balance sheets in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the end of
the reporting period with adjustments for unrecognised past-service costs. The
defined benefit obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in thecurrency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability.
Actuarial gains and losses as at end of the previous reporting year are
recognised on a straight-line basis within the period of the remaining average
service lives of the participating employees.

(c)Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue toemployees. A provision is made for the estimated liability for annual leave as aresult of services rendered by employees up to the balance sheet date.

A-29

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.19 Employee compensation (continued)(d)Other employee benefits
The other employee benefits includes employee share ownership plan andcontributions to the plan are recognised in profit or loss when incurred. The
details of the plan are described in Note 26(b).

2.20 Currency translation(a)Functional and presentation currency
Items included in the financial statements of each entity in the Group aremeasured using the currency of the primary economic environment in which theentity operates (“functional currency”). The financial statements are presented inJapanese Yen, which is the functional currency of the Company.

(b)Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”)
are translated into the functional currency using the exchange rates at the datesof the transactions. Currency translation differences resulting from the settlementof such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at the closing rates at the balance sheet date
are recognised in profit or loss. However, in the consolidated financial
statements, currency translation difference arising from borrowings in foreign
currencies and other currency instruments designated and qualifying as net
investment hedges and net investment in foreign operations, are recognised inother comprehensive income and accumulated in the currency translation
reserve.
When a foreign operation is disposed of or any borrowings forming part of the net
investment of the foreign operation are repaid, a proportionate share of theaccumulated translation differences is classified to profit or loss, as part of thegain or loss on disposal.
Foreign exchange gain or losses that relate to borrowings are presented in theincome statement within “Finance costs”. All other foreign exchange gains orlosses impacting profit or loss are presented in the income statement within“Other (losses)/gains – net”
Non-monetary items measured at fair values in foreign currencies are translatedusing the exchange rates at the date when the fair values are determined.

A-30

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20112.

Summary of significant accounting policies (continued)
2.21 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the Board of Directors whose members are responsible for allocating
resources and assessing performance of the operating segments.
2.22 Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash andcash equivalents include cash on hand, deposits with financial institutions which are
subject to an insignificant risk of change in value, and bank overdrafts. Bank
overdrafts are presented as current borrowings on the balance sheet.
2.23 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to theissuance of new ordinary shares are recognised against the share capital account.
2.24 Dividends to company’s shareholders
Dividends to the Company’s shareholders are recognised when the dividends areapproved for payment.

3.

Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
3.1

Critical accounting estimates and assumptions(a)Uncertain tax positions
The Group is subject to income taxes in numerous jurisdictions. In determining
the income tax liabilities, management is required to estimate the amount of
capital allowances and the deductibility of certain expenses (“uncertain tax
positions”) at each tax jurisdiction. The Group recognises liabilities for expected
tax issues based on estimates of whether additional taxes will be due. Where thefinal tax outcome of these matters is different from the amounts that were initiallyrecognised, such differences will impact the income tax and deferred income tax
provisions in the financial period in which such determination is made. The
carrying amounts of the Group’s provision for taxation as at 30 November 2009,2010 and 2011 were ¥55,164,000, ¥39,092,000 and ¥81,331,000 respectively.
The carrying amounts of the Group’s deferred tax liabilities as at 30 November
2009, 2010 and 2011 were ¥324,192,000, ¥307,734,000 and ¥280,380,000
respectively.

A-31

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20113.

Critical accounting estimates, assumptions and judgements (continued)
3.1

Critical accounting estimates and assumptions (continued)(b)Impairment of loans and receivables
Management reviews its loans and receivables for objective evidence ofimpairment at least on a quarterly basis. Significant financial difficulties of the
debtor, the probability that the debtor will enter bankruptcy, and default orsignificant delay in payments are considered objective evidence that a receivable
is impaired. In determining this, management makes judgement as to whether
there is observable data indicating that there has been a significant change in thepayment ability of the debtor, or whether there have been significant changes
with adverse effect in the technological, market, economic or legal environment
in which the debtor operates in.
Where there is objective evidence of impairment, management makes
judgements as to whether an impairment loss should be recorded as an expense.
In determining this, management uses estimates based on historical loss
experience for assets with similar credit risk characteristics. As at 30 November
2009, 2010 and 2011, management has made adequate provision for impairmentof trade and other receivables of ¥13,341,000, ¥29,176,000 and ¥18,181,000
respectively. The carrying value of trade and other receivables at the end of thereporting years were ¥1,195,835,000, ¥1,087,278,000 and ¥1,330,988,000
respectively.
If the net present value of estimated cash flows increase/decrease by 10% frommanagement’s estimates for all loans and receivables, the Group’s allowance for
impairment will decrease/increase by ¥119,584,000, ¥108,728,000 and¥133,099,000 as at 30 November 2009, 2010 and 2011 respectively.

(c)

Employee benefits
The present value of the pension obligations depends on a number of factors that
we determined on an actuarial basis using a number of assumptions. The
assumptions used in determining the net cost (income) for pensions include thediscount rate. Any changes in these assumptions will impact the carrying amountof pension obligations.
The Group determines the appropriate discount rate at the end of each year. Thisis the interest rate that should be used to determine the present value of
estimated future cash outflows expected to be required to settle the pension
obligations. In determining the appropriate discount rate, the Group considers theinterest rate of high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity approximating
the terms of the related pension liability. The key line items affected will be“Employee compensation” and “Retirement benefits obligation” as disclosed in
Note 7 and Note 26 respectively.

A-32

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 20113.

Critical accounting estimates, assumptions and judgements (continued)
3.2

Critical judgements in applying the entity’s accounting policies(a)Deferred income tax assets
The Group recognises deferred income tax assets on carried forward tax losses
to the extent there are sufficient estimated future taxable profits and/or taxable
temporary differences against which the tax losses can be utilised.
As at 30 November 2009, 2010 and 2011, deferred tax assets of certain group
entities amounting to ¥2,716,302,000, ¥2,449,313,000 and ¥1,724,661,000
respectively were recognised based on the anticipated future use of tax losses
carried forward by those entities. In the event that the tax authority regards thegroup entities as not satisfying the current tax legislation and disallowed the carryforward of the tax losses, the deferred tax asset will have to be written off as
income tax expense.

4.

Transition to IFRS
4.1

Basis of transition
The Group’s financial statements for the financial year ended 30 November 2009 are
the first annual financial statements prepared in accordance with IFRS. The Groupprepared its opening IFRS balance sheet at 1 December 2008, the date of transition
to IFRS.
The Group’s IFRS accounting policies presented in Note 2 have been applied in
preparing the financial statements for the financial year ended 30 November 2009 andthe opening balance sheet.

4.2

First-time adoption exemptions applied
Upon transition, IFRS 1 permits certain exemptions from full retrospective application.
The Group has applied all the mandatory and certain optional exemptions. The
exemptions adopted by the Group are set as below:(a)

The Group has elected not to comply with IFRS 3 ‘Business Combinations’retrospectively to business combinations that occurred before the date oftransition (1 December 2008).

(b)

The Group has elected to use facts and circumstances existing at the date oftransition to determine whether an arrangement contains a lease.

(c)

The Group has no cumulative actuarial gains and losses for its defined benefit
plans at the date of transition. After the date of transition, the Group recognises
these differences in profit and loss over the period of the remaining average
service lives.

(d)

The Group applied IAS 23 “Borrowing costs” relating to qualifying assets fortransactions that occurred on and after the date of transition (1 December 2008).

A-33

A-34

4.

4.3

7,541,092¥’000

8,326,305¥’000

Previous
GAAP
¥’000

–

Reclassification

55,384¥’000

Adjustment

8,381,689

¥’000

IFRS

Assets1,152,966

–
a
b, g

Supplies . . . . . . . . . . . . .

Deferred tax assets. . . . . . . .

Total current assets . . . . . . .

(508,033)

375,153a, dOther . . . . . . . . . . . . . . .

65,051,851(2,926,504)(2,941,265)

1,492

–
2,959,572(1,492)

2,888

9,617

(9,617)(151,375)

151,375(503,175)

53,507,844–
407,937

Allowance for doubtful accounts .

Notes and accounts receivable . .

(23,365,169)

23,379,723(30,142,675)–

Purchased receivables . . . . . .

a, cReal estate for sale in-progress .

30,060,521bbReal estate for sale. . . . . . . .

20,00014,761–

Short-term investment securities .

–7,704,299

112,808(18,307)–(1,396)–

132,880––

95,238–(14,554)

82,154––62,238,155

–

1,492

–

1,152,966

–

–

–

–

53,507,844––

20,00014,761

43,908,232

966,545

–

3,254

–

391,300(5,697)

81,361

399,856–

6,374,335

27,360,973

10,000–(814,469)(832,274)

2,335(2,335)

1,205,353(582,678)

5,697(81,361)(547,011)

33,967,938(6,293,956)(27,673,982)–

17,805491,357(134,271)

–

(919)

–

191,378––

147,155–(80,379)

313,009––43,585,120

–

2,335

–

1,205,353

–

–

–

–

33,967,938––

10,00017,805

Total current assets

Other assets

Trade and otherreceivables

Inventories

Available-for-sale financial
assetsFinancial assets, at fairvalue through profit or loss

Cash and cash equivalents(163,207)¥’000

Opening IFRS
balance sheet

Current assets
a

¥’000

¥’000

Adjustment

Cash and deposits . . . . . . . .

Reclassification

Previous
GAAP

30 November 2011
(end of last period presented
under previous GAAP)

Current assets

AssetsNote

1 December 2008
(Date of transition)

The total effect of the IFRS adoption for the balance sheet is further analysed as follows:

Reconciliation of balance sheet

Transition to IFRS (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

A-35

4.

4.3

13,257,642
78,309,493

Total assets . . . . . . . . . . .
–2,926,504

2,941,265

25,357–
147,237(25,357)

25,357–

9,075,231–
126,409(9,075,231)

12,542,077

Total non-current assets . . . .

Deferred tax assets. . . . . . . .

b, e, g, haIntangible assets . . . . . . . . .

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

a, b

365,907–

Property, plant and equipment . .

(366,546)

a, e

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

2,974(2,335)

365,966

2,335(2,974)eAllowance for doubtful accounts .

36,474–Long-term loan receivable . . . .

(8,940)8,940

Contributions . . . . . . . . . . .

138,023

25,21526,070––(1,197)

–

(238)

–

580

–

–

–

–

–

¥’000

–

78,447,516

16,209,361

3,114,572

25,357–125,2129,075,231

3,466,608

365,907–––36,474–59,967,598

16,059,366

870,404–

8,380

67,705–

14,599,553–

129,659(14,332)

10,325–

7,060

380,612¥’000

PreviousGAAP–814,469

832,274

8,380(8,380)–11,378,055(11,378,055)

125,635(127,794)

12,484(10,325)

369,867(7,060)(380,612)¥’000

Reclassification

632,238

140,881

21,983

–

–

(849)

–

119,764–(1,865)

1,848

–

–

–

–

¥’000

Adjustment

¥’000

IFRS

–

60,599,836

17,014,716

1,724,661

8,380

–

66,856

11,378,055

3,341,262

125,635–––

369,867–

Total assets

Total non-current assets

Deferred tax assets

Other assets

Intangible assets

Investment properties

Property, plant andequipment

Trade and otherreceivables

Available-for-sale financial
assetsNon-current assets
42,295Investment in securities . . . . .

(42,295)¥’000

Opening IFRS
balance sheet

Assets

¥’000

¥’000

Adjustment

30 November 2011
(end of last period presented
under previous GAAP)

Non-current assets

Reclassification

Previous
GAAP

1 December 2008
(Date of transition)

Assets

Note

Reconciliation of balance sheet (continued)

Transition to IFRS (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

A-36

4.

4.3

–

Total current liabilities . . . . .
31,547,346(374,830)(374,830)

25,769,398–
306,279–

Deferred tax liabilities. . . . . . .

–274,000− Finance lease obligation . . . .

(274,000)(24,466,398)(1,029,000)− Corporate bond . . . . . . . .

Current portionb, c, d3,118,478

2,251,658–

24,466,398

aIncome tax payable. . . . . . . .

(1,137,918)(114,177)(330,700)

1,271,328

Long-term borrowings due within
a year . . . . . . . . . . . . . .

a, gOther . . . . . . . . . . . . . . .

109,327

330,700

1,029,000aProvision for bonuses . . . . . .

Short-term borrowings . . . . . .

aAdvanced received . . . . . . . .

(668,863)(27,085)

68,551

–

–

–

–

–

5,897

–

(133,410)

4,850

–

27,027¥’000–

31,145,431–

25,769,398

–

–

–

–

3,124,375

2,251,658–––

8,791,214

122,053–783–

6,170,937–

79,271–

915,287

150,520545,967

806,396¥’000

Previous
GAAP(256,303)(256,303)

6,171,720

(783)

–

(6,170,937)––

2,517,703(995,666)(155,840)(545,488)(820,709)¥’000

Reclassification

235,843

134,250

–

–

–

–

–

2,060

–

80,379

5,320

(479)

14,313¥’000

Adjustment

¥’000

IFRS

–

8,770,754–

6,171,720

–

–

–

–

81,331

2,517,703–––

Total current liabilities

Borrowings

Current income tax
liabilities

Trade and other payables

Current liabilities
aNotes and accounts payable . . .

641,836¥’000

Opening IFRS
balance sheet

Liabilities

¥’000

¥’000

Adjustment

30 November 2011
(end of last period presented
under previous GAAP)

Current liabilities

Reclassification

Previous
GAAP

1 December 2008
(Date of transition)

Liabilities

Note

Reconciliation of balance sheet (continued)

Transition to IFRS (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

A-37

4.

4.3

i
a, h
a

f

Long-term borrowings . . . . . .

Deferred tax liabilities. . . . . . .

Provision for retirement benefits .

Provision for directors’ retirement
benefits. . . . . . . . . . . . . .

Negative goodwill. . . . . . . . .

24,874,900
56,422,246
21,887,247

Total non-current liabilities . . .

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

Net assets . . . . . . . . . . . .
––374,830–

374,944–6,314(246,674)(128,270)

374,830–

2,681,970–(2,681,970)

246,387

64,54913,732–
21,861,948

aOther payables . . . . . . . . . .

–2,681,970

Asset retirement obligations . . .

Lease and guarantee deposits
received . . . . . . . . . . . . .
a108,414

29,60956,694(6,314)–287

63,721–(1,000)

–

–

–

¥’000

–

21,995,661

56,451,855

25,306,424–

374,944––388,562

21,860,948

2,681,970–

24,976,049

34,991,549

26,200,335––

312,587

133,154

15,20023,904,245–

24,7101,810,439¥’000

Previous
GAAP

–

–

256,303–504,727(312,856)(191,871)

256,303–

1,835,279(24,710)(1,810,569)¥’000

Reclassification

331,902300,336

64,493––269

58,717

8,877(3,500)

–

–

130

¥’000

Adjustment

¥’000

IFRS

–

25,307,951

35,291,885

26,521,131–

504,727––

280,380

23,900,745

1,835,279–

Net assets

Total liabilities

Total non-current
liabilities

Retirement benefits
obligations

Deferred tax liabilities

Borrowings

Trade and other payables

Non-current liabilities¥’000

Opening IFRS
balance sheet

Liabilities

¥’000

¥’000

Adjustment

30 November 2011
(end of last period presented
under previous GAAP)

Non-current liabilities

Reclassification

Previous
GAAP

1 December 2008
(Date of transition)

Liabilities

Note

Reconciliation of balance sheet (continued)

Transition to IFRS (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

A-38

4.

4.3

Total equity . . . . . . . . . . .
––21,887,247(794)
4,232,289

794(4,231,495)

108,414–––

21,995,661

4,232,289––

13,615,352

24,976,049–(2,370)5,538,149

13,985,597–

5,514,129

2,370(5,516,499)–

331,902––(21,650)

353,552

25,307,951

5,514,129––

14,339,149

Total equity

Other reserves

Retained earnings

4,231,495

Accumulated othercomprehensive income/(loss). . .

108,4145,454,673

Capital reserves . . . . . . . . .

–

–

¥’000

IFRS

Share capital

–

¥’000

Adjustment

13,506,938

5,454,673¥’000

Reclassification

Retained earnings . . . . . . . .

4,148,020¥’000

Previous
GAAP

Equity–¥’000

Opening IFRS
balance sheet

4,148,020¥’000

Adjustment

30 November 2011
(end of last period presented
under previous GAAP)

Share capital . . . . . . . . . . .
i

¥’000

¥’000

–

Reclassification

Previous
GAAP

1 December 2008
(Date of transition)

EquityNote

Reconciliation of balance sheet (continued)

Transition to IFRS (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

4.

Transition to IFRS (continued)
4.4

Reconciliation of equity

1 December
2008(date oftransition)

30 November
2011(end of lastperiodpresented
under previous
GAAP)

¥’000

¥’000

21,887,247

24,976,049–(21,650)

Current year’s profit . . . . . . . . . . . . .

–(11,713)Retained profits brought forward . . .

108,414365,265

Total adjustment to equity . . . . . . .

108,414331,902

Total equity under IFRS . . . . . . . . .

21,995,661

25,307,951

NoteTotal equity under previous
GAAP . . . . . . . . . . . . . . . . . . . . . . . .
Capital reserve . . . . . . . . . . . . . . . . .

A-39

i

A-40

4.

4.5

a, e

Gross profit . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . .
Dividend income . . . . . . . . . . . . . .
Miscellaneous income . . . . . . . . . .

–––(3,143)748,837

Total comprehensive income forthe year . . . . . . . . . . . . . . . . . . .

––699,483(769,243)(719,708)
751,980–
69,760–(2,797)(2,861)(56,997)
62,655(178)
19,932–799(20,553)–¥’000

1,537,587(65,899)

5,469,159
2,797
2,861
64,760–(16,977)(19,932)
1,490
(799)
(3,080,126)(885,646)¥’000
24,759,291(19,290,132)

Profit for the year . . . . . . . . . . . .
Other comprehensive losses,
net of tax:
− Fair value losses . . . . . . . . . . . .

Profit before income tax . . . . . . . .
Current income tax . . . . . . . . . . . .
aDeferred income tax. . . . . . . . . . . . b, c, d, e, g,h, iLoss on valuation of membership . . .
Asset retirement obligations . . . . . . .
Amortisation of negative goodwill . . .
f
Miscellaneous expenses . . . . . . . . .
Administrative expenses . . . . . . . . . a, e, g, h, iInterest expense . . . . . . . . . . . . . .
a, b, da, c, ea, b, g, h

Revenue . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . .

Note(11,713)–(11,713)

20,225(28,077)(3,861)(288,938)––(7,763)–––(1,490)–163,336
106,778

¥’000
1,618
(290,556)

737,124(3,143)740,267–(769,243)

1,509,510–

5,180,221–––
62,655(17,155)–––(2,937,343)(778,868)¥’000
24,760,909(19,580,688)

Year ended 30 November 2011
(end of last period presented under previous GAAP)
Previous GAAP Reclassification
Adjustments
IFRS

Total comprehensive income forthe yearNet profit
Other comprehensive losses,
net of tax:
− Fair value losses

Income tax expense

Profit before income tax

Administrative expense
Finance expense

Other income
Other losses – net

Gross profit

Revenue
Cost of revenue

Reconciliation of total comprehensive income
Total comprehensive income for the financial year ended 30 November 2011 can be reconciled to the amounts reported under previous GAAP
as follows:

Transition to IFRS (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

4.

Transition to IFRS (continued)
4.6

Notes to the reconciliations(a)Difference in fiscal year end of an entity within the GroupOne of the subsidiaries, Tosei Community Co., Ltd has a different fiscal year end
from the Company and other entities within the Group. Under previous GAAP,
adjustment is only made for those material transactions. In applying IAS 27
Consolidated and Separate Financial Statements, management has decided toprepare additional financial statements as at the same date as the financial
statements of the Company. Differences have been adjusted and accounted in
the respective accounts as reflected in the reconciliation in this note. The net
effect on retained earnings at the date of transition amounted to ¥8,679,000.

(b)

Inventories
Under previous GAAP, the Group charged depreciation to its inventories andcapitalised advertising expenses pertaining to development of inventories until its
completion. In applying IAS 2 Inventories, depreciation and advertising expenses
which were previously recognised have been adjusted. In addition, there is no
capitalisation of other borrowings costs pertaining to the development ofqualifying assets under the previous GAAP which is inconsistent with IAS 23
Borrowing Costs.
Management had considered and quantified the timing difference on theadjustments passed into inventories and its related accounts, by adjusting thedeferred tax assets and deferred tax liabilities accordingly. The net effect at thedate of transition is an increase in the net carrying amount of inventories – realestate for sale by ¥82,154,000, decrease in inventories – real estate for salein-progress by ¥14,554,000 with a corresponding increase in retained earningsby ¥42,007,000 (net of deferred tax implications of ¥25,593,000).

(c)

Rental income
Under previous GAAP, free-rent period has not been considered during therecognition of rental income. In applying IAS 17 Leases, rental incentives such as
free rent period should be considered as an integral part of the consideration
received from the leased assets. Rental income (including rental incentives)
should be recognised on a straight-line basis over the lease term. The net effectat the date of transition is an increase in trade receivables by ¥44,717,000 witha corresponding increase in retained earnings by ¥26,498,000 (net of deferred
tax implications of ¥18,219,000).

A-41

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

4.

Transition to IFRS (continued)
4.6

Notes to the reconciliations (continued)(d)Recognition of borrowing costs
Under previous GAAP, borrowing costs in relation to total interest for the tenureof the borrowings have been fully recognised to profit or loss upon the utilisationof borrowings. In applying IAS 23 Borrowings Costs, borrowings costs is to berecognised to profit or loss in the period in which they are incurred. The Grouphas reversed the previously recognised interest expenses and accounted themas prepayments and amortised it over the tenure of the borrowings. The net effectat the date of transition is an increase in prepayment by ¥123,499,000 with acorresponding increase in retained earnings by ¥73,167,000 (net of deferred tax
implications of ¥50,332,000).

(e)

Derecognition of fund revenue
Under previous GAAP, fund revenue with a low likelihood of recoverability has
been recognised and allowance for impairment on the receivables has been
provided concurrently. In applying IAS 18 Revenue, the Group has derecognised
fund revenue for which the flow of economic benefits to the Group is notprobable. The allowance for impairment has also been adjusted accordingly.
Except for the reclassification, there is no impact to the consolidated financial
statements prepared.

(f)Gain on bargain purchase
Under previous GAAP, the Group recognised gain from a bargain purchase in thebalance sheet as at 30 November 2008 and amortised it over 5 years. In applying
IFRS 3 Business Combinations, bargain purchases should be recognised
immediately to profit or loss. The net effect at the date of transition is a decreasein negative goodwill with a corresponding increase in retained earnings by¥6,314,000 respectively.

(g)

Employee leave entitlement
Under previous GAAP, the Group is not required to account for any short-term
employee benefits expected to be paid in exchange of the service rendered by
the respective employees to the Group. In applying IAS 19 Employee Benefits,
the Group has recognised the expected cost of short-term employee benefits inthe form of paid absences. The net effect at the date of transition is an increasein accruals for employee leave entitlement by ¥18,204,000 with a corresponding
decrease in retained earnings by ¥10,918,000 (net of deferred tax implications of¥7,286,000).

A-42

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

4.

Transition to IFRS (continued)
4.6

Notes to the reconciliations (continued)(h)Retirement benefits obligation
Under previous GAAP, the Group recognised retirement benefits obligations
using the ‘convenient approach’. In applying IAS 19 Employee Benefits, anexternal independent actuarist had been engaged to make a reliable estimationon the fair value of the amount of benefit that employees have earned in returnfor their services in the current and prior periods using the actuarial technique.
The net effect at the date of transition is an increase in retirement benefits
obligations by ¥63,404,000 with a corresponding decrease in retained earningsby ¥37,334,000 (net of deferred tax implications of ¥26,069,000).

(i)

Capital reserves and capitalisation of shares issuance expenses
Under previous GAAP, the Company recognise share acquisition rights ofshareholders separately as part of capital reserves, whilst transaction costs
related to the issuance of new shares in the financial years ended 30 November
2009 and 2010 have been recognised in profits or loss. In applying IAS 32
Financial Instruments: Presentation, transaction costs directly attributable to theissuance of new ordinary shares of the Company have been accounted for as
deduction from the proceeds in equity. Accordingly, IFRS adjustments have been
passed accordingly to the respective financial years.

(j)

Reclassifications
Certain presentation differences between previous GAAP and IFRS on balance
sheet and profit or loss items have been reclassified accordingly. These
reclassifications do not have any impact on net profit before tax or total
comprehensive income.

4.7

Reconciliations of consolidated statements of cash flows
There were no material differences between previous GAAP and IFRS in terms of total
operating, investing and financing cash flows. However, there were reclassifications
made to individual line items within operating, investing and financing cash flows dueto the adjustments and reclassifications made to the consolidated balance sheet andconsolidated statement of total comprehensive income as detailed in Notes 4.3 and
4.5 above.

A-43

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

5.

Revenue

Revitalisation business. . . . . . . . . . . . . . . . . .
Development business . . . . . . . . . . . . . . . . . .
Rental business . . . . . . . . . . . . . . . . . . . . . . .
Fund business . . . . . . . . . . . . . . . . . . . . . . . .
Property management business . . . . . . . . . . .
Alternative investment business. . . . . . . . . . .

6.

2009

2010

2011

¥’000

¥’000

¥’000

9,962,365
16,556,368
3,422,431
896,952
2,597,765
186,998

8,149,422
11,682,418
2,591,502
1,077,760
2,768,513
170,167

12,040,887
5,256,146
2,533,995
1,234,805
3,514,569
180,507

33,622,879

26,439,782

24,760,909

2009

2010

2011

¥’000

¥’000

¥’000

85,18012,37747,605

7,100
34,221
2,069
116,931
38,03523,017,904

16,84332,9193,545
137,032
35,906
17,037,368(1,362)33,577
1,983
184,392
38,311
14,608,545

92,76383,460101,706

48,386
1,847,153
13,171
2,738,818
79,86530,95848,3283,112,141
206,436
30,67890,67339,762
1,888,951
10,606
2,121,339
70,19923,131
42,222
3,115,047
270,395
28,09580,85537,001
2,045,891
30,747
1,029,029
103,591
24,67742,4483,843,164
228,120
37,77880,82831,640,810

25,050,052

22,518,031

Expenses by nature

Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for impairment – trade and otherreceivables – net (Note 33(b)(ii)) . . . . . . . . . . . .
Amortisation of intangible assets (Note 21). . . . .
Bad debts written off . . . . . . . . . . . . . . . . . . . . .
Commission fee . . . . . . . . . . . . . . . . . . . . . . . .
Communication . . . . . . . . . . . . . . . . . . . . . . . .
Cost of inventories (Note 17) . . . . . . . . . . . . . . .
Depreciation of investment properties(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, plant and equipment(Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee compensation (Note 7) . . . . . . . . . . .
Entertainment. . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory write-down – net (Note 17) . . . . . . . . .
Other professional fees . . . . . . . . . . . . . . . . . . .
Rental expense on operating leases . . . . . . . . .
Stationery . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property management and maintenance fees . . .
Tax and dues . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenue and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property management and maintenance fees mainly consist of utilities charges, repair andmaintenance expenses and other incidental expenses.
A-44

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

7.

8.

Employee compensation
2009

2010

2011

¥’000

¥’000

¥’000

Salaries and bonuses. . . . . . . . . . . . . . . . . . .

1,462,924

1,505,010

1,672,093

Statutory welfare expense . . . . . . . . . . . . . . .

159,572

154,563

209,824

Retirement benefits . . . . . . . . . . . . . . . . . . . .

92,083

94,96578,050

Other short-term benefits . . . . . . . . . . . . . . . .

132,574

134,41385,924

1,847,153

1,888,951

2,045,891

2009

2010

2011

¥’000

¥’000

¥’000

Interest income. . . . . . . . . . . . . . . . . . . . . . . .

14,610

9,612

2,796

Dividend income. . . . . . . . . . . . . . . . . . . . . . .

2,832

2,814

2,861

Forfeiture of deposit received from option
to purchase . . . . . . . . . . . . . . . . . . . . . . . . . .

2,000

–

34,035

Refund from cancellation of insurance
premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,298––

Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . .

18,826

16,36622,96375,566

28,79262,655

Other income

Miscellaneous income mainly consists of income received from rental of spaces to vendorsof vending machines and others.
9.

Other losses – net
2009

2010

2011

¥’000

¥’000

¥’000

Forfeiture of deposit paid for an option topurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(280,438)––

Gains on disposal of available-for-salefinancial assets – net . . . . . . . . . . . . . . . . . . .

308

1,184

–

Impairment loss on available-for-salefinancial assets (Note 15) . . . . . . . . . . . . . . .

(456)

–

–

Impairment loss on membership (Note 22) . .

––(16,977)

Property, plant and equipment written off(Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(41,700)(4,687)(178)(322,286)(3,503)(17,155)

A-45

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

10. Finance expenses
2009

2010

2011

¥’000

¥’000

¥’000

805,826

826,734

778,868

2009

2010

2011

¥’000

¥’000

¥’000

− Current income tax – Japan . . . . . . .

56,15430,861

69,760

Deferred income tax (Note 27). . . . . . .

334,717

249,723

699,483

390,871

280,584

769,243

59,643––

450,514280,584

769,243

Interest expense – bank borrowings . . . . . . .

11.

Income taxes(a)Income tax expense

Tax expense attributable to profit ismade up of:Profit from current financial year:

Under provision in prior financial
years:− Current income tax – Japan . . . . . . .

The tax on the Group’s profit before tax differs from the theoretical amount that would
arise using the Japan standard rate of income tax as follows:
2009

2010

2011

¥’000

¥’000

¥’000

Profit before income tax . . . . . . . . . . . .

929,523588,285

1,509,510

Tax calculated at domestic tax rates
applicable to profit . . . . . . . . . . . . . . . .

381,104

241,196

618,900− Expenses not deductible for tax
purposes . . . . . . . . . . . . . . . . . . . . . .

13,381–

138,662− Income not subject to tax . . . . . . . . .

–(4,194)–− Deferred tax assets not recognised/(utilised) . . . . . . . . . . . . . . . . . . . . . .

7,993

35,945(558)− Change in tax rate . . . . . . . . . . . . . .

(21,158)––− Other . . . . . . . . . . . . . . . . . . . . . . . . .

9,551

7,637

12,239Tax charge . . . . . . . . . . . . . . . . . . . . . .

390,871

280,584

769,243

Effects of:

A-46

A-47

11.

(b)

Fair value (losses)/gains onavailable-for-sale financial
assets . . . . . . . . . . . . . . . . . . .

¥’000

815

¥’000

Beforetax(1,998)2009
Tax(charge)/credit(1,183)

¥’000

After
tax

1,970

¥’000

Before
tax

(808)

¥’000

2010
Tax
(charge)/credit

1,162

¥’000

After
tax

The tax (charge)/credit relating to each component of other comprehensive (losses)/income is as follows:

Income taxes (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

(5,328)¥’000

Before
tax

2,185

¥’000

2011
Tax
(charge)/credit(3,143)

¥’000

After
tax

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201112. Earnings per share(a)Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity
holders of the Company by the weighted average number of ordinary shares
outstanding during the financial years ended 30 November 2009, 2010 and 2011.

(b)

2009

2010

2011

Net profit attributable to the equity
holders of the Company (¥’000). . . . . .

479,009

307,701

740,267

Weighted average number of ordinary
shares outstanding for basic earnings
per share . . . . . . . . . . . . . . . . . . . . . . .

379,317432,579

456,840

Basic earnings per share (¥ pershare) . . . . . . . . . . . . . . . . . . . . . . . . . .

1,262.82

711.31

1,620.41

Diluted earnings per share
There were no diluted earnings per share for the financial years ended 30 November
2009, 2010 and 2011 as there were no potential dilutive ordinary shares.

13. Cash and cash equivalents
2009

2010

2011

¥’000

¥’000

¥’000

Cash at bank and on hand. . . . . . . . . . . . . . .

7,732,037

6,808,182

8,341,689

Short-term bank deposits . . . . . . . . . . . . . . . .

120,000

356,136

40,0007,852,037

7,164,318

8,381,689

For the purpose of presenting the consolidated statements of cash flows, cash and cash
equivalents comprise the following:
2009

2010

2011

¥’000

¥’000

¥’000

Cash and bank balances (as above) . . . . . . .

7,852,037

7,164,318

8,381,689

Less: Deposits more than 3 months . . . . . . .

(20,000)(306,136)(20,000)

Cash and cash equivalents per consolidated
statement of cash flows . . . . . . . . . . . . . . . . .

7,832,037

6,858,182

8,361,689

A-48

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

14. Financial assets, at fair value through profit or loss
2009

2010

2011

¥’000

¥’000

¥’000

14,66914,62017,805

At fair value on initial recognition
Unlisted equity securities – Japan . . . . . . . . .

The fair value losses – net for the financial years ended 30 November 2009, 2010 and 2011
amounting to ¥91,000, ¥49,000 and ¥1,466,000 respectively have been included as part of“Total cost of revenue and administrative expenses – Other”.
15. Available-for-sale financial assets
2009

2010

2011

¥’000

¥’000

¥’000

Beginning of financial year. . . . . . . . . . . . . . .

56,47453,63951,845Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20–

333,350

Fair value (losses)/gains recognised in othercomprehensive income (Note 30(b)(ii)) . . . . .

(1,998)1,970(5,328)

Impairment loss (Note 9) . . . . . . . . . . . . . . . .

(456)

–

–

Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(401)(3,764)–End of financial year . . . . . . . . . . . . . . . . . . .

53,63951,845379,867

Less: Current portion . . . . . . . . . . . . . . . . .

(10,000)(10,000)(10,000)

Non-current portion . . . . . . . . . . . . . . . . . . .

43,63941,845369,867

2009

2010

2011

¥’000

¥’000

¥’000

Listed securities – Japan . . . . . . . . . . . . . . . .

23,291

23,396

18,068Unlisted securities – Japan . . . . . . . . . . . . . .

30,34828,449361,799

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

53,63951,845379,867

Available-for-sale financial assets are analysed as follows:

A-49

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

16. Trade and other receivables – current
2009

2010

2011

¥’000

¥’000

¥’000

Trade receivables – non-related parties. . . . .

432,865

467,546

547,011

Less: Allowance for impairment(Note 33(b)(ii)) . . . . . . . . . . . . . . . . . . . . . . . .

(3,912)(8,861)(5,056)

Trade receivables – net . . . . . . . . . . . . . . . . .

428,953458,685

541,955

Loan to non-related parties . . . . . . . . . . . . . .

157,600

62,829

11,133

Less: Non-current portion (Note 18) . . . . . . .

(8,770)(13,031)(10,325)

148,830

49,798808

Advance payments . . . . . . . . . . . . . . . . . . . . .

70,682

5,669

225,752

Prepayments . . . . . . . . . . . . . . . . . . . . . . . . .

162,567

208,002257,326

Receivables purchased . . . . . . . . . . . . . . . . .

121,291

86,467

81,361Other receivables . . . . . . . . . . . . . . . . . . . . . .

103,180

174,356

98,792

Less: Allowance for impairment(Note 33(b)(ii)) . . . . . . . . . . . . . . . . . . . . . . . .

(2,073)(7,573)(641)

1,033,430

975,404

1,205,353

2009

2010

2011

¥’000

¥’000

¥’000

Real estate for sale . . . . . . . . . . . . . . . . . . . .

25,365,375

27,548,419

27,673,983

Real estate for sale in-progress . . . . . . . . . . .

12,616,374

10,286,799

6,293,955

37,981,749

37,835,218

33,967,938

17. Inventories

The cost of inventories recognised as an expense and included as part of “Total cost ofrevenue – Cost of inventories” for the respective financial years of 2009, 2010 and 2011
amounting to ¥23,017,904,000, ¥17,037,368,000 and ¥14,608,545,000 respectively.
Inventories of ¥37,290,992,000, ¥37,349,387,000 and ¥33,785,368,000 of the Group havebeen pledged as security for borrowings at the end of the respective financial years of 2009,2010 and 2011 (Note 24(a)).

A-50

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

17. Inventories (continued)
The cost of inventories recognised as expense in respect of write-down and the reversal ofsuch write-down are as follows:
2009

2010

2011

¥’000

¥’000

¥’000

(3,138,299)(2,323,404)(1,050,313)................

399,481

202,065

21,284Inventory write-down – net (Note 6). . . . . . . .

(2,738,818)(2,121,339)(1,029,029)

Inventory write-down(1)

Reversal of write-down..................
(2)

(1)

This relates to write-down of the carrying amount of real estate to its net realisable value.

(2)

The reversal is mainly due to an upturn of property market situation.

Details of major real estate for sale of the Group are disclosed under summary of major
properties (Note 37).
18. Trade and other receivables – non-current
2009

2010

2011

¥’000

¥’000

¥’000

Trade receivables – non-related parties. . . . .

4,374

12,664

11,626

Less: Allowance for impairment(Note 33(b)(ii)) . . . . . . . . . . . . . . . . . . . . . . . .

(4,374)(12,664)(11,626)

Trade receivables – net . . . . . . . . . . . . . . . . .

–

–

–

− Loan to non-related parties (Note 16) . . . .

8,770

13,031

10,325

Less: Allowance for impairment(Note 33(b)(ii)) . . . . . . . . . . . . . . . . . . . . . .

(2,982)

(78)

(858)

− Guarantee deposits. . . . . . . . . . . . . . . . . . .

155,183

97,628115,368− Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,434

1,293

800

162,405

111,874

125,635

Other receivables . . . . . . . . . . . . . . . . . . . . . .

The fair value of non-current trade and other receivables are computed based on cash flows
discounted at market borrowing rates. The market borrowing rates used and the fair values
are as follows:−
2009

2010

2011

Market borrowing rates . . . . . . . . . . .

2.30 – 3.02%

2.20 – 3.02%

2.10 – 3.02%

Loan to non-related parties (¥’000) . .

5,695

12,783

10,182

A-51

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

19. Investment properties
2009

2010

2011

¥’000

¥’000

¥’000

Beginning of financial year. . . . . . . . . . . . . . .

9,861,163

10,274,274

11,925,105

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,275

8,895

45,623

Written off. . . . . . . . . . . . . . . . . . . . . . . . . . . .

(421)

–

–

Transfer from inventories . . . . . . . . . . . . . . . .

2,092,195

4,808,059

507,958

Transfer to inventories . . . . . . . . . . . . . . . . . .

(1,698,938)(3,166,123)(239,394)

End of financial year . . . . . . . . . . . . . . . . . . .

10,274,274

11,925,105

12,239,292

Beginning of financial year. . . . . . . . . . . . . . .

785,932

790,933

763,658

Depreciation charge (Note 6) . . . . . . . . . . . . .

92,76383,460101,706

Written off. . . . . . . . . . . . . . . . . . . . . . . . . . . .

(421)

–

–

Transfer from inventories . . . . . . . . . . . . . . . .

14,41871,010–Transfer to inventories . . . . . . . . . . . . . . . . . .

(101,759)(181,745)(4,127)

End of financial year . . . . . . . . . . . . . . . . . . .

790,933

763,658

861,237

9,483,341

11,161,447

11,378,055

Cost

Accumulated depreciation

Net book value
End of financial year . . . . . . . . . . . . . . . . . .

(a)Investment properties are leased to non-related parties under operating leases (Note32(b)).

(b)

Certain investment properties are mortgaged to secure bank loans (Note 24(a)).

(c)

The land and buildings of the Group were valued by internal valuers mainly using
discounted cash flow method. Below are the fair values of investment properties ownedby the Group:

Investment properties. . . . . . . . . . . . . . .

A-52

2009

2010

2011

¥’000

¥’000

¥’000

13,201,087

12,939,987

12,046,214

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

19. Investment properties (continued)(d)

The following amounts are recognised in profit and loss:
2009

2010

2011

¥’000

¥’000

¥’000

1,273,905

1,123,346

888,640(395,666)(315,102)(336,855)

Rental income− Investment properties that generated
rental income . . . . . . . . . . . . . . . . . . .
Direct operating expenses arising from:− Investment properties that generated
rental income . . . . . . . . . . . . . . . . . . .

(e)Details of major investment properties of the Group are disclosed under summary ofmajor properties (Note 37).

20. Property, plant and equipment

Buildings
andstructures

Land

Tools,
equipment
andfixtures

¥’000

¥’000

¥’000

¥’000

Beginning of financial year. . . . . . .

1,259,563

2,219,719

94,345

3,573,627

Additions . . . . . . . . . . . . . . . . . . . .

11,043–

18,61029,653

Disposals . . . . . . . . . . . . . . . . . . . .

––(3,480)(3,480)

Written off. . . . . . . . . . . . . . . . . . . .

(40,792)–(27,166)(67,958)

Reclassified to inventories . . . . . . .

(5,480)––(5,480)End of financial year . . . . . . . . . . .

1,224,334

2,219,719

82,3093,526,362

Beginning of financial year. . . . . . .

65,161–

41,858107,019

Depreciation charge (Note 6) . . . . .

28,041–

20,34548,386

Written off. . . . . . . . . . . . . . . . . . . .

(12,102)–(14,156)(26,258)

Reclassified to inventories . . . . . . .

(809)

–

–

(809)

End of financial year . . . . . . . . . . .

80,291–

48,047

128,338

1,144,043

2,219,719

34,262

3,398,024

Total

2009
Cost

Accumulated depreciation

Net book value
End of financial year . . . . . . . . . .

A-53

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201120. Property, plant and equipment (continued)

Land

Tools,
equipment
andfixtures

Total

¥’000

¥’000

¥’000

¥’000

Beginning of financial year. . . . . . .

1,224,334

2,219,719

82,3093,526,362

Additions . . . . . . . . . . . . . . . . . . . .

3,460

–

10,595

14,055

Written off. . . . . . . . . . . . . . . . . . . .

(8,713)–(10,636)(19,349)

Reclassified to inventories . . . . . . .

(17,068)––(17,068)

End of financial year . . . . . . . . . . .

1,202,013

2,219,719

82,2683,504,000

Beginning of financial year. . . . . . .

80,291–

48,047

128,338

Depreciation charge (Note 6) . . . . .

24,621–

15,141

39,762

Written off. . . . . . . . . . . . . . . . . . . .

(4,180)–(10,482)(14,662)

Reclassified to inventories . . . . . . .

(5,375)––(5,375)End of financial year . . . . . . . . . . .

95,357–52,706

148,063

1,106,656

2,219,719

29,562

3,355,937

Beginning of financial year. . . . . . .

1,202,013

2,219,719

82,2683,504,000

Additions . . . . . . . . . . . . . . . . . . . .

8,362

–

14,342

22,704

Written off. . . . . . . . . . . . . . . . . . . .

(307)

–

(3,779)(4,086)

Reclassified to inventories . . . . . . .

–

–

(619)

(619)

End of financial year . . . . . . . . . . .

1,210,068

2,219,719

92,212

3,521,999

Beginning of financial year. . . . . . .

95,357–52,706

148,063

Depreciation charge (Note 6) . . . . .

24,325–

12,67637,001

Written off. . . . . . . . . . . . . . . . . . . .

(306)

–

(3,602)(3,908)

Reclassified to inventories . . . . . . .

–

–

(419)

(419)

End of financial year . . . . . . . . . . .

119,376–

61,361

180,737

1,090,692

2,219,719

30,851

3,341,262

Buildings
andstructures

2010
Cost

Accumulated depreciation

Net book value
End of financial year . . . . . . . . . .
2011
Cost

Accumulated depreciation

Net book value
End of financial year . . . . . . . . . .

A-54

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201120. Property, plant and equipment (continued)(a)

The carrying amounts of plant and equipment held under finance leases are¥3,732,000, ¥2,239,000 and ¥746,000 respectively at the end of respective financial
years of 2009, 2010 and 2011.

(b)

Bank borrowings are secured on property, plant and equipment of the Group withcarrying amounts of ¥3,335,048,000, ¥3,313,750,000 and ¥3,292,453,000 at the end ofrespective financial years of 2009, 2010 and 2011 (Note 24(a)).

(c)

Details of major owner-occupied building of the Group are disclosed under summary ofmajor properties (Note 37).

21. Intangible assets

Composition:
Licenses – telephone rights (Note 21(a)). . . .
Computer software licenses (Note 21(b)) . . .

(a)

2010

2011

¥’000

¥’000

¥’000

1,889
90,868

1,889
61,5281,889
64,96792,75763,417

66,856

2009

2010

2011

¥’000

¥’000

¥’000

1,889

1,889

1,889

2009

2010

2011

Licenses – Telephone rights

Cost
Beginning and end of financial year. . .

(b)

2009

Computer software licenses

¥’000

¥’000

¥’000

Cost
Beginning of financial year. . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . .
Written off. . . . . . . . . . . . . . . . . . . . . . .

170,382
1,766–

172,148
3,579(30,908)

144,819
37,016(11,033)

End of financial year . . . . . . . . . . . . . .

172,148

144,819

170,802

Accumulated amortisation
Beginning of financial year. . . . . . . . . .
Amortisation charge (Note 6) . . . . . . . .
Written off. . . . . . . . . . . . . . . . . . . . . . .

47,05934,221–

81,28032,919(30,908)

83,291
33,577(11,033)

End of financial year . . . . . . . . . . . . . .

81,28083,291

105,835

Net book value
End of financial year . . . . . . . . . . . . .

90,86861,52864,967

The amortisation expense is included in “Expenses – Administrative” in the
consolidated statements of comprehensive income.
A-55

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

22. Other assets
2009

2010

2011

¥’000

¥’000

¥’000

Club memberships at cost . . . . . . . . . . . . . . .

25,35725,35725,357

Less: Allowance for impairment (Note 9) . . . .

––(16,977)

25,35725,357

8,380

1,325

1,673

2,335

26,682

27,03010,715

Other assets, current . . . . . . . . . . . . . . . . . . .

1,325

1,673

2,335

Other assets, non-current . . . . . . . . . . . . . . .

25,35725,357

8,380

26,682

27,03010,715

2009

2010

2011

¥’000

¥’000

¥’000

Trade payables to non-related parties . . . . . .

705,301

342,582

820,709

Deposits for purchase of real estate . . . . . . .

273,574

285,596

545,488

Deferred revenue . . . . . . . . . . . . . . . . . . . . . .

1,201

800

–

Other payable to non-related parties . . . . . . .

276,108

301,910

290,718

Accruals for operating expenses . . . . . . . . . .

617,732

522,285

860,7881,873,916

1,453,173

2,517,703

Lease and guarantee deposits received . . . .

2,137,128

1,886,914

1,810,569

Assets retirement obligations . . . . . . . . . . . . .

––24,7102,137,128

1,886,914

1,835,279

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

Presented in balance sheets as:

23. Trade and other payables

Current

Non-current

A-56

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201124. Borrowings
2009

2010

2011

¥’000

¥’000

¥’000

Bank borrowings . . . . . . . . . . . . . . . . . . . . . .

16,184,804

10,823,561

6,170,937

Finance lease liabilities (Note 25) . . . . . . . . .

1,567

1,567

783

16,186,371

10,825,128

6,171,720

Bank borrowings . . . . . . . . . . . . . . . . . . . . . .

19,104,076

23,435,399

23,900,745

Finance lease liabilities (Note 25) . . . . . . . . .

2,352

783

–

19,106,428

23,436,182

23,900,745

35,292,799

34,261,310

30,072,465

Current

Non-Current

Total borrowings . . . . . . . . . . . . . . . . . . . . . . .

The exposure of the borrowings of the Group to interest rate changes and the contractual
repricing dates at the balance sheet dates are follows:
2009

2010

2011

¥’000

¥’000

¥’000

Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . .

16,186,371

10,825,128

6,171,720

1–5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,715,181

17,759,851

17,413,280

Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . .

4,391,247

5,676,331

6,487,465

35,292,799

34,261,310

30,072,465(a)Security granted
At the end of financial years 2009, 2010 and 2011, total borrowings included secured
liabilities of ¥34,968,201,000, ¥34,008,239,000 and ¥29,821,722,000 respectively.
Bank borrowings of the Group are secured over certain inventories (Note 17),
investment properties (Note 19) and certain land and buildings (Note 20). Financelease liabilities of the Group are effectively secured over the leased plant andequipment (Note 20), as the legal title is retained by the lessor and will be transferredto the Group upon full settlement of the financial lease liabilities.

(b)

Fair value of non-current borrowings
2009

2010

2011

¥’000

¥’000

¥’000

Bank borrowings . . . . . . . . . . . . . . . . .

19,093,573

23,427,988

23,885,818

Finance lease liabilities . . . . . . . . . . . .

2,152

725

–

A-57

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201124. Borrowings (continued)(b)

Fair value of non-current borrowings (continued)
The fair values above are determined from the cash flow analyses, discounted at themarket borrowing rates of an equivalent instrument at the balance sheet date which
the directors expect to be available to the Group as follows:
2009

2010

2011

%

%

%

Bank borrowings . . . . . . . . . . . . . . . . .

2.27

2.19

2.06

Finance lease liabilities . . . . . . . . . . . .

2.20

2.20

–

25. Finance lease liabilities
The Group leases certain plant and equipment from non-related parties under financeleases. The lease agreements do not have renewal clauses but provide the Group with
options to purchase the leased assets at nominal values at the end of the lease term.
2009

2010

2011

¥’000

¥’000

¥’000

– Not later than one year . . . . . . . . . . . . . . . .

1,711

1,675

825

– Between one and five years . . . . . . . . . . . .

2,500

825

–

4,211

2,500

825

Less: Future finance charges. . . . . . . . . . . . .

(292)

(150)

(42)

Present value of finance lease liabilities . . . .

3,919

2,350

783

Minimum lease payments due:

The present values of finance lease liabilities are analysed as follows:
2009

2010

2011

¥’000

¥’000

¥’000

Not later than one year (Note 24) . . . . . . . . .

1,567

1,567

783

Between one and five years (Note 24) . . . . .

2,352

783

–

3,919

2,350

783

The carrying amounts of finance lease liabilities approximate their fair values.

A-58

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

26. Employee benefits(a)Retirement benefits obligations
2009

2010

2011

¥’000

¥’000

¥’000

Retirement benefits plans(Note 26(a)(i)) . . . . . . . . . . . . . . . . . . .

136,338

161,431

191,871

Directors’ retirement benefits plans(Note 26(a)(ii)) . . . . . . . . . . . . . . . . . . .

273,008

301,522

312,856

409,346462,953504,727

Obligations recognised in the balance
sheet for:(i)

Retirement benefits plans
The Group adopts the retirement lump-sum grants policy based on their pension
plan. In addition, some of the entities in the Group adopt the Employees’ Pension
Fund and Defined Contribution Plan.
Defined benefit plans
The amounts included in the consolidated balance sheets arising from theGroup’s obligation in respect of its defined benefit plans are as follows:
2009

2010

2011

¥’000

¥’000

¥’000

Obligations under defined benefit
plans. . . . . . . . . . . . . . . . . . . . . . .

137,825

167,330

193,104

Net actuarial losses notrecognised . . . . . . . . . . . . . . . . . .

(1,487)(5,899)(1,233)Liabilities recognised in thebalance sheet . . . . . . . . . . . . . . . .

136,338

161,431

191,871

A-59

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

26. Employee benefits (continued)(a)Retirement benefits obligations (continued)(i)Retirement benefits plans (continued)
Defined benefit plans (continued)
Amounts recognised in profit or loss in respect of these defined benefit plans are
as follows:
2009

2010

2011

¥’000

¥’000

¥’000

Beginning of financial year. . . . . .

127,954

137,825

167,330

Current service cost . . . . . . . . . . .

30,33328,13829,745Interest cost . . . . . . . . . . . . . . . . .

2,990

2,990

3,447

Benefits paid . . . . . . . . . . . . . . . .

(24,939)(6,332)(3,992)

Actuarial losses/(gains) . . . . . . . .

1,487

4,709

(3,426)End of financial year . . . . . . . . . .

137,825

167,330

193,104

The principal actuarial assumptions used were as follows:
2009

2010

2011

%

%

%

Discount rate . . . . . . . . . . . . . . . .

2.23

2.11

1.68

Future salary increases . . . . . . . .

3.04

2.96

2.41

Multi-employer plans
During the financial years 2009 and 2010, the Company and some of its
subsidiaries have joined “Japan Residence Construction Industry Pension Fund”
under multi-employer plans. During the financial year of 2011, only one of its
subsidiaries joined the multi-employer plans.
Below are the amounts contributed to the fund by the Group:–

Contribution to the fund . . . . . . . .

2009

2010

2011

¥’000

¥’000

¥’000

33,263

34,977

9,886

The contribution to the fund is included as part of “Employee compensation –retirement benefits” (Note 7).

A-60

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

26. Employee benefits (continued)(a)Retirement benefits obligations (continued)(i)Retirement benefits plans (continued)
Defined contribution plans
During the financial year 2011, the Company and some of its subsidiaries haveparticipated under a voluntary joint defined contribution plan.
Below are the amounts contributed to the fund by the Group:–

Contribution to the fund . . . . . . . .

2009

2010

2011

¥’000

¥’000

¥’000

–

–

5,994

The contribution to the fund is included as part of “Employee compensation –retirement benefits” (Note 7).
(ii)

Director’s retirement benefits plans
2009

2010

2011

¥’000

¥’000

¥’000

Beginning of financial year. . . . . .

246,675

273,008

301,522

Provision made . . . . . . . . . . . . . .

28,06328,51425,837

Benefits paid . . . . . . . . . . . . . . . .

(1,730)–(14,503)

End of financial year . . . . . . . . . .

273,008

301,522

312,856

28,06328,51425,837

Provision made is included in
profit or loss:– Employee compensation –Retirement benefits . . . . . . . . . . .

A-61

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

26. Employee benefits (continued)(b)

Employee share ownership plan (“ESOP”)
The Company implemented the Tosei Employee Share Ownership Scheme (“ESOP”)
and adopted the rules of the ESOP as set out in the Employee Share Ownership Rulesof the Company on 1 September 2002.
The purpose of the ESOP is to enable full-time employees of the Company to acquireand accumulated shares of the Company by making small contributions on a regularbasis.
Under the ESOP, only full-time employees (“Participating Employee”) of the Company(excluding the directors of the Company and the employees of the subsidiaries) areentitled to participate in the ESOP. The Participating Employee will contribute a certain
portion of his monthly salary and biannual bonus to purchase shares of the Company.
Contributions from Participating Employees are made in units of ¥1,000 each. Each
Participating Employee is allowed to contribute a maximum of 20 units from hismonthly salary and 100 units from his annual bonus. Further, the dividends declaredand paid in respect of the shares held by the Participating Employee will becontributed to the ESOP. All Participating Employee will nominate an administrative
director to administer and hold on behalf all the shares under ESOP.
The Participating Employees may not transfer or pledge the rights to their shares.
When the Participating Employee’s number of shares under the ESOP reaches 1
share, the employee may, at his option, transfer such share into an account held in his
own name. In the event that the Participating Employee withdraws from the ESOP, thevested ESOP shares will be transferred to the securities account of the Participating
Employee and the equivalent value in cash for a fractional part of the share (converted
at the then market price) will be paid to the Participating Employee. The Participating
Employee may choose to make an extraordinary contribution to the ESOP such thatthe fractional part of the share is deemed to be one whole share.
There is no maximum limit for shares acquired under the ESOP. The Company
contributes an amount that is equal to 5.0% of the aggregate contribution of theParticipating Employees to the ESOP. Amounts contributed and paid by the Company
under the ESOP for the financial years ended 30 November 2009, 2010 and 2011
amounting to ¥442,000, ¥328,000 and ¥336,000 respectively have been included aspart of “Employee compensation – Other short-term benefits”.

A-62

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201127. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable rightto offset current income tax assets against current income tax liabilities and when thedeferred income taxes relate to the same fiscal authority. The amounts are shown on thebalance sheet as follows:
2009

2010

2011

¥’000

¥’000

¥’000

– to be recovered within one year . . . . . . . . .

1,154,630

525,728

785,330– to be recovered after one year . . . . . . . . . .

1,561,672

1,923,585

939,3312,716,302

2,449,313

1,724,661– to be settled within one year. . . . . . . . . . . .

(305,287)(283,935)(256,303)– to be settled after one year . . . . . . . . . . . .

(18,905)(23,799)(24,077)(324,192)(307,734)(280,380)

2009

2010

2011

¥’000

¥’000

¥’000

2,726,012

2,392,110

2,141,579– profit or loss (Note 11(a)) . . . . . . . . . . . . .

(334,717)(249,723)(699,483)– equity (Note 11(b)) . . . . . . . . . . . . . . . . . .

815

(808)

2,185

End of financial year . . . . . . . . . . . . . . . . . .

2,392,110

2,141,579

1,444,281

Deferred income tax assets

Deferred income tax liabilities

Movement in deferred income tax account is as follows:

Beginning of financial year . . . . . . . . . . . . . .
Charged toA-63

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201127. Deferred income taxes (continued)
The movement in deferred income tax assets and liabilities is as follows:

As at
1 December
2008

Recognised
Recognisedin otherin profit or comprehensive
loss
income

As at
30 November
2009

¥’000

¥’000

¥’000

¥’000

Enterprise tax payable . .

243,559(240,805)

–

2,754

Inventory write down
– net . . . . . . . . . . . . . . . .

2,475,786(2,563,809)–(88,023)

Unrealised profits oninventories . . . . . . . . . . .

186,995(6,867)–

180,128

Provision for retirement
benefits. . . . . . . . . . . . . .

52,486

3,408–

55,894

Provision for directors’
retirement benefits . . . . .

99,786

10,962–

110,748

Impairment losses . . . . .

71,206(705)–

70,501Other . . . . . . . . . . . . . . .

209,889

2,453–

212,342

Deferred tax assets notrecognised . . . . . . . . . . .

(444,321)(7,993)–(452,314)

Subtotal . . . . . . . . . . . . .

2,895,386(2,803,356)–

92,030

Revaluation of fair value
derived fromsubsidiaries’ assets andliabilities . . . . . . . . . . . . .

(320,011)

66,572–(253,439)

Available-for-salefinancial assets . . . . . . .

(546)

–

815

269

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

(68,551)(2,471)–(71,022)

Subtotal . . . . . . . . . . . . .

(389,108)64,101815(324,192)

Tax losses carriedforward . . . . . . . . . . . . . .

219,734

2,404,538–

2,624,272

Net balance . . . . . . . . . .

2,726,012(334,717)

815

2,392,110

Temporary differences:

A-64

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201127. Deferred income taxes (continued)
The movement in deferred income tax assets and liabilities is as follows:

As at
1 December
2009

Recognised
Recognisedin otherin profit or comprehensive
loss
income

¥’000

¥’000

¥’000

As at
30 November
2010
¥’000

Temporary differences:Enterprise tax payable . .

2,754(2,541)–

213

Inventory write down
– net . . . . . . . . . . . . . . . .

(88,023)

69,706–(18,317)

Unrealised profits oninventories . . . . . . . . . . .

180,128858–

180,986

Provision for retirement
benefits. . . . . . . . . . . . . .

55,894

10,408–66,302

Provision for directors’
retirement benefits . . . . .

110,748

10,933–

121,681

Impairment losses . . . . .

70,501(1,163)–

69,338Other . . . . . . . . . . . . . . .

212,342

21,217–

233,559

Deferred tax assets notrecognised . . . . . . . . . . .

(452,314)(35,945)–(488,259)

Subtotal . . . . . . . . . . . . .

92,03073,473–

165,503

Revaluation of fair value
derived fromsubsidiaries’ assets andliabilities . . . . . . . . . . . . .

(253,439)

40,792–(212,647)

Available-for-salefinancial assets . . . . . . .

269

–

(808)

(539)

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

(71,022)(23,526)–(94,548)

Subtotal . . . . . . . . . . . . .

(324,192)

17,266(808)(307,734)

Tax losses carriedforward . . . . . . . . . . . . . .

2,624,272(340,462)–

2,283,810

Net balance . . . . . . . . . .

2,392,110(249,723)(808)

2,141,579

A-65

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201127. Deferred income taxes (continued)
The movement in deferred income tax assets and liabilities is as follows:

As at
1 December
2010

Recognised
Recognisedin otherin profit or comprehensive
loss
income

¥’000

¥’000

¥’000

As at
30 November
2011
¥’000

Temporary differences:Enterprise tax payable . .

213

4,292

–

4,505

Inventory write down
– net . . . . . . . . . . . . . . . .

(18,317)

74,342–56,025

Unrealised profits oninventories . . . . . . . . . . .

180,986(1,283)–

179,703

Provision for retirement
benefits. . . . . . . . . . . . . .

66,302

12,625–78,927

Provision for directors’
retirement benefits . . . . .

121,6813,578–

125,259

Impairment losses . . . . .

69,338(1,088)–68,250

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

233,559(80,977)–

152,582

Deferred tax assets notrecognised . . . . . . . . . . .

(488,259)

558–(487,701)

Subtotal . . . . . . . . . . . . .

165,503

12,047–

177,550

Revaluation of fair value
derived fromsubsidiaries’ assets andliabilities . . . . . . . . . . . . .

(212,647)

77,204–(135,443)

Available-for-salefinancial assets . . . . . . .

(539)

–

2,185

1,646

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

(94,548)(52,035)–(146,583)

Subtotal . . . . . . . . . . . . .

(307,734)

25,1692,185(280,380)

Tax losses carriedforward . . . . . . . . . . . . . .

2,283,810(736,699)–

1,547,111

Net balance . . . . . . . . . .

2,141,579(699,483)

2,185

1,444,281

A-66

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201127. Deferred income taxes (continued)
Tax losses carried forward and deductible temporary differences for which deferred tax
assets have not been recognised are as follows:
As at
1 December
2008

As at
30 November
2009

As at
30 November
2010

As at
30 November
2011

¥’000

¥’000

¥’000

¥’000

Tax losses carriedforward . . . . . . . . . . . . .

219,734

215,100

234,224

199,314

Deductible temporary
differences . . . . . . . . . .

224,587

237,214254,035

288,387

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

444,321452,314488,259

487,701

Deferred income tax assets are recognised for tax losses and other deductible temporary
differences carried forward to the extent that realisation of the related tax benefits throughfuture taxable profits is probable. The Group has unrecognised tax losses and otherdeductible temporary differences stated above at the financial years ended 30 November
2009, 2010 and 2011 which can be carried forward and used to offset against future taxable
income subject to meeting certain statutory requirements. The tax losses and otherdeductible temporary differences have an expiry period of 9 years from the year ofassessment.
28. Share capital
No. ofordinarysharesShare capital
¥’000

2009
Beginning of financial year. . . . . . . . . . . . . . . . . . . . . . .

376,840

4,148,020

Shares issued for working capital . . . . . . . . . . . . . . . . .

19,000304,787

End of financial year . . . . . . . . . . . . . . . . . . . . . . . . . . .

395,840

4,452,807

Beginning of financial year. . . . . . . . . . . . . . . . . . . . . . .

395,840

4,452,807

Shares issued for working capital . . . . . . . . . . . . . . . . .

61,0001,001,866

End of financial year . . . . . . . . . . . . . . . . . . . . . . . . . . .

456,840

5,454,673

456,840

5,454,673

2010

2011
Beginning and end of financial year. . . . . . . . . . . . . . . .

A-67

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

28. Share capital (continued)
All issued ordinary shares are fully paid. There is no par value for these ordinary shares. The
amounts of ordinary shares contributed by shareholders since the date of incorporation andat the respective dates of share issuance are recorded as follows:(a)Amount not exceeding half of the total contribution by shareholders is not recorded asshare capital; and(b)

Amount not recorded as share capital under the preceding paragraph is recorded ascapital reserve (Note 30).

Fully paid ordinary shares carry one vote per share and carry a right to dividends as andwhen declared by the Company.
The newly issued shares rank pari passu in all respects with the previously issued shares.
29. Retained earnings
Retained earnings of the Group are distributable.
30. Other reserves

(a)

(b)

2009

2010

2011

¥’000

¥’000

¥’000

4,552,551

5,516,499

5,516,499

(389)

773

(2,370)End of financial year . . . . . . . . . . . . . .

4,552,162

5,517,272

5,514,129

Movements:(i) Capital reserve
Beginning of financial year. . . . . .
Shares issued . . . . . . . . . . . . . . .

4,231,495
321,056

4,552,551
963,948

5,516,499–

End of financial year . . . . . . . . . .

4,552,551

5,516,499

5,516,499

Accumulated other comprehensive income – fair value reserve
Beginning of financial year. . . . . .
794
(389)

773

Composition:
Capital reserve . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive
income – fair value reserve . . . . . . . . .

Capital reserve is distributable.
(ii)

Available-for-sale financial assets– Fair value (losses)/gains . . . . . .
– Tax on fair value changes . . . . .

End of financial year . . . . . . . . . .

(1,998)815(1,183)

1,970
(808)
1,162

(5,328)2,185(3,143)

(389)

773

(2,370)

Accumulated other comprehensive income – fair value reserve is non-distributable.

A-68

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 201131. Dividends

Ordinary dividends paid
Final dividend paid in respect of theprevious financial year of ¥500 (2010: ¥500
and 2009: ¥1,000) per ordinary share . . . . . .

2009

2010

2011

¥’000

¥’000

¥’000

376,840

197,920

228,420At the Annual General Meeting on 24 February 2012, a final dividend of ¥500 per ordinary
share amounting to a total of ¥228,420,000 will be recommended. These financial
statements do not reflect this dividend, which will be accounted for in shareholders’ equity as
an appropriation of retained profits in the financial year ending 30 November 2012.
32. Commitments(a)Operating lease commitments – where the Group is a lessee
The Group leases office equipment from non-related parties under non-cancellable
operating lease agreements. The leases have varying terms, escalation clauses andrenewal rights.
The future minimum lease payables under non-cancellable operating leases contracted
for at the balance sheet dates but not recognised as liabilities, are as follows:

Not later than one year . . . . . . . . . . . .
Between one and five years. . . . . . . . .

(b)

2009

2010

2011

¥’000

¥’000

¥’000

2,153
4,127

2,153
1,974

1,974
–

6,280

4,127

1,974

Operating lease commitments – where the Group is a lessor
The Group lease out office space, apartments, and condominiums to non-relatedparties under non-cancellable operating leases. The lessees are required to pay either
absolute fixed annual increase to the lease payments or contingent rents computed
based on their sales achieved during the lease period.
The future minimum lease receivables under non-cancellable operating leases contracted
for at the balance sheet date but not recognised as receivables, are as follows:

Not later than one year . . . . . . . . . . . .
Between one and five years. . . . . . . . .
More than five years . . . . . . . . . . . . . .

A-69

2009

2010

2011

¥’000

¥’000

¥’000

457,812373,469
57,440262,436
334,152
85,207

469,042998,895
525,498

888,721681,795

1,993,435

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management
Financial risk factors
The Group’s activities expose it to market risk (including currency risk, price risk and interestrisk), credit risk, liquidity risk and capital risk. The Group’s overall risk management strategy
seeks to minimise adverse effects from the unpredictability of financial markets on the Group’s
financial performance. The Group do not use financial instruments such as currency forwards,
interest rate swaps and foreign currency borrowings to hedge certain financial risk exposure.
The Board of Directors is responsible for setting the objectives and underlying principles offinancial risk management for the Group. This includes establishing detailed policies such as
authority levels, oversight responsibilities, risk identification and measurement, andexposure limits.
Financial risk management is carried out by the finance department in accordance with thepolicies set by the Board of Directors. The finance personnel identifies, evaluates and hedges
financial risks in close co-operation with the Group’s operating units. The finance personnel
measures actual exposures against the limits set and prepares periodic reports for review by
the Chief Financial Officer. Regular reports are also submitted to the Board of Directors.
(a)Market risk(i)Currency risk
Foreign currency risk arises from transactions denominated in currencies otherthan the functional currency of the Company. The Group’s business operations
are not exposed to significant foreign currency risks as it has no significant
transactions denominated in foreign currencies.

(ii)

Price risk
The Group is exposed to equity securities price risk arising from the investments
held by the Group which are classified on the consolidated balance sheet either
as financial assets, at fair value through profit or loss or available-for-salefinancial assets. These securities consist of those listed and unlisted equity
investments in Japan. To manage its price risk arising from investments in equity
securities, the Group diversifies its portfolio. Diversification of the portfolio isdone in accordance with the limits set by the Group.
If prices for equity securities had changed by 10% (2010: 10% and 2009: 10%)with all other variables including tax rate being held constant, the effects on profit
after tax and other comprehensive income would have been:
2009

2010

2011

¥’000

¥’000

¥’000

Profit after tax– increased by . . . . . . . . . . . . . . .
– decreased by . . . . . . . . . . . . . .

865
(865)

862
(862)

1,051
(1,051)Other comprehensive income– increased by . . . . . . . . . . . . . . .
– decreased by . . . . . . . . . . . . . .

3,165(3,165)

3,059(3,059)22,412(22,412)A-70

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management (continued)(a)Market risk (continued)(iii) Cash flow and fair value interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Fair valueinterest rate risk is the risk that the fair value of a financial instrument willfluctuate due to changes in market interest rates. As the Group does not have any
significant interest-bearing assets, the Group’s income is substantiallyindependent of changes in market interest rates. The Group’s interest rate risk
mainly arises from borrowings at floating interest rate. The Group manages its
interest rate risk by keeping bank loans to the minimum required to sustain theoperations of the Group.

(b)

Credit risk
Credit risk refers to the risk that counterparty will default as its contractual obligations
resulting in financial loss to the Group. The major classes of financial assets of theGroup are cash and cash equivalents and trade and other receivables. For tradereceivables, the Group adopts the policy of dealing only with customers of appropriate
credit history. For other financial assets, the Group adopts the policy of dealing onlywith high credit quality counterparties.
As the Group does not hold any collateral, the maximum exposure to credit for eachclass of financial instruments is the carrying amount of that class of financial
instruments presented on the balance sheet.
The credit risk for trade receivables based on the information provided to key
management is as follows:
2009

2010

2011

¥’000

¥’000

¥’000

428,953458,685

541,955

By types of customers
Non-related parties– Current . . . . . . . . . . . . . . . . . . . . . . .

(i)Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly current accountbalances with banks with high credit-ratings assigned by international creditrating agencies. Trade receivables that are neither past due nor impaired aresubstantially companies with a good collection track record with the Group.

A-71

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management (continued)(b)Credit risk (continued)(ii)

Financial assets that are past due and/or impaired
There is no other class of financial assets that is past due and/or impaired except
for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
2009

2010

2011

¥’000

¥’000

¥’000

Past due up to 3 months . . . . . . .

422,609453,258

535,630

Past due 3 to 6 months . . . . . . . .

3,152

3,455

4,526

Past due over 6 months . . . . . . . .

3,192

1,972

1,799

428,953458,685

541,955

The carrying amount of trade and other receivables individually determined to be
impaired and the movements in the related allowance for impairment are as
follows:
2009

2010

2011

¥’000

¥’000

¥’000

Gross amount. . . . . . . . . . . . . . . .

3,912

8,861

5,056

Less: Allowance for impairment . .

(3,912)(8,861)(5,056)–––

Beginning of financial year. . . . . .

6,404

3,912

8,861

Allowance made (Note 6). . . . . . .

713

7,615

–

Reversal of allowance made(Note 6) . . . . . . . . . . . . . . . . . . . .

–(2,646)–

Allowance utilised. . . . . . . . . . . . .

(3,205)(20)(3,805)End of financial year . . . . . . . . . .

3,912

8,861

5,056

Trade receivables – current

A-72

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management (continued)(b)Credit risk (continued)(ii)

Financial assets that are past due and/or impaired (continued)
2009

2010

2011

¥’000

¥’000

¥’000

Gross amount. . . . . . . . . . . . . . . .

4,374

12,664

11,626

Less: Allowance for impairment . .

(4,374)(12,664)(11,626)–––

Beginning of financial year. . . . . .

2,960

4,374

12,664

Allowance made (Note 6). . . . . . .

3,419

9,278

–

Allowance utilised. . . . . . . . . . . . .

(2,005)(988)(1,038)End of financial year . . . . . . . . . .

4,374

12,664

11,626Gross amount. . . . . . . . . . . . . . . .

2,073

7,573

641

Less: Allowance for impairment . .

(2,073)(7,573)

(641)

–

–

–

Beginning of financial year. . . . . .

3,213

2,073

7,573

Allowance made (Note 6). . . . . . .

–

5,500

–

Reversal of allowance made(Note 6) . . . . . . . . . . . . . . . . . . . .

––(2,142)

Allowance utilised. . . . . . . . . . . . .

(1,140)–(4,790)End of financial year . . . . . . . . . .

2,073

7,573

641

Gross amount. . . . . . . . . . . . . . . .

2,982

78

858

Less: Allowance for impairment . .

(2,982)

(78)

(858)

–

–

–

Beginning of financial year. . . . . .

14

2,982

78

Allowance made (Note 6). . . . . . .

2,968

–

780

Reversal of allowance made(Note 6) . . . . . . . . . . . . . . . . . . . .

–(2,904)–

Allowance utilised. . . . . . . . . . . . .

–

–

–

End of financial year . . . . . . . . . .

2,982

78

858

Trade receivables – non-current

Other receivables – current

Other receivables – non-current

A-73

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management (continued)(c)Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash and theavailability of funding through an adequate amount of committed credit facilities (Note24). At the balance sheet date, assets held by the Group for managing liquidity risk
included cash and short-term deposits as disclosed in Note 13.
The table below analyses the non-derivative financial liabilities of the Group into
relevant maturity groupings based on the remaining period from the balance sheet
date to the contractual maturity date. The amounts disclosed in the table are thecontractual undiscounted cash flows. Balances due within 12 months equal theircarrying amounts as the impact of discounting is not significant.
Less than
1 year

Between1 and 5 yearsOver
5 years

¥’000

¥’000

¥’000

Trade and other payables . . . . . . . .

1,873,916

1,263,742

873,386

Borrowings . . . . . . . . . . . . . . . . . . . .

16,186,371

15,487,294

4,787,685

18,060,287

16,751,036

5,661,071

Trade and other payables . . . . . . . .

1,453,173

993,035

893,879

Borrowings . . . . . . . . . . . . . . . . . . . .

10,825,128

18,833,757

6,146,532

12,278,301

19,826,792

7,040,411

Trade and other payables . . . . . . . .

2,517,703

945,095

890,184

Borrowings . . . . . . . . . . . . . . . . . . . .

6,171,720

18,406,719

6,997,496

8,689,423

19,351,814

7,887,680

At 30 November 2009

At 30 November 2010

At 30 November 2011(d)Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability tocontinue to operate as a going concern and to maintain an optimal capital structure so
as to maximise shareholder value. In order to maintain or achieve an optimal capital
structure, the Group may adjust the amount of dividend payment, return capital toshareholders, issue new shares or obtain new borrowings.
Management monitors capital based on equity ratio which the Group’s strategies were
unchanged from 2009, and the Board of Directors monitors the Group’s equity ratio on
periodic basis.
A-74

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management (continued)(d)Capital risk (continued)
2009

2010

2011

¥’000

¥’000

¥’000

Total equity . . . . . . . . . . . . . . . . . . . . . .

22,722,490

24,799,247

25,307,951

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

62,815,035

63,210,423

60,599,836

Equity ratio . . . . . . . . . . . . . . . . . . . . . .

36.17%

39.23%

41.76%The Group is in compliance with all externally imposed capital requirements for thefinancial years ended 30 November 2009, 2010 and 2011.
(e)

Fair value measurement
The following table presents assets and liabilities measured at fair value and classified
by level of the following fair value measurement hierarchy.
(a)quoted prices (unadjusted) in active markets for identical assets or liabilities(Level 1);(b)

inputs other than quoted prices included within Level 1 there are observable forthe asset or liability, either directly (is as prices) or indirectly (i.e. derived fromprices) (Level 2); and(c)inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
Level 1

Level 2

Level 3

Total

¥’000

¥’000

¥’000

¥’000

Financial assets at fair value
through profit or loss . . . . . . . . . . . .

–14,669–14,669Available-for-sale financial assets . .

23,291

30,348–53,639Total assets. . . . . . . . . . . . . . . . . . .

23,29145,017–68,308Financial assets at fair value
through profit or loss . . . . . . . . . . . .

–14,620–14,620Available-for-sale financial assets . .

23,39628,449–51,845

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

23,39643,069–66,465

2009

2010

A-75

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

33. Financial risk management (continued)(e)Fair value measurement (continued)
Level 1

Level 2

Level 3

Total

¥’000

¥’000

¥’000

¥’000

Financial assets at fair value
through profit or loss . . . . . . . . . . . .

–17,805–17,805

Available-for-sale financial assets . .

18,068361,799–379,867

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

18,068379,604–

397,672

2011

The fair value of financial instruments traded in active markets (such as trading andavailable-for-sale securities) is based on quoted market prices at the balance sheet
date. The quoted market price used for financial assets held by the Group is thecurrent market price. These instruments are included in Level 1.
The fair value of financial instruments that is not traded in an active market (e.g.
over-the-counter derivatives) is determined by using the value-in-use method. The
Group uses a variety of methods and makes assumptions that are based on market
conditions existing as at 30 November 2009, 2010 and 2011 respectively. These
instruments are included in Level 2. In infrequent circumstances, where a valuation
technique for these instruments is based on significant unobservable inputs, financial
instruments would be included in Level 3.
The carrying value less impairment provision of trade and other receivables, andpayables are assumed to approximate their fair values. The fair value of financial
liabilities for disclosures purposes is estimated based on quoted market prices ordealer quotes for similar instruments by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial
instruments. The fair value of current borrowings approximate their carrying amount.
34. Related party transactions
In addition to the information disclosed elsewhere in the financial statements, the following
transactions took place between the Group and related parties at terms agreed between parties:(a)

Sales and purchases of goods and services
2009

2010

2011

¥’000

¥’000

¥’000

–

2,100

–

Sales of goods and/or services to– Director . . . . . . . . . . . . . . . . . . . . . . .

A-76

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

34. Related party transactions (continued)(b)

Key management personnel compensation
Key management personnel compensation is as follows:
2009

2010

2011

¥’000

¥’000

¥’000

Salaries and bonuses. . . . . . . . . . . . . .

114,503110,837

123,995

Statutory welfare expenses . . . . . . . . .

4,767

4,820

4,238

Retirement benefits . . . . . . . . . . . . . . .

23,271

23,242

20,565

142,541

138,899

148,798

35. Segment information
The primary reportable segment is by business segment. As the Group operates only inJapan, no geographical segment information is shown.
The Group’s reportable segments are separate financial information available and evaluatedregularly by the Board of Directors to determine distribution of management resources andassess performance. The Board of Directors draws up comprehensive domestic strategies
for each segment and the Group conducts business activities accordingly. Consequently, theGroup is made up of different segments, as determined by the Board of Directors, and has
six reportable segments as follows:•

Revitalisation business – the Group increases the value of properties whose asset
value has declined and resells them;•

Development business – the Group sells condominium units and detached houses inlots to private customers and sells rental apartments and office buildings to investors;•

Rental business – the Group rents office buildings and condominiums to non-relatedparties and earns rental income;•Fund business – the Group provides fund asset management services;•

Property management business – the Group provides comprehensive property
management services; and•Alternative investment business – the Group acquires real estate collateralised loans,collects debt, and sells properties acquired as payment in kind.

No separate segmental liabilities by segment business are presented as management is of
the opinion that it is impracticable to separate liabilities for each business segment.
Additionally, the measurement of total liabilities for each reportable segment is not used by
the Board of Directors when making operating decisions about allocating resources to thebusiness segment and assessing its performance.
A-77

A-78
–
–
–

–
–
(337,106)(10,084,065)(458,806)
14,887,892–––

Interest and dividend income . .
Amortisation and depreciation .
Finance expenses . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .

(Loss)/profit before tax . . . . .

Segment/total assets . . . . . . .

Segment assets includes:
Additions to– Investment properties . . . . . .
– Property, plant andequipment. . . . . . . . . . . . . . . . .
– Intangible assets . . . . . . . . . .

3,467,732

3,422,431
45,301¥’000

Rentalbusiness

21,189,768

311,970––

20,275

13,032,389

1,958,196–––(115,786)(216,072)(164,461)(16,028,326) (1,229,289)

16,556,368

9,962,365

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

16,556,368–

9,962,365
–

¥’000

2009
Revenue
External revenue . . . . . . . . . . .
Inter-segment revenue . . . . . . .

¥’000

Revitalisation Development
businessbusiness–––

457,323

307,895

183(2,249)–(627,230)

937,191

896,952
40,239¥’000

Fundbusiness–––

985,732

217,923674(12,267)(4,343)(2,792,225)

3,026,084

2,597,765
428,319¥’000

Property
managementbusiness

The segment information provided to the management for the reportable segments are as follows:

35. Segment information (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011–––

3,060,633(206,373)

288
(244)
(72,983)(761,709)

628,275

186,998441,277¥’000

Alternative
investment
business

¥’000

Total

929,523

29,653
1,766–

29,653
1,766

20,2759,201,298 62,815,035(1,201,282)

16,297
17,442(44,824) (175,370)(10,861) (805,826)(206,758)(31,729,602)(955,136) 33,622,879– 33,622,879(955,136)–¥’000

Corporate

A-79
–
–
–

–
–
(311,786)(7,621,318)
216,318
23,082,397–––

Interest and dividend income . .
Amortisation and depreciation .
Finance expenses . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .

Profit/(loss) before tax . . . . . .

Segment/total assets . . . . . . .

Segment assets includes:
Additions to– Investment properties . . . . . .
– Property, plant andequipment. . . . . . . . . . . . . . . . .
– Intangible assets . . . . . . . . . .

2,638,582

2,591,502
47,080¥’000

Rentalbusiness

12,788,756(276,235)

–
–

8,895

14,661,428

1,363,318–––(94,832)(291,445)(131,561)(11,667,208) (1,048,871)

11,682,418

8,149,422

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

11,682,418–

8,149,422
–

¥’000

2010
Revenue
External revenue . . . . . . . . . . .
Inter-segment revenue . . . . . . .

¥’000

Revitalisation Development
businessbusiness

35. Segment information (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011–––

399,536458,32089(2,040)–(668,456)

1,128,727

1,077,760
50,967¥’000

Fundbusiness–––

971,531

118,513207(16,301)(4,667)(2,951,476)

3,090,750

2,768,513
322,237¥’000

Property
managementbusiness–––

2,811,671(131,915)

266
(167)
(69,043)(233,138)

170,167

170,167–¥’000

Alternative
investment
business

¥’000

Total

588,285

14,055
3,579–

14,055
3,579

8,895

8,495,104 63,210,423(1,160,034)

11,864
12,426(42,801) (156,141)(18,232) (826,734)(690,581)(24,881,048)(420,284) 26,439,782– 26,439,782(420,284)–¥’000

Corporate

A-80
–
–
–

–
–
(377,134)(10,314,958)
1,348,795
19,412,404–––

Interest and dividend income . .
Amortisation and depreciation .
Finance expenses . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .

Profit/(loss) before tax . . . . . .

Segment/total assets . . . . . . .

Segment assets includes:
Additions to– Investment properties . . . . . .
– Property, plant andequipment. . . . . . . . . . . . . . . . .
– Intangible assets . . . . . . . . . .

13,600,894(366,259)––(176,673)(5,445,732)

5,256,146

12,040,887

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

5,256,146–

12,040,887
–

¥’000

2011
Revenue
External revenue . . . . . . . . . . .
Inter-segment revenue . . . . . . .

¥’000

Revitalisation Development
businessbusiness

35. Segment information (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011––

45,62313,802,515

1,284,891–(101,233)(137,545)(1,058,446)

2,582,115

2,533,995
48,120¥’000

Rentalbusiness–––

815,668

518,83050(2,281)–(731,762)

1,252,823

1,234,805
18,018¥’000

Fundbusiness–––

1,733,741

115,966112(24,291)(5,004)(3,855,151)

4,000,300

3,514,569
485,731¥’000

Property
managementbusiness–––

2,445,028(257,046)100(5,947)(68,023)(363,683)

180,507

180,507–¥’000

Alternative
investment
business

¥’000

Total

22,70437,016–22,70437,01645,6238,789,586 60,599,836(1,135,667) 1,509,510

5,395
5,657
(38,532) (172,284)(14,489) (778,868)(536,172)(22,305,904)(551,869) 24,760,909– 24,760,909(551,869)–¥’000

Corporate

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the Financial Years ended 30 November 2009, 2010 and 2011

36. Events occurring after balance sheet date
Subsequent to the financial year ended 30 November 2011, the Company has incorporated
two subsidiaries, namely:(i)

Tosei Singapore Pte Ltd, a company incorporated and domiciled in Singapore with apaid up capital of ¥18,747,000. Its intended principal activities are those of real estate
management; and(ii)

Sannomiya Real Estate Sales LLC, a company incorporated and domiciled in Japan
with a paid up capital of ¥20,000,000. Its intended principal activities are of those of realestate agency and consultancy. With effect from 1 December 2012, Sannomiya Real
Estate Sales LLC is known as NAI Tosei Japan, Inc..

37. Summary of major properties
Below are summary of the major properties owned by the Group:Group’seffective
interest in
the property

Description

TenureGrossfloor area
(sq m)

Steel/8-storey

48 years

7,825

100%

Koishikawa Tosei
Building

Steel/10-storey,a ground-floor

48 years

3,276

100%

Nihonbashi-Hamacho
Building

Steel reinforced
concrete/9-storey

28 years

4,583

100%

Steel/9-storey

45 years

4,214

100%

Location
Real estate for sale
Kamata Tosei Building
Investment properties

Property, plant andequipment
Toranomon Tosei
Building

A-81

STATEMENT BY DIRECTORSIn the opinion of the directors,(i)the consolidated financial statements set out on pages A-3 to A-81 are drawn up so as to givea true and fair view of the state of affairs of the Group as at 30 November 2009, 2010 and2011, and of the results of the business, changes in equity and cash flows of the Group for
the financial years then ended; and(ii)

at the date of this statement there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements
for issue.

On behalf of the directors

Seiichiro Yamaguchi
Director

Noboru Hirano
Director

[●]

A-82

APPENDIX B

INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS OF TOSEI CORPORATION AND ITS SUBSIDIARIES FOR THE
SIX-MONTH PERIOD ENDED 31 MAY 2012
INDEPENDENT AUDITOR’S REPORT
22 February 2013
The Board of Directors
Tosei Corporation
Toranomon Tosei Building
4-2-3 Toranomon
Minato-ku, Tokyo
Dear Sirs
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Tosei Corporation (the“Company”) and its subsidiaries (collectively, the “Group”), which comprise the consolidatedbalance sheets of the Group as at 31 May 2012, and the consolidated statements ofcomprehensive income, the consolidated statements of changes in equity and the consolidated
statements of cash flows of the Group for the six-month period ended 31 May 2012 then ended,
and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fairview in accordance with International Financial Reporting Standards, and for devising andmaintaining a system of internal accounting controls sufficient to provide a reasonable assurance
that assets are safeguarded against loss from unauthorised use or disposition; and transactions
are properly authorised and that they are recorded as necessary to permit the preparation of trueand fair profit and loss accounts and balance sheets and to maintain accountability of assets.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity’s preparation of financial statements that give atrue and fair view in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
controls. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
B-1

INDEPENDENT AUDITOR’S REPORT (continued)
OpinionIn our opinion, the consolidated financial statements of the Group are properly drawn up inaccordance with International Financial Reporting Standards so as to give a true and fair view ofthe state of affairs of the Group as at 31 May 2012 and the results, changes in equity and cash
flows of the Group for six-month period ended on 31 May 2012.
Other Matters
The comparative figures for the corresponding six-month period ended 31 May 2011 wereextracted from the unaudited management financial information and we have not carried out anaudit or review of these financial information. The unaudited consolidated financial information forthe corresponding six-month period ended 31 May 2011 is the responsibility of the management.
Report on Other Legal and Regulatory Requirements
This report has been prepared in accordance with the Singapore Securities and Futures (Offersof Investments) (Shares and Debentures) Regulations 2009 for the purpose of inclusion in fillings
associated with a proposed secondary listing of the Company’s shares on the Mainboard of theSingapore Exchange Trading Securities Limited (“SGX-ST”).

Nexia TS Public Accounting Corporation
Public Accountants and Certified Public Accountants
SingaporeDirector-in-charge: Loh Hui Nee

B-2

Tosei Corporation and Its Subsidiaries
Consolidated Statements of Comprehensive Income
For the six-month period ended 31 May 2012

Note

Six-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)

10,656,349

10,147,521

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . .

(7,845,078)(7,905,844)

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

2,811,271

2,241,677

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

16,63010,855

Other losses – net . . . . . . . . . . . . . . . . . . . . . . .

8–(2,307)(1,468,116)(1,528,687)(402,766)(322,259)

957,019399,279(413,382)(177,295)

543,637

221,984(41)

271

Currency translation differences arising fromconsolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–

(369)

Other comprehensive (losses)/income,net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(41)

(98)

Total comprehensive income . . . . . . . . . . . . . .

543,596

221,886543,637

221,984

543,596

221,886

1,189.99

485.91

Expenses– Administrative . . . . . . . . . . . . . . . . . . . . . . . . .
– Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9Profit before income tax . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . .

10(a)Net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (losses)/income:Available-for-sale financial assets– Fair value (losses)/gains . . . . . . . . . . . . . . . . .

10(b)Profit attributable to:Equity holders of the Company . . . . . . . . . . . . .
Total comprehensive income attributable to:Equity holders of the Company . . . . . . . . . . . . .
Earnings per share attributable to equity
holders of the Company (¥ per share)– Basic and diluted . . . . . . . . . . . . . . . . . . . . . . .

11

The accompanying notes form an integral part of these financial statements.

B-3

Tosei Corporation and Its Subsidiaries
Balance Sheet
As at 31 May 2012
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

8,381,689
17,805
10,0001,205,353
33,967,938
2,335

6,975,514
18,013
10,0001,278,017
35,019,006
3,052

43,585,120

43,303,602

369,867
125,635
11,378,055
3,341,262
66,8568,380
1,724,661

390,622
166,618
11,429,099
3,338,292
56,1538,380
1,548,778

17,014,716

16,937,942

60,599,836

60,241,544

2,517,703
81,331
6,171,720

2,058,139
69,792
6,626,132

8,770,754

8,754,063

1,835,279
23,900,745
280,380
504,727

1,948,206
23,484,503
232,036
521,319

26,521,131

26,186,064

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

35,291,885

34,940,127

NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,307,951

25,301,417

5,454,673
14,339,149
5,514,129

5,454,673
14,332,713
5,514,031

25,307,951

25,301,417

Note

ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
Financial assets, at fair value through profit or loss . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . .
Trade and other receivables. . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current assets
Available-for-sale financial assets . . . . . . . . . . . . . . . .
Trade and other receivables. . . . . . . . . . . . . . . . . . . . .
Investment properties . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . .

12
13
14
15
16
21

14
17
18
19
20
21
26

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIESCurrent liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . .
Current income tax liabilities . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities . . . . . . . . . . . . . . . . . . .
Retirement benefits obligations . . . . . . . . . . . . . . . . . .

EQUITY
Capital and reserve attributable to equity holdersof the Company
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22
23

22
23
26
25

27
28
29

The accompanying notes form an integral part of these financial statements.

B-4

B-5

–
–
5,454,673

Dividend relating to 2010 paid (Note 30) . . . . . . . . . . . . . . . . . . .

Total comprehensive (losses)/income for the financial period . . . .

Balance at 31 May 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

––5,454,673

Dividend relating to 2011 paid (Note 30) . . . . . . . . . . . . . . . . . . . .

Total comprehensive income/(losses) for the financial period . . . .

Balance at 31 May 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,516,499––

5,516,499

5,516,499––

5,516,499¥’000(2,099)271–(2,370)

732

(41)

–

773

¥’000

(369)

(369)

–

–

–

–

–

–

¥’000

14,332,713

221,984(228,420)

14,339,149

14,142,519

543,637(228,420)

13,827,302¥’000

Attributable to equity holders of the Company
Currency
CapitalFair value translation
Retainedreserve
reserve
reserveearnings

The accompanying notes form an integral part of these financial statements.

5,454,673

Balance at 1 December 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . .

(audited)

5,454,673

¥’000

Share
capitalBalance at 1 December 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .

(unaudited)

Tosei Corporation and Its Subsidiaries
Consolidated Statements of Changes in Equity
For the six-month period ended 31 May 2012

25,301,417

221,886(228,420)

25,307,951

25,114,423

543,596(228,420)

24,799,247¥’000

Total equity

Tosei Corporation and Its Subsidiaries
Consolidated Statement of Cash Flows
For the six-month period ended 31 May 2012

Note

Cash flows from operating activities
Net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:– Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Amortisation and depreciation . . . . . . . . . . . . . . . . . . . . .
– Write off of property, plant and equipment. . . . . . . . . . . . .
– Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Dividend income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Unrealised currency translation losses . . . . . . . . . . . . . . .

8
7
7
9

Six-month period ended
31 May
2011
2012
¥’000
(unaudited)¥’000(audited)

543,637

221,984

413,382
83,294–(1,928)(1,272)402,766–

177,295
87,5102,307(871)(1,272)322,259(369)

1,439,879

808,843

Change in working capital:– Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Trade and other receivables . . . . . . . . . . . . . . . . . . . . . .
– Financial assets, at fair value through profit or loss . . . . . .
– Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . .
– Retirement benefits obligations . . . . . . . . . . . . . . . . . . . .

(640,115)(112,628)(19,975)(574)
518,117
13,938(1,051,068)(115,377)
(208)
(717)
(338,432)
16,592

Cash generated from/(used in) operations . . . . . . . . . . . . . .
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,198,642
1,281
1,272
(20,019)(680,367)
871
1,272(61,779)

Net cash provided by/(used in) operating activities . . . . .

1,181,176(740,003)

Cash flows from investing activities
Additions to property, plant and equipment . . . . . . . . . . . . .
Additions to investment properties . . . . . . . . . . . . . . . . . . .
Additions of intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Purchase of available-for-sale financial assets . . . . . . . . . . .

(4,420)(35,800)(31,570)(133,350)(20,427)(102,481)(4,280)(20,000)

Net cash used in investing activities . . . . . . . . . . . . . . . .

(205,140)(147,188)

Cash flows from financing activities
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of borrowings. . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of finance lease obligations. . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to equity holders of the Company . . . . . . . . .

5,395,000(6,008,373)(783)(416,959)(228,420)

6,874,000(6,835,047)(783)(328,734)(228,420)

Net cash used in financing activities . . . . . . . . . . . . . . . .

(1,259,535)(518,984)

Net decrease in cash and cash equivalents . . . . . . . . . . .

(283,499)(1,406,175)

Cash and cash equivalents
Beginning of financial period . . . . . . . . . . . . . . . . . . . . . . .

6,858,182

8,361,689

End of financial period . . . . . . . . . . . . . . . . . . . . . . . . . .

6,574,683

6,955,514

30

The accompanying notes form an integral part of these financial statements.

B-6

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012
These notes form an integral part of and should be read in conjunction with the accompanying
consolidated financial statements.
1.

General information
1.1

Introduction
The consolidated financial statements of Tosei Corporation (the “Company”) and its
subsidiaries (collectively, the “Group”) have been prepared for the purpose of inclusionin filings associated with a proposed secondary listing of the Company’s shares on the
Mainboard of the Singapore Exchange Securities Trading Limited (“SGX-ST”).
These consolidated financial statements were authorised for issue in accordance witha resolution of the Board of Directors of Tosei Corporation on 22 February 2013.

1.2

Corporate information
Tosei Corporation is listed on the Tokyo Stock Exchange, First Section andincorporated and domiciled in Japan. The address of its registered office is Toranomon
Tosei Building, 4-2-3 Toranomon, Minato-ku, Tokyo.
The principal activities of the Company are those of real estate revitalisation,
development and rental property management, investment in real estate funds,
financial products and assets, as well as advisory and asset management services.
The Group comprises the Company and the following subsidiaries:

Principal
activities

Name of companies

Country ofbusiness/incorporation

Equity Holding
2011

2012

%

%

Significant subsidiaries held by the Company
Tosei Community Co., Ltd.

Property
management

Japan

100

100

Tosei Revival Investment
Co., Ltd.

Alternative
investment

Japan

100

100

Fund

Japan

100

100

Real estate
Singapore(3)
management–

100

Real estateagency andconsultancy (3)–100Tosei Asset Advisor, Inc.
Tosei Singapore Pte. Ltd.
NAI Tosei Japan, Inc. (2)

(1)

B-7

Japan

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

1.

General information (continued)
1.2

Corporate information (continued)

Name of companies

Principal
activities

Country ofbusiness/incorporation

Equity Holding
2011

2012

%

%

Significant subsidiaries held by Tosei Revival Investment Co., Ltd.

2.

Hestia Capital Limited
Company

Alternative
investment

Japan

100

100

Metis Capital Co., Ltd. (4)Alternative
investment

Japan

100

–

Green House Limited
Company

Alternative
investment

Japan

100

100

(1)

Newly incorporated in 10 January 2012.

(2)

Newly incorporated in 20 January 2012 and not consolidated as its impact to the Group’s financial
statements is insignificant. This subsidiary was previously known as Sannomiya Real Estate Sales
LLC.

(3)

This is the intended activity of the subsidiary and operations have not commenced since the date ofincorporation.

(4)

Metis Capital Co., Ltd. merged with Tosei Revival Investment Co., Ltd. on 31 May 2012.

Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below.
2.1

Basis of preparation
These consolidated financial statements of the Group have been prepared for the
purpose of inclusion in filings associated with a proposed secondary listing of theCompany’s shares on the Mainboard of the Singapore Exchange Securities Trading
Limited (“SGX-ST”).
The preparation of financial statements in conformity with International Financial
Reporting Standards (“IFRS”) requires management to exercise its judgement in theprocess of applying the Group’s accounting policies. It also requires the use of certain
critical accounting estimates and assumptions. The areas involving high degree ofjudgement or complexity, or areas where assumptions and estimates are significant to
the financial statements, are disclosed in Note 3.

2.2

Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for saleof goods and rendering of services in the ordinary course of the Group’s activities.
Revenue is presented, net of value-added tax, rebates and discounts, and after
eliminating sales within the Group.
B-8

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.2

Revenue recognition (continued)
The Group recognises revenue when the amount of revenue and related cost can bereliably measured, it is probable that the collectibility of the related receivables isreasonably assured and when the specific criteria for each of the Group’s activities are
met as follows:(a)

Properties for sale
The Group recognises income on property when the risks and rewards ofownership have been transferred to the buyer. Depending on the selling
conditions associated with each property, revenue is generally not recognised if
the Group provides various guarantees and other financial support to the buyers(“continuing involvement”). Such continuing involvement by the Group would
then require revenue to be deferred until the Group’s continuing involvementceases. No revenue is recognised if there are significant uncertainties regarding
recovery of the consideration due, associated costs or the possible return of unit
sold.

(b)

Rental income
Rental income from operating lease (net of any incentives given to the lessee) is
recognised on a straight-line basis over the lease term except where analternative basis is more representative of the pattern of benefits to be derived
from the leased assets.

(c)

Financial advisory and management fee
Financial advisory and management fee is recognised as and when services are
rendered.

(d)Interest income
Interest income, including income arising from finance leases and other financial
instruments, is recognised using the effective interest method.

(e)

Dividend income
Dividend income is recognised when the right to receive payment is established.

(f)Other income
Other income is recognised at the point of entitlement of income.

B-9

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.3

Group accounting(a)Subsidiaries(i)

Consolidation
Subsidiaries are entities (including special purpose entities) over which theGroup has power to govern the financial and operating policies so as toobtain benefits from its activities, generally accompanied by a shareholding
giving rise to a majority of the voting rights. The existence and effect ofpotential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Group controls another entity.
Subsidiaries are consolidated from the date on which control is transferredto the Group. They are de-consolidated from the date on which control
ceases.
In preparing the consolidated financial statements, transactions, balances
and unrealised gains on transactions between group entities are eliminated.
Unrealised losses are also eliminated but are considered an impairment
indicator of the asset transferred. Accounting policies of subsidiaries havebeen changed where necessary to ensure consistency with the policies
adopted by the Group.

(ii)

Acquisitions
The acquisition method of accounting is used to account for businesscombinations by the Group.
The consideration transferred for the acquisition of a subsidiary or businesscomprises the fair value of the assets transferred, the liabilities incurred andthe equity interests issued by the Group. The consideration transferred also
includes the fair value of any contingent consideration arrangement and thefair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are, with limited exceptions, measured initially attheir fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any
non-controlling interest in the acquiree at the date of acquisition either at fairvalue or at the non-controlling interest’s proportionate share of theacquiree’s net identifiable assets.

B-10

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.3

Group accounting (continued)(a)Subsidiaries (continued)(ii)

Acquisitions (continued)
The excess of (i) the consideration transferred, the amount of any noncontrolling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the (ii) fair value of the net
identifiable assets acquired is recorded as goodwill. If those amounts areless than the fair value of the net identifiable assets of the subsidiaryacquired and the measurement of all amounts has been reviewed, thedifference is recognised directly in profit or loss as bargain purchase.

(iii) Disposals
When a change in the Group’s ownership interest in a subsidiary results ina loss of control over the subsidiary, the assets and liabilities of thesubsidiary including any goodwill are derecognised. Amounts recognised inother comprehensive income in respect of that entity are also reclassified to
profit or loss or transferred directly to retained earnings if required by aspecific Standard.
Any retained interest in the entity is remeasured at fair value. The difference
between the carrying amount of the retained investment at the date whencontrol is lost and its fair value is recognised in profit or loss.
(b)Transactions with non-controlling interests.
Changes in the Group’s ownership interest in a subsidiary that do not result in aloss of control over the subsidiary are accounted for as transactions with equity
owners of the Company. Any difference between the change in the carrying
amounts of the non-controlling interest and the fair value of the consideration
paid or received is recognised within equity attributable to the equity holders of
the Company.

2.4

Property, plant and equipment(a)Measurement(i)Land and buildings
Land and buildings are initially recognised at cost. Freehold land is
subsequently carried at cost less accumulated impairment losses. Buildings
are subsequently carried at cost less accumulated depreciation andaccumulated impairment losses.

B-11

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.4

Property, plant and equipment (continued)(a)Measurement (continued)(ii)

Other property, plant and equipment
All other items of property, plant and equipment are initially recognised atcost and subsequently carried at cost less accumulated depreciation andaccumulated impairment losses.

(iii) Components of costs
The cost of an item of property, plant and equipment initially recognised
includes its purchase price and any cost that is directly attributable tobringing the asset to the location and condition necessary for it to becapable of operating in the manner intended by management. Cost also
includes borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset (refer to Note 2.7 onborrowing costs).
(b)

Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plantand equipment is calculated using the straight-line method. If the depreciation
based on the reducing balance method has better reflects the pattern in which theasset’s future economic benefits are expected to be consumed, this method isapplied. The depreciable amounts of other items of property, plant and equipment
over their estimated useful lives are allocated as follows:
Useful lives
Buildings and structures

3–50 years

Tools, equipment and fixtures

3–20 years

The residual values, and estimated useful lives and depreciation method of
property, plant and equipment are reviewed, and adjusted as appropriate, at eachbalance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
Fully depreciated assets still in use are retained in the financial statements.
(c)

Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has
already been recognised is added to the carrying amount of the asset only when
it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repair andmaintenance expenses are recognised in profit or loss when incurred.
B-12

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.4

Property, plant and equipment (continued)(d)DisposalOn disposal of an item of property, plant and equipment, the difference between
the disposal proceeds and its carrying amount is recognised in profit or loss
within “Other (losses)/gains – net”.

2.5

Intangible assets(a)Acquired licenses
Licences acquired are initially recognised at cost. Acquired licenses with anindefinite useful life are subjected to impairment assessment by comparing its
recoverable amount with its carrying amount on an annual basis and whenever
there is an indication that the intangible asset may be impaired. The useful life ofacquired licenses is reviewed and assessed at the end of each balance sheet
date.

(b)

Acquired computer software licenses
Acquired computer software licences are initially capitalised at cost which
includes the purchase price (net of any discounts and rebates) and other directly
attributable cost of preparing the asset for its intended use. Direct expenditure
including employee costs, which enhances or extends the performance ofcomputer software beyond its specifications and which can be reliably measured,is added to the original cost of the software. Costs associated with maintaining
the computer software are recognised as an expense when incurred.
Computer software licences are subsequently carried at cost less accumulated
amortisation and accumulated impairment losses. These costs are amortised to
profit or loss using the straight-line method over their estimated useful lives ofthree to five years.

The amortisation period and amortisation method of intangible assets are reviewed atleast at each balance sheet date. The effects of any revision are recognised in profit
or loss when the changes arise.
2.6

Club memberships
Club memberships are stated at cost less impairment loss.

B-13

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.7

Borrowing costs
Borrowing costs are recognised in profit or loss using the effective interest method
except for those costs that are directly attributable to the construction or developmentof properties and assets under construction. This includes those costs on borrowings
acquired specifically for the construction or development of properties and assets
under construction, as well as those in relation to general borrowings used to financethe construction or development of properties and assets under constructions.
The actual borrowing costs incurred during the period up to the issuance of thetemporary occupation permit less any investment income on temporary investment ofthese borrowings, are capitalised in the cost of the property under development orassets under construction. Borrowing costs on general borrowings are capitalised byapplying a capitalisation rate to construction or development expenditures that are
financed by general borrowings.

2.8

Investment properties(a)

Investment properties include those portions of commercial and residentialbuildings that are held for long-term rental yields and/or for capital appreciationand land under operating leases that is held for long-term capital appreciation or
for a currently indeterminate use.
Investment properties are initially recognised at cost and subsequently carried atcost less accumulated depreciation and accumulated impairment loss.
Depreciation of investment properties is calculated using the straight-line
method. If the depreciation based on the reducing balance method has betterreflects the pattern in which the asset’s future economic benefits are expected tobe consumed, this method is applied. The allocated depreciable amounts of theinvestment properties over the estimated useful lives range between 3 to 50
years. Freehold land included in the investment properties is not depreciated.
The residual values, and estimated useful lives and depreciation method ofinvestment properties are reviewed, and adjusted as appropriate, at eachbalance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
Investment properties are subject to renovations or improvements at regularintervals. The cost of major renovations and improvements is capitalised and thecarrying amounts of the replaced components are recognised in profit or loss.
The cost of maintenance, repairs and minor improvements is recognised in profit
or loss when incurred.
On disposal of an investment property, the difference between the disposal
proceeds and the carrying amount is recognised in profit or loss within “Other(losses)/gains – net”.

B-14

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.8

Investment properties (continued)(b)Transfer
Transfers to, or from, investment properties are made when there is a change inuse, evidenced by:

2.9

(i)

commencement of development with a view to sell, for a transfer frominvestment properties to development properties; and(ii)

commencement of an operating lease to another party, for a transfer fromdevelopment properties to investment properties.

Impairment of non-financial assets(a)Intangible assets
Property, plant and equipment
Investment properties
Intangible assets, property, plant and equipment and investment properties aretested for impairment whenever there is any objective evidence or indication thatthese assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher ofthe fair value less cost to sell and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash inflows that are largely
independent of those from other assets. If this is the case, the recoverable
amount is determined for the CGU to which the asset belongs. If the recoverable
amount of the asset (or CGU) is estimated to be less than its carrying amount, thecarrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount isrecognised as an impairment loss in profit or loss.
An impairment loss for an asset is reversed if, and only if, there has been achange in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. The carrying amount of this asset isincreased to its revised recoverable amount, provided that this amount does notexceed the carrying amount that would have been determined (net of any
accumulated amortisation or depreciation) had no impairment loss beenrecognised for the asset in prior years.
A reversal of impairment loss for an asset is recognised in profit or loss, unlessthe asset is carried at revalued amount, in which case, such reversal is treatedas a revaluation increase. However, to the extent that an impairment loss on thesame revalued asset was previously recognised as an expense, a reversal of that
impairment is also credited to profit or loss.

B-15

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.10 Financial assets(a)Classification
The Group classifies its financial assets in the following categories: at fair value
through profit or loss, loans and receivables and available-for-sale. The
classification depends on the nature of the assets and the purpose for which theassets were acquired. Management determines the classification of its financial
assets at initial recognition.
(i)

Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, andthose designated at fair value through profit or loss at the date of inception.
Financial assets designated at fair value through profit or loss at inception
are those that are managed and their performances are evaluated on a fairvalue basis, in accordance with a documented Group investment strategy.
Assets in this category are presented as current assets if they are expected
to be realised within 12 months after the balance sheet date.

(ii)

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arepresented as current assets, except for those expected to be realised later
than 12 months after the balance sheet date or over its normal operating
cycle which are presented as non-current assets. Loans and receivables arepresented as “trade and other receivables” (Notes 15 and 17) and “cash andcash equivalents” (Note 12) on the balance sheet.

(iii) Available-for-sale financial assets
Available-for-sale financial assets, are non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are presented as non-current assets unless the investment matures ormanagement intends to dispose of the assets within 12 months after thebalance sheet date.
(b)

Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on tradedate – the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from thefinancial assets have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership. On disposal of afinancial asset, the difference between the carrying amount and the saleproceeds is recognised in profit or loss. Any amount in the other comprehensive
income relating to that asset is reclassified to profit or loss.
B-16

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.10 Financial assets (continued)(c)Initial measurement
Financial assets are initially recognised at fair value plus transaction costs
except for financial assets at fair value through profit or loss, which arerecognised at fair value. Transaction costs for financial assets at fair value
through profit or loss are recognised immediately as expenses.

(d)Subsequent measurement
Available-for-sale financial assets are subsequently carried at fair value. Loans
and receivables are subsequently carried at amortised cost using the effective
interest method.
Interest and dividend income on available-for-sale financial assets arerecognised separately in profit or loss. Changes in fair values of available-forsale equity securities (i.e. non-monetary items) are recognised in the fair value
reserve, together with the related currency translation differences.

(e)

Impairment
The Group assesses at each balance sheet date whether there is objective
evidence that a financial asset or a group of financial assets is impaired andrecognises an allowance for impairment when such evidence exists.
(i)

Loans and receivables
Significant financial difficulties of the debtor, probability that the debtor willenter bankruptcy, and default or significant delay in payments are objective
evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an
impairment allowance account for which is calculated as the difference
between the carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. When the asset
becomes uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are recognised
against the same line item in profit or loss.
The impairment allowance is reduced through profit or loss in a subsequent
period when the amount of impairment loss decreases and the related
decrease can be objectively measured. The carrying amount of the asset
previously impaired is increased to the extent that the new carrying amount
does not exceed the amortised cost had no impairment been recognised inprior periods.

B-17

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.10 Financial assets (continued)(e)Impairment (continued)(ii)

Available-for-sale financial assets
In addition to the objective evidence of impairment described in
Note 2.10(e)(i), a significant or prolonged decline in the fair value of anequity security below its cost is considered as an indicator that theavailable-for-sale financial assets are impaired.
If any evidence of impairment exists, the cumulative loss that wasrecognised in other comprehensive income is reclassified to profit or loss.
The cumulative loss is measured as the difference between the acquisition
cost (net of any principal repayments and amortisation) and the current fairvalue, less any impairment loss previously recognised as an expense. The
impairment losses recognised as an expense on equity securities are notreversed through profit or loss.

(f)

Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in thebalance sheet when there is a legally enforceable right to offset and there is anintention to settle on a net basis or realise the asset and settle the liability
simultaneously.

2.11

Financial guarantees
The Company has issued corporate guarantees to banks for borrowings of its
subsidiaries. These guarantees are financial guarantees as they require the Company
to reimburse the banks if the subsidiaries fail to make principal or interest payments
when due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costsin the Company’s balance sheet.
Financial guarantees are subsequently amortised to profit or loss over the period of
the subsidiaries’ borrowings, unless it is probable that the Company will reimburse thebank for an amount higher than the unamortised amount. In this case, the financial
guarantees shall be carried at the expected amount payable to the bank in the
Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.

B-18

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.12 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditionalright to defer settlement for at least 12 months after the balance sheet date, in whichcase they are presented as non-current liabilities.
Borrowings are initially recognised at fair value (net of transaction costs) andsubsequently carried at amortised cost. Any difference between the proceeds (net oftransaction costs) and the redemption value is recognised in profit or loss over theperiod of the borrowings using the effective interest method.
2.13 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to theGroup prior to the end of financial year which are unpaid. They are classified as
current liabilities if payment is due within a year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently
carried at amortised cost using the effective interest method.
2.14 Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchangetraded and over-the-counter securities and derivatives) are based on quoted market
prices at the balance sheet date. The quoted market prices used for financial assets
are the current bid prices; the appropriate quoted market prices for financial liabilities
are the current asking prices.
The fair values of financial instruments that are not traded in an active market are
determined by using valuation techniques. The Group uses a variety of methods andmakes assumptions that are based on market conditions existing at each balance
sheet date. When appropriate, quoted market prices or dealer quotes for similar
instruments are used. Valuation techniques, such as discounted cash flow analyses,
are also used to determine the fair values of the financial instruments.
The fair values of current financial assets and liabilities carried at amortised cost
approximate their carrying amounts.
2.15 Leases(a)When the Group is the lessee:
The Group leases office equipment under finance leases and operating leases
from non-related parties.
(i)

Lessee – Finance leases
Leases where the Group assumes substantially all risks and rewards
incidental to ownership of the leased assets are classified as financeleases.
B-19

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.15 Leases (continued)(a)When the Group is the lessee: (continued)(i)Lessee – Finance leases (continued)
The leased assets and the corresponding lease liabilities (net of financecharges) under finance leases are recognised on the balance sheet as plantand equipment and borrowings respectively, at the inception of the leases
based on the lower of the fair value of the leased assets and the present
value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the
reduction of the outstanding lease liability. The finance expense isrecognised in profit or loss on a basis that reflects a constant periodic rateof interest on the finance lease liability.

(ii)

Lessee – Operating leases
Leases where substantially all risks and rewards incidental to ownership are
retained by the lessors are classified as operating leases. Payments madeunder operating leases (net of any incentives received from the lessors) arerecognised in profit or loss on a straight-line basis over the period of thelease.
Contingent rents are recognised as an expense in profit or loss whenincurred.

(b)

When the Group is the lessor:
The Group leases investment properties under operating lease to non-relatedparties.
(i)

Lessor – Operating leases
Leases of investment properties where the Group retains substantially all
risks and rewards incidental to ownership are classified as operating leases.
Rental income from operating leases (net of any incentives given to thelessees) is recognised in profit or loss on a straight-line basis over the lease
term.
Initial direct costs incurred by the Group in negotiating and arranging
operating leases are added to the carrying amount of the leased assets andrecognised as an expense in profit or loss over the lease term on the same
basis as the lease income.
Contingent rents are recognised as income in profit or loss when earned.

B-20

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.16 Inventories
Inventories consist of real estate for sale and real estate for sale in-progress. They arestated at the lower of cost plus, where appropriate, a portion of attributable profit, andestimated net realisable value. Net realisable value represents the estimated selling
price less costs to be incurred in selling the property.
The cost of inventories comprise specifically identified costs, including acquisition
costs, development expenditure, borrowing costs and other related expenditure.
Borrowing costs payable on loans funding a development property are also
capitalised, on a specific identification basis, as part of the cost of the development
property until the completion of development.
2.17 Income taxes
Current income tax for current and prior periods is recognised at the amount expected
to be paid to or recovered from the tax authorities, using the tax rates and tax laws thathave been enacted or substantially enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the financial
statements except when the deferred income tax arises from the initial recognition ofan asset or liability in a transaction that is not a business combination and affects
neither accounting nor taxable profit or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on
investments in subsidiaries, except where the Group is able to control the timing of thereversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that futuretaxable profit will be available against which the deductible temporary differences andtax losses can be utilised.
Deferred income tax is measured:(i)at the tax rates that are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled, based on tax rates
and tax laws that have been enacted or substantially enacted by the balance
sheet date; and(ii)

based on the tax consequence that will follow from the manner in which theGroup expects, at the balance sheet date, to recover or settle the carrying
amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expense in profit or
loss.

B-21

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.18 Provisions for other liabilities and charges
Provision for other liabilities and charges are recognised when the Group has apresent legal or constructive obligation as a result of past events, and it is more likely
than not that an outflow of resources will be required to settle the obligation and theamount has been reliably estimated.
2.19 Employee compensation
Employee benefits are recognised as an expense, unless the cost qualifies to becapitalised as an asset.
(a)Defined contribution plans
Defined contribution plans are post-employment benefit plans which the Grouppays fixed contributions into separate entities such as the Pension Scheme on a
mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid.

(b)

Post employment benefit obligations
Post employment benefit obligations are defined benefit plans which define theamount of benefit where employee will receive on retirement according to laws
depending on age and years of service.
The liability recognised in the statement of financial position in respect of defined
benefit pension plans is the present value of the defined benefit obligation at theend of the reporting period with adjustments for unrecognised past-service costs.
The defined benefit obligation is calculated annually by independent actuaries
using the projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in thecurrency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability.
Actuarial gains and losses as at end of the previous reporting year are
recognised on a straight-line basis within the period of the remaining average
service lives of the participating employees.

(c)Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue toemployees. A provision is made for the estimated liability for annual leave as aresult of services rendered by employees up to the balance sheet date.

B-22

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.19 Employee compensation (continued)(d)Other employee benefits
The other employee benefits includes employee share ownership plan andcontributions to the plan are recognised in profit or loss when incurred. The
details of the plan are described in Note 25(b).

2.20 Currency translation(a)Functional and presentation currency
Items included in the financial statements of each entity in the Group aremeasured using the currency of the primary economic environment in which theentity operates (“functional currency”). The financial statements are presented inJapanese Yen, which is the functional currency of the Company.

(b)Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”)
are translated into the functional currency using the exchange rates at the datesof the transactions. Currency translation differences resulting from the settlementof such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at the closing rates at the balance sheet date
are recognised in profit or loss. However, in the consolidated financial
statements, currency translation difference arising from borrowings in foreign
currencies and other currency instruments designated and qualifying as net
investment hedges and net investment in foreign operations, are recognised inother comprehensive income and accumulated in the currency translation
reserve.
When a foreign operation is disposed of or any borrowings forming part of the net
investment of the foreign operation are repaid, a proportionate share of theaccumulated translation differences is classified to profit or loss, as part of thegain or loss on disposal.
Foreign exchange gain or losses that relate to borrowings are presented in theincome statement within “Finance costs”. All other foreign exchange gains orlosses impacting profit or loss are presented in the income statement within“Other (losses)/gains – net”.
Non-monetary items measured at fair values in foreign currencies are translatedusing the exchange rates at the date when the fair values are determined.

B-23

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20122.

Summary of significant accounting policies (continued)
2.21 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the Board of Directors whose members are responsible for allocating
resources and assessing performance of the operating segments.
2.22 Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash andcash equivalents include cash on hand, deposits with financial institutions which are
subject to an insignificant risk of change in value, and bank overdrafts. Bank
overdrafts are presented as current borrowings on the balance sheet.
2.23 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to theissuance of new ordinary shares are recognised against the share capital account.
2.24 Dividends to company’s shareholders
Dividends to the Company’s shareholders are recognised when the dividends areapproved for payment.

3.

Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
3.1

Critical accounting estimates and assumptions(a)Uncertain tax positions
The Group is subject to income taxes in numerous jurisdictions. In determining
the income tax liabilities, management is required to estimate the amount of
capital allowances and the deductibility of certain expenses (“uncertain tax
positions”) at each tax jurisdiction. The Group recognise liabilities for expected
tax issues based on estimates of whether additional taxes will be due. Where thefinal tax outcome of these matters is different from the amounts that were initiallyrecognised, such differences will impact the income tax and deferred income tax
provisions in the financial period in which such determination is made. The
carrying amounts of the Group’s provision for taxation as at 30 November 2011
and 31 May 2012 were ¥81,331,000 and ¥69,792,000 respectively. The carrying
amounts of the Group’s deferred tax liabilities as at 30 November 2011 and
31 May 2012 were ¥280,380,000 and ¥232,036,000 respectively.

B-24

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20123.

Critical accounting estimates, assumptions and judgements (continued)
3.1

Critical accounting estimates and assumptions (continued)(b)Impairment of loans and receivables
Management reviews its loans and receivables for objective evidence ofimpairment at least quarterly. Significant financial difficulties of the debtor, theprobability that the debtor will enter bankruptcy, and default or significant delay
in payments are considered objective evidence that a receivable is impaired. In
determining this, management makes judgement as to whether there isobservable data indicating that there has been a significant change in thepayment ability of the debtor, or whether there have been significant changes
with adverse effect in the technological, market, economic or legal environment
in which the debtor operates in.
Where there is objective evidence of impairment, management makes
judgements as to whether an impairment loss should be recorded as an expense.
In determining this, management uses estimates based on historical loss
experience for assets with similar credit risk characteristics. As at 30 November
2011 and 31 May 2012, management has made adequate provision for
impairment of trade and other receivables of ¥18,181,000 and ¥16,325,000
respectively. The carrying value of trade and other receivables as at 30
November 2011 and 31 May 2012 were ¥1,330,988,000 and ¥1,444,635,000
respectively.
If the net present value of estimated cash flows increase/decrease by 10% frommanagement’s estimates for all loans and receivables, the Group’s allowance for
impairment will decrease/increase by ¥133,099,000 and ¥144,464,000 as at 30
November 2011 and 31 May 2012 respectively.

(c)

Employee benefit
The present value of the pension obligations depends on a number of factors that
we determined on an actuarial basis using a number of assumptions. The
assumptions used in determining the net cost (income) for pensions include thediscount rate. Any changes in these assumptions will impact the carrying amountof pension obligations.
The Group determines the appropriate discount rate at the end of each year. Thisis the interest rate that should be used to determine the present value of
estimated future cash outflows expected to be required to settle the pension
obligations. In determining the appropriate discount rate, the Group considers theinterest rate of high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity approximating
the terms of the related pension liability. The key line items affected will be“Employee compensation” and “Retirement benefits obligation” as disclosed in
Note 6 and Note 25 respectively.

B-25

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 20123.

Critical accounting estimates, assumptions and judgements (continued)
3.2

Critical judgements in applying the entity’s accounting policies(a)Deferred income tax assets
The Group recognises deferred income tax assets on carried forward tax losses
to the extent there are sufficient estimated future taxable profits and/or taxable
temporary differences against which the tax losses can be utilised.
As at 31 November 2011 and 31 May 2012, deferred tax assets of certain group
entities amounting to ¥1,724,661,000 and ¥1,548,778,000 respectively wererecognised based on the anticipated future use of tax losses carried forward by
those entities. In the event that the tax authority regards the group entities as notsatisfying the current tax legislation and disallowed the carry forward of the tax
losses, the deferred tax assets will have to be written off as income tax expense.

4.

RevenueSix-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)

Revitalisation business . . . . . . . . . . . . . . . . . . . . . . . .

6,489,457

3,354,963

Development business . . . . . . . . . . . . . . . . . . . . . . . .

388,223

3,016,296

Rental business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,256,900

1,142,288

Fund business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

874,755

387,446

Property management business . . . . . . . . . . . . . . . . .

1,554,965

1,780,738

Alternative investment business . . . . . . . . . . . . . . . . .

92,049465,790

10,656,349

10,147,521

B-26

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

5.

Expenses by nature
Six-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of allowance for impairment – trade andother receivables – net . . . . . . . . . . . . . . . . . . . . . . . .
Amortisation of intangible assets . . . . . . . . . . . . . . . .
Bad debts written off. . . . . . . . . . . . . . . . . . . . . . . . . .
Commission fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of inventories (Note 16) . . . . . . . . . . . . . . . . . . .
Depreciation of investment properties . . . . . . . . . . . .
Depreciation of property, plant and equipment . . . . . .
Employee compensation (Note 6). . . . . . . . . . . . . . . .
Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory write-down – net (Note 16) . . . . . . . . . . . . .
Other professional fees. . . . . . . . . . . . . . . . . . . . . . . .
Property management and maintenance fees . . . . . .
Rental expense on operating leases . . . . . . . . . . . . .
Stationery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax and dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,252

14,720(4,075)
16,735576
109,234
19,4195,690,695
48,93017,629
1,028,000
5,768
420,219
31,984
1,683,986
12,055
21,906130,361
18,151
51,369(1,183)
14,983–74,081
20,2105,755,344
51,43721,0901,091,771
8,533
233,251
78,3981,867,198
11,99626,097
105,848
18,94341,814

Total cost of revenue and administrative expenses . .

9,313,194

9,434,531

Property management and maintenance fees mainly consist of utilities charges, repair andmaintenance expenses and other incidental expenses.
6.

Employee compensation
Six-month period ended 31 May
2011
2012

Salaries and bonuses . . . . . . . . . . . . . . . . . . . . . . . . .
Statutory welfare expenses . . . . . . . . . . . . . . . . . . . .
Retirement benefits. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term benefits . . . . . . . . . . . . . . . . . . . . . .

B-27

¥’000
(unaudited)¥’000(audited)

844,477
101,301
39,95842,264

869,607108,932
43,291
69,941

1,028,000

1,091,771

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

7.

Other income
Six-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,928

871

Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,272

1,272

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,4308,712

16,63010,855

Miscellaneous income mainly consists of income received from rental of spaces to vendorsof vending machines and others.
8.

Other losses – net
Six-month period ended 31 May
2011
2012

Property, plant and equipment written off . . . . . . . . . .

9.

¥’000
(unaudited)¥’000(audited)

–

2,307

Finance expenses
Six-month period ended 31 May
2011
2012

Interest expense – bank borrowings . . . . . . . . . . . . . .

¥’000(unaudited)¥’000(audited)

402,766

322,259

10. Income taxes(a)Income tax expense
Six-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)– Current income tax – Japan . . . . . . . . . . . . .

26,49750,241

Deferred income tax . . . . . . . . . . . . . . . . . . . . .

386,885

127,054

413,382

177,295

Tax expense attributable to profit is made up of:Profit from current financial year

B-28

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

10. Income taxes (continued)(a)Income tax expense (continued)
The tax on the Group’s profit before tax differs from the theoretical amount that would
arise using the Japan standard rate of income tax as follows:
Six-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)

Profit before income tax . . . . . . . . . . . . . . . . . .

957,019399,279

Tax calculated at domestic tax rates
applicable to profit . . . . . . . . . . . . . . . . . . . . . .

392,377

163,704– Expenses not deductible for tax purposes . .

1,850

3,911

– Deferred tax assets not recognised/(utilised) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,989(72,622)– Change in tax rate . . . . . . . . . . . . . . . . . . . . .

–84,346– Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,166(2,044)

Tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . .

413,382

177,295

Effects of:(b)

The tax (charge)/credit relating to each component of other comprehensive(losses)/income is as follows:

Fair value (losses)/gains onavailable-for-sale financial
assets. . . . . . . . . . . . . . . . . . .

Six-month period ended 31 May
2011
2012
(unaudited)(audited)
Tax
Tax
After
Before (charge)/
Before (charge)/
creditcredit
tax
tax
tax

After
tax

¥’000

¥’000

¥’000

¥’000

¥’000

¥’000

(69)

28

(41)

755

(484)

271

B-29

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 201211.

Earnings per share(a)Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity
holders of the Company by the weighted average number of ordinary shares
outstanding during the financial periods ended 31 May 2011 and 2012 respectively.

(b)

31 May2011

31 May2012(unaudited)(audited)

Net profit attributable to the equity holders of
the Company (¥’000) . . . . . . . . . . . . . . . . . . . . . .

543,637

221,984

Weighted average number of ordinary shares
outstanding for basic earnings per share. . . . . . .

456,840

456,840

Basic earnings per share (¥ per share) . . . . . . . .

1,189.99

485.91

Diluted earnings per share
There were no diluted earnings per share for the financial periods ended 31 May 2011
and 2012 as there were no potential dilutive ordinary shares.

12. Cash and cash equivalents

Cash at bank and on hand. . . . . . . . . . . . . . . . . . . . . . .
Short-term bank deposits . . . . . . . . . . . . . . . . . . . . . . . .

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

8,341,689
40,0006,785,514
190,000

8,381,689

6,975,514

For the purpose of presenting the consolidated statement of cash flows, cash and cash
equivalents comprise the following:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Cash and bank balances (as above) . . . . . . . . . . . . . . .
Less: Deposits more than 3 months . . . . . . . . . . . . . . .

8,381,689(20,000)

6,975,514(20,000)

Cash and cash equivalents per consolidated statementof cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,361,689

6,955,514

B-30

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

13. Financial assets, at fair value through profit or loss
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

17,80518,013

At fair value on initial recognition
Unlisted equity securities – Japan . . . . . . . . . . . . . . . . .

The fair value losses – net for the six-month period ended 31 May 2011 and 2012 amounting
to ¥25,000 and ¥1,792,000 respectively have been included as part of “Total cost of revenue
and administrative expenses – Other”.
14. Available-for-sale financial assets
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Beginning of financial year/period . . . . . . . . . . . . . . . . .

51,845379,867

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

333,350

20,000Fair value (losses)/gains recognised in othercomprehensive income (Note 29(b)(ii)) . . . . . . . . . . . . .

(5,328)755

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

379,867

400,622

Less: Current portion . . . . . . . . . . . . . . . . . . . . . . . . .

(10,000)(10,000)

Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . .

369,867

390,62230 November
2011

31 May2012¥’000(audited)¥’000(audited)

Listed securities – Japan . . . . . . . . . . . . . . . . . . . . . . . .

18,06818,824

Unlisted securities – Japan . . . . . . . . . . . . . . . . . . . . . .

361,799

381,798

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

379,867

400,622

Available-for-sale financial assets are analysed as follows:

B-31

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

15. Trade and other receivables
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Trade receivables – non-related parties. . . . . . . . . . . . .

547,011484,349

Less: Allowance for impairment (Note 32(b)(ii)). . . . . . .

(5,056)(3,807)

Trade receivables – net . . . . . . . . . . . . . . . . . . . . . . . . .

541,955

480,542

Loan to non-related parties . . . . . . . . . . . . . . . . . . . . . .

11,133

10,784

Less: Non-current portion (Note 17) . . . . . . . . . . . . . . .

(10,325)(9,966)808

818

Advance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

225,752

78,776

Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257,326

256,913

Receivables purchased . . . . . . . . . . . . . . . . . . . . . . . . .

81,36178,744

Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98,792

383,237

Less: Allowance for impairment (Note 32(b)(ii)). . . . . . .

(641)(1,013)

1,205,353

1,278,017

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Real estate for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,673,983

26,179,678

Real estate for sale in-progress . . . . . . . . . . . . . . . . . . .

6,293,955

8,839,328

33,967,938

35,019,006

16. Inventories

The cost of inventories recognised as an expense and included in “Total cost of revenue –Cost of inventories” for the six-month periods ended 31 May 2011 and 2012 amounted to¥5,690,695,000 and ¥5,755,344,000 respectively.
Inventories of ¥33,785,368,000 and ¥34,945,232,000 of the Group have been pledged as
security for borrowings of the Group at the end of the respective financial year/period ended
30 November 2011 and 31 May 2012 (Note 23(a)).

B-32

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

16. Inventories (continued)
The cost of inventories recognised as expense in respect of write-down and the reversal ofsuch write-down are as follows:
For the six-month period
ended 31 May
2011
2012
¥’000
(audited)¥’000(audited)

Inventory write-down (1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of write-down (2) . . . . . . . . . . . . . . . . . . . . . . . .

(716,640)
296,421(238,235)
4,984

Inventory write-down – net . . . . . . . . . . . . . . . . . . . . . . .

(420,219)(233,251)(1)This relates to write-down of the carrying amount of real estate to its net realisable value.

(2)

The reversal is mainly due to an upturn of property market situation.

Details of major real estate for sale of the Group are disclosed under summary of major
properties (Note 35).
17. Trade and other receivables – non-current
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Trade receivables – non-related parties. . . . . . . . . . . . .
Less: Allowance for impairment (Note 32(b)(ii)). . . . . . .

11,626(11,626)

12,004(11,434)

Trade receivables – net . . . . . . . . . . . . . . . . . . . . . . . . .

–570

Other receivables– Loan to non-related parties (Note 15). . . . . . . . . . . . .
Less: Allowance for impairment (Note 32(b)(ii)) . . . . .
– Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,325(858)
115,368
800

9,966
(71)
154,619
1,534

125,635

166,618

The fair value of non-current trade and other receivables are computed based on cash flows
discounted at market borrowing rates. The market borrowing rates used and the fair values
are as follows:

Market borrowing rates . . . . . . . . . . . . . . . . . . . . . . . . .
Loan to non-related parties (¥’000) . . . . . . . . . . . . . . . .

B-33

30 November
2011

31 May2012(audited)(audited)

2.10 – 3.02%
10,1822.00 – 3.02%
9,836

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

18. Investment properties
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Beginning of financial year/period . . . . . . . . . . . . . . . . .

11,925,105

12,239,292

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45,623

102,481Transfer from inventories . . . . . . . . . . . . . . . . . . . . . . . .

507,958–

Transfer to inventories . . . . . . . . . . . . . . . . . . . . . . . . . .

(239,394)–

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

12,239,292

12,341,773

Beginning of financial year/period . . . . . . . . . . . . . . . . .

763,658

861,237

Depreciation charge . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101,706

51,437

Transfer to inventories . . . . . . . . . . . . . . . . . . . . . . . . . .

(4,127)–

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

861,237

912,674

11,378,055

11,429,099

Cost

Accumulated depreciation

Net book value
End of financial year/period . . . . . . . . . . . . . . . . . . . .

(a)Investment properties are leased to non-related parties under operating leases(Note 31(b)).

(b)

Certain investment properties are mortgaged to secure bank loans (Note 23(a)).

(c)

The land and buildings of the Group were valued by internal valuers mainly using
discounted cash flow method. Below are the fair values of investment properties ownedby the Group:

Investment properties. . . . . . . . . . . . . . . . . . . . . . .

B-34

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

12,046,214

12,214,983

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

18. Investment properties (continued)(d)

The following amounts are recognised in profit and loss:
Six-month period ended 31 May
2011
2012
¥’000
(unaudited)¥’000(audited)

425,535

392,696(140,865)(150,892)

Rental income– Investment properties that generated
rental income . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct operating expenses arising from:– Investment properties that generated
rental income . . . . . . . . . . . . . . . . . . . . . . . . . .

(e)Details of major investment properties of the Group are disclosed under summary ofmajor properties (Note 35).

19. Property, plant and equipment

Land

Tools,
equipment
andfixtures

Total

¥’000

¥’000

¥’000

¥’000

Beginning of financial year. . . . . . .

1,202,013

2,219,719

82,2683,504,000

Additions . . . . . . . . . . . . . . . . . . . .

8,362

–

14,342

22,704

Written off. . . . . . . . . . . . . . . . . . . .

(307)

–

(3,779)(4,086)

Reclassified to inventories . . . . . . .

–

–

(619)

(619)

End of financial year . . . . . . . . . . .

1,210,068

2,219,719

92,212

3,521,999

Beginning of financial year. . . . . . .

95,357–52,706

148,063

Depreciation charge . . . . . . . . . . . .

24,325–

12,67637,001

Written off. . . . . . . . . . . . . . . . . . . .

(306)

–

(3,602)(3,908)

Reclassified to inventories . . . . . . .

–

–

(419)

(419)

End of financial year . . . . . . . . . . .

119,376–

61,361

180,737

1,090,692

2,219,719

30,851

3,341,262

Building
andstructures

30 November 2011
(audited)
Cost

Accumulated depreciation

Net book value
End of financial year . . . . . . . . . .

B-35

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

19. Property, plant and equipment (continued)

Land

Tools,
equipment
andfixtures

Total

¥’000

¥’000

¥’000

¥’000

Beginning of financial period . . . . .

1,210,068

2,219,719

92,212

3,521,999

Additions . . . . . . . . . . . . . . . . . . . .

977–

19,45020,427

Written off. . . . . . . . . . . . . . . . . . . .

(4,254)–(10,213)(14,467)

End of financial period . . . . . . . . . .

1,206,791

2,219,719

101,449

3,527,959

Beginning of financial period . . . . .

119,376–

61,361

180,737

Depreciation charge . . . . . . . . . . . .

13,022–

8,068

21,090

Written off. . . . . . . . . . . . . . . . . . . .

(2,486)–(9,674)(12,160)

End of financial period . . . . . . . . . .

129,912–59,755

189,667

1,076,879

2,219,719

41,694

3,338,292

Building
andstructures

31 May 2012
(audited)
Cost

Accumulated depreciation

Net book value
End of financial period . . . . . . . .

(a)

The carrying amounts of plant and equipment held under finance leases are ¥746,000
and ¥Nil at the respective financial year/period ended 30 November 2011 and 31 May
2012.

(b)

Bank borrowings are secured on property, plant and equipment of the Group withcarrying amounts of ¥3,292,453,000 and ¥3,281,169,000 at the respective financial
year/period ended 30 November 2011 and 31 May 2012 (Note 23(a)).

(c)

Details of major owner-occupied building of the Group is disclosed under summary ofmajor properties (Note 35).

B-36

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

20. Intangible assets
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Licenses – telephone rights (Note 20(a)). . . . . . . . . . . .

1,889

1,889

Computer software licenses (Note 20(b)) . . . . . . . . . . .

64,96754,264

66,85656,15330 November
2011

31 May2012¥’000(audited)¥’000(audited)

1,889

1,889

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Beginning of financial year/period . . . . . . . . . . . . .

144,819

170,802

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,016

4,280

Written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11,033)–

End of financial year/period . . . . . . . . . . . . . . . . . .

170,802

175,082

Beginning of financial year/period . . . . . . . . . . . . .

83,291

105,835

Amortisation charge . . . . . . . . . . . . . . . . . . . . . . . .

33,577

14,983

Written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11,033)–

End of financial year/period . . . . . . . . . . . . . . . . . .

105,835

120,818

64,96754,264Composition:(a)Licenses – Telephone rights

Cost
Beginning and end of financial year/period . . . . . .

(b)Computer software licenses

Cost

Accumulated amortisation

Net book value
End of financial year/period . . . . . . . . . . . . . . . .

The amortisation expense is included in “Expenses – Administrative” in the
consolidated statement of comprehensive income.
B-37

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

21. Other assets
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

25,35725,357(16,977)(16,977)

End of financial year/period . . . . . . . . . . . . . . . . . . . .

8,380

8,380

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

2,335

3,052

10,715

11,432Other assets, current . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,335

3,052

Other assets, non-current . . . . . . . . . . . . . . . . . . . . . . .

8,380

8,380

10,715

11,43230 November
2011

31 May2012¥’000(audited)¥’000(audited)

Trade payables to non-related parties . . . . . . . . . . . . . .

820,709361,761

Deposits for purchase of real estate . . . . . . . . . . . . . . .

545,488

801,194

Other payable to non-related parties . . . . . . . . . . . . . . .

290,718

257,532

Accruals for operating expenses . . . . . . . . . . . . . . . . . .

860,788637,652

2,517,703

2,058,139

Lease and guarantee deposits received . . . . . . . . . . . .

1,810,569

1,923,430

Assets retirement obligations . . . . . . . . . . . . . . . . . . . . .

24,71024,776

1,835,279

1,948,206

Club memberships – Cost
Beginning and end of financial year/period . . . . . . . . . .
Accumulated impairment loss
Beginning and end of financial year/period . . . . . . . . . .
Net book value

Presented in balance sheets as:

22. Trade and other payables

Current

Non-current

B-38

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

23. Borrowings
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,170,937

6,626,132

Finance lease liabilities (Note 24) . . . . . . . . . . . . . . . . .

783–

6,171,720

6,626,132

Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,900,745

23,484,503

Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,072,465

30,110,635

Current

Non-Current

The exposure of the borrowings of the Group to interest rate changes and the contractual
repricing dates at the balance sheet dates are as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,171,720

6,626,132

1–5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,413,280

17,650,733

Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,487,465

5,833,770

30,072,465

30,110,635(a)Security granted
Total borrowings included secured liabilities of ¥29,821,722,000 and ¥29,912,455,000
at the respective financial year/period ended 30 November 2011 and 31 May 2012.
Bank borrowings of the Group are secured over certain inventories (Note 16),
investment properties (Note 18) and certain land and buildings (Note 19). Financelease liabilities of the Group are effectively secured over the leased plant andequipment (Note 19), as the legal title is retained by the lessor and will be transferredto the Group upon full settlement of the financial lease liabilities.

B-39

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

23. Borrowings (continued)(b)

Fair value of non-current borrowings

Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . .

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

23,885,818

23,467,481

The fair values above are determined from the cash flow analyses, discounted at themarket borrowing rates of an equivalent instrument at the balance sheet date which
the directors expect to be available to the Group as follows:

Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . .

30 November
2011

31 May2012%(audited)%(audited)

2.06

2.02

24. Finance lease liabilities
The Group leases certain plant and equipment from non-related parties under financeleases. The lease agreements do not have renewal clauses but provide the Group with
options to purchase the leased assets at nominal values at the end of the lease term.
30 November
2011

31 May2012¥’000(audited)¥’000(audited)– Not later than one year . . . . . . . . . . . . . . . . . . . . . . . .

825–

Less: Future finance charges. . . . . . . . . . . . . . . . . . . . .

(42)

–

Present value of finance lease liabilities . . . . . . . . . . . .

783–

Minimum lease payments due:

The present values of finance lease liabilities are analysed as follows:

Not later than one year (Note 23) . . . . . . . . . . . . . . . . .

B-40

30 November
2011

31 May2012¥’000(audited)¥’000(audited)783–

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

25. Employee benefits(a)Retirement benefits obligations

Obligations recognised in the balance sheet for:Retirement benefits plans (Note 25(a)(i)). . . . . . .
Directors’ retirement benefits plans(Note 25(a)(ii)) . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i)

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

191,871

203,962

312,856

317,357

504,727

521,319

Retirement benefits plans
The Group adopts the retirement lump-sum grants policy based on their pension
plan. In addition, some of the entities in the Group adopt the Employees’ Pension
Fund and Defined Contribution Plan.
Defined benefit plans
The amounts included in the consolidated balance sheets arising from theGroup’s obligation in respect of its defined benefit plans are as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Obligations under defined benefit plans . . . . .
Net actuarial losses not recognised . . . . . . . .

193,104(1,233)

204,641(679)

Liabilities recognised in the balance sheet . .

191,871

203,962

Amounts recognised in profit or loss in respect of these defined benefit plans are
as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Beginning of financial year/period . . . . . . . .
Current service cost . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gains)/losses . . . . . . . . . . . . . . . .

167,330
29,745
3,447(3,992)(3,426)

193,104
17,294
1,953(10,034)
2,324

End of financial year/period . . . . . . . . . . . . .

193,104

204,641

B-41

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

25. Employee benefits (continued)(a)Retirement benefits obligations (continued)(i)Retirement benefits plans (continued)
Defined benefit plans (continued)
The principal actuarial assumptions used were as follows:

Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
Future salary increases . . . . . . . . . . . . . . . .

30 November
2011

31 May2012%(audited)%(audited)

1.68
2.41

1.68
2.41

Multi-employer plans
During the financial year 2011 and six-month period ended 31 May 2012, one of
the Company’s subsidiaries joined the “Japan Residence Construction Industry
Pension Fund” under multi-employer plans.
Below are the amounts contributed to the fund by the Group:–

Contribution to the fund . . . . . . . . . . . . . . . .

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

9,886

4,866

The contribution to the fund is included as part of “Employee compensation –retirement benefits” (Note 6).
Defined contribution plans
During the financial year 2011 and six-month period ended 31 May 2012, theCompany and some of its subsidiaries have participated under a voluntary joint
defined contribution plan.
Below are the amounts contributed to the fund by the Group:–

Contribution to the fund . . . . . . . . . . . . . . . .

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

5,994

3,391

The contribution to the fund is included as part of “Employee compensation –retirement benefits” (Note 6).
B-42

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

25. Employee benefits (continued)(a)Retirement benefits obligations (continued)
(ii)

(b)

Director’s retirement benefits plans
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Beginning of financial year/period . . . . . . . .
Provision made . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . .

301,52225,837(14,503)

312,855
12,324(7,822)End of financial year/period . . . . . . . . . . . . .

312,856

317,357

Provision made is included in profit or loss:– Employee compensation – Retirement
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,837

12,324

Employee share ownership plan (“ESOP”)
The Company implemented the Tosei Employee Share Ownership Scheme (“ESOP”)
and adopted the rules of the ESOP as set out in the Employee Share Ownership Rulesof the Company on 1 September 2002.
The purpose of the ESOP is to enable full-time employees of the Company to acquire andaccumulated shares of the Company by making small contributions on a regular basis.
Under the ESOP, only full-time employees (“Participating Employee”) of the Company(excluding the directors of the Company and the employees of the subsidiaries) areentitled to participate in the ESOP. The Participating Employee will contribute a certain
portion of his monthly salary and biannual bonus to purchase shares of the Company.
Contributions from Participating Employees are made in units of ¥1,000 each. Each
Participating Employee is allowed to contribute a maximum of 20 units from hismonthly salary and 100 units from his annual bonus. Further, the dividends declaredand paid in respect of the shares held by the Participating Employee will becontributed to the ESOP. All Participating Employee will nominate an administrative
director to administer and hold on behalf all the shares under ESOP.
The Participating Employees may not transfer or pledge the rights to their shares.
When the Participating Employee’s number of shares under the ESOP reaches 1
share, the employee may, at his option, transfer such share into an account held in his
own name. In the event that the Participating Employee withdraws from the ESOP, thevested ESOP shares will be transferred to the securities account of the Participating
Employee and the equivalent value in cash for a fractional part of the share (converted
at the then market price) will be paid to the Participating Employee. The Participating
Employee may choose to make an extraordinary contribution to the ESOP such thatthe fractional part of the share is deemed to be one whole share.
B-43

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

25. Employee benefits (continued)(b)

Employee share ownership plan (“ESOP”) (continued)
There is no maximum limit for shares acquired under the ESOP. The Company
contributes an amount that is equal to 5.0% of the aggregate contribution of theParticipating Employees to the ESOP. Amounts contributed and paid by the Company
under the ESOP for the six-month periods ended 31 May 2011 and 2012 amounting to¥163,000 and ¥169,000 respectively have been included as part of “Employeecompensation – Other short-term benefits”.

26. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable rightto offset current income tax assets against current income tax liabilities and when thedeferred income taxes relate to the same fiscal authority. The amounts are shown in thebalance sheet as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)– to be recovered within one year . . . . . . . . . . . . . . . . .

785,330

757,916– to be recovered after one year . . . . . . . . . . . . . . . . . .

939,331790,862

1,724,661

1,548,778

30 November
2011

31 May2012¥’000(audited)¥’000(audited)– to be settled within one year. . . . . . . . . . . . . . . . . . . .

(256,303)(202,976)– to be settled after one year . . . . . . . . . . . . . . . . . . . .

(24,077)(29,060)(280,380)(232,036)

Deferred income tax assets

Deferred income tax liabilities

B-44

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

26. Deferred income taxes (continued)
Movement in deferred income tax account is as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

2,141,579

1,444,281– profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(699,483)(127,054)– equity (Note 29(b)(ii)) . . . . . . . . . . . . . . . . . . . . . . . . .

2,185

(484)

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

1,444,281

1,316,743

Beginning of financial year/period . . . . . . . . . . . . . . . . .
Charged to

The movement in deferred income tax assets and liabilities is as follows:
Recognised
As at
Recognisedin other
As at
1 December
in profit comprehensive 30 November
2010
or loss
income
2011
¥’000

¥’000

¥’000

¥’000

213
(18,317)

4,292
74,342––

4,505
56,025

180,986(1,283)–

179,703

66,302

12,625–78,927(audited)
Temporary differences:Enterprise tax payable . . . .
Inventory write down – net .
Unrealised profits oninventories . . . . . . . . . . . . .
Provision for retirement
benefits . . . . . . . . . . . . . . . .
Provision for directors’
retirement benefits . . . . . . .
Impairment losses . . . . . . .
Other . . . . . . . . . . . . . . . . .
Deferred tax assets notrecognised . . . . . . . . . . . . .

121,681
69,338233,559

3,578(1,088)(80,977)–––

125,259
68,250152,582(488,259)

558–(487,701)

Subtotal . . . . . . . . . . . . . . .

165,503

12,047–

177,550

Revaluation of fair value
derived from subsidiaries’
assets and liabilities . . . . . .
Available-for-sale financial
assets . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .

(212,647)

77,204–(135,443)(539)(94,548)–(52,035)

2,185
–

1,646
(146,583)

Subtotal . . . . . . . . . . . . . . .

(307,734)

25,1692,185(280,380)

Tax losses carried forward .

2,283,810(736,699)–

1,547,111

Net balance . . . . . . . . . . . .

2,141,579(699,483)

2,185

1,444,281

B-45

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

26. Deferred income taxes (continued)
The movement in deferred income tax assets and liabilities is as follows:

As at
Recognised
1 December in profit or
2011
loss

Recognisedin othercomprehensive
incomeAs at
31 May
2012

¥’000

¥’000

¥’000

¥’000

4,505
56,025(1,130)82,765––

3,375
138,790

179,703(25,535)–

154,168

78,927(2,570)–76,357(audited)
Temporary differences:Enterprise tax payable . . . . .
Inventory write down – net . .
Unrealised profits oninventories . . . . . . . . . . . . . .
Provision for retirement
benefits. . . . . . . . . . . . . . . . .
Provision for directors’
retirement benefits . . . . . . . .
Impairment losses . . . . . . . .
Other . . . . . . . . . . . . . . . . . .
Deferred tax assets notrecognised . . . . . . . . . . . . . .

125,259
68,250152,582(12,258)(9,364)(8,326)–––

113,001
58,886144,256(487,701)

72,622–(415,079)

Subtotal . . . . . . . . . . . . . . . .

177,550

96,204–

273,754

Revaluation of fair value
derived from subsidiaries’
assets and liabilities . . . . . . .
Available-for-sale financial
assets . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . .

(135,443)

48,169–(87,274)

1,646(146,583)

–
659

(484)
–

1,162
(145,924)

Subtotal . . . . . . . . . . . . . . . .

(280,380)

48,828(484)(232,036)

Tax losses carried forward . .

1,547,111(272,086)–

1,275,025

Net balance . . . . . . . . . . . . .

1,444,281(127,054)(484)

1,316,743

Tax losses carried forward and deductible temporary differences for which deferred tax
assets have not been recognised are as follows:
As at
1 December
2010

As at
30 November
2011

As at
31 May2012¥’000(audited)¥’000(audited)¥’000(audited)Tax losses carried forward . . . . . . . . . . .

234,224

199,314

155,851

Deductible temporary differences. . . . . .

254,035

288,387

259,228

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

488,259

487,701

415,079

B-46

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

26. Deferred income taxes (continued)
Deferred income tax assets are recognised for tax losses and other deductible temporary
differences carried forward to the extent that realisation of the related tax benefits throughfuture taxable profits is probable. The Group has unrecognised tax losses and otherdeductible temporary differences stated above for the financial year ended 30 November
2011 and six-month period ended 31 May 2012 which can be carried forward and used tooffset against future taxable income subject to meeting certain statutory requirements. The
tax losses and other deductible temporary differences have an expiry period of 9 years fromthe year of assessment.
27. Share capital
No. ofordinarysharesShare capital¥’000

30 November 2011
(audited)
Beginning and end of financial year. . . . . . . . . . . . . . . .

456,840

5,454,673

456,840

5,454,673

31 May 2012
(audited)
Beginning and end of financial period . . . . . . . . . . . . . .

All issued ordinary shares are fully paid. There is no par value for these ordinary shares. The
amounts of ordinary shares contributed by shareholders since the date of incorporation andat the respective dates of share issuance are recorded as follows:(a)Amount not exceeding half of the total contribution by shareholders is not recorded asshare capital; and(b)

Amount not recorded as share capital under the preceding paragraph is recorded ascapital reserve (Note 29).

Fully paid ordinary shares carry one vote per share and carry a right to dividends as andwhen declared by the Company.
Any newly issued shares rank pari passu in all respects with previously issued shares.
28. Retained earnings
Retained earnings of the Group are distributable.

B-47

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

29. Other reserves(a)

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

5,516,499

5,516,499– fair value reserve . . . . . . . . . . . . . . . . . . . . . . . .

(2,370)(2,099)– currency translation reserve . . . . . . . . . . . . . . . .

–

(369)

5,514,129

5,514,031

5,516,499

5,516,499

Composition:
Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income(b)Movements:(i)

Capital reserve
Beginning and end of financial year/period . .
Capital reserve is distributable.

(ii)

Accumulated other comprehensive income – fair value reserve
Beginning of financial year/period . . . . . . . . .

773(2,370)– Fair value (losses)/gains (Note 14). . . . . . .

(5,328)755– Tax on fair value changes (Note 26). . . . . .

2,185

(484)

(3,143)271(2,370)(2,099)Available-for-sale financial assets

End of financial year/period . . . . . . . . . . . . . .

Accumulated other comprehensive income – fair value reserve is non-distributable.
(iii) Accumulated other comprehensive income – currency translation reserve
Beginning of financial year/period . . . . . . . . .

––Net currency translation differences offinancial statements of a foreign subsidiary. .

–

(369)

End of financial year/period . . . . . . . . . . . . . .

–

(369)

Accumulated other comprehensive income – currency translation reserve is nondistributable.

B-48

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

30. Dividends

Ordinary dividends paid
Final dividend paid in respect of the previous financial
year of ¥500 (2011: ¥500) per ordinary share . . . . . . . .

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

228,420

228,420

31. Commitments(a)Operating lease commitments – where the Group is a lessee
The Group leases office equipment from non-related parties under non-cancellable
operating lease agreement. The leases have varying terms, escalation clauses andrenewal rights.
The future minimum lease payables under non-cancellable operating leases contracted
for at the balance sheet dates but not recognised as liabilities, are as follows:

Not later than one year . . . . . . . . . . . . . . . . . . . . .
Between one and five years. . . . . . . . . . . . . . . . . .

(b)

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

1,974
–

–
–

1,974

–

Operating lease commitments – where the Group is a lessor
The Group lease out commercial and residential buildings to non-related parties under
non-cancellable operating leases. The lessees are required to pay either absolute fixedannual increase to the lease payments or contingent rents computed based on theirsales achieved during the lease period.
The future minimum lease receivables under non-cancellable operating leases
contracted for at the balance sheet date but not recognised as receivables, are as
follows:

Not later than one year . . . . . . . . . . . . . . . . . . . . .
Between one and five years. . . . . . . . . . . . . . . . . .
More than five years . . . . . . . . . . . . . . . . . . . . . . .

B-49

30 November
2011

31 May2012¥’000(audited)¥’000(audited)

469,042998,895
525,498

528,676
1,041,490
581,377

1,993,435

2,151,543

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management
Financial risk factors
The Group’s activities expose it to market risk (including currency risk, price risk and interestrisk), credit risk, liquidity risk and capital risk. The Group’s overall risk management strategy
seeks to minimise adverse effects from the unpredictability of financial markets on theGroup’s financial performance. The Group do not use financial instruments such as currency
forwards, interest rate swaps and foreign currency borrowings to hedge certain financial risk
exposure.
The Board of Directors is responsible for setting the objectives and underlying principles offinancial risk management for the Group. This includes establishing detailed policies such as
authority levels, oversight responsibilities, risk identification and measurement, exposure
limits.
Financial risk management is carried out by the finance department in accordance with thepolicies set by the Board of Directors. The finance personnel identifies, evaluates andhedges financial risks in close co-operation with the Group’s operating units. The financepersonnel measures actual exposures against the limits set and prepares periodic reports forreview by the Chief Financial Officer. Regular reports are also submitted to the Board of
Directors.
(a)Market risk(i)Currency risk
Foreign currency risk arises from transactions denominated in currencies otherthan the functional currency of the Company. The Group’s business operations
are not exposed to significant foreign currency risks as it has no significant
transactions denominated in foreign currencies.

(ii)

Price risk
The Group is exposed to equity securities price risk arising from the investments
held by the Group which are classified on the consolidated balance sheet either
as financial assets, at fair value through profit or loss or available-for-salefinancial assets. These securities consist of those listed and unlisted equity
investments in Japan. To manage its price risk arising from investments in equity
securities, the Group diversifies its portfolio. Diversification of the portfolio isdone in accordance with the limits set by the Group.

B-50

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management (continued)(a)Market risk (continued)(ii)

Price risk (continued)
If prices for equity securities had changed by 10% (2011: 10%) with all othervariables including tax rate being held constant, the effects on profit or loss andother comprehensive income would have been:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)– increased by . . . . . . . . . . . . . . . . . . . . . . .

1,051

1,062

– decreased by . . . . . . . . . . . . . . . . . . . . . .

(1,051)(1,062)– increased by . . . . . . . . . . . . . . . . . . . . . . .

22,412

23,636– decreased by . . . . . . . . . . . . . . . . . . . . . .

(22,412)(23,636)

Profit after tax

Other comprehensive income(iii) Cash flow and fair value interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Fair valueinterest rate risk is the risk that the fair value of a financial instrument willfluctuate due to changes in market interest rates. As the Group does not have any
significant interest-bearing assets, the Group’s income is substantiallyindependent of changes in market interest rates. The Group’s interest rate risk
mainly arises from borrowings at floating interest rate. The Group manages its
interest rate by keeping bank loans to the minimum required to sustain theoperations of the Group.
(b)

Credit risk
Credit risk refers to the risk that counterparty will default as its contractual obligations
resulting in financial loss to the Group. The major classes of financial assets of theGroup are cash and cash equivalents and trade and other receivables. For tradereceivables, the Group adopts the policy of dealing only with customers of appropriate
credit history. For other financial assets, the Group adopts the policy of dealing onlywith high credit quality counterparties.
As the Group does not hold any collateral, the maximum exposure to credit for eachclass of financial instruments is the carrying amount of that class of financial
instruments presented on the balance sheet.

B-51

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management (continued)(b)Credit risk (continued)
The credit risk for trade receivables based on the information provided to key
management is as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)– Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

541,955

480,542– Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–570

By types of customers
Non-related parties(i)

Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly current accountbalances with banks with high credit-ratings assigned by international creditrating agencies. Trade receivables that are neither past due nor impaired aresubstantially companies with a good collection track record with the Group.

(ii)

Financial assets that are past due and/or impaired
There is no other class of financial assets that is past due and/or impaired except
for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Past due up to 3 months . . . . . . . . . . . . . . .

535,630

472,210

Past due 3 to 6 months . . . . . . . . . . . . . . . .

4,526

7,152

Past due over 6 months . . . . . . . . . . . . . . . .

1,799

1,750

541,955

481,112

B-52

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management (continued)(b)Credit risk (continued)(ii)

Financial assets that are past due and/or impaired (continued)
The carrying amount of trade and other receivables individually determined to be
impaired and the movements in the related allowance for impairment are as follows:
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

5,056(5,056)

3,807(3,807)––

Beginning of financial year/period . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

8,861–(3,805)

5,056(1,127)(122)

End of financial year/period . . . . . . . . . . . . .

5,056

3,807

Trade receivables – non-current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

11,626(11,626)

11,434(11,434)––

Beginning of financial year/period . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

12,664–(1,038)

11,626(192)–

End of financial year/period . . . . . . . . . . . . .

11,626

11,434

Other receivables – current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

641
(641)

1,013
(1,013)––

Beginning of financial year/period . . . . . . . .
Allowance made . . . . . . . . . . . . . . . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

7,573–(2,142)(4,790)

641
372
–
–

End of financial year/period . . . . . . . . . . . . .

641

1,013

Other receivables – non-current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

858
(858)

71
(71)

–

–

Beginning of financial year/period . . . . . . . .
Allowance made . . . . . . . . . . . . . . . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

78
780
–
–

858
–
(236)
(551)

End of financial year/period . . . . . . . . . . . . .

858

71

Trade receivables – current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

B-53

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management (continued)(c)Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash and theavailability of funding through an adequate amount of committed credit facilities (Note23). At the balance sheet date, assets held by the Group for managing liquidity risk
included cash and short-term deposits as disclosed in Note 12.
The table below analyses non-derivative financial liabilities of the Group into relevant
maturity groupings based on the remaining period from the balance sheet date to thecontractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying amounts
as the impact of discounting is not significant.
Less than
1 year

Between 1
and 5 years

Over 5
years

¥’000

¥’000

¥’000

At 30 November 2011
(audited)
Trade and other payables . . . . . . . . . .

2,517,703

945,095

890,184

Borrowings . . . . . . . . . . . . . . . . . . . . . .

6,171,720

18,406,719

6,997,496

8,689,423

19,351,814

7,887,680

Trade and other payables . . . . . . . . . .

2,058,139

999,289

948,917

Borrowings . . . . . . . . . . . . . . . . . . . . . .

6,626,132

18,677,888

5,176,502

8,684,271

19,677,177

6,125,419

At 31 May 2012
(audited)(d)Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability tocontinue to operate as a going concern entity and to maintain an optimal capital
structure so as to maximise shareholder value. In order to maintain or achieve an
optimal capital structure, the Group may adjust the amount of dividend payment,
return capital to shareholders, issue new shares or obtain new borrowings.
Management monitors capital based on equity ratio which the Group’s strategies were
unchanged from 2009 and the Board of Directors monitors the Group’s equity ratio on
periodic basis.

B-54

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management (continued)(d)Capital risk (continued)
30 November
2011

31 May2012¥’000(audited)¥’000(audited)

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,307,951

25,301,417

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

60,599,836

60,241,544

Equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41.76%

42.00%The Group is in compliance with all externally imposed capital requirements for thefinancial year ended 30 November 2011 and the financial period ended 31 May 2012.
(e)Fair value measurement
The following table presents assets and liabilities measured at fair value and classified
by level of the following fair value measurement hierarchy.
(a)quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);(b)

inputs other than quoted prices included within Level 1 there are observable forthe asset or liability, either directly (is as prices) or indirectly (i.e. derived fromprices) (Level 2); and(c)inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
Level 1

Level 2

Level 3

Total

¥’000

¥’000

¥’000

¥’000

30 November 2011
(audited)
Financial assets at fair value
through profit or loss . . . . . . . . . . . .

–17,805–17,805

Available-for-sale financial assets . .

18,068361,799–379,867

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

18,068379,604–

397,672

Financial assets at fair value
through profit or loss . . . . . . . . . . . .
Available-for-sale financial assets . .

–18,82418,013
381,798––

18,013400,622

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

18,824

399,811–418,635

31 May 2012
(audited)

B-55

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

32. Financial risk management (continued)(e)Fair value measurement (continued)
The fair value of financial instruments traded in active markets (such as trading andavailable-for-sale securities) is based on quoted market prices at the balance sheet
date. The quoted market price used for financial assets held by the Group is thecurrent bid price. These instruments are included in Level 1.
The fair value of financial instruments that is not traded in an active market (e.g.
over-the-counter derivatives) is determined by using the value-in-use method. The
Group uses a variety of methods and makes assumptions that are based on market
conditions existing as at 30 November 2011 and 31 May 2012 respectively. These
instruments are included in Level 2. In infrequent circumstances, where a valuation
technique for these instruments is based on significant unobservable inputs, financial
instruments would be included in Level 3.
The carrying value less impairment provision of trade and other receivables, andpayables are assumed to approximate their fair values. The fair value of financial
liabilities for disclosures purposes is estimated based on quoted market prices ordealer quotes for similar instruments by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial
instruments. The fair value of current borrowings approximate their carrying amount.

33. Related party transactions
In addition to the information disclosed elsewhere in the financial statements, the followings
transactions took place between the Group and related parties at terms agreed between
parties:(a)

Sales and purchases of goods and services
Six-month period ended 31 May
2011
2012
¥’000
(audited)¥’000(audited)− Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–10,164

Professional fees paid to related party . . . . . . . .

–

4,116

Sales of goods and/or services to

B-56

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

33. Related party transactions (continued)(b)

Key management personnel compensation
Key management personnel compensation is as follows:
Six-month period ended 31 May
2011
2012

Salaries and bonuses . . . . . . . . . . . . . . . . . . . . .
Statutory welfare expenses . . . . . . . . . . . . . . . .
Retirement benefits. . . . . . . . . . . . . . . . . . . . . . .

¥’000(audited)¥’000(audited)

60,495
2,222
10,45563,6002,026
10,21673,17275,842

34. Segment information
The primary reportable segment is by business segment. As the Group operates
predominantly in Japan, no geographical segment information is shown.
The Group’s reportable segments are separate financial information available and evaluatedregularly by the Board of Directors to determine distribution of management resources andassess performance. The Board of Directors draws up comprehensive domestic strategies
for each segment and the Group conducts business activities accordingly. Consequently, theGroup is made up of different segments, as determined by the Board of Directors, and has
six reportable segments as follows:•

Revitalisation business – the Group increases the value of properties whose asset
value has declined and resells them;•

Development business – the Group sells condominium units and detached houses inlots to private customers and sells rental apartments and office buildings to investors;•

Rental business – the Group rents office buildings and condominiums to non-relatedparties and earns rental income;•Fund business – the Group provides fund asset management services;•

Property management business – the Group provides comprehensive property
management services; and•Alternative investment business – the Group acquires real estate collateralised loans,collects debt, and sells properties acquired as payment in kind.

No separate segmental liabilities by segment business are presented as management is of
the opinion that it is impracticable to separate liabilities for each business segment.
Additionally, the measurement of total liabilities for each reportable segment is not used by
the Board of Directors when making operating decisions about allocating resources to thebusiness segment and assessing its performance.
B-57

B-58
388,223

6,489,457––(204,893)(5,461,186)
823,378

19,412,404–––

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

Interest and dividend income. . . .
Amortisation and depreciation . . .
Finance expense. . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .

Profit/(loss) before tax . . . . . . .

30 November 2011
(audited)
Segment/total assets . . . . . . . .

Segment assets includes:
Additions to− Investment properties. . . . . . . .
− Property, plant and equipment .
− Intangible assets . . . . . . . . . . .
–––13,600,894(687,934)––(78,280)(997,877)

388,223–¥’000

For the six-month period ended 31 May 2011
(unaudited)
Revenue
External revenue. . . . . . . . . . . . .
6,489,457
Inter-segment revenue . . . . . . . .
–

¥’000

Revitalisation Development
businessbusiness

45,623––13,802,515

678,197–(49,379)(73,298)(480,246)

1,281,120

1,256,900
24,220¥’000

Rentalbusiness–––

815,668

488,18319(1,606)–(395,912)

885,682

874,755
10,927¥’000

Fundbusiness–––

1,733,741

35,40563(11,200)(2,594)(1,705,618)

1,754,754

1,554,965
199,789¥’000

Property
managementbusiness

The segment information provided to the management for the reportable segments are as follows:

34. Segment information (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012–––

2,445,028

165,784

31(1,957)(35,895)
111,556

92,04992,049–¥’000

Alternative
investment
business–
22,70437,016

8,789,586(545,994)

3,087(19,152)(7,806)(287,187)(234,936)–(234,936)¥’000

Corporate

45,62322,70437,01660,599,836

957,019

3,200(83,294)(402,766)(9,216,470)

10,656,349

10,656,349
–

¥’000

Total

B-59
3,354,963––(149,253)(3,130,319)
75,391

20,156,425–––

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

Interest and dividend income. . . .
Amortisation and depreciation . . .
Finance expense. . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .

Profit/(loss) before tax . . . . . . .

31 May 2012
(audited)
Segment/total assets . . . . . . . .

Segment assets includes:
Additions to− Investment properties. . . . . . . .
− Property, plant and equipment .
− Intangible assets . . . . . . . . . . .

For the six-month period ended 31 May 2012
(audited)
Revenue
External revenue. . . . . . . . . . . . .
3,354,963
Inter-segment revenue . . . . . . . .
–

¥’000

–
–
–

14,017,267

201,142––(53,162)(3,035,995)

3,290,299

3,016,296
274,003¥’000

Revitalisation Development
businessbusiness

34. Segment information (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

102,481––

13,897,486

529,888–(50,052)(82,432)(506,192)

1,168,564

1,142,288
26,276¥’000

Rentalbusiness–––

880,516

81,40634(2,074)–(315,825)

399,271

387,446
11,825¥’000

Fundbusiness–––

1,623,308

79,992

53(10,682)(2,251)(1,846,217)

1,939,089

1,780,738
158,351¥’000

Property
managementbusiness–––

2,282,464

13,23425(3,684)(32,007)(419,160)

468,060

465,790
2,270

¥’000

Alternative
investment
business–
20,4274,280

7,384,078(581,774)

2,031(21,018)(3,154)(86,908)(472,725)–(472,725)¥’000

Corporate

102,481
20,427
4,280

60,241,544

399,279

2,143(87,510)(322,259)(9,340,616)

10,147,521

10,147,521
–

¥’000

Total

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

35. Summary of major properties
Below are summary of the major properties owned by the Group:Group’seffective
interestin theproperty

Description

TenureGrossfloor area
(sq m)

Steel/8-storey

48 years

7,825

100%

Koishikawa Tosei Building

Steel/10-storey,a ground-floor

48 years

3,276

100%

Nihonbashi-Hamacho
Building

Steel reinforced
concrete/9-storey

28 years

4,583

100%

Steel/9-storey

45 years

4,214

100%

Location
Real estate for sale
Kamata Tosei Building
Investment properties

Property, plant andequipment
Toranomon Tosei Building

36. New or revised accounting standards and interpretations(i)

Below are the mandatory standards, amendments and interpretations to existing
standards that have been published, and are expected to be relevant for the Group’s
accounting periods beginning on or after January 2012 or later periods and which theGroup has not early adopted:

Standard/
Interpretation

Applicable forfinancial years
beginning on/
afterContent

IAS * 1

Presentation to items of othercomprehensive income

1 July 2012

IAS 12

Deferred tax: recovery of underlying assets

1 January 2012

IAS 19Amendments to IAS 19, ‘Employee benefits’

1 January 2013

IFRS 7

Disclosure: transfer of financial assets

1 July 2011

IFRS 9Financial instruments: Classification andmeasurement

1 January 2013

Deferral of mandatory effective date of IFRS
9 and amendments to transition disclosure

1 January 2015

Consolidated financial statements

1 January 2013

Amendments for investment entities

1 January 2014

Disclosure of interests in other entities

1 January 2013

Amendments for investment entities

1 January 2014

Fair value measurement

1 January 2013

IFRS 10IFRS 12IFRS 13

B-60

Tosei Corporation and Its Subsidiaries
Notes to the Consolidated Financial Statements
For the six-month period ended 31 May 2012

36. New or revised accounting standards and interpretations (continued)(ii)

Below are the mandatory standards, amendments and interpretations to existing
standards that have been published, and are not expected to be relevant for the Group’s
accounting periods beginning on or after January 2012 or later periods and which theGroup has not early adopted:

Standard/
Interpretation

Content

Applicable forfinancial years
beginning on/
after

IAS 27

Separate financial statements

1 January 2013

Amendments for investment entities

1 January 2014

IAS 28Investments in associates and joint venture

1 January 2013

IAS 32

Amendments relating to the offsetting ofassets and liabilities

1 January 2014

IFRS 1

Amendments for government loan with abelow-market rate of interests whentransitioning to IFRSs

1 January 2013

Amendments resulting from Annual
Improvements 2009-2011 Cycle (repeat
application, borrowing costs)

1 January 2013

IFRS 7

Amendments related to the offsetting ofassets and liabilities

1 January 2013

IFRS 11

Joint arrangements

1 January 2013

IFRIC ** 20

Shipping costs in the production phase of asurface mine

1 January 2013

* : International Accounting Standard** : International Financial Reporting Standards Interpretations Committee

B-61

STATEMENT BY DIRECTORSIn the opinion of the directors,(i)the consolidated financial statements as set out on pages B-3 to B-61 are drawn up so as togive a true and fair view of the state of affairs of the Group as at 31 May 2012, and of theresults of the business, changes in equity and cash flows of the Group for the six-month
period then ended; and(ii)

at the date of this statement there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements
for issue.

On behalf of the directors

Seiichiro Yamaguchi
Director

Noboru Hirano
Director

[●]

B-62

APPENDIX CINDEPENDENT AUDITOR’S REPORT ON THE UNAUDITED CONSOLIDATEDFINANCIAL STATEMENTS OF TOSEI CORPORATION AND
ITS SUBSIDIARIES FOR THE THREE-MONTH AND NINE-MONTH PERIODSENDED 31 AUGUST 2012
INDEPENDENT AUDITOR’S REVIEW REPORT
22 February 2013
The Board of Directors
Tosei Corporation
Toranomon Tosei Building
4-2-3 Toranomon
Minato-ku, Tokyo
Dear Sirs
Introduction
We have reviewed the accompanying unaudited consolidated financial statements of Tosei
Corporation (the “Company”) and its subsidiaries (collectively, the “Group”), which comprise theconsolidated balance sheet of the Group as at 31 August 2012, and the consolidated statementof comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows of the Group for the three-month and nine-month periods ended 31 August
2012, and a summary of significant accounting policies and other explanatory information.
Management is responsible for the preparation and presentation of these unaudited interim
financial information in accordance with International Financial Reporting Standards. Our
responsibility is to express a conclusion on these unaudited interim financial information based on
our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements
2410, “Review of Interim Financial Information Performed by the Independent Auditor of the
Entity”. A review of interim financial information consists of making inquires, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that theaccompanying unaudited financial information does not present fairly, in all material respects, thefinancial position of the Group as at 31 August 2012, and of its financial performance,
consolidated statement of changes in equity and consolidated statement of cash flows for thethree-month and nine-month periods then ended in accordance with International Financial
Reporting Standards.

C-1

INDEPENDENT AUDITOR’S REVIEW REPORT (continued)
Other Matters
The comparative figures for the corresponding three-month and nine-month periods ended 31
August 2011 were extracted from the unaudited management financial information and we havenot carried out a review of those financial information. The unaudited consolidated financial
information for the corresponding three-month and nine-month periods ended 31 August 2011 is
the responsibility of the management.
Report on Other Legal and Regulatory Requirements
This report has been prepared in accordance with the Singapore Securities and Futures (Offersof Investments) (Shares and Debentures) Regulations 2009 for the purpose of inclusion in fillings
associated with a proposed secondary listing of the Company’s shares on the Mainboard of theSingapore Exchange Trading Securities Limited (“SGX-ST”).

Nexia TS Public Accounting Corporation
Public Accountants and Certified Public Accountants
SingaporeDirector-in-charge: Loh Hui Nee

C-2

Tosei Corporation and Its Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income
For the three-month and nine-month periods ended 31 August 2012

Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

5,554,472

4,618,172

16,210,821

14,765,693

Cost of revenue . . . . . . . . . . . . . . . .

(4,151,097)(3,328,921) (11,996,175) (11,234,764)

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

1,403,375

1,289,251

4,214,646

3,530,929

Note

Revenue . . . . . . . . . . . . . . . . . . . . .

4

Other income . . . . . . . . . . . . . . . . . .

7

8,590

6,003

25,22016,858Other losses – net. . . . . . . . . . . . . . .

8–(18,874)–(21,181)(678,350)(748,022)(2,146,466)(2,276,710)(187,967)(150,887)(590,733)(473,146)

545,648

377,471

1,502,667

776,750(233,249)(151,224)(646,631)(328,519)

312,399

226,247

856,036448,231(1,145)347(1,186)618

Currency translation differences
arising from consolidation . . . . . . . . .

–

421

–

52

Other comprehensive (losses)/income,net of tax . . . . . . . . . . . . . . . . . . . . .

(1,145)768(1,186)670

Total comprehensive income . . . . . .

311,254

227,015854,850448,901

312,399

226,247

856,036448,231311,254

227,015854,850448,901

683.83495.24

1,873.82

981.15

Expenses . . . . . . . . . . . . . . . . . . . . .
– Administrative . . . . . . . . . . . . . . . .
– Finance . . . . . . . . . . . . . . . . . . . . .

9Profit before income tax . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . .

10(a)Net profit. . . . . . . . . . . . . . . . . . . . .
Other comprehensive (losses)/income:Available-for-sale financial assets– Fair value (losses)/gains . . . . . . . . .

10(b)Profit attributable to:Equity holders of the Company . . . . . .
Total comprehensive income
attributable to:Equity holders of the Company . . . . . .
Earnings per share attributable toequity holders of the Company(¥ per share)– Basic and diluted . . . . . . . . . . . . . .

11

The accompanying notes form an integral part of these financial statements.
C-3

Tosei Corporation and Its Subsidiaries
Balance Sheet
As at 31 August 2012

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

8,381,689
17,805
10,0001,205,353
33,967,938
2,335

6,541,823
17,89010,0002,386,408
36,877,367
1,880

43,585,120

45,835,368

369,867
125,635
11,378,055
3,341,262
66,8568,380
1,724,661

391,160
172,179
11,714,742
3,331,802
48,5198,380
1,402,624

17,014,716

17,069,406

60,599,836

62,904,774

2,517,703
81,331
6,171,720

2,438,105
72,0036,614,864

8,770,754

9,124,972

1,835,279
23,900,745
280,380
504,727

2,112,596
25,413,598
192,711532,465

26,521,131

28,251,370

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

35,291,885

37,376,342

NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,307,951

25,528,432

5,454,673
14,339,149
5,514,129

5,454,673
14,558,960
5,514,799

25,307,951

25,528,432

Note

ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets, at fair value through profit or loss . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current assets
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . .
Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . .

12
13
14
15
16
21

14
17
18
19
20
21
26

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIESCurrent liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-current liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities. . . . . . . . . . . . . . . . . . . . . . .
Retirement benefits obligations . . . . . . . . . . . . . . . . . . . . . .

EQUITY
Capital and reserve attributable to equity holdersof the Company
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22
23

22
23
26
25

27
28
29

The accompanying notes form an integral part of these financial statements.
C-4

C-5
5,454,673––
5,454,673
5,454,673––
5,454,673

Balance at 1 December 2010 . . . . . . . . . . . . . . . . . . . . . . . . .

Dividend relating to 2010 paid (Note 30) . . . . . . . . . . . . . . . . . .

Total comprehensive (losses)/income for the financial period . . . .

Balance at 31 August 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at 1 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . .

Dividend relating to 2011 paid (Note 30) . . . . . . . . . . . . . . . . . .

Total comprehensive income for the financial period . . . . . . . . . .

Balance at 31 August 2012. . . . . . . . . . . . . . . . . . . . . . . . . . .

5,516,499––

5,516,499

5,516,499––

5,516,499

5,516,499–

5,516,499

5,516,499–

5,516,499(1,752)618–(2,370)(413)(1,186)–773(1,752)347(2,099)(413)(1,145)

732

¥’000

52

52

–

–

–

–

–

–

52

421

(369)

–

–

–

¥’000

Currencytranslation
reserve

The accompanying notes form an integral part of these financial statements.

5,454,673

5,454,673

Balance at 1 June 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at 31 August 2012. . . . . . . . . . . . . . . . . . . . . . . . . . .

5,454,673

Balance at 31 August 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .

––Total comprehensive (losses)/income for the financial period . . . .

Total comprehensive income for the financial period . . . . . . . . . .

5,454,673¥’000

Balance at 1 June 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥’000

Share capital

Fair value
reserve

14,558,960

448,231(228,420)

14,339,149

14,454,918

856,036(228,420)

13,827,302

14,558,960

226,247

14,332,713

14,454,918

312,399

14,142,519¥’000

Retainedearnings

Attributable to equity holders of the Company(unaudited)
Capitalreserve

Tosei Corporation and Its Subsidiaries
Unaudited Consolidated Statements of Changes in Equity
For the three-month and nine-month periods ended 31 August 2012

25,528,432

448,901(228,420)

25,307,951

25,425,677

854,850(228,420)

24,799,247

25,528,432

227,015

25,301,417

25,425,677

311,254

25,114,423¥’000

Total equity

Tosei Corporation and Its Subsidiaries
Unaudited Consolidated Statement of Cash Flows
For the three-month and nine-month periods ended 31 August 2012

Note

Three-month period ended
31 August(unaudited)
2011
2012

Nine-month period ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

312,399

226,247

856,036448,231233,249
44,153

151,224
45,533646,631
127,447

328,519
133,043

8

–

–

–

2,307

8
7
7
9

–
(672)
(945)
187,966–

18,874(643)(945)
150,886421–(2,600)(2,217)590,733–

18,874(1,514)(2,217)473,14652

776,150

591,597

2,216,030

1,400,441

1,390,164
53,752(2,402,317)(1,109,859)

750,119(58,876)(3,453,385)(1,225,236)

2,085
547
256,063
14,797

123
1,172
544,830
11,146(17,890)(27)
774,180
28,735(85)455
202,398
27,738Cash generated from/(used in) operations .
Interest received . . . . . . . . . . . . . . . . .
Dividend received. . . . . . . . . . . . . . . . .
Income tax paid . . . . . . . . . . . . . . . . . .

2,493,558
593
945(16,181)(2,367,308)
643
945(42,375)

3,692,271
1,875
2,217
(36,198)(3,047,674)
1,514
2,217
(104,154)

Net cash provided by/(used in)operating activities . . . . . . . . . . . . . . .

2,478,915(2,408,095)

3,660,165(3,148,097)(15,701)(3,842)(3,415)(1,011)(4,629)–(20,195)(39,642)(34,984)(21,438)(107,110)(4,280)–––216,967(133,350)–(20,000)
216,967(22,958)

211,327(228,171)64,139547,000(2,680,493)(391)(218,817)

4,932,000(3,017,490)(147)(151,286)

5,942,000(8,688,866)(1,174)(635,777)

11,806,000(9,852,537)(930)(480,021)––(228,420)(228,420)

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

(2,352,701)

1,763,077(3,612,237)

1,244,092

Net increase/(decrease) in cash andcash equivalents . . . . . . . . . . . . . . . .

103,256(433,691)(180,243)(1,839,866)

Cash and cash equivalents
Beginning of financial period . . . . . . . . . .

6,574,683

6,955,514

6,858,182

8,361,689

End of financial period . . . . . . . . . . . .

6,677,939

6,521,823

6,677,939

6,521,823

Cash flows from operating activities
Net profit . . . . . . . . . . . . . . . . . . . . . .
Adjustments for:– Income tax expense . . . . . . . . . . . . . .
– Amortisation and depreciation . . . . . . . .
– Write off of property, plant andequipment . . . . . . . . . . . . . . . . . . . .
– Loss on disposal of investment
properties . . . . . . . . . . . . . . . . . . . .
– Interest income . . . . . . . . . . . . . . . . .
– Dividend income . . . . . . . . . . . . . . . .
– Interest expense . . . . . . . . . . . . . . . .
– Unrealised currency translation losses . .
Change in working capital:– Inventories . . . . . . . . . . . . . . . . . . . .
– Trade and other receivables . . . . . . . . .
– Financial assets, at fair value throughprofit or loss . . . . . . . . . . . . . . . . . . .
– Other assets . . . . . . . . . . . . . . . . . .
– Trade and other payables . . . . . . . . . .
– Retirement benefits obligations . . . . . . .

Cash flows from investing activities
Additions to property, plant and equipment .
Additions to investment properties . . . . . .
Additions of intangible assets . . . . . . . . .
Purchase of available-for-sale financial
assets . . . . . . . . . . . . . . . . . . . . . . . .
Disposal of investment properties . . . . . . .
Net cash (used in)/provided by investing
activities . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Proceeds from borrowings . . . . . . . . . . .
Repayment of borrowings . . . . . . . . . . . .
Repayment of finance lease obligations . . .
Interest paid . . . . . . . . . . . . . . . . . . . .
Dividends paid to equity holders of theCompany . . . . . . . . . . . . . . . . . . . . . .

30

The accompanying notes form an integral part of these financial statements.

C-6

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

These notes form an integral part of and should be read in conjunction with the accompanying
unaudited consolidated financial statements.
1.

General information
1.1

Introduction
The unaudited consolidated financial statements of Tosei Corporation (the “Company”)
and its subsidiaries (collectively, the “Group”) have been prepared for the purpose ofinclusion in filings associated with a proposed secondary listing of the Company’s
shares on the Mainboard of the Singapore Exchange Securities Trading Limited(“SGX-ST”).
These unaudited consolidated financial statements were authorised for issue inaccordance with a resolution of the Board of Directors of Tosei Corporation on
22 February 2013.

1.2

Corporate information
Tosei Corporation is listed on the Tokyo Stock Exchange, First Section andincorporated and domiciled in Japan. The address of its registered office is Toranomon
Tosei Building, 4-2-3 Toranomon, Minato-ku, Tokyo.
The principal activities of the Company are those of real estate revitalisation,
development and rental property management, investment in real estate funds,
financial products and assets, as well as advisory and asset management services.
The Group comprises the Company and the following subsidiaries:

Name of companies

Principal activities

Country ofbusiness/incorporation

Equity Holding
2011
2012
%

%

Significant subsidiaries held by the Company
Tosei Community
Co., Ltd.

Property management

Japan

100

100

Tosei Revival
Investment Co., Ltd.

Alternative investment

Japan

100

100

Tosei Asset Advisor,
Inc.

Fund

Japan

100

100

Tosei Singapore Pte.
Ltd. (1)Real estate
management (3)Singapore–100

NAI Tosei Japan,
Inc. (2)Real estate agency
and consultancy (3)

Japan

–

100

C-7

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

1.

General information (continued)
1.2

Corporate information (continued)

Name of companies

Principal activities

Country ofbusiness/incorporation

Equity Holding
2011
2012
%

%

Significant subsidiaries held by Tosei Revival Investment Co., Ltd.

2.

Hestia Capital
Limited Company

Alternative investment

Japan

100

100

Metis Capital Co.,
Ltd. (4)Alternative investment

Japan

100

–

Green House
Limited Company

Alternative investment

Japan

100

100

(1)

Newly incorporated in 10 January 2012.

(2)

Newly incorporated in 20 January 2012 and not consolidated as its impact to the Group’s financial
statements is insignificant. This subsidiary was previously known as Sannomiya Real Estate Sales
LLC.

(3)

This is the intended activity of the subsidiary and operations have not commenced since the date ofincorporation.

(4)

Metis Capital Co., Ltd. merged with Tosei Revival Investment on 31 May 2012.

Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these unaudited consolidated
financial statements are set out below.
2.1

Basis of preparation
These unaudited consolidated financial statements of the Group have been prepared
for the purpose of inclusion in filings associated with a proposed secondary listing of
the Company’s shares on the Mainboard of the Singapore Exchange Securities
Trading Limited (“SGX-ST”).
The preparation of financial statements in conformity with International Financial
Reporting Standards (“IFRS”) requires management to exercise its judgement in theprocess of applying the Group’s accounting policies. It also requires the use of certain
critical accounting estimates and assumptions. The areas involving high degree ofjudgement or complexity, or areas where assumptions and estimates are significant to
the financial statements, are disclosed in Note 3.

2.2

Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for saleof goods and rendering of services in the ordinary course of the Group’s activities.
Revenue is presented, net of value-added tax, rebates and discounts, and after
eliminating sales within the Group.
C-8

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.2

Revenue recognition (continued)
The Group recognises revenue when the amount of revenue and related cost can bereliably measured, it is probable that the collectibility of the related receivables isreasonably assured and when the specific criteria for each of the Group’s activities are
met as follows:(a)

Properties for sale
The Group recognises income on property when the risks and rewards ofownership have been transferred to the buyer. Depending on the selling
conditions associated with each property, revenue is generally not recognised if
the Group provides various guarantees and other financial support to the buyers(“continuing involvement”). Such continuing involvement by the Group would
then require revenue to be deferred until the Group’s continuing involvementceases. No revenue is recognised if there are significant uncertainties regarding
recovery of the consideration due, associated costs or the possible return of unit
sold.

(b)

Rental income
Rental income from operating lease (net of any incentives given to the lessee) is
recognised on a straight-line basis over the lease term except where analternative basis is more representative of the pattern of benefits to be derived
from the leased assets.

(c)

Financial advisory and management fee
Financial advisory and management fee is recognised as and when services are
rendered.

(d)Interest income
Interest income, including income arising from finance leases and other financial
instruments, is recognised using the effective interest method.

(e)

Dividend income
Dividend income is recognised when the right to receive payment is established.

(f)Other income
Other income is recognised at the point of entitlement of income.

C-9

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.3

Group accounting(a)Subsidiaries(i)

Consolidation
Subsidiaries are entities (including special purpose entities) over which theGroup has power to govern the financial and operating policies so as toobtain benefits from its activities, generally accompanied by a shareholding
giving rise to a majority of the voting rights. The existence and effect ofpotential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Group controls another entity.
Subsidiaries are consolidated from the date on which control is transferredto the Group. They are de-consolidated from the date on which control
ceases.
In preparing the unaudited consolidated financial statements, transactions,balances and unrealised gains on transactions between group entities are
eliminated. Unrealised losses are also eliminated but are considered an
impairment indicator of the asset transferred. Accounting policies ofsubsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.

(ii)

Acquisitions
The acquisition method of accounting is used to account for businesscombinations by the Group.
The consideration transferred for the acquisition of a subsidiary or businesscomprises the fair value of the assets transferred, the liabilities incurred andthe equity interests issued by the Group. The consideration transferred also
includes the fair value of any contingent consideration arrangement and thefair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are, with limited exceptions, measured initially attheir fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any noncontrolling interest in the acquiree at the date of acquisition either at fairvalue or at the non-controlling interest’s proportionate share of theacquiree’s net identifiable assets.

C-10

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.3

Group accounting (continued)(a)Subsidiaries (continued)(ii)

Acquisitions (continued)
The excess of (i) the consideration transferred, the amount of any noncontrolling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the (ii) fair value of the net
identifiable assets acquired is recorded as goodwill. If those amounts areless than the fair value of the net identifiable assets of the subsidiaryacquired and the measurement of all amounts has been reviewed, thedifference is recognised directly in profit or loss as bargain purchase.

(iii) Disposals
When a change in the Group’s ownership interest in a subsidiary results ina loss of control over the subsidiary, the assets and liabilities of thesubsidiary including any goodwill are derecognised. Amounts recognised inother comprehensive income in respect of that entity are also reclassified to
profit or loss or transferred directly to retained earnings if required by aspecific Standard.
Any retained interest in the entity is remeasured at fair value. The difference
between the carrying amount of the retained investment at the date whencontrol is lost and its fair value is recognised in profit or loss.
(b)Transactions with non-controlling interests.
Changes in the Group’s ownership interest in a subsidiary that do not result in aloss of control over the subsidiary are accounted for as transactions with equity
owners of the Company. Any difference between the change in the carrying
amounts of the non-controlling interest and the fair value of the consideration
paid or received is recognised within equity attributable to the equity holders of
the Company.

2.4

Property, plant and equipment(a)Measurement(i)Land and buildings
Land and buildings are initially recognised at cost. Freehold land is
subsequently carried at cost less accumulated impairment losses. Buildings
are subsequently carried at cost less accumulated depreciation andaccumulated impairment losses.

C-11

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.4

Property, plant and equipment (continued)(a)Measurement (continued)(ii)

Other property, plant and equipment
All other items of property, plant and equipment are initially recognised atcost and subsequently carried at cost less accumulated depreciation andaccumulated impairment losses.

(iii) Components of costs
The cost of an item of property, plant and equipment initially recognised
includes its purchase price and any cost that is directly attributable tobringing the asset to the location and condition necessary for it to becapable of operating in the manner intended by management. Cost also
includes borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset (refer to Note 2.7 onborrowing costs).
(b)

Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plantand equipment is calculated using the straight-line method. If the depreciation
based on the reducing balance method has better reflects the pattern in which theasset’s future economic benefits are expected to be consumed, this method isapplied. The depreciable amounts of other items of property, plant and equipment
over their estimated useful lives are allocated as follows:
Useful lives
Buildings and structures

3 – 50 years

Tools, equipment and fixtures3 – 20 years

The residual values, and estimated useful lives and depreciation method of
property, plant and equipment are reviewed, and adjusted as appropriate, at eachbalance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
Fully depreciated assets still in use are retained in the financial statements.
(c)

Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has
already been recognised is added to the carrying amount of the asset only when
it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repair andmaintenance expenses are recognised in profit or loss when incurred.
C-12

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.4

Property, plant and equipment (continued)(d)DisposalOn disposal of an item of property, plant and equipment, the difference between
the disposal proceeds and its carrying amount is recognised in profit or loss
within “Other (losses)/gains – net”.

2.5

Intangible assets(a)Acquired licenses
Licences acquired are initially recognised at cost. Acquired licenses with anindefinite useful life are subjected to impairment assessment by comparing its
recoverable amount with its carrying amount on an annual basis and whenever
there is an indication that the intangible asset may be impaired. The useful life ofacquired licenses is reviewed and assessed at the end of each balance sheet
date.

(b)

Acquired computer software licenses
Acquired computer software licences are initially capitalised at cost which
includes the purchase price (net of any discounts and rebates) and other directly
attributable cost of preparing the asset for its intended use. Direct expenditure
including employee costs, which enhances or extends the performance ofcomputer software beyond its specifications and which can be reliably measured,is added to the original cost of the software. Costs associated with maintaining
the computer software are recognised as an expense when incurred.
Computer software licences are subsequently carried at cost less accumulated
amortisation and accumulated impairment losses. These costs are amortised to
profit or loss using the straight-line method over their estimated useful lives ofthree to five years.

The amortisation period and amortisation method of intangible assets are reviewed atleast at each balance sheet date. The effects of any revision are recognised in profit
or loss when the changes arise.
2.6

Club memberships
Club memberships are stated at cost less impairment loss.

C-13

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.7

Borrowing costs
Borrowing costs are recognised in profit or loss using the effective interest method
except for those costs that are directly attributable to the construction or developmentof properties and assets under construction. This includes those costs on borrowings
acquired specifically for the construction or development of properties and assets
under construction, as well as those in relation to general borrowings used to financethe construction or development of properties and assets under constructions.
The actual borrowing costs incurred during the period up to the issuance of thetemporary occupation permit less any investment income on temporary investment ofthese borrowings, are capitalised in the cost of the property under development orassets under construction. Borrowing costs on general borrowings are capitalised byapplying a capitalisation rate to construction or development expenditures that are
financed by general borrowings.

2.8

Investment properties(a)

Investment properties include those portions of commercial and residentialbuildings that are held for long-term rental yields and/or for capital appreciationand land under operating leases that is held for long-term capital appreciation or
for a currently indeterminate use.
Investment properties are initially recognised at cost and subsequently carried atcost less accumulated depreciation and accumulated impairment loss.
Depreciation of investment properties is calculated using the straight-line
method. If the depreciation based on the reducing balance method has betterreflects the pattern in which the asset’s future economic benefits are expected tobe consumed, this method is applied. The allocated depreciable amounts of theinvestment properties over the estimated useful lives range between 3 to 50
years. Freehold land included in the investment properties is not depreciated.
The residual values, and estimated useful lives and depreciation method ofinvestment properties are reviewed, and adjusted as appropriate, at eachbalance sheet date. The effects of any revision are recognised in profit or loss
when the changes arise.
Investment properties are subject to renovations or improvements at regularintervals. The cost of major renovations and improvements is capitalised and thecarrying amounts of the replaced components are recognised in profit or loss.
The cost of maintenance, repairs and minor improvements is recognised in profit
or loss when incurred.
On disposal of an investment property, the difference between the disposal
proceeds and the carrying amount is recognised in profit or loss within “Other(losses)/gains – net”.

C-14

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.8

Investment properties (continued)(b)Transfer
Transfers to, or from, investment properties are made when there is a change inuse, evidenced by:

2.9

(i)

commencement of development with a view to sell, for a transfer frominvestment properties to development properties; and(ii)

commencement of an operating lease to another party, for a transfer fromdevelopment properties to investment properties.

Impairment of non-financial assets(a)Intangible assets
Property, plant and equipment
Investment properties
Intangible assets, property, plant and equipment and investment properties aretested for impairment whenever there is any objective evidence or indication thatthese assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher ofthe fair value less cost to sell and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash inflows that are largely
independent of those from other assets. If this is the case, the recoverable
amount is determined for the CGU to which the asset belongs. If the recoverable
amount of the asset (or CGU) is estimated to be less than its carrying amount, thecarrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount isrecognised as an impairment loss in profit or loss.
An impairment loss for an asset is reversed if, and only if, there has been achange in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. The carrying amount of this asset isincreased to its revised recoverable amount, provided that this amount does notexceed the carrying amount that would have been determined (net of any
accumulated amortisation or depreciation) had no impairment loss beenrecognised for the asset in prior years.
A reversal of impairment loss for an asset is recognised in profit or loss, unlessthe asset is carried at revalued amount, in which case, such reversal is treatedas a revaluation increase. However, to the extent that an impairment loss on thesame revalued asset was previously recognised as an expense, a reversal of that
impairment is also credited to profit or loss.

C-15

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.10 Financial assets(a)Classification
The Group classifies its financial assets in the following categories: at fair value
through profit or loss, loans and receivables and available-for-sale. The
classification depends on the nature of the assets and the purpose for which theassets were acquired. Management determines the classification of its financial
assets at initial recognition.
(i)

Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, andthose designated at fair value through profit or loss at the date of inception.
Financial assets designated at fair value through profit or loss at inception
are those that are managed and their performances are evaluated on a fairvalue basis, in accordance with a documented Group investment strategy.
Assets in this category are presented as current assets if they are expected
to be realised within 12 months after the balance sheet date.

(ii)

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arepresented as current assets, except for those expected to be realised later
than 12 months after the balance sheet date or over its normal operating
cycle which are presented as non-current assets. Loans and receivables arepresented as “trade and other receivables” (Notes 15 and 17) and “cash andcash equivalents” (Note 12) on the balance sheet.

(iii) Available-for-sale financial assets
Available-for-sale financial assets, are non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are presented as non-current assets unless the investment matures ormanagement intends to dispose of the assets within 12 months after thebalance sheet date.
(b)

Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on tradedate – the date on which the Group commits to purchase or sell the asset.

C-16

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.10 Financial assets (continued)(b)

Recognition and derecognition (continued)
Financial assets are derecognised when the rights to receive cash flows from thefinancial assets have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership. On disposal of afinancial asset, the difference between the carrying amount and the saleproceeds is recognised in profit or loss. Any amount in the other comprehensive
income relating to that asset is reclassified to profit or loss.

(c)

Initial measurement
Financial assets are initially recognised at fair value plus transaction costs
except for financial assets at fair value through profit or loss, which arerecognised at fair value. Transaction costs for financial assets at fair value
through profit or loss are recognised immediately as expenses.

(d)Subsequent measurement
Available-for-sale financial assets are subsequently carried at fair value. Loans
and receivables are subsequently carried at amortised cost using the effective
interest method.
Interest and dividend income on available-for-sale financial assets arerecognised separately in profit or loss. Changes in fair values of available-forsale equity securities (i.e. non-monetary items) are recognised in the fair value
reserve, together with the related currency translation differences.

(e)

Impairment
The Group assesses at each balance sheet date whether there is objective
evidence that a financial asset or a group of financial assets is impaired andrecognises an allowance for impairment when such evidence exists.
(i)

Loans and receivables
Significant financial difficulties of the debtor, probability that the debtor willenter bankruptcy, and default or significant delay in payments are objective
evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an
impairment allowance account for which is calculated as the difference
between the carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. When the asset
becomes uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are recognised
against the same line item in profit or loss.
C-17

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.10 Financial assets (continued)(e)Impairment (continued)(i)

Loans and receivables (continued)
The impairment allowance is reduced through profit or loss in a subsequent
period when the amount of impairment loss decreases and the related
decrease can be objectively measured. The carrying amount of the asset
previously impaired is increased to the extent that the new carrying amount
does not exceed the amortised cost had no impairment been recognised inprior periods.

(ii)

Available-for-sale financial assets
In addition to the objective evidence of impairment described in Note
2.10(e)(i), a significant or prolonged decline in the fair value of an equity
security below its cost is considered as an indicator that the available-forsale financial assets are impaired.
If any evidence of impairment exists, the cumulative loss that wasrecognised in other comprehensive income is reclassified to profit or loss.
The cumulative loss is measured as the difference between the acquisition
cost (net of any principal repayments and amortisation) and the current fairvalue, less any impairment loss previously recognised as an expense. The
impairment losses recognised as an expense on equity securities are notreversed through profit or loss.

(f)

Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in thebalance sheet when there is a legally enforceable right to offset and there is anintention to settle on a net basis or realise the asset and settle the liability
simultaneously.

2.11

Financial guarantees
The Company has issued corporate guarantees to banks for borrowings of its
subsidiaries. These guarantees are financial guarantees as they require the Company
to reimburse the banks if the subsidiaries fail to make principal or interest payments
when due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costsin the Company’s balance sheet.

C-18

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.11

Financial guarantees (continued)
Financial guarantees are subsequently amortised to profit or loss over the period of
the subsidiaries’ borrowings, unless it is probable that the Company will reimburse thebank for an amount higher than the unamortised amount. In this case, the financial
guarantees shall be carried at the expected amount payable to the bank in the
Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.

2.12 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditionalright to defer settlement for at least 12 months after the balance sheet date, in whichcase they are presented as non-current liabilities.
Borrowings are initially recognised at fair value (net of transaction costs) andsubsequently carried at amortised cost. Any difference between the proceeds (net oftransaction costs) and the redemption value is recognised in profit or loss over theperiod of the borrowings using the effective interest method.
2.13 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to theGroup prior to the end of financial year which are unpaid. They are classified as
current liabilities if payment is due within a year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently
carried at amortised cost using the effective interest method.
2.14 Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchangetraded and over-the-counter securities and derivatives) are based on quoted market
prices at the balance sheet date. The quoted market prices used for financial assets
are the current bid prices; the appropriate quoted market prices for financial liabilities
are the current asking prices.
The fair values of financial instruments that are not traded in an active market are
determined by using valuation techniques. The Group uses a variety of methods andmakes assumptions that are based on market conditions existing at each balance
sheet date. When appropriate, quoted market prices or dealer quotes for similar
instruments are used. Valuation techniques, such as discounted cash flow analyses,
are also used to determine the fair values of the financial instruments.
The fair values of current financial assets and liabilities carried at amortised cost
approximate their carrying amounts.
C-19

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.15 Leases(a)When the Group is the lessee:
The Group leases office equipment under finance leases and operating leases
from non-related parties.
(i)

Lessee – Finance leases
Leases where the Group assumes substantially all risks and rewards
incidental to ownership of the leased assets are classified as financeleases.
The leased assets and the corresponding lease liabilities (net of financecharges) under finance leases are recognised on the balance sheet as plantand equipment and borrowings respectively, at the inception of the leases
based on the lower of the fair value of the leased assets and the present
value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the
reduction of the outstanding lease liability. The finance expense isrecognised in profit or loss on a basis that reflects a constant periodic rateof interest on the finance lease liability.

(ii)

Lessee – Operating leases
Leases where substantially all risks and rewards incidental to ownership are
retained by the lessors are classified as operating leases. Payments madeunder operating leases (net of any incentives received from the lessors) arerecognised in profit or loss on a straight-line basis over the period of thelease.
Contingent rents are recognised as an expense in profit or loss whenincurred.

(b)

When the Group is the lessor:
The Group leases investment properties under operating lease to non-relatedparties.
(i)

Lessor – Operating leases
Leases of investment properties where the Group retains substantially all
risks and rewards incidental to ownership are classified as operating leases.
Rental income from operating leases (net of any incentives given to thelessees) is recognised in profit or loss on a straight-line basis over the lease
term.

C-20

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.15 Leases (continued)(b)

When the Group is the lessor: (continued)(i)Lessor – Operating leases (continued)
Initial direct costs incurred by the Group in negotiating and arranging
operating leases are added to the carrying amount of the leased assets andrecognised as an expense in profit or loss over the lease term on the same
basis as the lease income.
Contingent rents are recognised as income in profit or loss when earned.

2.16 Inventories
Inventories consist of real estate for sale and real estate for sale in-progress. They arestated at the lower of cost plus, where appropriate, a portion of attributable profit, andestimated net realisable value. Net realisable value represents the estimated selling
price less costs to be incurred in selling the property.
The cost of inventories comprise specifically identified costs, including acquisition
costs, development expenditure, borrowing costs and other related expenditure.
Borrowing costs payable on loans funding a development property are also
capitalised, on a specific identification basis, as part of the cost of the development
property until the completion of development.
2.17 Income taxes
Current income tax for current and prior periods is recognised at the amount expected
to be paid to or recovered from the tax authorities, using the tax rates and tax laws thathave been enacted or substantially enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the financial
statements except when the deferred income tax arises from the initial recognition ofan asset or liability in a transaction that is not a business combination and affects
neither accounting nor taxable profit or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on
investments in subsidiaries, except where the Group is able to control the timing of thereversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that futuretaxable profit will be available against which the deductible temporary differences andtax losses can be utilised.

C-21

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.17 Income taxes (continued)
Deferred income tax is measured:(i)at the tax rates that are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled, based on tax rates
and tax laws that have been enacted or substantially enacted by the balance
sheet date; and(ii)

based on the tax consequence that will follow from the manner in which theGroup expects, at the balance sheet date, to recover or settle the carrying
amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expense in profit orloss.
2.18 Provisions for other liabilities and charges
Provision for other liabilities and charges are recognised when the Group has apresent legal or constructive obligation as a result of past events, and it is more likely
than not that an outflow of resources will be required to settle the obligation and theamount has been reliably estimated.
2.19 Employee compensation
Employee benefits are recognised as an expense, unless the cost qualifies to becapitalised as an asset.
(a)Defined contribution plans
Defined contribution plans are post-employment benefit plans which the Grouppays fixed contributions into separate entities such as the Pension Scheme on a
mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid.

(b)

Post employment benefit obligations
Post employment benefit obligations are defined benefit plans which define theamount of benefit where employee will receive on retirement according to laws
depending on age and years of service.
The liability recognised in the statement of financial position in respect of defined
benefit pension plans is the present value of the defined benefit obligation at theend of the reporting period with adjustments for unrecognised past-service costs.
The defined benefit obligation is calculated annually by independent actuaries
using the projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using

C-22

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.19 Employee compensation (continued)(b)

Post employment benefit obligations (continued)
interest rates of high-quality corporate bonds that are denominated in thecurrency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability.
Actuarial gains and losses as at end of the previous reporting year are
recognised on a straight-line basis within the period of the remaining average
service lives of the participating employees.

(c)Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue toemployees. A provision is made for the estimated liability for annual leave as aresult of services rendered by employees up to the balance sheet date.

(d)Other employee benefits
The other employee benefits includes employee share ownership plan andcontributions to the plan are recognised in profit or loss when incurred. The
details of the plan are described in Note 25(b).

2.20 Currency translation(a)Functional and presentation currency
Items included in the financial statements of each entity in the Group aremeasured using the currency of the primary economic environment in which theentity operates (“functional currency”). The financial statements are presented inJapanese Yen, which is the functional currency of the Company.

(b)Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”)
are translated into the functional currency using the exchange rates at the datesof the transactions. Currency translation differences resulting from the settlementof such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at the closing rates at the balance sheet date
are recognised in profit or loss. However, in the consolidated financial
statements, currency translation difference arising from borrowings in foreign
currencies and other currency instruments designated and qualifying as net
investment hedges and net investment in foreign operations, are recognised inother comprehensive income and accumulated in the currency translation
reserve.

C-23

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20122.

Summary of significant accounting policies (continued)
2.20 Currency translation (continued)(b)Transactions and balances (continued)
When a foreign operation is disposed of or any borrowings forming part of the net
investment of the foreign operation are repaid, a proportionate share of theaccumulated translation differences is classified to profit or loss, as part of thegain or loss on disposal.
Foreign exchange gain or losses that relate to borrowings are presented in theincome statement within “Finance costs”. All other foreign exchange gains orlosses impacting profit or loss are presented in the income statement within“Other (losses)/gains – net”.
Non-monetary items measured at fair values in foreign currencies are translatedusing the exchange rates at the date when the fair values are determined.

2.21 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the Board of Directors whose members are responsible for allocating
resources and assessing performance of the operating segments.
2.22 Cash and cash equivalents
For the purpose of presentation in the unaudited consolidated statement of cash flows,
cash and cash equivalents include cash on hand, deposits with financial institutions
which are subject to an insignificant risk of change in value, and bank overdrafts. Bank
overdrafts are presented as current borrowings on the balance sheet.
2.23 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to theissuance of new ordinary shares are recognised against the share capital account.
2.24 Dividends to company’s shareholders
Dividends to the Company’s shareholders are recognised when the dividends areapproved for payment.

C-24

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20123.

Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
3.1

Critical accounting estimates and assumptions(a)Uncertain tax positions
The Group is subject to income taxes in numerous jurisdictions. In determining
the income tax liabilities, management is required to estimate the amount of
capital allowances and the deductibility of certain expenses (“uncertain tax
positions”) at each tax jurisdiction. The Group recognise liabilities for expected
tax issues based on estimates of whether additional taxes will be due. Where thefinal tax outcome of these matters is different from the amounts that were initiallyrecognised, such differences will impact the income tax and deferred income tax
provisions in the financial period in which such determination is made. The
carrying amounts of the Group’s provision for taxation as at 30 November 2011
and 31 August 2012 were ¥81,331,000 and ¥72,003,000 respectively. The
carrying amounts of the Group’s deferred tax liabilities as at 30 November 2011
and 31 August 2012 were ¥280,380,000 and ¥192,711,000 respectively.

(b)

Impairment of loans and receivables
Management reviews its loans and receivables for objective evidence ofimpairment at least quarterly. Significant financial difficulties of the debtor, theprobability that the debtor will enter bankruptcy, and default or significant delay
in payments are considered objective evidence that a receivable is impaired. In
determining this, management makes judgement as to whether there isobservable data indicating that there has been a significant change in thepayment ability of the debtor, or whether there have been significant changes
with adverse effect in the technological, market, economic or legal environment
in which the debtor operates in.
Where there is objective evidence of impairment, management makes
judgements as to whether an impairment loss should be recorded as an expense.
In determining this, management uses estimates based on historical loss
experience for assets with similar credit risk characteristics. As at 30 November
2011 and 31 August 2012, management has made adequate provision for
impairment of trade and other receivables of ¥18,181,000 and ¥20,394,000
respectively. The carrying value of trade and other receivables as at 30
November 2011 and 31 August 2012 were ¥1,330,988,000 and ¥2,558,587,000
respectively.
If the net present value of estimated cash flows increase/decrease by 10% frommanagement’s estimates for all loans and receivables, the Group’s allowance for
impairment will decrease/increase by ¥133,099,000 and ¥255,859,000 as at 30
November 2011 and 31 August 2012 respectively.

C-25

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 20123.

Critical accounting estimates, assumptions and judgements (continued)
3.1

Critical accounting estimates and assumptions (continued)(c)

Employee benefit
The present value of the pension obligations depends on a number of factors that
we determined on an actuarial basis using a number of assumptions. The
assumptions used in determining the net cost (income) for pensions include thediscount rate. Any changes in these assumptions will impact the carrying amountof pension obligations.
The Group determines the appropriate discount rate at the end of each year. Thisis the interest rate that should be used to determine the present value of
estimated future cash outflows expected to be required to settle the pension
obligations. In determining the appropriate discount rate, the Group considers theinterest rate of high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity approximating
the terms of the related pension liability. The key line items affected will be“Employee compensation” and “Retirement benefits obligation” as disclosed in
Note 6 and Note 25 respectively.

3.2

Critical judgements in applying the entity’s accounting policies(a)Deferred income tax assets
The Group recognises deferred income tax assets on carried forward tax losses
to the extent there are sufficient estimated future taxable profits and/or taxable
temporary differences against which the tax losses can be utilised.
As at 30 November 2011 and 31 August 2012, deferred tax assets of certain
group entities amounting to ¥1,724,661,000 and ¥1,402,624,000 respectively
were recognised based on the anticipated future use of tax losses carried forward
by those entities. In the event that the tax authority regards the group entities as
not satisfying the current tax legislation and disallowed the carry forward of the
tax losses, the deferred tax assets will have to be written off as income tax
expense.

C-26

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

4.

5.

RevenueThree-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Revitalisation business. . . . . . . . . .

2,544,117

1,174,793

9,033,574

4,529,756

Development business . . . . . . . . . .

1,270,513

1,602,853

1,658,736

4,619,149

Rental business . . . . . . . . . . . . . . .

627,846

621,699

1,884,746

1,763,987

Fund business . . . . . . . . . . . . . . . .

180,318

219,932

1,055,073

607,378

Property management business . . .

887,965

771,379

2,442,930

2,552,117

Alternative investment business. . .

43,713

227,516

135,762

693,306

5,554,472

4,618,172

16,210,821

14,765,693

Expenses by natureThree-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Advertising . . . . . . . . . . . . . . . . . . .

5,955

6,079

16,207

20,799Allowance for impairment – tradeand other receivables – net . . . . . .

1,883

4,145

(2,192)

2,962

Amortisation of intangible assets . .

8,507

7,634

25,242

22,617

Bad debts written off . . . . . . . . . . .

–

–

576

–

Commission fee . . . . . . . . . . . . . . .

37,846

40,578147,080

114,659

Communication. . . . . . . . . . . . . . . .

9,425

9,502

28,84429,712

Cost of inventories (Note 16) . . . . .

3,156,178

2,457,194

8,846,873

8,212,538

Depreciation of investment
properties . . . . . . . . . . . . . . . . . . . .

26,551

27,10175,48178,538Depreciation of property, plant andequipment. . . . . . . . . . . . . . . . . . . .

9,095

10,79826,72431,888

Employee compensation (Note 6) .

500,692525,255

1,528,692

1,617,026

Entertainment . . . . . . . . . . . . . . . . .

3,403

3,185

9,171

11,718Inventory write-down – net(Note 16) . . . . . . . . . . . . . . . . . . . .

––420,219

233,251

C-27

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

5.

Expenses by nature (continued)
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

Other professional fees . . . . . . . . .

17,17725,59949,161103,997

Property management andmaintenance fees . . . . . . . . . . . . . .

969,969

845,995

2,653,955

2,713,193

Rental expense on operatingleases . . . . . . . . . . . . . . . . . . . . . . .

6,137

5,486

18,192

17,482

Stationery . . . . . . . . . . . . . . . . . . . .

9,754

10,084

31,66036,181

Tax and dues . . . . . . . . . . . . . . . . .

39,91872,863

170,279

178,711

Transportation . . . . . . . . . . . . . . . .

9,803

11,282

27,95430,225

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

17,154

14,163

68,52355,977

Total cost of revenue andadministrative expenses . . . . . . . . .

4,829,447

4,076,943

14,142,641

13,511,474¥’000

Property management and maintenance fees mainly consist of utilities charges, repair andmaintenance expenses and other incidental expenses.
6.

Employee compensation
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Salaries and bonuses. . . . . . . . . . .

406,875

429,670

1,251,352

1,299,277

Statutory welfare expenses . . . . . .

53,71554,317

155,016

163,249

Retirement benefits . . . . . . . . . . . .

19,39420,08859,352

63,379Other short-term benefits . . . . . . . .

20,70821,18062,972

91,121500,692525,255

1,528,692

1,617,026

C-28

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

7.

Other income
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Interest income. . . . . . . . . . . . . . . .

672

643

2,600

1,514

Dividend income. . . . . . . . . . . . . . .

945

945

2,217

2,217

Miscellaneous. . . . . . . . . . . . . . . . .

6,973

4,415

20,403

13,127

8,590

6,003

25,22016,858

Miscellaneous income mainly consists of income received from rental of spaces to vendorsof vending machines and others.
8.

9.

Other losses – net
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Property, plant and equipment
written off . . . . . . . . . . . . . . . . . . . .

–

–

–

2,307

Loss on disposal of investment
properties . . . . . . . . . . . . . . . . . . . .

–18,874–

18,874–

18,874–

21,181

Finance expenses

Interest expense – bankborrowings . . . . . . . . . . . . . . . . . . .

Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

187,967

150,887

590,733

473,146

C-29

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

10. Income taxes(a)Income tax expenses
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

– Current income tax –Japan . . . . . . . . . . . . . . . .

14,95244,58641,44894,826

Deferred income tax. . . . . . .

218,297

106,638

605,183

233,693

233,249

151,224

646,631

328,519

Tax expense attributable toprofit is made up of:Profit from current financial
year

The tax on the Group’s profit before tax differs from the theoretical amount that would
arise using the Japan standard rate of income tax as follows:
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Profit before income tax . . . .

545,648

377,471

1,502,667

776,750

Tax calculated at domestic
tax rates applicable to profit.

223,716

154,763

616,093

318,467– Expenses not deductible
for tax purposes . . . . . . . .

1,234

1,051

3,084

4,962

– Deferred tax assets notrecognised/(utilised) . . . . .

5,553(10,779)

22,542(83,401)– Change in tax rate . . . . . .

–(3,360)–80,986– Other . . . . . . . . . . . . . . . . .

2,746

9,549

4,912

7,505

Tax charge . . . . . . . . . . . . . .

233,249

151,224

646,631

328,519

Effects of:

C-30

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

10. Income taxes (continued)(b)

The tax (charge)/credit relating to each component of other comprehensive(losses)/income is as follows:
Three-month period ended
31 August 2011
(unaudited)

Fair value(losses)/gains onavailable-for-salefinancial assets . . .

Beforetax

Tax(charge)/credit¥’000(1,945)After tax

Beforetax

Tax(charge)/creditAfter tax

¥’000

¥’000

¥’000

¥’000

¥’000

800

(1,145)

538

(191)

347

Nine-month period ended
31 August 2011
(unaudited)

Fair value(losses)/gains onavailable-for-salefinancial assets . . .

11.

Three-month period ended
31 August 2012
(unaudited)

Beforetax

Tax(charge)/credit¥’000(2,014)Nine-month period ended
31 August 2012
(unaudited)

After tax

Beforetax

Tax(charge)/creditAfter tax

¥’000

¥’000

¥’000

¥’000

¥’000

828

(1,186)

1,293

(675)

618

Earnings per share(a)Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity
holders of the Company by the weighted average number of ordinary shares
outstanding during the three-month and nine-month periods ended 31 August 2011
and 2012 respectively.

C-31

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 201211.

Earnings per share (continued)
(a)

(b)

Basic earnings per share (continued)
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

Net profit attributable to theequity holders of theCompany (¥’000) . . . . . . . . .

312,399

226,247

856,036448,231Weighted average numberof ordinary shares
outstanding for basic
earnings per share . . . . . . . .

456,840

456,840

456,840

456,840

Basic earnings per share(¥ per share) . . . . . . . . . . . .

683.83495.24

1,873.82

981.15

Diluted earnings per share
There were no diluted earnings per share for the three-month and nine-month periods
ended 31 August 2011 and 2012 as there were no potential dilutive ordinary shares.

12. Cash and cash equivalents

Cash at bank and on hand. . . . . . . . . . . . . . . . . . . . . . .
Short-term bank deposits . . . . . . . . . . . . . . . . . . . . . . . .

30 November
2011

31 August
2012

¥’000
(audited)
8,341,689
40,000¥’000(unaudited)
6,351,823
190,000

8,381,689

6,541,823

For the purpose of presenting the consolidated statement of cash flows, cash and cash
equivalents comprise the following:
30 November
2011

31 August2012

Cash and bank balances (as above) . . . . . . . . . . . . . . .
Less: Deposits more than 3 months . . . . . . . . . . . . . . .

¥’000(audited)
8,381,689(20,000)¥’000(unaudited)
6,541,823(20,000)

Cash and cash equivalents per consolidated statementof cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,361,689

6,521,823

C-32

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

13. Financial assets, at fair value through profit or loss
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

17,805

17,890

At fair value on initial recognition
Unlisted equity securities – Japan . . . . . . . . . . . . . . . . .

The fair value losses – net for the three-month and nine-month periods ended 31 August
2011 and 2012 amounting to ¥2,084,000, ¥122,000, ¥2,109,000 and ¥1,914,000 respectively
have been included as part of “Total cost of revenue and administrative expenses – Other”.
14. Available-for-sale financial assets
30 November
2011

31 August
2012

¥’000

¥’000

(audited)(unaudited)

Beginning of financial year/period . . . . . . . . . . . . . . . . .

51,845379,867

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

333,350

20,000Fair value (losses)/gains recognised in othercomprehensive income (Note 29(b)(ii)) . . . . . . . . . . . . .

(5,328)1,293

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

379,867

401,160

Less: Current portion . . . . . . . . . . . . . . . . . . . . . . . . .

(10,000)(10,000)

Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . .

369,867

391,160

30 November
2011

31 August2012

Available-for-sale financial assets are analysed as follows:

¥’000

¥’000

(audited)(unaudited)

Listed securities – Japan . . . . . . . . . . . . . . . . . . . . . . . .

18,06819,362Unlisted securities – Japan . . . . . . . . . . . . . . . . . . . . . .

361,799

381,798

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

379,867

401,160

C-33

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

15. Trade and other receivables
30 November
2011

31 August
2012

¥’000

¥’000

(audited)(unaudited)

Trade receivables – non-related parties. . . . . . . . . . . . .

547,011495,201

Less: Allowance for impairment (Note 32(b)(ii)). . . . . . .

(5,056)(3,303)

Trade receivables – net . . . . . . . . . . . . . . . . . . . . . . . . .

541,955

491,898

Loan to non-related parties . . . . . . . . . . . . . . . . . . . . . .

11,133

3,678

Less: Non-current portion (Note 17) . . . . . . . . . . . . . . .

(10,325)(3,387)808

291

Advance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

225,752

141,546

Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257,326

271,028

Receivables purchased . . . . . . . . . . . . . . . . . . . . . . . . .

81,361

6,277

Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98,792

1,479,815

Less: Allowance for impairment (Note 32(b)(ii)). . . . . . .

(641)(4,447)1,205,353

2,386,408

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Real estate for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,673,983

28,048,559

Real estate for sale in-progress . . . . . . . . . . . . . . . . . . .

6,293,955

8,828,808

33,967,938

36,877,367

16. Inventories

The cost of inventories recognised as an expense and included in “Total cost of revenue –Cost of inventories” for the three-month and nine-month periods ended 31 August 2011 and2012 amounted to ¥3,156,178,000, ¥2,457,194,000, ¥8,846,873,000, and ¥8,212,538,000
respectively.
Inventories of ¥33,785,368,000 and ¥36,800,411,000 of the Group have been pledged as
security for borrowings of the Group at the end of the respective financial year/period ended
30 November 2011 and 31 August 2012 (Note 23(a)).

C-34

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

16. Inventories (continued)
The cost of inventories recognised as expense in respect of write-down and the reversal ofsuch write-down are as follows:
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

..........

––(716,640)(238,235)

Reversal of write-down (2) . . . . . . . .

––296,421

4,984

Inventory write-down – net . . . . . . .

––(420,219)(233,251)

Inventory write-down

(1)

(1)

This relates to write-down of the carrying amount of real estate to its net realisable value.

(2)

The reversal is mainly due to an upturn of property market situation.

Details of major real estate for sale of the Group are disclosed under summary of major
properties (Note 35).
17. Trade and other receivables – non-current
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Trade receivables – non-related parties. . . . . . . . . . . . .

11,626

14,088Less: Allowance for impairment (Note 32(b)(ii)). . . . . . .

(11,626)(12,626)

Trade receivables – net . . . . . . . . . . . . . . . . . . . . . . . . .

–

1,462

– Loan to non-related parties (Note 15). . . . . . . . . . . . .

10,325

3,387

Less: Allowance for impairment (Note 32(b)(ii)) . . . . .

(858)

(17)

– Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .

115,368

166,094– Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

800

1,253

125,635

172,179

Other receivables

C-35

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

17. Trade and other receivables – non-current (continued)
The fair value of non-current trade and other receivables are computed based on cash flows
discounted at market borrowing rates. The market borrowing rates used and the fair values
are as follows:
30 November
2011

31 August2012(audited)(unaudited)

Market borrowing rates . . . . . . . . . . . . . . . . . . . . . . . . .

2.10 – 3.02%

2.00 – 3.02%

Loan to non-related parties (¥’000) . . . . . . . . . . . . . . . .

10,182

3,386

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Beginning of financial year/period . . . . . . . . . . . . . . . . .

11,925,105

12,239,292

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45,623

107,110

Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–(247,954)

Transfer from inventories . . . . . . . . . . . . . . . . . . . . . . . .

507,958

586,491

Transfer to inventories . . . . . . . . . . . . . . . . . . . . . . . . . .

(239,394)–

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

12,239,292

12,684,939

Beginning of financial year/period . . . . . . . . . . . . . . . . .

763,658

861,237

Depreciation charge . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101,706

78,538

Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–(12,113)

Transfer from inventories . . . . . . . . . . . . . . . . . . . . . . . .

–42,535

Transfer to inventories . . . . . . . . . . . . . . . . . . . . . . . . . .

(4,127)–

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

861,237

970,197

11,378,055

11,714,742

18. Investment properties

Cost

Accumulated depreciation

Net book value
End of financial year/period . . . . . . . . . . . . . . . . . . . .

C-36

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

18. Investment properties (continued)(a)Included within transfer from inventories is land use rights amounting to ¥Nil and¥346,164,000 as at the respective financial year/period ended 30 November 2011 and
31 August 2012. The land use rights are long-term leasehold interests in the usage ofland which were acquired together with a commercial building situated on that plot of
land. Both land use rights and the building are acquired from a third party in 2008. The
land use rights are only transferable with the attached building and are amortised
based on the remaining useful lives of 31 years as at 31 August 2012.

(b)

Investment properties are leased to non-related parties under operating leases (Note31(b)).

(c)

Certain investment properties are mortgaged to secure bank loans (Note 23(a)).

(d)

The land and buildings of the Group were valued by internal valuers mainly using
discounted cash flow method. Below are the fair values of investment properties
owned by the Group:

Investment properties. . . . . . . . . . . . . . . . . . . . . .

(e)

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

12,046,214

12,549,304

The following amounts are recognised in profit and loss:
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

215,190

221,191

640,725

613,887(77,882)(80,242)(218,747)(231,134)

Rental income– Investment properties thatgenerated rental income . .
Direct operating expenses
arising from:– Investment properties thatgenerated rental income . .

(f)Details of major investment properties of the Group are disclosed under summary ofmajor properties (Note 35).

C-37

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

19. Property, plant and equipment

Land

Tools,
equipment
and fixtures

Total

¥’000

¥’000

¥’000

¥’000

Beginning of financial year . . . . .

1,202,013

2,219,719

82,2683,504,000

Additions . . . . . . . . . . . . . . . . .

8,362

–

14,342

22,704

Written off . . . . . . . . . . . . . . . .

(307)

–

(3,779)(4,086)

Reclassified to inventories . . . . .

–

–

(619)

(619)

End of financial year . . . . . . . . .

1,210,068

2,219,719

92,212

3,521,999

Beginning of financial year . . . . .

95,357–52,706

148,063

Depreciation charge . . . . . . . . .

24,325–

12,67637,001

Written off . . . . . . . . . . . . . . . .

(306)

–

(3,602)(3,908)

Reclassified to inventories . . . . .

–

–

(419)

(419)

End of financial year . . . . . . . . .

119,376–

61,361

180,737

1,090,692

2,219,719

30,851

3,341,262

Beginning of financial period . . .

1,210,068

2,219,719

92,212

3,521,999

Additions . . . . . . . . . . . . . . . . .

1,837

–

22,89824,735

Written off . . . . . . . . . . . . . . . .

(4,254)–(10,213)(14,467)

End of financial period . . . . . . . .

1,207,651

2,219,179

104,897

3,532,267

Building andstructures

30 November 2011
(audited)
Cost

Accumulated depreciation

Net book value
End of financial year . . . . . . . .
31 August 2012
(unaudited)
Cost

Accumulated depreciation
Beginning of financial period . . .

119,376–

61,361

180,737

Depreciation charge . . . . . . . . .

19,169–12,71931,888

Written off . . . . . . . . . . . . . . . .

(2,486)–(9,674)(12,160)

End of financial period . . . . . . . .

136,059–

64,406200,465

1,071,592

2,219,719

40,4913,331,802

Net book value
End of financial period . . . . . .

C-38

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

19. Property, plant and equipment (continued)(a)Included within additions in the consolidated financial statements are tools, equipment
and fixtures acquired under finance lease amounting to ¥Nil and ¥3,297,000 at therespective financial year/period ended 30 November 2011 and 31 August 2012.
The carrying amounts of plant and equipment held under finance leases are ¥746,000
and ¥3,160,000 at the respective financial year/period ended 30 November 2011 and
31 August 2012.

(b)

Bank borrowings are secured on property, plant and equipment of the Group withcarrying amounts of ¥3,292,453,000 and ¥3,275,845,000 at the respective balance
sheet dates (Note 23(a)).

(c)

Details of major owner-occupied building of the Group is disclosed under summary ofmajor properties (Note 35).

20. Intangible assets
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Licenses – telephone rights (Note 20(a)). . . . . . . . . . . .

1,889

1,889

Computer software licenses (Note 20(b)) . . . . . . . . . . .

64,967

46,63066,856

48,51930 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

1,889

1,889

Composition:(a)Licenses – Telephone rights

Cost
Beginning and end of financial year/period . . . . .

C-39

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

20. Intangible assets (continued)(b)Computer software licenses
30 November
2011

31 August
2012

¥’000

¥’000

(audited)(unaudited)

Beginning of financial year/period . . . . . . . . . . . .

144,819

170,802

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,016

4,280

Written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11,033)–

End of financial year/period . . . . . . . . . . . . . . . . .

170,802

175,082

Beginning of financial year/period . . . . . . . . . . . .

83,291

105,835

Amortisation charge . . . . . . . . . . . . . . . . . . . . . . .

33,577

22,617

Written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11,033)–

End of financial year/period . . . . . . . . . . . . . . . . .

105,835

128,452

64,967

46,630

Cost

Accumulated amortisation

Net book value
End of financial year/period . . . . . . . . . . . . . . .

The amortisation expense is included in “Expenses – Administrative” in the unaudited
consolidated statement of comprehensive income.
21. Other assets
30 November
2011

31 August
2012

¥’000

¥’000

(audited)(unaudited)

25,35725,357(16,977)(16,977)

End of financial year/period . . . . . . . . . . . . . . . . . . . .

8,380

8,380

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

2,335

1,880

10,715

10,260Club memberships at cost
Beginning and end of financial year/period . . . . . . . . . .
Accumulated impairment loss
Beginning and end of financial year/period . . . . . . . . . .
Net book value

C-40

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

21. Other assets (continued)
30 November
2011

31 August
2012

¥’000

¥’000

(audited)(unaudited)

Other assets, current . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,335

1,880

Other assets, non-current . . . . . . . . . . . . . . . . . . . . . . .

8,380

8,380

10,715

10,26030 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Trade payables to non-related parties . . . . . . . . . . . . . .

820,709908,747

Deposits for purchase of real estate . . . . . . . . . . . . . . .

545,488782,053

Other payable to non-related parties . . . . . . . . . . . . . . .

290,718

244,310

Accruals for operating expenses . . . . . . . . . . . . . . . . . .

860,788502,995

2,517,703

2,438,105

Lease and guarantee deposits received . . . . . . . . . . . .

1,810,569

2,087,787

Assets retirement obligations . . . . . . . . . . . . . . . . . . . . .

24,71024,8091,835,279

2,112,596

Presented in balance sheets as:

22. Trade and other payables

Current

Non-current

C-41

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

23. Borrowings
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,170,937

6,613,972

Finance lease liabilities (Note 24) . . . . . . . . . . . . . . . . .

783

892

6,171,720

6,614,864

Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,900,745

25,411,173

Finance lease liabilities (Note 24) . . . . . . . . . . . . . . . . .

–

2,425

23,900,745

25,413,598

30,072,465

32,028,462

Current

Non-Current

Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The exposure of the borrowings of the Group to interest rate changes and the contractual
repricing dates at the balance sheet dates are as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,171,720

6,614,837

1 – 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,413,280

19,442,545

Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,487,465

5,971,080

30,072,465

32,028,462(a)Security granted
Total borrowings included secured liabilities of ¥29,821,722,000 and ¥31,849,354,000
at the respective balance sheet dates. Bank borrowings of the Group are secured overcertain inventories (Note 16), investment properties (Note 18) and certain land andbuildings (Note 19). Finance lease liabilities of the Group are effectively secured overthe leased plant and equipment (Note 19), as the legal title is retained by the lessor
and will be transferred to the Group upon full settlement of the financial leaseliabilities.

C-42

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

23. Borrowings (continued)(b)

Fair value of non-current borrowings
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . .

23,885,818

25,395,671

Finance lease liabilities . . . . . . . . . . . . . . . . . . . .

–

2,426

The fair values above are determined from the cash flow analyses, discounted at themarket borrowing rates of an equivalent instrument at the balance sheet date which
the directors expect to be available to the Group as follows:
30 November
2011

31 August2012%(audited)%(unaudited)Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . .

2.06

2.02

Finance lease liabilities . . . . . . . . . . . . . . . . . . . .

–

2.20

24. Finance lease liabilities
The Group leases certain plant and equipment from non-related parties under financeleases. The lease agreements do not have renewal clauses but provide the Group with
options to purchase the leased assets at nominal values at the end of the lease term.
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)– Not later than one year . . . . . . . . . . . . . . . . . . . . . . . .

825

903

– Between one and five years . . . . . . . . . . . . . . . . . . . .

–

2,558

825

3,461

Less: Future finance charges. . . . . . . . . . . . . . . . . . . . .

(42)

(144)

Present value of finance lease liabilities . . . . . . . . . . . .

783

3,317

Minimum lease payments due:C-43

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

24. Finance lease liabilities (continued)
The present values of finance lease liabilities are analysed as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Not later than one year (Note 23) . . . . . . . . . . . . . . . . .

783

892

Between one and five years (Note 23) . . . . . . . . . . . . .

–

2,425

Present value of finance lease liabilities . . . . . . . . . . . .

783

3,317

The carrying amounts of finance lease liabilities approximate their fair values.
25. Employee benefits(a)Retirement benefits obligations
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Retirement benefits plans (Note 25(a)(i)). . . . . . .

191,871

209,405

Directors’ retirement benefits plans(Note 25(a)(ii)) . . . . . . . . . . . . . . . . . . . . . . . . . . .

312,856

323,060

504,727

532,465

Obligations recognised in the balance sheet for:(i)

Retirement benefits plans
The Group adopts the retirement lump-sum grants policy based on their pension
plan. In addition, some of the entities in the Group adopt the Employees’ Pension
Fund and Defined Contribution Plan.

C-44

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

25. Employee benefits (continued)(a)Retirement benefits obligations (continued)(i)Retirement benefits plans (continued)
Defined benefit plans
The amounts included in the consolidated balance sheets arising from theGroup’s obligation in respect of its defined benefit plans are as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Obligations under defined benefit plans. . . .

193,104

210,085

Net actuarial losses not recognised . . . . . . .

(1,233)(680)

Liabilities recognised in the balance sheet .

191,871

209,405

Amounts recognised in profit or loss in respect of these defined benefit plans are
as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Beginning of financial year/period . . . . . . . .

167,330

193,104

Current service cost . . . . . . . . . . . . . . . . . . .

29,74525,941

Interest cost . . . . . . . . . . . . . . . . . . . . . . . . .

3,447

2,929

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . .

(3,992)(12,895)

Actuarial (gains)/losses . . . . . . . . . . . . . . . .

(3,426)

1,006

End of financial year/period . . . . . . . . . . . . .

193,104

210,085

C-45

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

25. Employee benefits (continued)(a)Retirement benefits obligations (continued)(i)Retirement benefits plans (continued)
The principal actuarial assumptions used were as follows:
30 November
2011

31 August2012%(audited)%(unaudited)

Discount rate . . . . . . . . . . . . . . . . . . . . . . . .

1.68

1.68

Future salary increases . . . . . . . . . . . . . . . .

2.41

2.41

Multi-employer plans
At the respective balance sheet dates, one of the Company’s subsidiaries joined
the “Japan Residence Construction Industry Pension Fund” under multi-employer
plans.
Below are the amounts contributed to the fund by the Group:–

Contribution to the fund . . . . . . . . . . . . . . . .

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

9,886

7,140

The contribution to the fund is included as part of “Employee compensation –retirement benefits” (Note 6).
Defined contribution plans
At the respective balance sheet dates, the Company and some of its subsidiaries
have participated under a voluntary joint defined contribution plan.
Below are the amounts contributed to the fund by the Group:–

Contribution to the fund . . . . . . . . . . . . . . . .

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

5,994

5,096

The contribution to the fund is included as part of “Employee compensation –retirement benefits” (Note 6).
C-46

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

25. Employee benefits (continued)(a)Retirement benefits obligations (continued)(ii)

Director’s retirement benefits plans
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Beginning of financial year/period . . . . . . . .

301,522

312,856

Provision made . . . . . . . . . . . . . . . . . . . . . .

25,83718,026

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . .

(14,503)(7,822)End of financial year/period . . . . . . . . . . . . .

312,856

323,060

25,83718,026

Provision made is included in profit or loss:– Employee compensation – Retirement
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)Employee share ownership plan (“ESOP”)
The Company implemented the Tosei Employee Share Ownership Scheme (“ESOP”)
and adopted the rules of the ESOP as set out in the Employee Share Ownership Rulesof the Company on 1 September 2002.
The purpose of the ESOP is to enable full-time employees of the Company to acquireand accumulated shares of the Company by making small contributions on a regularbasis.
Under the ESOP, only full-time employees (“Participating Employee”) of the Company(excluding the directors of the Company and the employees of the subsidiaries) areentitled to participate in the ESOP. The Participating Employee will contribute a certain
portion of his monthly salary and biannual bonus to purchase shares of the Company.
Contributions from Participating Employees are made in units of ¥1,000 each. Each
Participating Employee is allowed to contribute a maximum of 20 units from hismonthly salary and 100 units from his annual bonus. Further, the dividends declaredand paid in respect of the shares held by the Participating Employee will becontributed to the ESOP. All Participating Employee will nominate an administrative
director to administer and hold on behalf all the shares under ESOP.
The Participating Employees may not transfer or pledge the rights to their shares.
When the Participating Employee’s number of shares under the ESOP reaches 1
share, the employee may, at his option, transfer such share into an account held in his
own name. In the event that the Participating Employee withdraws from the ESOP, thevested ESOP shares will be transferred to the securities account of the Participating
Employee and the equivalent value in cash for a fractional part of the share (converted

C-47

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

25. Employee benefits (continued)(b)

Employee share ownership plan (“ESOP”) (continued)
at the then market price) will be paid to the Participating Employee. The Participating
Employee may choose to make an extraordinary contribution to the ESOP such thatthe fractional part of the share is deemed to be one whole share.
There is no maximum limit for shares acquired under the ESOP. The Company
contributes an amount that is equal to 5.0% of the aggregate contribution of theParticipating Employees to the ESOP. Amounts contributed and paid by the Company
under the ESOP for the three-month and nine-month periods ended 31 August 2011
and 2012 amounted to ¥109,000, ¥108,000, ¥272,000 and ¥277,000 respectively havebeen included as part of “Employee compensation – Other short-term benefits”.

26. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable rightto offset current income tax assets against current income tax liabilities and when thedeferred income taxes relate to the same fiscal authority. The amounts are shown in thebalance sheet as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)– to be recovered within one year . . . . . . . . . . . . . . . . .

785,330

619,920– to be recovered after one year . . . . . . . . . . . . . . . . . .

939,331782,704

1,724,661

1,402,624– to be settled within one year. . . . . . . . . . . . . . . . . . . .

(256,303)(183,834)– to be settled after one year . . . . . . . . . . . . . . . . . . . .

(24,077)(8,877)(280,380)(192,711)

Deferred income tax assets

Deferred income tax liabilities

C-48

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

26. Deferred income taxes (continued)
Movement in deferred income tax account is as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

2,141,579

1,444,281– profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(699,483)(233,693)– equity (Note 29(b)(ii)) . . . . . . . . . . . . . . . . . . . . . . . . .

2,185

(675)

End of financial year/period . . . . . . . . . . . . . . . . . . . . . .

1,444,281

1,209,913

Beginning of financial year/period . . . . . . . . . . . . . . . . .
Charged to

The movement in deferred income tax assets and liabilities is as follows:

As at
1 December
2010

Recognised
Recognisedin otherin profit or comprehensive
loss
income

¥’000

¥’000

¥’000

As at
30 November
2011
¥’000

(audited)
Temporary differences:Enterprise tax payable . .

213

4,292

–

4,505

Inventory write down –net . . . . . . . . . . . . . . . . . .

(18,317)

74,342–56,025

Unrealised profits oninventories . . . . . . . . . . . .

180,986(1,283)–

179,703

Provision for retirement
benefits . . . . . . . . . . . . . .

66,302

12,625–78,927

Provision for directors’
retirement benefits . . . . .

121,6813,578–

125,259

Impairment losses . . . . . .

69,338(1,088)–68,250

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

233,559(80,977)–

152,582

Deferred tax assets notrecognised. . . . . . . . . . . .

(488,259)

558–(487,701)

Subtotal . . . . . . . . . . . . . .

165,503

12,047–

177,550

C-49

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

26. Deferred income taxes (continued)

As at
1 December
2010

Recognised
Recognisedin otherin profit or comprehensive
loss
income¥’000

As at
30 November
2011

¥’000

¥’000

¥’000

Revaluation of fair value
derived fromsubsidiaries’ assets andliabilities . . . . . . . . . . . . .

(212,647)

77,204–(135,443)

Available-for-salefinancial assets . . . . . . . .

(539)

–

2,185

1,646

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

(94,548)(52,035)–(146,583)

Subtotal . . . . . . . . . . . . . .

(307,734)

25,1692,185(280,380)

Tax losses carriedforward . . . . . . . . . . . . . .

2,283,810(736,699)–

1,547,111

Net balance . . . . . . . . . . .

2,141,579(699,483)

2,185

1,444,281(audited)
Temporary differences:(continued)

The movement in deferred income tax assets and liabilities is as follows:
As at
1 December
2011

Recognised
Recognisedin otherin profit or comprehensive
loss
incomeAs at
31 August
2012

¥’000

¥’000

¥’000

¥’000

4,505
56,025(2,287)53,721––

2,218
109,746

179,703(22,344)–

157,359

78,927(612)–

78,315(unaudited)
Temporary differences:Enterprise tax payable . . . .
Inventory write down – net .
Unrealised profits oninventories . . . . . . . . . . . . .
Provision for retirement
benefits. . . . . . . . . . . . . . . .
Provision for directors’
retirement benefits . . . . . . .
Impairment losses . . . . . . .
Other . . . . . . . . . . . . . . . . .
Deferred tax assets notrecognised . . . . . . . . . . . . .

125,259
68,250152,582(10,233)(9,583)(41,675)–––

115,026
58,667110,907(487,701)

83,400–(404,301)

Subtotal . . . . . . . . . . . . . . .

177,550

50,387–

227,937

C-50

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

26. Deferred income taxes (continued)

As at
1 December
2011

Recognised
Recognisedin otherin profit or comprehensive
loss
income

¥’000

¥’000

¥’000

As at
31 August
2012
¥’000

(unaudited)
Temporary differences:(continued)
Revaluation of fair value
derived from subsidiaries’
assets and liabilities . . . . . .
Available-for-sale financial
assets . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .

(135,443)

89,190–(46,253)

1,646(146,583)–(4,952)

(675)
–

971
(151,535)

Subtotal . . . . . . . . . . . . . . .

(280,380)

84,238(675)(196,817)

Tax losses carried forward .

1,547,111(368,318)–

1,178,793

Net balance . . . . . . . . . . . .

1,444,281(233,693)(675)

1,209,913

Tax losses carried forward and deductible temporary differences for which deferred tax
assets have not been recognised are as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Tax losses carried forward . . . . . . . . . . . . . . . . . . . . . . .

199,314139,185

Deductible temporary differences. . . . . . . . . . . . . . . . . .

288,387

265,115

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

487,701

404,300

Deferred income tax assets are recognised for tax losses and other deductible temporary
differences carried forward to the extent that realisation of the related tax benefits throughfuture taxable profits is probable. The Group has unrecognised tax losses and otherdeductible temporary differences stated above for as at the respective balance sheet dates
which can be carried forward and used to offset against future taxable income subject tomeeting certain statutory requirements. The tax losses and other deductible temporary
differences have an expiry period of 9 years from the year of assessment.

C-51

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

27. Share capital
No. ofordinarysharesShare capital¥’000

30 November 2011
(audited)
Beginning and end of financial year. . . . . . . . . . . . . . . .

456,840

5,454,673

456,840

5,454,673

31 August 2012
(unaudited)
Beginning and end of financial period . . . . . . . . . . . . . .

All issued ordinary shares are fully paid. There is no par value for these ordinary shares. The
amounts of ordinary shares contributed by shareholders since the date of incorporation andat the respective dates of share issuance are recorded as follows:(a)Amount not exceeding half of the total contribution by shareholders is not recorded asshare capital; and(b)

Amount not recorded as share capital under the preceding paragraph is recorded ascapital reserve (Note 29).

Fully paid ordinary shares carry one vote per share and carry a right to dividends as andwhen declared by the Company.
Any newly issued shares rank pari passu in all respects with previously issued shares.
28. Retained earnings
Retained earnings of the Group are distributable.

C-52

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

29. Other reserves(a)

31 August
2012

¥’000
(audited)¥’000(unaudited)

5,516,499

5,516,499(2,370)–(1,752)52

5,514,129

5,514,799

5,516,499

5,516,499

Composition:
Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income– fair value reserve . . . . . . . . . . . . . . . . . . . . . . . .
– currency translation reserve . . . . . . . . . . . . . . . .

(b)

30 November
2011

Movements:(i)

Capital reserve
Beginning and end of financial year/period . .
Capital reserve is distributable.

(ii)

Accumulated other comprehensive income – fair value reserve
Beginning of financial year/period . . . . . . . . .
Available-for-sale financial assets– Fair value (losses)/gains (Note 14). . . . . . .
– Tax on fair value changes (Note 26). . . . . .
End of financial year/period . . . . . . . . . . . . . .

773(2,370)(5,328)2,185(3,143)

1,293
(675)
618

(2,370)(1,752)

Accumulated other comprehensive income – fair value reserve is nondistributable.
(iii) Accumulated other comprehensive income – currency translation reserve
Beginning of financial year/period . . . . . . . . .

––Net currency translation differences offinancial statements of a foreign subsidiary. .

–52

End of financial year/period . . . . . . . . . . . . . .

–52

Accumulated other comprehensive income – currency translation reserve is
non-distributable.

C-53

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

30. Dividends

Ordinary dividends paid
Final dividend paid in respect of the previous financial
year of ¥500 (2011: ¥500) per ordinary share . . . . . . . .

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

228,420

228,420

A final dividend of ¥600 per ordinary share amounting to a total of ¥274,104,000 will berecommended on the coming Annual General Meeting. These financial statements do notreflect this dividend, which will be accounted for in shareholders’ equity as an appropriationof retained profits in the financial year ending 30 November 2013.
31. Commitments(a)Operating lease commitments – where the Group is a lessee
The Group leases office equipment from non-related parties under non-cancellable
operating lease agreement. The leases have varying terms, escalation clauses andrenewal rights.
The future minimum lease payables under non-cancellable operating leases contracted
for at the balance sheet dates but not recognised as liabilities, are as follows:(b)

30 November
2011

31 August
2012

¥’000

¥’000

(audited)(unaudited)

Not later than one year . . . . . . . . . . . . . . . . . . . .

1,974

–

Between one and five years. . . . . . . . . . . . . . . . .

–

–

1,974

–

Operating lease commitments – where the Group is a lessor
The Group lease out office space, apartments, and condominiums to non-relatedparties under non-cancellable operating leases. The lessees are required to pay either
absolute fixed annual increase to the lease payments or contingent rents computed
based on their sales achieved during the lease period.

C-54

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

31. Commitments (continued)(b)Operating lease commitments – where the Group is a lessor (continued)
The future minimum lease receivables under non-cancellable operating leases
contracted for at the balance sheet date but not recognised as receivables, are as
follows:

Not later than one year . . . . . . . . . . . . . . . . . . . .
Between one and five years. . . . . . . . . . . . . . . . .
More than five years . . . . . . . . . . . . . . . . . . . . . .

30 November
2011

31 August
2012

¥’000
(audited)
469,042998,895
525,498¥’000(unaudited)
606,259
1,131,757
429,382

1,993,435

2,167,398

32. Financial risk management
Financial risk factors
The Group’s activities expose it to market risk (including currency risk, price risk and interestrisk), credit risk, liquidity risk and capital risk. The Group’s overall risk management strategy
seeks to minimise adverse effects from the unpredictability of financial markets on theGroup’s financial performance. The Group do not use financial instruments such as currency
forwards, interest rate swaps and foreign currency borrowings to hedge certain financial risk
exposure.
The Board of Directors is responsible for setting the objectives and underlying principles offinancial risk management for the Group. This includes establishing detailed policies such as
authority levels, oversight responsibilities, risk identification and measurement, exposure
limits.
Financial risk management is carried out by the finance department in accordance with thepolicies set by the Board of Directors. The finance personnel identifies, evaluates andhedges financial risks in close co-operation with the Group’s operating units. The financepersonnel measures actual exposures against the limits set and prepares periodic reports forreview by the Chief Financial Officer. Regular reports are also submitted to the Board of
Directors.
(a)Market risk(i)Currency risk
Foreign currency risk arises from transactions denominated in currencies otherthan the functional currency of the Company. The Group’s business operations
are not exposed to significant foreign currency risks as it has no significant
transactions denominated in foreign currencies.
C-55

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(a)Market risk (continued)(ii)

Price risk
The Group is exposed to equity securities price risk arising from the investments
held by the Group which are classified on the consolidated balance sheet either
as financial assets, at fair value through profit or loss or available-for-salefinancial assets. These securities consist of those listed and unlisted equity
investments in Japan. To manage its price risk arising from investments in equity
securities, the Group diversifies its portfolio. Diversification of the portfolio isdone in accordance with the limits set by the Group.
If prices for equity securities had changed by 10% (2011: 10%) with all othervariables including tax rate being held constant, the effects on profit or loss andother comprehensive income would have been:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Profit after tax– increased by . . . . . . . . . . . . . . . . . . . . . . .
– decreased by . . . . . . . . . . . . . . . . . . . . . .

1,051(1,051)

1,056(1,056)

Other comprehensive income– increased by . . . . . . . . . . . . . . . . . . . . . . .
– decreased by . . . . . . . . . . . . . . . . . . . . . .

22,412(22,412)

23,668(23,668)(iii) Cash flow and fair value interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Fair valueinterest rate risk is the risk that the fair value of a financial instrument willfluctuate due to changes in market interest rates. As the Group does not have any
significant interest-bearing assets, the Group’s income is substantiallyindependent of changes in market interest rates. The Group’s interest rate risk
mainly arises from borrowings at floating interest rate. The Group manages its
interest rate by keeping bank loans to the minimum required to sustain theoperations of the Group.

C-56

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(b)Credit risk
Credit risk refers to the risk that counterparty will default as its contractual obligations
resulting in financial loss to the Group. The major classes of financial assets of theGroup are cash and cash equivalents and trade and other receivables. For tradereceivables, the Group adopts the policy of dealing only with customers of appropriate
credit history. For other financial assets, the Group adopts the policy of dealing onlywith high credit quality counterparties.
As the Group does not hold any collateral, the maximum exposure to credit for eachclass of financial instruments is the carrying amount of that class of financial
instruments presented on the balance sheet.
The credit risk for trade receivables based on the information provided to key
management is as follows:

By types of customers
Non-related parties– Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i)

30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

541,955–

491,898
1,462

Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly current accountbalances with banks with high credit-ratings assigned by international creditrating agencies. Trade receivables that are neither past due nor impaired aresubstantially companies with a good collection track record with the Group.

C-57

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(b)Credit risk (continued)(ii)

Financial assets that are past due and/or impaired
There is no other class of financial assets that is past due and/or impaired except
for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Past due up to 3 months . . . . . . . . . . . . . . .

535,630

490,137

Past due 3 to 6 months . . . . . . . . . . . . . . . .

4,526

2,479

Past due over 6 months . . . . . . . . . . . . . . . .

1,799

744

541,955

493,360

The carrying amount of trade and other receivables individually determined to be
impaired and the movements in the related allowance for impairment are as
follows:
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

5,056(5,056)3,303(3,303)––

Beginning of financial year/period . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

8,861–(3,805)

5,056(1,631)(122)

End of financial year/period . . . . . . . . . . . . .

5,056

3,303

Trade receivables – current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

C-58

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(b)Credit risk (continued)
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

11,626(11,626)

12,626(12,626)––

Beginning of financial year/period . . . . . . . .
Allowance made . . . . . . . . . . . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

12,664–(1,038)

11,626
1,003(3)

End of financial year/period . . . . . . . . . . . . .

11,626

12,626

641
(641)

4,447
(4,447)––

Beginning of financial year/period . . . . . . . .
Allowance made . . . . . . . . . . . . . . . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

7,573–(2,142)(4,790)

641
3,880
–
(74)

End of financial year/period . . . . . . . . . . . . .

641

4,447

Trade receivables – non-current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

Other receivables – current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

C-59

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(b)Credit risk (continued)
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

858
(858)

17
(17)

–

–

Beginning of financial year/period . . . . . . . .
Allowance made . . . . . . . . . . . . . . . . . . . . . .
Reversal of allowance made . . . . . . . . . . . .
Allowance utilised. . . . . . . . . . . . . . . . . . . . .

78
780
–
–

858
–
(290)
(551)

End of financial year/period . . . . . . . . . . . . .

858

17

Other receivables – non-current
Gross amount. . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for impairment . . . . . . . . . .

(c)Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash and theavailability of funding through an adequate amount of committed credit facilities (Note23). At the balance sheet date, assets held by the Group for managing liquidity risk
included cash and short-term deposits as disclosed in Note 12.
The table below analyses non-derivative financial liabilities of the Group into relevant
maturity groupings based on the remaining period from the balance sheet date to thecontractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying amounts
as the impact of discounting is not significant.

At 30 November 2011
(audited)
Trade and other payables . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . .

At 31 August 2012
(unaudited)
Trade and other payables . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . .

C-60

Less than
1 year

Between 1
and 5 years

Over 5
years

¥’000

¥’000

¥’000

2,517,703
6,171,720

945,095
18,406,719

890,184
6,997,496

8,689,423

19,351,814

7,887,680

2,438,105
6,614,864

983,113
20,426,616

1,129,483
5,318,274

9,052,969

21,409,729

6,447,757

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(d)Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability tocontinue to operate as a going concern entity and to maintain an optimal capital
structure so as to maximise shareholder value. In order to maintain or achieve an
optimal capital structure, the Group may adjust the amount of dividend payment,
return capital to shareholders, issue new shares or obtain new borrowings.
Management monitors capital based on equity ratio which the Group’s strategies were
unchanged from 2009, and the Board of Directors monitors the Group’s equity ratio on
periodic basis.
30 November
2011

31 August
2012

¥’000
(audited)¥’000(unaudited)

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,307,951
60,599,836

25,528,432
62,904,774

Equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41.76%

40.58%The Group is in compliance with all externally imposed capital requirements for thefinancial year/period ended 30 November 2011 and 31 August 2012.
(e)Fair value measurement
The following table presents assets and liabilities measured at fair value and classified
by level of the following fair value measurement hierarchy.
(a)quoted prices (unadjusted) in active markets for identical assets or liabilities(Level 1);(b)

inputs other than quoted prices included within Level 1 there are observable forthe asset or liability, either directly (is as prices) or indirectly (i.e. derived fromprices) (Level 2); and(c)inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).

C-61

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

32. Financial risk management (continued)(e)Fair value measurement (continued)
Level 1

Level 2

Level 3

Total

¥’000

¥’000

¥’000

¥’000

30 November 2011
(audited)
Financial assets at fair value
through profit or loss . . . . . . . . . . . .
Available-for-sale financial assets . .

–18,06817,805
361,799––

17,805379,867

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

18,068379,604–

397,672

31 August 2012
(unaudited)
Financial assets at fair value
through profit or loss . . . . . . . . . . . .
Available-for-sale financial assets . .

–19,362

17,890381,798––

17,890401,160

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

19,362399,688–

419,050

The fair value of financial instruments traded in active markets (such as trading andavailable-for-sale securities) is based on quoted market prices at the balance sheet
date. The quoted market price used for financial assets held by the Group is thecurrent bid price. These instruments are included in Level 1.
The fair value of financial instruments that is not traded in an active market (e.g.
over-the-counter derivatives) is determined by using the value-in-use method. The
Group uses a variety of methods and makes assumptions that are based on market
conditions existing as at 30 November 2011 and 31 August 2012 respectively. These
instruments are included in Level 2. In infrequent circumstances, where a valuation
technique for these instruments is based on significant unobservable inputs, financial
instruments would be included in Level 3.
The carrying value less impairment provision of trade and other receivables, andpayables are assumed to approximate their fair values. The fair value of financial
liabilities for disclosures purposes is estimated based on quoted market prices ordealer quotes for similar instruments by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial
instruments. The fair value of current borrowings approximates their carrying amount.

C-62

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

33. Related party transactions
In addition to the information disclosed elsewhere in the financial statements, the followings
transactions took place between the Group and related parties at terms agreed between
parties:(a)

Sales and purchases of goods and services
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

– Director . . . . . . . . . . . . . . .

–

6,309

–

16,473

Professional fees paid torelated party . . . . . . . . . . . . .

–

1,393

–

5,509

Sales of goods and/or
services to(b)

Key management personnel compensation
Key management personnel compensation is as follows:
Three-month period
ended
31 August(unaudited)
2011
2012

Nine-month period
ended
31 August(unaudited)
2011
2012

¥’000

¥’000

¥’000

¥’000

Salaries and bonuses. . . . . .

31,20032,40091,69596,000Statutory welfare expenses .

1,003

1,013

3,225

3,039

Retirement benefits . . . . . . .

5,055

5,135

15,51015,351

37,25838,548110,430

114,390

C-63

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

34. Segment information
The primary reportable segment is by business segment. As the Group operates
predominantly in Japan, no geographical segment information is shown.
The Group’s reportable segments are separate financial information available and evaluatedregularly by the Board of Directors to determine distribution of management resources andassess performance. The Board of Directors draws up comprehensive domestic strategies
for each segment and the Group conducts business activities accordingly. Consequently, theGroup is made up of different segments, as determined by the Board of Directors, and has
six reportable segments as follows:•

Revitalisation business – the Group increases the value of properties whose asset
value has declined and resells them;•

Development business – the Group sells condominium units and detached houses inlots to private customers and sells rental apartments and office buildings to investors;•

Rental business – the Group rents office buildings and condominiums to non-relatedparties and earns rental income;•Fund business – the Group provides fund asset management services;•

Property management business – the Group provides comprehensive property
management services; and•Alternative investment business – the Group acquires real estate collateralised loans,collects debt, and sells properties acquired as payment in kind.

No separate segmental liabilities by segment business are presented as management is of
the opinion that it is impracticable to separate liabilities for each business segment.
Additionally, the measurement of total liabilities for each reportable segment is not used by
the Board of Directors when making operating decisions about allocating resources to thebusiness segment and assessing its performance.

C-64

C-65
2,544,117–
2,544,117––(72,278)(2,220,171)
251,668

External revenue. . . . . . . . . .

Inter-segment revenue . . . . . .

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

Interest and dividend income .

Amortisation anddepreciation . . . . . . . . . . . . .

Finance expense. . . . . . . . . .

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

Profit/(loss) before tax. . . . .

Revenue(unaudited)

219,058(1,021,589)(29,866)––

1,270,513–

1,270,513

¥’000

¥’000

For the three-month period ended 31 August 2011

Development
business

Revitalisation
business

288,935(260,067)(64,890)(25,748)–

639,640

11,794

627,846¥’000

Rentalbusiness

11,753(171,651)–(1,110)30

184,484

4,166

180,318

¥’000

Fund
business

42,322(1,023,781)(1,255)(7,310)6

1,074,662

186,697

887,965¥’000

Property
managementbusiness

The segment information provided to the management for the reportable segments are as follows:

34. Segment information (continued)

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

(353)

(25,935)(16,218)(1,980)67

43,713–43,713¥’000

Alternative
investment
business–(267,735)(55,127)(3,460)(8,005)

1,514(202,657)(202,657)¥’000

Corporate

545,648(4,778,321)(187,967)(44,153)

1,617

5,554,472–

5,554,472

¥’000

Total

C-66

9,033,574–

9,033,574––(277,170)(7,681,357)

1,075,047

External revenue . . . . . . . .

Inter-segment revenue . . . .

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

Interest and dividend
income . . . . . . . . . . . . . . .

Amortisation anddepreciation . . . . . . . . . . . .

Finance expense . . . . . . . .

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

Profit/(loss) before tax . . .

Revenue(unaudited)(468,877)(2,019,467)(108,146)––

1,658,736–

1,658,736

¥’000

¥’000

For the nine-month period ended 31 August 2011

Development
business

Revitalisation
business

34. Segment information (continued)

967,133(740,313)(138,189)(75,127)–

1,920,762

36,016

1,884,746¥’000

Rentalbusiness

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

499,934(567,563)–(2,717)49

1,070,165

15,092

1,055,073

¥’000

Fund
business

76,926(2,730,203)(3,849)(18,507)69

2,829,416

386,486

2,442,930¥’000

Property
managementbusiness

165,433

85,621(52,113)(3,936)

99

135,762–

135,762¥’000

Alternative
investment
business–(812,929)(341,509)(11,266)(27,160)

4,600(437,594)(437,594)¥’000

Corporate

1,502,667(13,994,791)(590,733)(127,447)

4,817

16,210,821–

16,210,821

¥’000

Total

C-67
–
–
–

– Property, plant andequipment . . . . . . . . . . . . .

– Intangible assets . . . . . . . .

19,412,404

–

–

–

13,600,894

¥’000

¥’000

– Investment properties . . . . .

Additions to

Segment assets includes:

Segment/total assets . . . . . .

(audited)

30 November 2011

Development
business

Revitalisation
business

34. Segment information (continued)––

45,62313,802,515¥’000

Rentalbusiness

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

–

–

–

815,668

¥’000

Fund
business–––

1,733,741¥’000

Property
managementbusiness–––

2,445,028¥’000

Alternative
investment
business

37,01622,704–

8,789,586¥’000

Corporate

37,01622,70445,62360,599,836

¥’000

Total

C-68
–
1,174,793––(77,938)(1,124,582)(27,727)

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

Interest and dividend income .

Amortisation anddepreciation . . . . . . . . . . . . .

Finance expense. . . . . . . . . .

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

(Loss)/profit before tax . . . .

1,174,793

Inter-segment revenue . . . . . .

External revenue. . . . . . . . . .

Revenue(unaudited)

274,136(1,308,006)(20,711)––

1,602,853–

1,602,853

¥’000

¥’000

For the three-month period ended 31 August 2012

Development
business

Revitalisation
business

34. Segment information (continued)

301,435(278,415)(36,096)(18,760)–

634,706

13,007

621,699¥’000

Rentalbusiness

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

77,126(150,743)–(1,164)36

228,997

9,065

219,932

¥’000

Fund
business

17,264(827,719)(1,005)(5,411)

6

851,393

80,014

771,379¥’000

Property
managementbusiness

16,133(200,833)(8,136)(2,470)56

227,516–

227,516¥’000

Alternative
investment
business–(280,896)(155,571)(7,001)(17,728)

1,490(102,086)(102,086)¥’000

Corporate

377,471(4,045,869)(150,887)(45,533)

1,588

4,618,172–

4,618,172

¥’000

Total

C-69
–
4,529,756––(227,189)(4,254,901)
47,666

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

Interest and dividend income .

Amortisation anddepreciation . . . . . . . . . . . . .

Finance expense. . . . . . . . . .

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

Profit/(loss) before tax. . . . .

4,529,756

Inter-segment revenue . . . . . .

External revenue. . . . . . . . . .

Revenue(unaudited)

475,278(4,344,001)(73,873)––

4,893,152

274,0034,619,149

¥’000

¥’000

For the nine-month period ended 31 August 2012

Development
business

Revitalisation
business

34. Segment information (continued)

831,322(784,607)(118,529)(68,812)–

1,803,270

39,283

1,763,987¥’000

Rentalbusiness

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

158,530(466,569)–(3,238)70

628,267

20,889607,378

¥’000

Fund
business

97,255(2,673,936)(3,256)(16,093)58

2,790,482

238,365

2,552,117¥’000

Property
managementbusiness

29,364(619,993)(40,143)(6,154)

80

695,574

2,268

693,306¥’000

Alternative
investment
business–(862,665)(242,478)(10,156)(38,746)

3,523(574,808)(574,808)¥’000

Corporate

776,750(13,386,485)(473,146)(133,043)

3,731

14,765,693–

14,765,693

¥’000

Total

C-70
–
–
–

– Property, plant andequipment . . . . . . . . . . . . .

– Intangible assets . . . . . . . .

22,524,269

–

–

–

15,611,078

¥’000

¥’000

– Investment properties . . . . .

Additions to

Segment assets includes:

Segment/total assets . . . . . .

(unaudited)

31 August 2012

Development
business

Revitalisation
business

34. Segment information (continued)––

107,110

13,884,812¥’000

Rentalbusiness

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

–

–

–

880,721

¥’000

Fund
business–––

1,474,941¥’000

Property
managementbusiness–––

1,815,168¥’000

Alternative
investment
business

4,280

24,735–

6,713,785¥’000

Corporate

4,280

24,735

107,11062,904,774

¥’000

Total

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

35. Summary of major properties
Below are summary of the major properties owned by the Group:Group’seffective
interest intheproperty

Location

Description

TenureGrossfloor area
(sq m)

Real estate for sale
Kamata Tosei Building

Steel/8-storey

48 years

7,825

100%

48 years

3,276

100%

Nihonbashi-Hamacho
Building

Steel/10-storey,a ground-floor
Steel reinforced
concrete/9-storey

28 years

4,583

100%

Property, plant andequipment
Toranomon Tosei Building

Steel/9-storey

45 years

4,214

100%

Investment properties
Koishikawa Tosei Building

36. New or revised accounting standards and interpretations(i)

Below are the mandatory standards, amendments and interpretations to existing
standards that have been published, and are expected to be relevant for the Group’s
accounting periods beginning on or after January 2012 or later periods and which theGroup has not early adopted:

Standard/
Interpretation
IAS* 1
IAS 12
IAS 19IFRS 7IFRS 9IFRS 10IFRS 12IFRS 13

Applicable forfinancial years
beginning on/
afterContent
Presentation to items of othercomprehensive income
Deferred tax: recovery of underlying assets
Amendments to IAS 19, ‘Employee benefits’
Disclosure: transfer of financial assets
Financial instruments: Classification andmeasurement
Deferral of mandatory effective date of IFRS
9 and amendments to transition disclosure
Consolidated financial statements
Amendments for investment entities
Disclosure of interests in other entities
Amendments for investment entities
Fair value measurement

C-71

1 July 2012
1 January 2012
1 January 2013
1 July 2011
1 January 2013
1 January 2015
1 January 2013
1 January 2014
1 January 2013
1 January 2014
1 January 2013

Tosei Corporation and Its Subsidiaries
Notes to the Unaudited Consolidated Financial Statements
For the three-month and nine-month periods ended 31 August 2012

36. New or revised accounting standards and interpretations (continued)(ii)

Below are the mandatory standards, amendments and interpretations to existing
standards that have been published, and are not expected to be relevant for theGroup’s accounting periods beginning on or after January 2012 or later periods andwhich the Group has not early adopted:

Standard/
Interpretation

Content

Applicable forfinancial years
beginning on/
after

IAS 27

Separate financial statements

1 January 2013

Amendments for investment entities

1 January 2014

IAS 28Investments in associates and joint venture

1 January 2013

IAS 32

Amendments relating to the offsetting ofassets and liabilities

1 January 2014

IFRS 1

Amendments for government loan with abelow-market rate of interests whentransitioning to IFRSs

1 January 2013

Amendments resulting from Annual
Improvements 2009-2011 Cycle (repeat
application, borrowing costs)

1 January 2013

IFRS 7

Amendments related to the offsetting ofassets and liabilities

1 January 2013

IFRS 11

Joint arrangements

1 January 2013

IFRIC** 20

Shipping costs in the production phase of asurface mine

1 January 2013

* : International Accounting Standard** : International Financial Reporting Standards Interpretations Committee

C-72

STATEMENT BY DIRECTORSIn the opinion of the directors,(i)the unaudited consolidated financial statements as set out on pages C-3 to C-72 are drawn
up so as to give a true and fair view of the state of affairs of the Group as at 31 August 2012,and of the results of the business, changes in equity and cash flows of the Group for thethree-month and nine-month periods then ended; and(ii)

at the date of this statement there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements
for issue.

On behalf of the directors

Seiichiro Yamaguchi
Director

Noboru Hirano
Director

[●]

C-73

This page has been intentionally left blank.

APPENDIX DCOMPARISON OF SINGAPORE CORPORATE LAW
WITH JAPANESE CORPORATE LAW
No.

Singapore Corporate Law

Japanese Corporate Law

Power of Directors to Allot and Issue Shares(Note: Unless otherwise stated, all articles
below refer to those of the JapaneseCompanies Act)

1.

Section 161: Approval of company
required for issue of shares by directors
The power to issue shares in a company
is usually vested with the directors of thatcompany subject to any restrictions in thearticles of association of that company.
However, notwithstanding anything to thecontrary in the memorandum or articles
of association of a company, priorapproval of the company at a general
meeting is required to authorise thedirectors to exercise any power of thecompany to issue shares, or the shareissue is void under the Singapore
Companies Act. Such approval need not
be specific but may be general and, once
given, will only continue in force until theconclusion of the next annual general
meeting or the expiration of the period
within which the next annual general
meeting is required by law to be held,
whichever is the earlier, provided thatsuch approval has not been previously
revoked or varied by the company in a
general meeting.

Article 201(1): Special Provisions on
Determination of Subscription Requirements
for Public Company
A Public Company (a company whose
articles of incorporation do not require, as afeature of all or part of its shares, theapproval of the company for the acquisitionof such shares by transfer) may issue sharesby a resolution of the company’s board of
directors, if the number of shares to beissued is within the limit of the total numberof shares issuable as set out in the articles ofincorporation, unless the shares are issued
at a “particularly favourable price”. There isno specific definition of “particularly
favourable price” provided in the JapaneseCompanies Act. It is generally understoodthat “particularly favourable price” means anamount to be paid for the issuance of shares
which is below the price calculated by amethod considered as reasonable.
Article 37: Provision for total number ofauthorized shares
Article 113(3): Amendment of total number ofauthorized shares
Article 466: Changes in articles ofincorporation
Article 309(2): Special resolution ofshareholders meeting
In order to issue shares exceeding the total
number of issuable shares specified in thearticles of incorporation, a company needs toincrease the total number of issuable sharesby amending the relevant provision(s) of its
articles of incorporation by a special
resolution of a shareholders’ meeting. In
such case, the total number of issuable
shares after such amendment may notexceed four times the total number of issued
shares at the time when such amendment tothe articles of incorporation becomes
effective.

D-1

No.

Singapore Corporate Law

Japanese Corporate Law
Article 201(1): Special provision for PublicCompany except for particularly favourable
price
Article 199(3)(2): particularly favourable
price
Article 309(2): Special resolution ofshareholders meeting
If the shares are to be issued at a“particularly favourable price” to subscribers,
shareholders’ approval by a special
resolution of a shareholders’ meeting isrequired and the reason for the necessity ofsuch favourable issuance must be explainedby the directors at such shareholders’meeting.

Power of Directors to Dispose of the Company’s or its Subsidiaries’ Assets
2.

Section 157A: Powers of directors
The Singapore Companies Act provides
that the business of a company is to be
managed by or under the direction of thedirectors. The directors may exercise all
the powers of a company except any
power that the Singapore Companies Act
or the memorandum and articles ofassociation of the company require thecompany to exercise in a general
meeting.

Section 160: Approval of company
required for disposal by directors ofcompany’s undertaking or property
Under the Singapore Companies Act,prior approval of the company at a
general meeting is required before thedirectors can carry into effect any
proposals for disposing of the whole orsubstantially the whole of the company’s
undertaking or property, notwithstanding
anything in a company’s memorandum or
articles of association.

D-2

Article 349(1)(4): Representatives of thecompany
Article 362(2): Authority of board of directors
Article 348(1): Execution of operations
The Japanese Companies Act provides thatthe business of a company is to be operated
by or managed by or under the direction of
the directors in accordance with the decisionof the board of directors of the company, ifany. The representative director(s) andauthorized director(s) may exercise all thepowers with respect to the business of thecompany except any power for the exerciseof which the Japanese Companies Act or thearticles of incorporation of the company
require a resolution of shareholders’meeting.
Article 467: Approval of assignment ofbusiness
Article309(2):
Specialresolutionofshareholders meeting
Article 362(4): Approval of board of directors
required for disposal of important assets
Under the Japanese Companies Act, whenthe entire or a significant part of business ofthecompanyisbeingtransferred,shareholders’ approval by a special
resolution at a shareholders’ meeting of thecompany is required. For the acceptance ofassignment of the entire business of anothercompany, the approval by a special
resolution of a shareholders’ meeting isrequired. On the other hand, for theassignment of an insignificant part of thebusiness or properties, rights and/or
obligations of the company, only a resolutionof the board of directors is required.

No.

Singapore Corporate Law

Japanese Corporate Law

Loans to Directors
3.

Section 162: Loans to directors
A company (other than an exempt privatecompany) is prohibited from making aloan to a director of the company or adirector of a related company (and to the
spouse or natural, step or adopted
children of any such director), and fromgiving a guarantee or providing any
security in connection with such a loan,
except in the following circumstances.
(i)(subject to, inter alia, the approvalof the company in a general
meeting) the provision of funds tosuch a director to meet expenditure
incurred or to be incurred for the
purposes of the company or for the
purpose of enabling him properly toperform his duties as an officer ofthe company;(ii)(subject to, inter alia, the approvalof the company in a general
meeting) a loan to a director in fulltime employment of the company ora related company for the purposeofpurchasingorotherwise
acquiring a home occupied or to beoccupied by that director; however,not more than one such loan may beoutstanding from the director at any
one time;(iii) any loan to a director in full time
employment of the company or a
related company pursuant to an
employee loan scheme approved ina general meeting, provided theloan is in accordance with that
scheme; and(iv) a loan made in the ordinary courseof business by a company whoseordinary business includes thelending of money or the giving ofguarantees in connection with loans
made by other persons if theactivities of that company are
regulated by any written law relating
to banking, finance companies orinsurance or are subject tosupervision by the Authority.

D-3

Article 356(1): Restrictions on conflicting
interest transactions
Article 365: Restrictions on conflicting
interest transactions for companies withboard of directors
Article 369(2): Restrictions on resolution ofboard of directors meeting
There are no provisions that prohibit themaking of a loan by a company to a directorof such company under the JapaneseCompanies Act. Such a transaction is subject
to the regulations with respect to anytransaction with conflicts of interest between
the company and its director (“Conflict
Transaction”), specifically, those governingtransactions between them, as mentioned
below. Where a director intends to carry out
any Conflict Transaction (including loans)with the company for himself/herself or for athird party, such director shall disclosematerial facts on the relevant transaction to,
and obtain approval for, such transaction
from the board of directors (or, for a company
without a board of directors, from theshareholders’ meeting). A director who
intends to carry out (or have carried out)
such a Conflict Transaction may notparticipate in the discussion, nor vote forsuch approval at a meeting of the board of
directors. Further, a director who has
engaged in such Conflict Transactions shallreport the material facts with respect to such
Conflict Transaction to the board of directors
without delay after such transaction.
Conflict Transactions can be categorized as“direct conflict transactions” and “indirectconflict transactions” as follows:(1)

A transaction to be executed between
the company and the director where thedirector is acting on behalf of himself or
herself or a third party is known as a“direct conflict transaction”; and(2)

A transaction that the company intends
to execute directly with a person otherthan the director but involving a conflictof interests between the company andsuch director is known as an “indirectconflict transaction” (e.g. the guaranteeof a director’s debts by the company).

No.

Singapore Corporate Law

Japanese Corporate Law

For these purposes, a related company
of a company means its holding
company, its subsidiary and a subsidiaryof its holding company.
Section 163: Prohibition of loans topersons connected with directors oflending company
A company (the “first mentioned
company”) (other than an exempt privatecompany) is also prohibited from making
loans to connected persons or entering
into any guarantee or providing any
security in connection with a loan madeto connected persons by a third-party.
Connected persons of the first mentioned
company include companies in which thedirector(s) of the first mentioned
company, individually or collectively,
have an interest in 20.0% or more (asdetermined in accordance with theSingapore
Companies
Act).
This
prohibition does not apply to:(i)anything done by a company where
the other company is its subsidiary,
holding company or a subsidiary of
its holding company; or(ii)acompany
whoseordinarybusiness includes the lending ofmoney or the giving of guarantees
in connection with loans made byother persons, to anything done in
the ordinary course of that business
if the activities of that company are
regulated by any written law relating
to banking, finance companies orinsurance or are subject tosupervision by the Authority.

Giving of Financial Assistance to Purchase the Issuer’s or its Holding Company’s
Shares4.

Section 76: Company financing dealing
in its shares, etc
Generally, a company is prohibited fromgiving financial assistance to any person
directly or indirectly for the purpose of, orin connection with, the acquisition of thatcompany’s shares or shares in its holding
company.

D-4

Article 155
Under the Japanese Companies Act, acompany is not specifically prohibited fromgiving financial assistance to any person for
his/her purchase of the company’s shares.
However, the Japanese Companies Act
prohibits a company from directly or
indirectly acquiring its own shares in any

No.

Singapore Corporate Law

Japanese Corporate Law

Financial assistance includes the making
of a loan, the giving of a guarantee, theprovision of security, and the release of adebt or obligation. Certain transactions
are specifically provided by theSingapore Companies Act not to beprohibited. These include the payment of
a dividend in good faith and in theordinary course of commercial dealing,
the payment by a company pursuant to a
reduction of capital in accordance with
the Singapore Companies Act, the giving
by a company in good faith and in theordinary course of commercial dealing ofany
representation,
warrantyorindemnity in relation to an offer to the
public of, or an invitation to the public to
subscribe for or purchase shares or unitsof shares in the company, and theentering into by the company, in goodfaith and in the ordinary course ofcommercial dealing, of an agreementwith a subscriber for shares in thecompany permitting the subscriber tomake payments for the shares by
instalments.

name other than for the company’s account,unless the company is expressly permitted to
do so (a) by a resolution of its shareholders
at a meeting of the shareholders of thecompany in case of the acquisition based on
the agreement with its shareholders, or (b)by a provision in its articles of incorporation
allowing acquisitions from the market or
through a public tender offer procedure,
within the limits of distributable profits of thecompany, or (c) through other procedures
pursuant to the relevant provisions of theJapanese Companies Act for specific cases.
Therefore, if any financial assistance given
by a company to any person for the purposeof his/her acquisition of the company’s
shares is regarded as an indirect acquisitionof the shares by the company, there is apossibility that such financial assistance falls
into violation of the above prohibition.

The Singapore Companies Act further
provides that a company can givefinancialassistanceincertaincircumstances, including but not limitedto: (i) where the amount of financial
assistance does not exceed 10.0% of theaggregate of the total paid-up capital andreserves of the company as disclosed in
the most recent financial statements ofthe company and the company receives
fair value in connection with the financial
assistance; and (ii) where the financial
assistance is approved unanimously by
the shareholders of the company, if
certain conditions and procedures under
the Singapore Companies Act arecomplied with. Where the company is a
subsidiary of a listed corporation or asubsidiary whose ultimate holding
company is incorporated in Singapore,
the listed corporation or the ultimate
holding company, as the case may be, isalso required to pass a special resolution
to approve the giving of the financial
assistance.

D-5

No.

Singapore Corporate Law

Japanese Corporate Law

Disclosure of Interest in Contracts with the Issuer
5.

Section 156: Disclosure of interests intransactions, property, officers, etc
The Singapore Companies Act provides
that, where a director of a company isdirectly or indirectly interested in atransaction or proposed transaction withthat company, such a director must, assoon as practicable after the relevantfacts have come to his knowledge,
declare the nature of his interest at a
meeting of directors of the company. For
these purposes, an interest of a memberof a director’s family (this includes his
spouse, natural, step or adopted
children) is treated as an interest of that
director.
The Singapore Companies Act also
provides that every director of a company
who holds any office or possesses any
property whereby whether directly or
indirectly duties or interests might becreated in conflict with his duties orinterests as director shall declare at a
meeting of the directors of the company
the fact and the nature, character andextent of the conflict. For this purpose, aninterest of a member of a director’s family
shall be treated as an interest of thedirector.

Article 356(1): Restrictions on conflicting
interest transactions
Article 365: Restrictions on conflicting
interest transactions with companies withboard of directors
Article 435(3): Disclosure of conflicttransaction in the Financial Statements
The Japanese Companies Act provides that(a) where a director intends to carry out, forhimself/herself or for a third party, anytransactions in the line of business of thecompany, or (b)(i) where a director intends tocarry out any transactions with the company
for himself/herself or for a third party or (ii)where the company intends to carry out any
transactions with a third party that results in
a conflict of interests between the company
and such director (“Conflict Transactions”),
such director shall disclose the material factsof the relevant transactions to, and obtainapproval from the board of directors (or, for acompany without a board of directors, fromthe shareholders’ meeting). In such cases,
such director may not participate in thediscussion, nor vote for such approval at theboard of directors. A director who has
engaged in any of the transactions
mentioned above shall report the material
facts of such transaction to the board of
directors
without
delay
after
such
transaction.
A
company
shall
preparefinancialstatements and business reports for eachbusiness year as well as supplementaryschedules thereof pursuant to the applicableordinances. In the supplementary schedules,
the details of Conflict Transactions executedin the manner mentioned above shall be
included.

D-6

No.

Singapore Corporate Law

Japanese Corporate Law

Remuneration
6.

Section 169: Provision and improvementof director’s emoluments
The Singapore Companies Act provides
that a company shall not provide
emoluments or improve emoluments fora director in respect of his office unlessthe provision has been approved by aresolution that is not related to othermatters, and any resolution passed inbreach of this provision is void.

For
these
purposes,theterm“emoluments” in relation to a director
includesfees
andpercentages,
expenses allowance in so far as thosesums are charged to income tax inSingapore, contributions paid under apension scheme, and any benefits
received otherwise than in cash inrespect of his services as a director.

Article 361
The Japanese Companies Act provides thatthe amount or calculation method of
remuneration of directors shall be fixed by ashareholders’ resolution at a shareholders’meeting or provided for in the articles ofincorporation.
The term “remuneration” means any financial
benefits received by a director from acompany as a consideration for the
execution of his duties as director, such as
salary, bonuses, retirement benefits andstock options.
In practice, the total or maximum amount of
all directors’ remuneration is determined byan ordinary resolution of a shareholders’meeting and the detailed allotment or
distribution of such amount to each individual
director is decided by a resolution of theboard of directors.

Appointment, Qualification, Retirement, Resignation, Removal of Directors
7.

Number, Qualification and Appointment
of Directors

Number, Qualification and Appointment of
Directors

Section 145: Directors

Article 326
Article 331(4)Under the Singapore Companies Act,every company must have at least one
director who is ordinarily resident in
Singapore. Where the company has only
one member, that sole director may also
be the sole member of the company.
No person other than a natural person
who has attained the age of 18 years andwho is otherwise of full legal capacity canbe a director of a company.

D-7

Under the Japanese Companies Act, acompany must have at least one director. A
company with a board of directors must haveat least three directors and at least one
representative director shall be elected fromamongst them by the board of directors.
Note: Although Japanese Corporate Law does
not have any provision that requires at least
one representative director living in Japan,
under the practice of the Japanese commercial
registration, there must be at least one
representative director (if the corporations do
not have the representative director, at least
one director) resident in Japan for the following
reason. For the registration of a stockcompany, a certificate of seal registration of therepresentative director(s) shall be attached to
the relevant application document. Under thecommon practice in Japan, being a resident inJapan is a prerequisite to obtain a certificate ofseal registration (which is conducted by the
local governments pursuant to their own local
codes). Therefore, at least one of therepresentative directors shall necessarily be aresident in Japan.

No.

Singapore Corporate Law

Japanese Corporate Law

Section 147: Qualification of director

Article 331(1)Every director, who is by the articles ofassociation required to hold a specified
share qualification and who is not alreadyqualified, must obtain his qualification
within two months after his appointment
or such shorter period as is fixed by thearticles of association.

No person other than a natural person of fulllegal capacity or qualified by the JapaneseCompanies Act can act as a director of acompany.
Article 331(2)A Public Company shall not impose any
shareholding qualification on the directors ofsuchcompany
inthearticlesofincorporation.
Article 911(3)The names of the directors and name(s) andaddress(es) of representative director(s) of acompany are registered in corporate registrywhich is available to the public.

Section 153: Age limit for directors
In the case of a Public Company, theappointment of directors at a general
meeting must generally be voted on
individually. In addition, no person of orover the age of 70 years shall be
appointed as a director of a PublicCompany or of a subsidiary of a PublicCompany, unless he has been appointed,
re-appointed or authorised to continue in
office as a director by an ordinary
resolution passed at an annual general
meeting of the company until the next
general meeting of the company.

Article 329(1)(2)
Article 341

Subject to the provisions of theSingapore Companies Act, the articles ofassociation of a company may also
empower the board of directors to
appoint any directors to fill a casualvacancy or an additional director.

A director to fill a vacancy shall be elected bya shareholders’ meeting in the same way aselecting a director as per above.

Audit Committee

Audit Committee

Directors shall be elected by the majority (incases where a higher proportion is provided
for in the articles of incorporation, suchproportion or more) of the votes of theshareholders present at the meeting where
the shareholders holding the majority of thevotes (in cases where a proportion of one
third or more is provided for in the articles ofincorporation, such proportion or more) of
the shareholders entitled to exercise theirvotes are present.

There are no restrictions under the JapaneseCompanies Act in relation to the maximum
age of a director of a Public Company or of a
subsidiary of a Public Company.

Section 201B: Audit committees
Under the Section 201B of the Singapore
Companies Act, every company that isincorporated in Singapore and listed, isrequired to have an audit committee.
Such an audit committee shall be
appointed by the directors from among
their number and shall be composed ofthree or more members of whom amajority shall not be:(i)executive directors of the company
or any related corporation;

D-8

There are no similar rules under theJapanese Companies Act which require acompany to have an audit committee
appointed by the directors. Under theJapanese Companies Act, a statutory auditor
may be appointed by the majority (in cases
where a higher proportion is provided for in
the articles of incorporation, such proportion
or more) of the votes of the shareholders
present at the meeting where theshareholders holding the majority of thevotes (in cases where a proportion of one
third or more is provided for in the articles ofincorporation, such proportion or more) of
the shareholders entitled to exercise theirvotes are present.

No.

Singapore Corporate Law(ii)Japanese Corporate Law

a spouse, parent, brother, sister,son or adopted son or daughter or
adopted daughter of an executive
director of the company or of any
related corporation; or(iii) any person having a relationshipwhich, in the opinion of the board of
directors, would interfere with theexercise of independent judgment
in carrying out the functions of anaudit committee.
8.

Disqualification of Directors

Disqualification of Directors
Section 148: Restriction on undischarged
bankrupt being director or manager
Under the Singapore Companies Act, aperson may not act as a director of any
corporation if he is an undischarged
bankrupt unless he has the leave of theSingapore
courtsorthewrittenpermission of the Official Assignee
appointed under the Bankruptcy Act,
Chapter 20 of Singapore, to do so.

There are no similar rules under theJapanese Companies Act which prohibit an
undischarged bankrupt from acting as adirector of any corporation.

Section 149: Disqualification of unfit
directors of insolvent companies
A person may be disqualified from acting
as a director of a company by theSingapore courts for a period notexceeding five years if (a) he is or has
been a director of a company which has
at any time gone into liquidation (whether
while he was a director or within three
years of his ceasing to be a director) and
was insolvent at that time and (b) his
conduct makes him unfit to be a directorof a company.
Section149A:
Disqualificationof
directors of companies wound up on
grounds of national security or interest
A person may, subject to certain
exceptions, also be disqualified fromacting as a director by the Singapore
courts for a period of three years if he isa director of a company which is ordered
to be wound up by the Singapore courtson the ground that it is being used for
purposes against national security orinterest.

D-9

There are no similar rules under theJapanese Companies Act which disqualifies
a person from acting as a director of acompany if he is or has been a director of acompany which has at any time gone into
liquidation (whether while he was a director
or within three years of his ceasing to be adirector) and was insolvent at that time andhis conduct makes him unfit to be a directorof a company.
There are no similar rules under theJapanese Companies Act which disqualifies
a person from acting as a director of acompany if he is a director of a company
which is ordered to be wound up by theJapan courts on the ground that it is being
used for purposes against national security
or interest.

No.

Singapore Corporate Law

Japanese Corporate Law

Section 154: Disqualification to act asdirector on conviction of certain offences

Article 331(1):A person could also be disqualified fromacting as a director of a company onother grounds, such as conviction of any
offence (whether in Singapore orelsewhere) involving fraud or dishonesty
which is punishable with imprisonment
for three months or more, or because of
persistent default in relation to delivery of
documents
totheRegistrarofCompanies
appointed
undertheSingapore Companies Act.

The following persons may not act as adirector:
(a)

(b)

9.

a person who has been sentenced to apenalty for having:(i)violated the provisions of theJapanese Companies Act (such asprovisions relating to aggravatedbreach of trust, sharing profits inconnection with the exercise ofshareholders’ rights); or(ii)

committed a certain crime under,inter alia, the Financial Instruments
and Exchange Act (such as
misstatement in annual securities
report), the Civil Rehabilitation Act(such as fraud in rehabilitation), theCorporate Reorganization Act andthe Bankruptcy Act, for whom two
years have not elapsed since theday on which the execution of thesentence was completed or thesentence no longer applied; ora person who has violated any laws andregulations (other than those mentioned
above)
andwassentenced
toimprisonment or a more severe penalty
and who has not completed theexecution of the sentence or to whom
the sentence still applies (excluding
persons for whom the execution of thesentence is suspended).

Resignation of Directors

Resignation of Directors

Section 145(5)Article 330:
(Article 651(1) of the Civil Code)
Article 346(1)(2):Under the Singapore Companies Act, a
director of a company cannot resign or
vacate his office unless there isremaining in the company at least one
director who is ordinarily resident in
Singapore,andany
purported
resignation or vacation of office in breachof this provision is deemed to be invalid.

A director may resign from his office at any
time. The notice of resignation is not required
to be in writing but is usually submitted inwriting. However, where there are no
directors in office, or where there is avacancy which results in less than three
directors as prescribed under the JapaneseCompanies Act or the minimum number of
directors as stipulated in the company’s
articles of incorporation, a director who
retired from office due to expiration of his/herterm of office or who has resigned shall

D-10

No.

10.

Singapore Corporate Law

Japanese Corporate Law

Subject to the provisions of theSingapore Companies Act, the articles ofassociation of a company may providethat a director’s resignation is effectiveby giving written notice of the company,
unless the director’s contract or thearticles of association otherwise provide.

continue to have the rights and obligations ofa director until a newly elected director
assumes his/her office. In that case, if thecourt finds it necessary, it may, in response
to a petition by interested persons, elect a
person who is to temporarily perform theduties of a director.

Removal of Directors

Removal of Directors

Section 152

Article 339(1)Article 341

A director of a Public Company may beremoved before the expiration of his
period of office by an ordinary resolution(which requires special notice to be givenin accordance with the provisions of theSingapore Companies Act) of theshareholders, notwithstanding anything
in the memorandum or articles ofassociation of that company or in any
agreement between that company andthe director, but where any director soremoved was appointed to represent theinterests of any particular class ofshareholders or debenture holders, theresolution to remove him shall not takeeffect until his successor has been
appointed.
Subject to the provisions of theSingapore Companies Act, the articles ofassociation of a company may prescribe
the manner in which a director may beremoved from office before the expirationof his term of office.

D-11

Resolutions for the removal of directors
before the expiration of his period of officeshall be made by the majority (in cases
where a higher proportion is provided for in
the articles of incorporation, such proportion
or more) of the votes of the shareholders
present at the meeting where theshareholders holding the majority of thevotes (in cases where a proportion of one
third or more is provided for in the articles ofincorporation, such proportion or more) of
the shareholders entitled to exercise theirvotes are present.
Article 303(2)Article 854(1)Under the Japanese Companies Act, ashareholders’ resolution is generally required
for any removal of a director and a proposal
for the removal of a director is usuallysubmitted to the shareholders meeting by theboard of directors. Shareholders holding one
percent or more of the voting rights of acompany or 300 or more voting rights of acompany for the preceding six months ormore may demand that the board include theremoval of a director in as a proposed
resolution of a shareholders meeting,provided that such demand is made eightweeks prior to the shareholders’ meeting.
Where a director commits a wrongful act or isin violation of Japanese laws and regulationsor the company’s articles of incorporation in
relation to the execution of his/her duties as adirector, and the resolution proposing to
remove such director is rejected at theshareholders’meeting,
shareholders(excluding the shareholders who are unable
to exercise his/her voting right on the
resolution to remove the director and theshareholders who are the directors of thecompany subjected to the said lawsuit below)

No.

Singapore Corporate Law

Japanese Corporate Law
holding three percent or more voting rights ofthe company for the preceding six months ormore or shareholders (excluding treasury
shares and the shareholders who are
directors of the company subjected to thesaid lawsuit below) holding three percent ormore shares of the all issued shares of thecompany for the preceding six months ormore may bring a lawsuit for the removal ofthe director within thirty days from the day ofthe shareholders meeting.

Mergers and Similar Arrangements
11.

Section 212: Approval of compromise or
arrangement by Court

Article 783(1)Article 795(1)The Singapore Companies Act provides
that the Singapore courts have theauthority, in connection with a scheme forthe reconstruction of any company orcompanies or the amalgamation of any
two or more companies and that under
the scheme the whole or any part of theundertaking or the property of any
company concerned in the scheme (thetransferor company) is to be transferred
to another company (the transfereecompany), to order the transfer to thetransferee company of the whole or any
part of the undertaking and of theproperty or liabilities of the transferorcompany. Such power only exists inrelation to companies incorporated in
Singapore.

The Japanese Companies Act provides thattwo (or more) companies may conductcertain types of reorganisation, such as anabsorption-type merger and a consolidationtype merger, with a special resolution byshareholders’ meeting of each of thecompanies and in accordance with otherprocedures set out in the JapaneseCompanies Act. Such reorganisation isvoluntary and no authority is given to thecourts to order such reorganisation.

Section 215A to J
The Singapore Companies Act further
provides for a voluntary amalgamation
process without the need for a court
order. Under this voluntary amalgamation
process, two or more companies may
amalgamate and continue as one
company, which may be one of theamalgamating companies or a newcompany, in accordance with theprocedures set out in the Singapore
Companies Act. As part of theseprocedures, the board of directors ofeach of the amalgamating company must
make a solvency statement in relation toboth the amalgamating company and theamalgamated company.

Article 785(1): Repurchase of shares fordissenting shareholders of an absorbed
company
Article 797(1): Repurchase of shares fordissenting shareholders of a surviving
company
Article 789(2): Creditor protection procedure
for an absorbed company
Article 799(2): Creditor protection procedure
for a surviving company
Under the Japanese Companies Act, thefollowing procedures, amongst others, will benecessary for such reorganisations:−

Resolution of a board of directors;−

Special resolution
meeting;−

Procedures for protecting the creditors(public notices and individual notices
for known creditors); and−Proceduresforappraisalrightsexercisable by dissenting shareholders(notices or public notices).

D-12

of

shareholders’No.

Singapore Corporate Law

Japanese Corporate Law
Article 796(3): Simple merger (kan-i)
Article 784(1): Summary merger (ryakushiki)
Article 796(1): Summary merger (ryakushiki)
In certain cases where the proposed
reorganisation is expected to have a small
impact on shareholders of the company, theresolution of a shareholders’ meeting is not
required. Further, a reorganisation between
companies where one company has 90%
control over the other company (“thecontrolled company”) may be conductedwithout a shareholders’ meeting of thecontrolled company.
The definition of “small impact” for each of
the above-mentioned provisions is asfollows:
Article 796(3)The amount set forth in item (i) does notexceed one-fifth (or, in cases where a lesser
proportion is prescribed in the articles ofincorporation of the surviving stock company,
etc., such proportion) of the amount set forthin item (ii):
(i)

D-13

the total amount of the amounts listed(a) through (c):(a)

theamountobtainedbymultiplying the number of sharesof the surviving stock company,
etc.
to
be
deliveredtoshareholders
of
the
stock
company absorbed in absorptiontype merger or the wholly owned
subsidiary company in shareexchange, to partners of themembership company absorbed inabsorption-type merger or to thesplitting company in absorptiontype company split (hereinafterreferred to as “Shareholders, etc.
of the Absorbed Company, etc.” inthis item) by the amount of net
assets per share;(b)the total amount of the book valueof bonds, share options or bonds
with share options of the surviving
stock company, etc. to be delivered
to Shareholders, etc. of theAbsorbed Company, etc.; andNo.

Singapore Corporate Law

Japanese Corporate Law
(c)

(ii)

the total amount of the book valueof property other than shares, etc.
of the surviving stock company,
etc.
to
be
deliveredtoShareholders, etc. of the Absorbed
Company, etc.; andthe amount calculated by the method
specified by the applicable ordinances
as the total assets of the surviving stockcompany, etc.

Article 784(1) proviso
The exception above regarding summary
merger under Article 784(1) is not applicableif all or part of the value of the merger, etc. in
the absorption-type merger or shareexchange is shares with a restriction ontransfer, etc., and the absorbed stockcompany, etc. is a Public Company as well as
a company with no provision on issuing classshares.
Article 796(1) proviso
The exception above regarding summary
merger under Article 796(1) is not applicableif all or part of the monies, etc. to bedelivered to shareholders of the stockcompany absorbed in absorption-typemerger or the wholly owned subsidiarycompany in share exchange, to partners ofthe membership company absorbed inabsorption-type merger or to the splitting
company in absorption-type company split
are shares with a restriction on transfer, etc.
of the surviving stock company, etc., and thesurviving stock company, etc. is not a PublicCompany.
Appraisal Rights
12.

The Singapore Companies Act does notprovide for appraisal rights to theshareholders of a company in connection
with a merger.

Dissenting shareholders who oppose theproposed merger at the shareholders’meeting have the right to demand that theirshares be purchased by the company at afair price in accordance with the procedures
set out in the Japanese Companies Act.

D-14

No.

Singapore Corporate Law

Japanese Corporate Law

Shareholders’ Suits and Protection of Minority Shareholders
13.

Section 216: Personal remedies in casesof oppression or injustice
A member or a holder of a debenture of acompany may apply to the Singapore
courts for an order under Section 216 of
the Singapore Companies Act to remedy
situations where:(i)a company’s affairs are being
conducted or the powers of thecompany’s directors are being
exercised in a manner oppressive
to, or in disregard of the interests of
one or more of the members,
shareholders
orholdersofdebenturesofthecompany,
including the applicant; or(ii)

a company has done an act, or
threatens to do an act, or themembers or holders of debentures
have passed some resolution, or
propose to pass some resolution,
which
unfairly
discriminates
against, or is otherwise prejudicial
to, one or more of the company’s
members or holders of debentures,
including the applicant.

Article 360(1)In cases where a director engages, or is
likely to engage, in an act outside the scopeof the purpose of the company, or other acts
in violation of the laws and regulations ofJapan or the articles of incorporation of thecompany, and if such act is likely to cause
substantial detriment (or, in the case wheresuch company has a statutory auditor, if suchact is likely to cause irreparable damage) tothe company, shareholders holding sharesconsecutively for the preceding six months ormore (or, in cases where a shorter period isprescribed in the articles of incorporation,such period or more) may apply to the courts
to have such director cease such act.
Creditors of a company do not have similar
rights in such situations.

Singapore courts have wide discretion as
to the relief they may grant under suchapplication, including, inter alia, directing
or prohibiting any act or cancelling orvarying any transaction or resolution,
providing that the company be wound up,
or authorising civil proceedings to bebrought in the name of or on behalf of thecompany by such person or persons andon such terms as the court directs.
Section 216A: Derivative or representative
actions
In addition, a member of a company whois seeking relief for damage done to thecompany may bring a common law
derivative action in certain circumstances
against the persons who have done
wrong to the company. Further, section
216A of the Singapore Companies Act
prescribes a procedure to bring astatutory derivative action. The statutory
procedure is available to, inter alia, (i) amember of a company not listed on the
SGX-ST, and (ii) any other person who, inthe discretion of the court, is a proper
person to make an application under
Section
216A oftheSingapore
Companies Act.

Article 847: Derivative Suits
Any shareholder of a Public Company who
has held shares continuously for at least six
preceding months can make a written
request to the company, addressed to thestatutory auditor, to commence an action
against a director who has done wrong to thecompany and caused damage to it. If thecompany fails to commence the action within
60 days of the date of the shareholder’srequest, the shareholder may commence theaction against the director on behalf of thecompany (a derivative action).

D-15

No.

Singapore Corporate Law

Japanese Corporate Law
There are no provisions under the JapaneseCompanies Act which allow shareholders ofa company to bring an action on behalf of thecompany against third parties who havedone wrong to the company.

Shareholders’ Action by Written Consent
14.

Section 184A: Passing of resolution by
written means
Notwithstanding any other provision of
the Singapore Companies Act, a privatecompany may pass any resolution by
written means (save for any resolution todispense with the holding of annual
general meetings or any resolution which
special notice is required) in accordancewith the provisions of the Singapore
Companies
Act.
There
is
no
corresponding provision in the Singapore
Companies Act which applies to a PublicCompany.

Article 319(1): Omission of Resolution of
Shareholders’ meeting
Article 370: Omission of Resolution of Boardof directors’ meeting
Any company may pass any resolution ofshareholders’ meeting and the board of
directors’ meeting by written means inaccordance with the provisions of theJapanese Companies Act.

Shareholders’ Proposals
15.

Section 183: Circulation of members
resolution
Under the Singapore Companies Act, (a)any number of members representing notless than 5.0% of the total voting rights ofall the members having at the date ofrequisition a right to vote at a meeting towhich the requisition relates or (b) notless than 100 members holding shareson which there has been paid up an
average sum, per member, of not lessthan S$500, may requisition the company
to give to members notice of any
resolution which may properly be moved
and is intended to be moved at the next
annual general meeting, and circulate tomembers any statement of not more than
1,000 words with respect to the matter
referred to in any proposed resolution or
the business to be dealt with at thatmeeting.

Article 318(4): Right to request for inspection
and copying
Article 297(1): Right to request for conveningof a shareholders’ meeting
Article 303(1): Right to propose agenda
Article 305(1): Right to request for inclusionof proposal in notice of convening theshareholders’ meeting
Article 306(1)(2): Right to petition the court toappoint an inspector for the procedures of ashareholders’ meeting
Any shareholder and creditor of the company
has the right to inspect or ask for a copy ofthe minutes of a shareholders’ meeting. Also,thefollowingrightsaregiven
toshareholders:−

D-16

Shareholders holding three per cent ormore of the voting rights in a company
continuously for preceding six months ormore have the right to require
shareholders’ meetings to be convened
by showing the matters which shall be thepurpose of the shareholders’ meeting(limited to the matters on which suchshareholders may exercise their votes);

No.

Singapore Corporate Law

Japanese Corporate Law

Section 176: Conveying of extraordinary
general meeting on requisition−

Shareholders holding one per cent ormore of the voting rights of a company,
or 300 or more voting rights of acompany continuously for preceding six
months or more are entitled to ask eightweeks prior to the meeting date, thatthe board of directors place specificitems on the agenda for a shareholders’meeting, and are entitled to request thatthe company list a summary of their
proposalsonthecompany’s
convocation notice;−

Shareholders holding one per cent ormore of the voting rights are entitled to
apply
to
the
court
beforeashareholders’ meeting to appoint a
inspector who shall be retained toinvestigate the convocation procedures
and method of resolution relating tosuch shareholders’ meeting.

Members holdings not less than 10.0% of
the paid up capital of a company, or in thecase of a company not having a sharecapital, of members representing not lessthan 10% of the total voting rights of all
members having a right to vote at general
meetings, may requisition for an
extraordinary
generalmeetinginaccordance with the provisions of theSingapore Companies Act. The directors
must convene the meeting to be held assoon as practicable, but in any case notlater than two months, after the receipt by
the company of the requisition.
Section 177: Calling of Meeting
Two or more members holding not lessthan 10.0% of the company issued sharecapital may also call a meeting of thecompany in accordance with theprovisions of the Singapore Companies
Act.
Winding Up and Dissolution
16.

Winding Up

Article 475

The winding up of a company may bedone in the following ways:

A company must go into liquidation in thefollowing cases:(i)

members’ voluntary winding up;

(i)

(ii)

creditors’ voluntary winding up;

where the company is dissolved by,inter alia, shareholders’ voluntary
winding up (except where the company
is dissolved via being the absorbed
company in an absorption-type merger
or where the bankruptcy proceedings
have commenced and have not been
completed);(ii)

where a judgement allowing a claim
seeking invalidation of the incorporationof the company becomes final andbinding; or(iii) court compulsory winding up; and(iv) an order made pursuant to Section
216 of the Singapore Companies
Act for the winding up of thecompany.
The type of winding up depends, interalia, on whether the company is solvent.

(iii) where a judgement allowing a claim
seeking invalidation of a share transfer
becomes final and binding.
Article 824(1): Right to petition the court toorder the dissolution of the company
There are no provisions for the equivalent tocreditors’ voluntary winding up provided in
the Singapore Companies Act under theJapanese Companies Act. If creditors wish todissolve the company, creditors must file forbankruptcy of the company.

D-17

No.

Singapore Corporate Law

Japanese Corporate Law
Article 15 of the Bankruptcy Act of Japan:
Grounds for Commencement of Bankruptcy
Proceedings(1)

When a debtor is unable to pay debts,
thecourt,
upon
petition,shallcommence bankruptcy proceedings byan order pursuant to the provision of
Article 30(1).

Article 18 of the Bankruptcy Act of Japan:
Petition for Commencement of Bankruptcy
Proceedings(1)

A creditor or debtor may file a petition
for commencement of bankruptcy
proceedings.

(2)

A creditor, when filing a petition forcommencementofbankruptcy
proceedings, provide prima facie proof
showing of the existence of the claim
held thereby and the fact constituting
the grounds for the commencement ofbankruptcy proceedings.

Article 20 of the Bankruptcy Act of Japan:
Method of Filing Petition for Commencementof Bankruptcy Proceedings(1)

A petition for commencement ofbankruptcy proceedings shall be filed
by means of a document stating thematters specified by the Rules of theSupreme Court.

Article 30 of the Bankruptcy Act of Japan:
Order of Commencement of Bankruptcy
Proceedings
(1)

D-18

Where a petition for commencement ofbankruptcy proceedings is filed, thecourt, when it finds a fact constituting
the grounds for the commencement ofbankruptcy proceedings, shall make anorder of commencement of bankruptcy
proceedings, except in any of the cases
listed in the following items:(i)Where expenses for bankruptcy
proceedings are not prepaid.

(ii)

Where
the
petitionforcommencement of bankruptcy
proceedings is filed for an
unjustifiable purpose or it is not
filed in good faith.

No.

Singapore Corporate Law

Japanese Corporate Law

Dissolution

Article 471: Dissolution

A company may be dissolved:

A company may be dissolved on the following
grounds:

(i)

(ii)

through the process of liquidation
pursuant to the winding up of thecompany;
in a merger or amalgamation of two
companies where the court mayorder the dissolution of one after its
assets and liabilities have beentransferred to the other; or(iii) when it is struck off the register by
the Registrar of Companies on the
ground that it is a defunct company.

(i)

The expiration of the duration provided
for in its articles of incorporation;(ii)

The grounds for dissolution provided forin its articles of incorporation;(iii) A resolution of a shareholders’ meeting;(iv) A merger (limited to cases where suchcompany ceases to exist as a result of
the merger);(v)

A ruling to commence
procedures; orbankruptcy(vi) Judgment ordering the dissolution of
the company pursuant to the relevant
provisions of the Japanese Companies
Act.
Variation of Rights of Shares
17.

Section 74: Rights of holders of classesof shareUnder the Singapore Companies Act, if aprovision is made in the memorandum or
articles of association of a company for
authorising the variation or abrogation of
the rights attached to any class of sharesin the company and in pursuance of thatprovision such rights are at any timevaried or abrogated, the holders of notless in aggregate than 5.0% of the issued
shares of that class may apply to theSingapore courts to have the variation or
abrogation cancelled in accordance with
the Singapore Companies Act.
The court may, if satisfied that thevariation or abrogation would unfairly
prejudice the shareholders of the classrepresented by the applicant, disallow
the variation or abrogation, and shall if
not so satisfied, confirm it.

Article 108: Types of shares
Article201:
SpecialProvisionson
Determination of Subscription Requirements
for Public Company
Article 322: Class shareholders’ meeting
A company can issue different classes ofshares by a resolution of the board of
directors of the Public Company, if thecompany’s articles of incorporation provide
for the issuance of such shares and the total
number of issuable shares in such class ofshares is not exceeded. However, under theJapanese Companies Act, any variation or
abrogation of the rights attached to any classof shares in a company that will or is likely tocause detriment to that class of shareholders
shall not take effect unless a special
resolution of that class of shareholders ismade at a meeting constituted by that classof shareholders.

D-19

No.

Singapore Corporate Law

Japanese Corporate Law

Amendment of Governing Documents
18.

Amendments to Memorandum andArticles of Association

Amendments to Articles of Incorporation

Section 26 and 26A: General provisions
as to the alteration of memorandum
Unless otherwise provided in the
Singapore Companies Act, a Company’s
memorandum of association may bealtered by way of special resolution,
except that any entrenching provision in
the memorandum and any provisioncontained in the memorandum before
1 April 2004 which could not be altered
before that date may be removed oraltered only if all members of thecompany agree.
For
these
purposes,theterm“entrenchingprovision”
meansaprovision of the memorandum or articles
of association of a company to the effectthat other specified provisions of thememorandum or articles (a) may not bealtered in the manner provided by theSingapore Companies Act, or (b) may not
be so altered except by a resolution
passed by a specified majority greaterthan 75.0%, or where other specified
conditions are met.

Companies constituted under the JapaneseCompanies Act do not have a memorandum
as part of its constitution.
Article 466: Amendments of articles ofincorporation
Article 309(2): Resolution of shareholders’meeting for amendments of articles ofincorporation
Unless otherwise provided in the JapaneseCompanies Act, a company’s articles ofincorporation may be altered by way of
special resolution of a shareholders’meeting.

Subject to the Singapore Companies Act
and
to
any
conditions
inits
memorandum, a company’s articles ofassociation may be altered by way of
special resolution except that any
entrenching provision in the articles ofassociation may be removed or alteredonly if all members of the company
agree.
Any alteration to the articles ofassociation takes effect on and from thedate of the special resolution approving
such alteration or such later date as is
specified in the resolution.

D-20

No.

Singapore Corporate Law

Japanese Corporate Law

Directors’ Fiduciary Duties
19.

Section 157: As to the duty and liability ofofficers
Every director by virtue of his officeoccupies a fiduciary position with respect
to the company. A director is not
permitted to place himself in a situation
where his interests conflict with his duty.
Duties are imposed upon any person who
becomes a director of a company andbreaches of these duties may lead tocriminal or civil liabilities. Such duties aregoverned by statute and common law.
Such duties include (without limitation)
duties of care and skill and duties to act
in good faith in the best interest of thecompany, as well as the statutory duty
under the Singapore Companies Act to
act honestly and to use reasonablediligence in the discharge of the duties of
his office at all times.

Article 330: Duty of care of a good manager(Article 644 of the Civil Code)
Article 355: Duty of loyalty
Every director by virtue of his office has afiduciary relationship with the company. The
fiduciary relationship is similar to that of aprincipal and agent relationship. This
relationship arises from the fact that acompany being an juridical person can only
act through the agency of natural persons.
Such being the case, a company can only act
through agents, i.e. its individual directors,
and it is the duty of the “agents” to act in thebest interests of the company. Accordingly, a
director is generally not permitted to place
himself in a situation where his interests
conflict with his duty. Duties are imposed
upon any person who becomes a director of
a company and breaches of these duties maylead to criminal or civil liabilities. Such duties
are governed by statute and include (without
limitation) duties of care and skill and duties
to act in good faith in the best interest of thecompany, as well as the statutory duty under
the Japanese Companies Act to act honestly
and to use reasonable diligence in the
discharge of the duties of his office at all
times.

Conversion
20.

Section 31: Change from public to privatecompany and change from private to
Public Company

Article 466: Amendments of articles ofincorporation
Article 2(5) Definition of Public Company

The Singapore Companies Act provides
that a private company may be converted
to a Public Company and vice versa by,inter alia, passing a special resolution. A
limited company could be converted into
an unlimited company and vice versa bycomplying with the provisions in the
Singapore Companies Act.

Under the Japanese Companies Act, aprivate company is automatically converted
into a Public Company when the restriction
on transfer of all or part of its shares in its
articles of incorporation is removed by aspecial resolution of the shareholders’meeting of the company.

D-21

No.

Singapore Corporate Law

Japanese Corporate Law

Rights of Shareholders
21.

Section 180: Member’s rights at meeting

Article 105 (Rights of Shareholders)

The Singapore Companies Act provides
that every member shall, notwithstanding
any provision in the memorandum or
articles, have a right to attend any
general meeting of the company and to
speak and vote on any resolution before
the meeting except that the company’s
articles may provide that a member shallnot be entitled to vote unless all calls orother sums personally payable by him in
respect of shares in the company havebeen paid.

(1)

Notwithstanding the above, the articles ofa company may provide that holders ofpreference shares shall not have theright to vote at a general meeting of thecompany except that any preference
shares issued after 15th August 1984
shall carry the right to attend any general
meeting and in a poll thereat to at least
one vote in respect of each such shareheld during such period as thepreferential dividend or any part thereof
remains in arrear and unpaid, such
period starting from a date not more than
12 months, or such lesser period as thearticles may provide, after the due date ofthe dividend or upon any resolution which
varies the rights attached to such sharesor upon any resolution for the winding upof the company.

A shareholder shall have the following
rights and other rights recognizedpursuant to the provisions of theJapanese Companies Act with respect
to the shares he/she holds:(i)

The right to receive dividends ofsurplus(ii)

The right to receive distribution ofresidual assets(iii) The right to vote at shareholders’meetings
Article 446 (Amounts of Surplus)
The amount of the surplus of a stockcompany shall be the amount obtained bysubtracting the sum of the amounts listed initem (v) through (vii) from the sum of theamounts listed in item (i) through (iv):
(i)

(ii)

D-22

The amount obtained by subtracting thesum of the amounts listed in Subitem (c)through (e) from the sum of the amounts
listed in Sub-item (a) through (b) as at
the last day of the most recent business
year:
(a)

The amount of assets;(b)

The sum of the book value oftreasury shares;(c)

The amount of liabilities;(d)

The sum of the amount of statedcapital and reserves;(e)

The sum of the amounts, otherthan those listed in Sub-item (c)and (d), recorded in each accounttitle prescribed by the applicableordinances.

In cases where treasury shares aredisposed of after the last day of themost recent business year, the amountobtained by subtracting the book valueof such treasury shares from theamount of the value received in
exchange for such treasury shares;

No.

Singapore Corporate Law

Japanese Corporate Law(iii) In cases where the amount of statedcapital is reduced after the last day ofthe most recent business year, theamount of such reduction;(iv) In cases where the reserves are
reduced after the last day of the mostrecent business year, the amount ofsuch reduction (excluding the amountunder item (ii) of Article 448(1));(v)

In cases where treasury shares arecanceled pursuant to the provisions ofArticle 178(1) after the last day of themost recent business year, the amountof the book value of such treasury
shares;(vi) The sum of the following amounts incases where dividend of surplus is paid
after the last day of the most recent
business year:(a)

The total book value of thedividend property referred to initem (i) of Article 454(1) (excluding
the book value of such dividend
property assigned to shareholders
who exercised the rights todemand distribution of monies
provided for in item (i), paragraph(4) of that paragraph);(b)

The sum of the amounts of themoney delivered to shareholders
who exercised the rights todemand distribution of monies
provided for in item (i) of Article454(4); and(c)

The sum of the amounts of money
paid
toshareholders
ofdisqualified shares provided for in
Article 456.

(vii) The sum of the amounts, other thanthose listed in the preceding two items,
recorded in each account title
prescribedbytheapplicableordinances.

D-23

No.

Singapore Corporate Law

Japanese Corporate Law
Article 108 (Shares of Different Classes)
Shares without any voting right at theshareholders meeting can be issued under
the Japanese Corporate Law.
Matters relating to the shareholders right toreceive rights offering are as follows:
Article 238 (Determination of Subscription
Requirements)
Article 241 (Cases where Entitlement toAllotment of Share Option is Granted toShareholders)
In carrying out solicitation under Article
238(1), the stock company may grant
entitlement to the allotment of share options
to its shareholders.

Interest in Securities
22.

Section 4 of the SFA sets out what
constitutes an “interest in securities”:(1)

Subject to this section, a person has
an interest in securities if he has
authority(whetherformalor
informal, or express or implied) todispose of, or to exercise control
over the disposal of, thosesecurities.

Under the Financial Instruments andExchange Act (the “FIEA”), there is arelevant provision regarding a similar
concept with the Interest in Securities asfollows.
Article 27-23 of the FIEA: (Submission of
Large Volume Holding Report)
A holder of the shares whose Holding Ratioof Share Certificates, etc. pertaining to said
Share Certificates, etc. exceeds 5% (suchholder shall be hereinafter referred to as a“Large Volume Holder”) shall, pursuant to theprovisions of the applicable ordinances,submit to the Prime Minister a report (the“Large Volume Holding Report”) that
contains the matters related to the Holding
Ratio of Share Certificates, etc., mattersrelated to the funds for the acquisition,
purposes of holding and any other mattersspecified by the applicable ordinances within
five days from the date on which such person
has come to be a Large Volume Holder.

D-24

No.

Singapore Corporate Law

Japanese Corporate Law
The Large Volume Holding Report referred toabove has to be filed by those who are “inpossession” (hoyuu) of voting securities,
which includes, but is not limited to, “owners”(shoyuu-sha) of such voting securities.
Under Article 27-23 of the FIEA and related
provisions, the following persons are
deemed to possess the voting securities andwould be required to make a Large Volume
Holding Report where the 5% threshold iscrossed:(i)persons who own voting securities or
have contractual rights to own suchvoting securities whether or not suchvoting securities/contractual rights areheld in their own name or the name ofanother person or a fictitious name (e.g.
a purchaser of the voting securities or apurchaser of a call option for the voting
securities);(ii)

persons who:(a)

are authorised by contract or law
to exercise, or direct the exercise
of, the voting rights pertaining tothevotingsecurities
asshareholders of the issuer of suchvoting securities;(b)

are aware of having such authority
as described in (ii)(a) above; and(c)have an intention to control thebusiness of such issuer (exclusiveof those who fall under item (iii)
below); and(iii) persons who are authorised by adiscretionary investment contract or
any other contract or law to invest in thevoting securities (e.g. (i) a trustee with adiscretion to acquire or dispose of
voting securities in respect of trust
assets, (ii) an asset managementcompany
authorised
tomakeinvestment decisions pursuant to adiscretionary investment management
contract).

D-25

No.

Singapore Corporate Law

Japanese Corporate Law(2)

For the purposes of subsection (1),
it is immaterial that the authority of aperson to dispose of, or to exercise
control over the disposal of,particular securities is, or is capableof being made, subject to restraint
or restriction.

There is no equivalent provision under the
FIEA.

(3)

Where any property held in trust
consists of or includes securities
and a person knows, or has
reasonable grounds for believing,that he has an interest under thetrust, he shall be deemed to have aninterest in those securities.

Please see the Article 27-23 of the FIEA
described above.

(4)

Where a corporation has, or is by
the provisions of this section
deemed to have, an interest in asecurity and –There is no equivalent provision under the
FIEA.

(a)

the corporation is, or its
directors are, accustomed orunder an obligation, whether
formal or informal, to act inaccordancewiththedirections,
instructionsorwishes of a person; or(b)a person has a controllinginterest in the corporation,that person shall be deemed to havean interest in that security.
(5)

Where a corporation has, or is by
the provisions of this section (apartfrom this subsection) deemed tohave, an interest in a security and –(a)a person is;(b)

the associates of a person are;or(c)a person and his associates
are,

There is no equivalent provision under the
FIEA.

entitled to exercise or control theexercise of not less than 20.0% of
the votes attached to the voting
shares in the corporation, that
person shall be deemed to have aninterest in that security.

D-26

No.

Singapore Corporate Law

Japanese Corporate Law(6)

There is no equivalent provision under the
FIEA.

(7)

For the purposes of subsection (5),a person is an associate of anotherperson if the first-mentioned person
is:(a)a related corporation of thesecond-mentioned person;(b)a person in accordance withwhose directions, instructions
or wishes that the secondmentioned
personisaccustomed or is under anobligation, whether formal orinformal, to act in relation to
the security referred to in
subsection (4);(c)

a person who is accustomed oris under an obligation, whether
formal or informal, to act inaccordancewiththedirections,
instructionsorwishesofthesecondmentioned person in relation tothat security;(d)a corporation which is, or the
directors
of
which
are,
accustomed or under anobligation, whether formal orinformal, to act in accordancewith the directions, instructions
or wishes of the secondmentioned person in relation tothat security; or(e)a corporation in accordancewith the directions, instructions
or wishes of which, or of thedirectors of which, the secondmentioned
personisaccustomed or under anobligation, whether formal orinformal, to act in relation tothat security.

A person shall be deemed to havean interest in a security in any one
or
more
of
the
following
circumstances:(a)Please see the Article 27-23 of the FIEA
described above regarding a purchaser ofthe voting securities or a purchaser of a call
option for the voting securities. There is noother equivalent provision under the FIEA.

where he has entered into acontracttopurchaseasecurity;

D-27

No.

Singapore Corporate Law(8)Japanese Corporate Law(b)where he has a right,
otherwise than by reason of
having an interest under atrust, to have a security
transferred to himself or to hisorder, whether the right is
exercisable presently or in the
future and whether on thefulfilment of a condition or not;(c)where he has the right toacquire a security or an interestin a security, under an option,
whether the right is exercisable
presently or in the future andwhether on the fulfilment of acondition or not; or(d)where he is entitled, otherwise
than by reason of his having
been appointed a proxy or
representative to vote at a
meeting of members of acorporation or of a class of its
members, to exercise orcontrol the exercise of a rightattached to a security, notbeing a security of which he is
the registered holder.

A person shall be deemed to havean interest in a security if that
security is held jointly with anotherperson.

Under the FIEA, there is a relevant provision
regarding a Joint Holder of voting securities
under the Large Volume Holding Reportsystem as follows.
Paragraphs 5 and 6 of Article 27-23 of the
FIEA: (Submission of Large Volume
Holding Report)
The term “Joint Holder” means anotherholder of the voting securities, in cases
where a holder of voting securities has
agreed on jointly acquiring or transferring
said voting securities, or on jointly exercising
the voting right and other rights as ashareholder of the issuer, with another holderof the voting securities.
When a holder of voting securities, andanother holder of the voting securities have ashareholder relationship, family relationshipor any other special relationship other holder
generally shall be deemed to fall under the
Joint Holder, provided, however, that thisshall not apply to the cases where the thevoting securities held by either said holder orthe other holder is not more than the number
specified by the applicable ordinances.

D-28

No.

Singapore Corporate Law

Japanese Corporate Law(9)There is no equivalent provision under the
FIEA.

For the purpose of determining
whether a person has an interest ina security, it is immaterial that theinterest cannot be related to aparticular security.

(10) There shall be disregarded –(a)an interest in a security if theinterest is that of a person who
holds the security as baretrustee;(b)

an interest in a security if theinterest is that of a person
whoseordinarybusiness
includes the lending of money
if he holds the interest only by
way of security for the
purposes of a transaction
entered into in the ordinary
courseofbusinessinconnection with the lending ofmoney;(c)an interest of a person in asecurity if that interest is aninterest held by him by reason of
his holding a prescribed office;(d)an interest of a company in its
own securities if that interest ispurchasedorotherwise
acquired in accordance withsections 76B to 76G of theSingapore Companies Act; and(e)a prescribed interest in asecurity being an interest ofsuch person, or of the persons
included in such class of
persons, as may be prescribed.

(11) An interest in a security shall not bedisregarded by reason only of –(a)

its remoteness;(b)

the manner in which it arose;or(c)the fact that the exercise of aright conferred by the interestis, or is capable of being madesubjecttorestraintorrestriction.

Please see the Article 27-23 of the FIEA
described above regarding a person holding
voting securities as trustee. There is no otherequivalent provisions under the FIEA.

There is no equivalent provisions under the
FIEA.

D-29

No.

Singapore Corporate Law

Japanese Corporate Law

Substantial Shareholding
23.

Under section 4(4) of the SFA a person
has a substantial shareholding in a
corporation if:
(a)

(b)

he has an interest in one or morevoting shares (excluding treasury
shares) in the corporation; andthe total votes attached to thatshare, or those shares, is not lessthan 5.0% of the total votes
attached to all the voting shares(excluding treasury shares) in thecorporation.

If the corporation is one in which theshare capital is divided into 2 or moreclasses of shares, a person has asubstantial
shareholdinginthe
corporation if:
(a)

(b)

he has an interest in one or morevoting shares (excluding treasury
shares) in one of those classes; andthe total votes attached to thatshare, or those shares, is not lessthan 5% of the total votes attached
to all the voting shares (excluding
treasury shares) in that class.

Notification of interests
Under section 135 of the SFA, a person
who is or had been a substantial
shareholder in a corporation shall givenotice in writing to the corporation ofparticulars of the voting shares in thecorporation in which he has or had aninterest or interests and the nature andextent of the interest or interests.
Such notice shall be given within two
business days after the person becomesaware that he is or had been asubstantial shareholder.

Under the FIEA, there is a relevant provision
regarding a similar concept with the“Substantial” shareholders as follows.
Article 27-23 of the FIEA: (Submission of
Large Volume Holding Report)
A holder of the shares whose Holding Ratioof Share Certificates, etc. pertaining to said
Share Certificates, etc. exceeds 5% (suchholder shall be hereinafter referred to as a“Large Volume Holder”) shall, pursuant to theprovisions of the applicable ordinances,submit to the Prime Minister a Large Volume
Holding Report that contains the mattersrelated to the Holding Ratio of Share
Certificates, etc., matters related to the funds
for the acquisition, purposes of holding andany other matters specified by the applicableordinances within five days from the date on
which such person has come to be a Large
Volume Holder.
The Large Volume Holding Report referred toabove has to be filed by those who are “inpossession” (hoyuu) of voting securities, which
includes, but is not limited to, “owners”(shoyuu-sha) of such voting securities. Under
Article 27-23 of the FIEA and related provisions,the following persons are deemed to possess thevoting securities and would be required to makea Large Volume Holding Report where the 5%
threshold is crossed:(i)persons who own voting securities or
have contractual rights to own suchvoting securities whether or not suchvoting securities/contractual rights areheld in their own name or the name ofanother person or a fictitious name (e.g.
a purchaser of the voting securities or apurchaser of a call option for the voting
securities);(ii)

persons who:(a)Notification of change in interests
Under section 136 of the SFA,
where there is a change in thepercentage level of interest or interestsof a substantial shareholder in a
corporation in voting

D-30

are authorised by contract or law
to exercise, or direct the exercise
of, the voting rights pertaining tothevotingsecurities
asshareholders of the issuer of suchvoting securities;

No.

Singapore Corporate Law

Japanese Corporate Law

shares in the corporation, the substantial
shareholder shall give notice in writing to
the corporation within 2 business days
after he becomes aware of the change.
“Percentage level” in relation to a
substantial shareholder means thepercentage
figureascertainedbyexpressing the total votes attached to all
the voting shares in which the substantial
shareholder has an interest or interests
immediately before or (as the case maybe) immediately after the relevant time asa percentage of the total votes attachedto:(a)

all the voting
company; orshares

in

the

(b)

where the share capital of thecompany is divided into two or moreclasses of shares, all the voting
shares included in the classconcerned.

(b)

are aware of having such authority
as described in (ii)(a) above; and(c)have an intention to control thebusiness of such issuer (exclusiveof those who fall under item (iii)
below); and(iii) persons who are authorised by adiscretionary investment contract or
any other contract or law to invest in thevoting securities (e.g. (i) a trustee with adiscretion to acquire or dispose of
voting securities in respect of trust
assets, (ii) an asset managementcompany
authorised
tomakeinvestment decisions pursuant to adiscretionary investment management
contract).
Article 27-25 of the FIEA: Submission ofAmendment Report Pertaining to Large
Volume Holding Report(1)

Notification of ceasing to be substantial
shareholder
Under section 137 of the SFA, a person
who ceases to be a substantial
shareholder in a corporation shall givenotice in writing to the corporation within
2 business days after he becomes awarethat he has ceased to be a substantial
shareholder.
Beneficial owner to ensure notification by
person who holds, acquires or disposesof interests on his behalf
Under section 137A of the SFA, a person
who authorises another person to hold,acquire or dispose of, on his behalf,
voting shares or an interest or interests invoting shares in a corporation, he shalltake reasonable steps to ensure that thesecond-mentioned person notifies him assoon as practicable and, in any case, nolater than two business days after any
acquisition or disposal of any of thosevoting shares or interest or interests invoting shares effected by the secondmentioned person on his behalf.

D-31

A person who is required to submit a
Large Volume Holding Report shall, if,
after the day when the person has cometo be a Large Volume Holder, theholding ratio of shares has increased
or decreased by 1% or more or where
there arises any other mattersprescribed by a Cabinet Order as
amendments in important matters to becontained in the Large Volume Holding
Report, submit to the Prime Minister areport on the amended matters within
five business days from theamendment, pursuant to the provisionsof the applicable ordinances.

No.

Singapore Corporate Law

Japanese Corporate Law

Notification by person who holds,
acquires or disposes of interests forbenefit of another person
Under section 137B of the SFA, where aperson holds voting shares in a
corporation, being voting shares in whichanother person has an interest, he shallgive to the second-mentioned person
notice of any acquisition or disposal of
any of those shares effected by him assoon as practicable, no later than two
business days after acquiring or
disposing of the shares.
Power of corporation to require
disclosure of beneficial interest in its
voting shares
Under section 137F of the SFA, any
corporation may by notice in writing
require any member of the corporation
within such reasonable time as is
specified in the notice, or where thecorporation is informed that any otherperson has an interest in any of thevoting shares in the corporation, thecorporation may by notice in writing
require that other person within suchreasonable time as is specified in thenotice to:(a)to inform it whether he holds any
voting shares in the corporation as
beneficial owner or as trustee; and(b)

if he holds them as trustee, toindicate so far as he can the
persons for whom he holds them(either by name or by otherparticulars sufficient to enable those
persons to be identified) and thenature of their interest.

Any corporation may by notice in writing
require any member of the corporation to
inform it whether any of the voting rights
carried by any voting shares in thecorporation held by him are the subject ofan agreement or arrangement underwhich another person is entitled tocontrol his exercise of those rights and, if
so, to give particulars of the agreement
or arrangement and parties to it.
Any person to whom a notice is issued
under section 137F shall comply with that
notice.
D-32

No.

Singapore Corporate Law

Japanese Corporate Law

Duty of corporation to make disclosure
Under section 137G of the SFA, where a
corporation has been notified in writing
by a substantial shareholder in thecorporation pursuant to a requirement
imposed on him under section 135, 136
or 137, the corporation shall announce orotherwise disseminate the information
stated in the notice to the securities
market operated by the securities
exchange on whose official list any or allof the shares of the corporation arelisted, as soon as practicable and in any
case, no later than the end of thebusiness day following the day on which
the corporation received the notice.
Foreign Exchange Restriction
24.

Foreign Exchange and Foreign Trade Act(“FETA”)
Article 26 of the FETA (Definition of
Inward Direct Investment, etc.)(1)

The term “foreign investor” shall mean
any one of the following persons who
makes inward direct investment, etc.
listed in the items of the next paragraph.
(i)

An individual who is a non-residentof Japan(ii)

A juridical person or otherorganization established pursuant
to foreign laws and regulations, ora juridical person or otherorganization having its principal
office in a foreign state(iii) A corporation of which the ratio of
the sum of the number of voting
rights directly held by those listed
in items 1 or 2 and the number ofvoting rights specified by Cabinet
Order as those indirectly held
through other corporations to thenumber of voting rights of allshareholders or members of suchcorporation is 50% or higher(iv) In addition to what is listed in thepreceding two items, a juridical
person or other organization inwhich persons as listed in item 1
occupy the majority of either theofficers (meaning directors orother persons equivalent thereto;
hereinafter the same shall apply inthis item) or the officers having thepower of representation

D-33

No.

Singapore Corporate Law

Japanese Corporate Law(2)

The term “inward direct investment,etc.” shall mean an act that falls under
any of the following items.
(i), (ii) omitted(iii) Acquisition of the shares of a
Listed Corporation, etc. (limited tocases where the ratio of thenumber of shares of the Listed
Corporation, etc. pertaining to theacquisition in the total number ofissued shares of the Listed
Corporation, etc., or the ratio of
the sum of the number of shares of
the Listed Corporation, etc. which
will be held by a person who
conducts the acquisition after theacquisition and the number ofshares of the Listed Corporation,
etc.
held
by
non-resident
individuals, corporations or otherorganizations (limited to thosewhich fall under those listed in
items 2 to 4 inclusive of thepreceding paragraph), which are
specified by Cabinet Order as
being in a permanent economic
relationship, kinship or otherspecial relationship equivalent
thereto with a person who
conducted the acquisition in the
total number of issued shares of
the Listed Corporation, etc. is notless than 10%)(iv), (v), (vi) omitted(vii) Act specified by cabinet order as
equivalent to any of the acts set
forth in the preceding items.

Article 55-5 of the FETA (Report of Inward
Direct Investment, etc.)
(1)

D-34

When a foreign investor has made an
inwarddirectinvestment,
etc.
(excluding those specified by Cabinet
Order by taking into consideration
inheritance, testamentary gift, mergerofjuridical
personsor
othercircumstances; hereinafter the same
shall apply in this article), he/she shallreport, pursuant to the provisions ofCabinet Order, to the Minister ofFinance and the minister having
jurisdiction over the business thecontent of the inward direct investment,
etc., the time of making the inward
direct investment, etc. and othermatters specified by Cabinet Order.

No.

Singapore Corporate Law

Japanese Corporate Law

Miscellaneous
25.

Article 461 (Restriction on Dividends)(1)

The total book value of the monies, etc.
delivered to shareholders as a result of
the following acts may not exceed theDistributable Amount as at the day on
which such act takes effect:(i)

The purchase of shares of suchstock company in response to ademand under item (i)(c) or (2)(c)of Article 138;(ii)

The acquisition of shares of suchstock company based on adecision pursuant to the provisionsof Article 156(1) (limited toacquisitions of shares by suchstock company in the cases
provided for in Article 163 or Article
165(1));(iii) The acquisition of shares of suchstock company based on adecision pursuant to the provisionsof Article 157(1);(iv) The acquisition of shares of suchstock company pursuant to theprovisions of Article 173(1);(v)

The purchase of shares of suchstock company based on a request
pursuant to the provisions ofArticle 176(1);(vi) The purchase of shares of suchstock company pursuant to theprovisions of Article 197(3);(vii) The purchase of shares of suchstock company pursuant to theprovisions of Article 234(4); or(viii) Dividend of surplus.

D-35

No.

Singapore Corporate Law

Japanese Corporate Law
Article 138 (Method
Approval of Transfer)

for

Requestsfor

The requests listed in the following items(hereinafter in this Subsection referred to as“Requests for Approval of Transfer”) shall bemade by disclosing the matters provided forin such items:
(i)

(ii)

D-36

Requests pursuant to the provisions ofArticle 136: The following matters:(a)the number of shares withrestriction on transfer that theshareholders making such request
intend to transfer to others (or, fora company with class shares, theclasses of the shares and thenumber of shares for each class);(b)

the name of the person accepting
the transfer of the shares withrestriction on transfer referred to in(a); and(c)in cases where a stock company
determines not to give approval
under Article 136, if it is requested
that such stock company ordesignated purchaser provided forin Article 140(4) purchase theshares with restriction on transfer
referred to in (a), the statement tosuch effect.

the request pursuant to the provisionsof paragraph (1) of the precedingarticle: The following matters:(a)the number of shares withrestriction on transfer which theacquirer of shares making such
request has acquired (or, for acompany with class shares, theclasses of the shares and thenumber of shares for each class);(b)

the name of the acquirer of sharesreferred to in (a); and(c)in cases where a stock company
determines not to effect theapproval under paragraph (1) of
the preceding article, if it isrequested
that
such
stock
company or the designatedpurchaser provided for in Article
140(4) purchase the shares withrestriction on transfer referred to in(a), a statement to such effect.

No.

Singapore Corporate Law

Japanese Corporate Law
Article 156 (Determination ofregarding Acquisition of Shares)(1)

Matters

A stock company shall prescribe thefollowing matters by resolution of ashareholders meeting in advance inorder to acquire for value own shares byagreement with its shareholders;provided, however, that the period
under item (iii) cannot exceed one year:(i)the number of shares to beacquired (or, for a company withclass shares, the classes of theshares and the number of sharesfor each class);(ii)

the description and total amount of
the monies, etc. (excluding theshares, etc. of such stock company.
The same shall apply hereinafter inthis Subsection.) that will bedelivered in exchange for theacquisition of the shares; and(iii) the period during which the sharescan be acquired.
(2)

The provisions of the preceding
paragraph shall not apply to the cases
listed in item (i) and item (ii), and in item(iv) to item (xiii) inclusive of thepreceding article.

Article 157 (Determination of Acquisition
Price)(1)

Whenever a stock company intends toacquire its shares in accordance with adetermination
pursuant
totheprovisions of paragraph (1) of thepreceding article, it shall prescribe thefollowing matters:(i)the number of shares to be acquired(or, for a company with class shares,
the class of the shares and thenumber of the shares);(ii)

the description, and the number oramount, or the method for the
calculation thereof, of the monies,
etc. that will be delivered in
exchange for the acquisition of
one share;(iii) the total amount of monies, etc. thatwill be delivered in exchange for theacquisition of the shares; and

D-37

No.

Singapore Corporate Law

Japanese Corporate Law(iv) The date on which the offer totransfer the shares will be made.
(2)

A company with board of directors shalldetermine the matters listed in each
item of the preceding paragraph byresolution of the board of directors.

(3)

The conditions prescribed for theacquisition of shares under paragraph(1) shall be uniform for eachdetermination
made
under
the
provisions of that paragraph.

Article 163 (Acquisition of Shares from
Subsidiaries)
In cases where a stock company acquires
shares in such stock company that are heldby its subsidiary, for the purpose of theapplication of the provisions of Article 156(1),“shareholders meeting” in such paragraphshall be read as “shareholders meeting (orboard of directors meeting for a Company
with Board of Directors).” In such cases, theprovisions of Article 157 to Article 160
inclusive shall not apply.
Article 165(1)

The provisions of Article 157 to Article
160 inclusive shall not apply in cases
where a stock company acquires
shares in such stock company throughtransactions undertaken by that stockcompany in the market or through atakeover bid provided for in Article27-2(6) of the FIEA (hereinafter in thisarticlereferredtoas“MarketTransactions”).

(2)

A company with board of directors may
provide in its articles of incorporation to
the effect that the acquisition of own
shares by Market Transactions may beprescribed by resolution of a board of
directors meeting.

(3)

In cases where the provision of the articles
of incorporation under the provisions of thepreceding paragraph is created, for the
purpose of the application of the provisionsof Article 156(1), “shareholders meeting” insuch paragraph shall be read as“shareholders meeting (or shareholders
meeting or board of director’s meeting in
the cases provided for in Article 165(1)).”

D-38

No.

Singapore Corporate Law

Japanese Corporate Law
Article 173 (Effectuation)(1)

A stock company shall acquire classshares subject to wholly call on theacquisition day.

(2)

In the cases listed in the following
items, shareholders of the class sharessubject to wholly call other than thestock company shall become theperson provided for in each of suchitems in accordance with provisions
made by resolution of the shareholders
meeting under Article 171(1) on theacquisition day:(i)

In cases where there is a provisionon the matters listed in Article
171(1)(i)(a):Shareholders
ofshares under that item (i)(a);(ii)

In cases where there is a provisionon the matters listed in Article
171(1)(i)(b): Bondholders of bonds
under that item (i)(b);(iii) In cases where there is a provisionon the matters listed in Article
171(1)(i)(c): Holders of shareoptions under that item (i)(c); or(iv) In cases where there is a provisionon the matters listed in Article
171(1)(i)(d): Bondholders of thebonds with respect to bonds withshare option under that item (i)(d),and holders of share options
attached to such Bonds with shareoption.
Article 176 (Demand for Sale)
(1)

D-39

If a stock company determines thematters listed in each item of paragraph(1) of the preceding article, it may
demand that the persons under item (ii)of that paragraph sell the shares underitem (i) of that paragraph to such stockcompany; provided, however, that thisshall not apply when one year has
lapsed from the day when such stockcompany acquires knowledge of thegeneralsuccession,
includinginheritances.

No.

Singapore Corporate Law

Japanese Corporate Law(2)

Demands pursuant to the provisions ofparagraph (1) shall be made by disclosing
the number of shares relating to suchdemand (or, for a company with classshares, the classes of the shares and thenumber of shares for each class).

(3)

A stock company may withdraw ademand under the provisions ofparagraph (1) at any time.

Article 197 (Auction of Shares)(1)

A stock company may sell shares thatfall under both of the following items by
auction and tender the proceeds thereof
to the shareholders of such shares:(i)that there is no requirement to givenotice or issue a demand to theshareholder of such sharespursuant to the provisions ofparagraph (1) of the precedingarticle, or Article 294(2); and(ii)

that the shareholders of suchshareshave
notreceived
dividendsofsurplusforconsecutive five years.

(2)

In lieu of sale by auction under theprovisions of the preceding paragraph,a stock company may sell shares underthat paragraph with a market price in an
amount calculated by the method
prescribed by the applicable ordinances
as the market price thereof, and shares
under that paragraph without a market
price using a method other than auction
with the permission of the court. In suchcases, if there are two or more
directors, the petition for suchpermission shall be filed with theconsent of all directors.

(3)

The stock company may purchasesome or all of the shares sold under theprovisions of the preceding paragraph.
In such cases, the stock company shallprescribe the following matters:
(i)

D-40

the number of shares to bepurchased (or, for a company withclass shares, the classes ofshares and the number of sharesfor each class); andNo.

Singapore Corporate Law

Japanese Corporate Law(ii)

The total amount of the monies tobe delivered in exchange for thepurchase of the shares in thepreceding item.

(4)

A company with board of directors shalldetermine the matters listed in each itemof the preceding paragraph by resolutionof a board of directors meeting.

(5)

Notwithstanding the provisions ofparagraph (1) and paragraph (2), incases where there are registeredpledgees of shares, the stock company
may effect the auction under theprovisions of paragraph (1), or the salepursuant to the provisions of paragraph(2), only if such registered pledgees ofshares are the persons who fall underboth of the following items:(i)that there is no requirement to givenotice or issue a demand to such
persons under the provisions ofArticle 196(1) applied mutatis
mutandis under paragraph (3) ofthat paragraph; and(ii)

that the persons have not received
the dividends of surplus to which
they are entitled under theprovisions of Article 154(1) for
consecutive five years.

Article 234 (Treatment of Fractions)(1)

In cases where a stock company
delivers shares in such stock company
to the persons listed in the following
items when any act listed in such items
is carried out, if the number of theshares of such stock company that shallbe delivered to such persons includes afraction of less than one share, thestock company shall sell the number ofshares equivalent to the total sum of thefractions by auction (in cases where thetotal sum includes a fraction of less thanone, such fraction shall be rounded off)and shall deliver the proceeds of that
auction to such persons in proportion to
the fractions attributed to them:
(i)

D-41

the acquisition of shares under theprovisions of Article 170(1): The
shareholders
of
such
stock
company;

No.

Singapore Corporate Law

Japanese Corporate Law(ii)

the acquisition of shares under theprovisions of Article 173(1): The
shareholders
of
such
stock
company;(iii) the allotment of shares without
contribution provided for in theprovisions of Article 185: The
shareholders
of
such
stock
company;(iv) the acquisition of share options
pursuant to the provisions ofArticle 275(1): The holders of theshare options provided for in of236(1)(vii)(a);(v)

mergers (limited to cases wheresuch stock company survives themerger): The shareholders or
members of the company which is
to be extinguished after themerger;(vi) the issuing of shares to be issued
at the time of incorporation undermergercontracts:
The
shareholders or members of thecompany
which
is
to
be
extinguished after the merger;(vii) the acquisition of all issued sharesof another stock company byshareexchange:Theshareholders
of
the
stock
company that effects the shareexchange; or(viii) the issuing of shares to be issued
at the time of incorporation undersharetransferplan:
The
shareholders
of
the
stock
company that effects the sharetransfer plan.
(2)

D-42

In lieu of sale by auction under theprovisions of the preceding paragraph,a stock company may sell shares underthat paragraph with a market price in an
amount calculated by the method
prescribed by the applicable ordinances
as the market price thereof, and shares
under that paragraph without a market
price using a method other than auction
with the permission of the court.

No.

Singapore Corporate Law

Japanese Corporate Law
In such cases, if there are two or more
directors, the petition for suchpermission shall be filed with theconsent of all directors.
(3)

For the purpose of the application of theprovisions of the preceding paragraphin cases where the shares underparagraph (1) are sold, “of that auction”
in paragraph (1) shall be read as “of thatsale.”(4)

A stock company may purchase someor all of the shares sold pursuant to theprovisions of paragraph (2). In suchcases, the following matters shall beprescribed:(i)the number of shares to bepurchased (or, for a company withclass shares, the classes of theshares and the number of sharesfor each class); and(ii)

the total amount of the monies tobe delivered in exchange for thepurchase of the shares under thepreceding item.

(5)

A company with board of directors shalldetermine the matters listed in each
item of the preceding paragraph byresolution of the board of directors.

(6)

The provisions of paragraphs (1) to (4)inclusive shall apply mutatis mutandis
to cases where bonds or share optionsof such stock company are delivered tothe persons provided for in each item ofparagraph (1) when any act listed insuch items is carried out.

Article 299 (Notice ofShareholders’ Meetings)

Convocationof

Article 301 (Giving Reference Documents for
Shareholders’ Meetings and Voting Forms)
The directors shall, when dispatching a
notice under Article 299(1), give theshareholders the document stating mattersof reference for the exercise of votes and the
document to be used by the Shareholders forexercise the votes pursuant to the provisionsof the applicable ordinances.

D-43

No.

Singapore Corporate Law

Japanese Corporate Law

Settlement System
26.

Shares of the listed company will be
registered in the name of the CDP or its
nominee and held by the CDP for and on
behalf of persons who maintain, either
directly or through depository agents,
securities accounts with the CDP.
Persons named as direct securities
account holders and depository agents inthe depository register maintained by the
CDP, rather than CDP itself, will betreated under the Singapore Companies
Act as members of the listed company inrespect of the number of shares credited
to their respective securities accounts.

There is no equivalent provision in theJapanese Corporate Law.
For reference, the settlement system of the
TSE is as follows:−

Japan Securities Depository Center,
Inc. (JASDEC) is the book-entry
transfer institution in accordance with
the Act on Book-Entry Transfer ofCompany Bonds, Shares, etc. whichfacilitated the dematerialization of awide range of securities.

−

All domestic listed stocks became
paperless in January 2009. JASDEC
offers following services.

Withdrawal from book-entry settlement
system1.

Book-entry transfer for stocks, etc.

2.

Book-entry transfer for commercial
papers3.

Book-entry transfer for corporate
bonds

4.

Book-entry transfer for investment
trusts

A fee of S$10.00 for each withdrawal of
1,000 Shares or less and a fee of
S$25.00 for each withdrawal of morethan 1,000 Shares is payable.

5.

DVP settlement services for offexchange transaction deliveries

6.

Pre-settlement matching system

In addition, a fee of S$2.00 or such otheramount as directors of the listedcompany may decide, is payable to theshare registrar for each share certificate
issued and a stamp duty of S$10.00 isalso payable where shares are withdrawn
in the name of the person withdrawing
the shares or S$0.20 per S$100.00 orpart thereof of the last-transacted pricewhere it is withdrawn in the name of athird party.

7.

Custodystocks8.

Other businesses

Persons holding shares in securities
accounts with the CDP may withdraw
shares from the book-entry settlement
system in the form of physical sharecertificates. Such share certificates will,
however, not be valid for delivery
pursuant to trades transacted on the
SGX-ST, although they will be prima facie
evidence of title.

servicesforforeign−

Settlement of securities related toregular stock transactions in theexchange market is conducted on thethird business day after the transaction
date (T+3) through book-entry transfer
between JSCC’s account and theclearing
participant’s
account
at
JASDEC.

−

Settlement of securities between
customers and securities companies isconducted through book-entry transfer
to or from the customer’s account atsecurities companies, etc.

Since all of the listed shares have been
computerized and become paperless,custodization process will not be required.

D-44

No.

Singapore Corporate Law

Japanese Corporate Law

Book-entry settlement system
Persons
holding
physicalshare
certificates who wish to trade on the
SGX-ST must deposit their sharecertificates with the CDP together withthe duly executed and stamped
instruments of transfer in favour of the
CDP, and have their respective securities
accounts credited with the number ofshares deposited before they can effectthe desired trades. A fee of S$20.00 is
payable upon the deposit of each
instrument of transfer with the CDP.
Transactions in shares under the bookentry settlement system will be reflectedby the seller’s securities account being
debited with the number of shares soldand the buyer’s securities account being
credited with the number of shares being
acquired.
No transfer of stamp duty is currently
payable for shares that are settled on a
book-entry basis.
A Singapore clearing fee for trades inshares on the SGX-ST is payable at therate of 0.05% of the transaction value
subject to a maximum of S$200.00 pertransaction. The clearing fee, instrumentof transfer deposit fee and sharewithdrawal fee may be subject toSingapore Goods and Services Tax at theprevailing rate (currently 7.0%).
Dealings of shares will be carried out in
Singapore Dollars and will be effected forsettlement on the CDP on a scriplessbasis.
Settlement of trades on a normal “ready”
basis on the SGX-ST generally takes
place on the third Market Day following
the transaction date, and payment for the
securities is generally settled on thefollowing business day.

D-45

This page has been intentionally left blank.

E-1

Rule 703(1) does not apply to particular information while each of thefollowing conditions applies.

(3)

Condition 2: the information is confidential; andCondition 1: a reasonable person would not expect the information to
be disclosed;

Rule 703(1) does not apply to information which it would be a breachof law to disclose.

would be likely to materially affect the price or value of its
securities.

is necessary to avoid the establishment of a false market in theissuer’s securities; or

(2)

(b)

(a)

703(1) An issuer must announce any information known to the issuer
concerning it or any of its subsidiaries or associated companies
which:

Disclosure of Material Information

SGX-ST LISTING MANUAL RULE

(1)

Where a body which decides a listed company’s businessexecution makes a decision on carrying out any of the matters
enumerated in the following (a) through (ap) (including cases

Rule 402. Disclosure of Corporate Information
Where a listed company falls under any of the following items (excluding
those which the TSE deems as matters whose effect on investors’
investment decisions is of minor significance, such as cases which fallunder the criteria specified by the TSE Securities Listing Enforcement
Rules), the listed company must disclose details immediately pursuant
to the provisions of the TSE Securities Listing Enforcement Rules:

Rule 401. Faithful Execution of Business, etc.
A listed company shall make efforts to carry out such faithful executionof business as strengthening prompt, accurate and fair disclosure ofcorporate information at all times from the viewpoint of investors with fullrecognition that timely and appropriate disclosure of corporate
information to investors is the basis of a sound market for financial
instruments[Note: Unless otherwise stated, all rules below refer to those of the
TSE Securities Listing Regulations.]

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSCOMPARISON BETWEEN SINGAPORE AND JAPANESE LISTING RULES AND SECURITIES LAWS

APPENDIX E

E-2

(5)

(4)

ensure that its directors and executive officers are familiar with
the Exchange’s disclosure requirements and Corporate
Disclosure Policy.

(b)

The Exchange will not waive any requirements under this Rule.

observe the Corporate Disclosure Policy set out in Appendix 7.1of the Manual, and(a)In complying with the Exchange’s disclosure requirements, an issuer
must:(iv) the information is a trade secret.

(iii) the information is generated for the internal management
purposes of the entity;isthe information comprises matters of supposition
insufficiently definite to warrant disclosure;

(ii)

or

the information concerns an incomplete proposal or negotiation;(i)

Condition 3: one or more of the following applies:

SGX-ST LISTING MANUAL RULE

An offering of shares issued by a stock company or treasury
shares to be disposed of by the stock company prescribed in
Article 199, Paragraph 1 of the Japanese Companies Act toentities (including entities who will subscribe for preferred
equity investments issued by a cooperative structured
financial institution) who will subscribe for such shares(including an offering provided by foreign laws and regulations
corresponding thereto (limited to cases where the company is
a listed foreign company; the same shall apply hereinafter) incases of an offering of treasury shares to be disposed of toentities who will subscribe for such shares), an offering ofentities who will subscribe for offered subscription warrants
prescribed in Article 238, Paragraph 1 of the same Act(including an offering of entities who will subscribe for own
subscription warrants to be disposed), or a secondary offeringof shares or subscription warrants;
Shelf-registration (including its withdrawal) pertaining tooffering or secondary offering prescribed in the preceding (a)or commencement of a demand survey for such offering or
secondary offering pertaining to such shelf-registration;
Decrease in amount of capital;
Decrease in amount of capital reserve or profit reserve;

(a)

(b)

(c)
(d)

where the body makes a decision that it will not carry out matterspertaining to such decision):

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-3

SGX-ST LISTING MANUAL RULE

A gratis allotment of shares or gratis allotment of subscription
warrants;(f)

Dividend from surplus;
Share exchange;
Share transfer;
Merger;Corporate split

(h)
(i)
(j)
(k)
(l)

Dissolution (excluding dissolution by means of a merger);
Commercialization of a new product or new technology;

(n)
(o)

(m) Transfer or acquisition of all or part of the business;

Stock split or reverse stock split;(g)(f-2) Shelf registration pertaining to gratis allotment of subscription
warrants in the preceding (f.) (including cancellation of suchregistration), or commencement of surveys on demand or
expected exercise of rights for the gratis allotment ofsubscription warrants pertaining to such registration;

Acquisition of own stock pursuant to the provisions of Article
156, Paragraph 1 of the Japanese Companies Act (including
cases where the provisions apply by replacing terms pursuant
to the provisions of Article 163 and Article 165, Paragraph 3 ofthe same Act) or the provisions of foreign laws and regulations
corresponding thereto, or the provisions of Article 15 of thePreferred Equity Investment Act;(e)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-4

SGX-ST LISTING MANUAL RULE

Application for delisting or withdrawal of registration of astock, etc. to a domestic financial instruments exchange or aforeign financial instruments exchange, etc.;
Petition for commencement of bankruptcy proceedings,
commencementofrehabilitation
proceedings,
orcommencement of reorganization proceedings;

(u)

(v)

(w) Commencementofanewbusiness(includingcommercialization of sales of new products or provision of
new services; the same shall apply hereinafter);

Suspension or abolition of all or part of the business;(t)Transfer or acquisition of fixed assets (meaning fixed assets
referenced in Article 2, Item 22 of the Corporation Tax Act (ActNo. 34 of 1965); the same shall apply hereinafter);(r)

Lease of fixed assets;

Transfer or acquisition of shares or equity interest
accompanied by change in a subsidiary, etc. (meaning a
subsidiary prescribed in Article 166, Paragraph 5 of the FIEA,
and in cases of a listed foreign company (limited to an entity
deemed necessary by the TSE), its subsidiary, affiliatedcompany or other entities deemed necessary by the TSE; thesame shall apply hereinafter) or other matters accompanied
by change in a subsidiary, etc.;

(q)

(s)

Business alliance or dissolution of business alliance;(p)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-5

SGX-ST LISTING MANUAL RULE

Request for a bid or any other onerous acquisition to competewith a takeover bid prescribed in the first sentence of thepreceding (x) pertaining to a stock, etc. prescribed in Article
27-2, Paragraph 1 of the FIEA whose issuer is such listedcompany or an act to collect a stock, etc. as prescribed in therelevant enforcement ordinance pertaining to such stock, etc.
(hereinafter referred to as a “takeover bid, etc.” in thisSub-item (y)) or an announcement of an opinion or arepresentation to shareholders concerning a takeover bid,
etc.;
Issue of subscription warrants to officers or employees of alisted company or its subsidiaries, etc., or other grant ofanything deemed to be a stock option or an issue of shares;

(y)

(z)

(ac) Change in a trade name or a corporate name;(ab) Rationalization such as personnel reduction;(aa) Change in representative directors or representative
executive officers (including officers who should represent a
cooperative structured financial institution);A takeover bid prescribed in Article 27-2, Paragraph 1 of the
FIEA with respect to a stock, etc. prescribed in the same
paragraph (limited to cases where the provisions of the mainclause in the same paragraph apply) or a takeover bid
prescribed in Article 27-22-2, Paragraph 1 of the FIEA withrespect to a listed stock, etc. prescribed in Article 24-6,
Paragraph 1 of the FIEA;(x)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-6

SGX-ST LISTING MANUAL RULE(aj) Change in certified public accountants, etc. who prepare audit
certification, etc. of financial statements, etc. or quarterly
financial statements, etc. contained in a securities report or aquarterly report;(ai) Matters accompanied by an increase in the total number ofunits of ordinary equity contributions;(ah) Early redemption of all or part of a listed bond, listed
convertible bond or listed exchangeable corporate bond or
convocation of a bondholders meeting and any otherimportant matters relating to rights concerning a listed bond,listed convertible bond or a listed exchangeable corporatebond;(ag) Petition for mediation in accordance with specified mediation
procedures on the basis of the Act on Specified Mediation for
Promoting Adjustment of Specified Liabilities, etc. (Act No.
158 of 1999);(af) Petition pursuant to the provisions of Article 74, Paragraph 5of the Deposit Insurance Act (Act No. 34 of 1971);(ae) Change in the end date of the business year;(ad) Change in the number of shares for a Share Unit of a stock orabolition or introduction of the provisions for the number ofshares for a Share Unit;

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-7

SGX-ST LISTING MANUAL RULE(ap) In addition to the matters referenced in (a) through thepreceding (ao), important matters related to operation, whichhave a remarkable effect on investors’ investment decisions.

(ao) Change in contents and other schemes of a listed stock
without voting rights, a listed stock with voting rights (limited
to such stock issued by a company which issues multiple
classes of stocks with voting rights), or a listed preferredstock, etc. (excluding a stock whose dividends are linked to a
subsidiary); or(an) Amendment to the articles of incorporation;(am) Submission of internal control reports containing content to
the effect that there is a material deficiency in the internal
control system that should be disclosed or that the evaluation
result of the internal control system cannot be stated;(al) Shareholder services will not be entrusted to a shareholder
services agent approved by the TSE;(ak) Putting notes on matters relating to the going concern
assumption in financial statements, etc. or quarterly financial
statements, etc.;

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-8

SGX-ST LISTING MANUAL RULE
(2)

Damage arising from a disaster or damage which occurs in
the course of business execution;
Change in major shareholders (meaning major shareholders
as prescribed in Article 163, Paragraph 1 of the FIEA; thesame shall apply hereinafter) or the largest shareholder(meaning, out of the major shareholders, the shareholder(including preferred equity investors as prescribed by thePreferred Equity Investment Act; the same shall apply
hereinafter) with the largest number of shares (including theshares held in the name of another entity (including ahypothetical entity) but excluding the entities specified by the
Cabinet Office Ordinance on Regulations of Securities
Transactions, etc. (Cabinet Office Ordinance No. 59 of 2007;
hereinafter referred to as the “Cabinet Office Ordinance on
Transactions Regulations”) in consideration of the mode of
the possession of shares as prescribed in the same paragraphand other circumstances; the same shall apply hereinafter));
Fact which causes delisting of a specified security (meaning a
specified security prescribed in Article 163, Paragraph 1 of the
FIEA; the same shall apply in this Sub-item (c)) or options
pertaining to a specified security;

(a)

(b)

(c)

Where any of the facts referenced in the following (a) through (z)occurs:EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-9

SGX-ST LISTING MANUAL RULE

Where a lawsuit of a claim relating to property rights is raisedor a judgment is made as to such lawsuit or all or part of theaction pertaining to such lawsuit is completed without ajudicial decision;
Where a petition for a provisional disposition order seeking forsuspension of a business or any other disposition
corresponding thereto is made, or there is a judicial decisionon such petition, or all or part of the procedures for such
petition are completed without a judicial decision;
Cancellation of a license, suspension of a business or any
other disciplinary action corresponding to these on the basisof laws and regulations by an administrative agency or
accusation of violation of laws and regulations by anadministrative agency;
Change in controlling shareholders or other affiliatedcompanies prescribed in Article 8, Paragraph 17, Item 4 of the
Financial Statements, etc. Rules;
Petition or notification for commencement of bankruptcy
proceedings, commencement of rehabilitation proceedings, orcommencement of reorganization proceedings, or executionof enterprise mortgage by a creditor or any entity other thansuch listed company (hereinafter referred to as “petition forcommencement of bankruptcy proceedings, etc.”);

(d)

(e)

(f)

(g)

(h)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-10

SGX-ST LISTING MANUAL RULE

As a result of an occurrence of a dishonor, etc., petition forcommencement of bankruptcy procedures, etc., or a factcorresponding to these pertaining to a debtor or a main debtor
concerning guarantee obligations, default of a right to obtainreimbursement against such main debtor is likely to occur
where accounts receivable, loans or other receivables or suchguarantee obligations against such debtors;

(k)

(n)

Discovery of resources;(m) Exemption of obligations or extension of a repayment
deadline (limited to an extension that the TSE deems
equivalent to exemption of obligations) by a creditor orassumption or fulfillment of obligations by a third party;

Suspension of trade with a main business partner (meaning abusiness partner with more than 10% of the total sales or of
the total purchase amount in the previous business year; thesame shall apply hereinafter) or suspension of trade with two
or more business partners for the same reason or in the same
period;Petition for commencement of bankruptcy proceedings
pertaining to a parent company, etc.;

(j)

(l)

Dishonor of a bill or a check (limited to where the reason is a
shortage of a fund to be paid) or suspension of trading by aclearing house (hereinafter referred to as “dishonor, etc.”;(i)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-11

SGX-ST LISTING MANUAL RULE

Claim for suspension of issue of a stock or a subscription
warrant or disposition of treasury stock by shareholders(including ordinary equity investors prescribed by thePreferred Equity Investment Act; the same shall apply in thefollowing (p));
Demand for convocation of a general shareholders meetingby shareholders (including a general meeting of ordinary
equity investors and that of preferred equity investors);
Market value of all or part of the securities held (limited tosecurities listed on a domestic financial instruments exchange
other than a stock of a subsidiary, etc. of such listed company)
falls below book values as of the end of a business year or aquarterly accounting period (an amount of value calculated on
the basis of the closing prices of a financial instruments
exchange on such day (where no such closing prices areavailable, the closing prices of a financial instruments
exchange on a preceding day)) (limited to where such listedcompany adopts cost method as an evaluation method of
securities);
Acceleration of obligations pertaining to a corporate bond;Convocation of a meeting of bondholders for a listed bond,listed convertible bond or listed exchangeable corporate bondand other important facts pertaining to rights of a listed bond,listed convertible bond or listed exchangeable corporate
bond;

(o)

(p)

(q)

(r)
(s)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-12

SGX-ST LISTING MANUAL RULE

Change in certified public accountants, etc. who prepare an
audit certification, etc. of financial statements, etc. orquarterly financial statements, etc. contained in a securities
report or a quarterly report (excluding a case of disclosing thedetails pursuant to the provisions of the preceding item, wherea body of a listed company which decides its businessexecution makes a decision on changing such certified public
accountants, etc. (including cases where the body makes adecision that it will not carry out matters pertaining to suchdecision));A securities report or a quarterly review report to which audit
reports or quarterly review reports of Article 3, Paragraph 1 in
the Cabinet Office Ordinance on Audit Certification preparedby two (2) or more certified public accountants or audit firms(including audit reports or interim audit reports pertaining tocertification corresponding to audit certification by certified
public accountants or audit firms) are attached is not expected
to be submitted to the Prime Minister, etc. within a period
specified in Article 24, Paragraph 1 of the FIEA or Article
24-4-7, Paragraph 1 of the FIEA or has not been submitted
within such period (except cases where the company has
disclosed that such report is not expected to be submitted
within such period), was submitted after such disclosure had
been made, or has received approval of the Prime Minister,
etc. related to extension of such period;

(t)

(u)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-13

SGX-ST LISTING MANUAL RULE

The fact that an audit report attached to financial statements,
etc. or a quarterly review report attached to quarterly financial
statements, etc. has come to contain a “qualified opinion withexceptions” or “qualified conclusion with exceptions” ofcertified public accountants, etc. with making issues
concerning a going concern assumption as exceptions, or an“adverse opinion”, “negative conclusion”, or a fact that
“opinions are not expressed” or a fact “conclusions are notexpressed” by a certified public accountant (in cases of a
specified business company, these shall include a “qualified
opinion with exceptions”, an “opinion that interim financial
statements, etc. do not provide useful information”, and a factthat “opinions are not expressed” by a certified public
accountant, etc. with making issues concerning a going
concern assumption as exceptions);(x)

In addition to the facts referenced in a. through the precedingw., matters relating to operation, business or assets of such
listed company or important matters related to a listed stock,etc. which have a remarkable effect on investors’ investment
decisions.

(w) Where a notice of canceling a shareholder services agent
agreement is received, there is a likelihood that theshareholder services will not be entrusted to a shareholder
services agent approved by the TSE, or it has decided not to
entrust that the shareholder services will not be entrusted to ashareholder services agent approved by the TSE; or(v-2) An internal control audit report regarding an internal control
report has come to contain an “adverse opinion” or a fact that
“opinions are not expressed”;(v)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-14

SGX-ST LISTING MANUAL RULE

(1)

Share exchange;
Share transfer;
Merger;Corporate split;
Transfer or acquisition of all or part of the business;
Dissolution (excluding dissolution by means of a merger);

(a)
(b)
(c)
(d)
(e)
(f)

Where a body which decides business execution of a subsidiary,etc. of a listed company makes a decision on carrying out any of thefollowing matters referenced in (a) through (s) with respect to such
subsidiary, etc. (including where decision is made for not carryingout matters pertaining to such decision):

Rule 403. Disclosure of Information of Subsidiaries, etc.
A listed company shall disclose details immediately pursuant to theprovisions of the TSE Securities Listing Enforcement Rules, where its
subsidiary, etc. falls under any of the following items (excluding thosewhich the TSE deems as matters whose effect on investors’ investment
decisions is of minor significance, such as facts which fall under thecriteria specified by the TSE Securities Listing Enforcement Rules withregard to the matters referenced in Item 1 and facts referenced in Item2, and those that meet criteria prescribed by the Cabinet Office
Ordinance on Transactions Regulations as matters which have an effectof minor significance on investors’ investment decisions with regard to
the matters referenced in Article 166, Paragraph 2, Item 5 of the FIEA as
prescribed in Item 3, Sub-item (a), and the facts referenced in Article
166, Paragraph 2, Item 6 as prescribed in Item 3, Sub-item (b)):

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-15

SGX-ST LISTING MANUAL RULE

Commencement of a new business;
A takeover bid prescribed in Article 27-2, Paragraph 1 of the
FIEA with respect to a stock, etc. as prescribed in the same
paragraph (limited to cases where the provisions of the mainclause in the same paragraph apply) or a takeover bid
prescribed in Article 27-22-2, Paragraph 1 of the FIEA withrespect to a stock, etc. as prescribed in Article 24-6,
Paragraph 1 of the FIEA;

(n)
(o)

(m) Petition for commencement of bankruptcy proceedings,
commencementofrehabilitation
proceedings,
orcommencement of reorganization proceedings;

Suspension or abolition of all or part of the business;

Transfer or acquisition of fixed assets;

(j)

(l)

Transfer or acquisition of shares or equity interest
accompanied by change in a sub-subsidiary (meaning a
sub-subsidiary prescribed in Article 29, Item 2 of the FIEA
Enforcement Ordinance, and meaning a subsidiary, etc. of thesubsidiary, etc. of a listed foreign company (limited to an entity
deemed necessary by the TSE); the same shall apply
hereinafter.), or matters accompanied by change in a subsubsidiary;(i)Lease of fixed assets;

Business alliance or dissolution of business alliance;

(h)

(k)

Commercialization of a new product or new technology;(g)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-16

SGX-ST LISTING MANUAL RULE

(2)

Petition pursuant to the provisions of Article 74, Paragraph 5of the Deposit Insurance Act;
Petition of arbitration by specific mediation procedures on thebasis of the law on specified mediation for promoting
adjustment of specified obligations, etc.; orIn addition to the matters referenced in (a) through thepreceding (r), important matters related to operation, businessor assets of a subsidiary of such listed company which have aremarkable effect on investors’ investment decisions;

(q)

(r)

(s)

Damage arising from a disaster or damage which occurs in
the course of business execution;
Where a lawsuit of a claim relating to property rights is raisedor a judgment is made as to such lawsuit or all or part of theaction pertaining to such lawsuit is completed without ajudicial decision;
Where a petition of a provisional order seeking for suspensionof a business or any other disposition corresponding to this is
made or there is a judicial decision on such petition or all orpart of the proceedings for such petition is completed without
a judicial decision;

(a)

(b)

(c)

Where any of the facts referenced in the following (a) through (l)occurs to a subsidiary, etc. of a listed company:

Change in a trade name or a corporate name;(p)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-17

SGX-ST LISTING MANUAL RULE

Suspension of trade with a main business partner orsuspension of trade with two or more business partners for thesame reason or in the same period;
Exemption of obligations or extension of a repayment
deadline (limited to an extension that the TSE deems
equivalent to exemption of obligations) by a creditor orassumption or fulfillment of obligations by a third party;(j)

Petition for commencement of bankruptcy proceedings, etc.
pertaining to a sub-subsidiary;

(g)

(i)

Dishonor, etc.;(f)

As a result of an occurrence of a dishonor, etc., petition forcommencement of bankruptcy procedures, etc., or a factcorresponding to these pertaining to a debtor or a main debtor
concerning guarantee obligations, default of a right to obtainreimbursement against such main debtor is likely to occur
where accounts receivable, loans or other receivables or suchguarantee obligations against such debtors;

Petition for commencement of bankruptcy proceedings, etc. by acreditor or any other entity other than such subsidiary, etc.;

(e)

(h)

Cancellation of a license, suspension of a business or any
other disciplinary action corresponding to them on the basis oflaws and regulations by an administrative agency or
accusation of violation of laws and regulations by anadministrative agency;(d)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-18

SGX-ST LISTING MANUAL RULE

Where a body which decides the business execution of alinked subsidiary makes a decision on carrying out the mattersreferenced in Article 166, Paragraph 2, Item 5, Sub-items (i)through (viii) of the FIEA with respect to such linked subsidiary(including cases where decision is made not to carry out
matters relating to such decision); or
Where a fact referenced in Article 166, Paragraph 2, Item 6,
Sub-item (i) or (ii) of the FIEA occurs to a linked subsidiary.

(a)

(b)

Where a listed company owns a linked subsidiary (meaning alinked subsidiary as prescribed in Article 49, Item 11 of Cabinet
Office Ordinance on Transactions Regulations; the same shallapply in this item and in Rule 405, Paragraph 3), in addition to thepreceding two items, in cases of such linked subsidiary fallingunder the following (a) or (b):In addition to the facts referenced in (a) through the preceding(k), important matters relating to operation, business or assetsof such subsidiary which have a remarkable effect on
investors’ investment decisions;(l)Rule 411-2. Implementation of Timely and Appropriate Disclosure of
Corporate Information
The provisions of the this section state the minimum requirements,
methods, etc. that a listed company should observe with respect totimely disclosure of corporate information, etc., and a listed company
shall not use the provisions of the same section as an excuse for failures
to disclose corporate information in a more timely and appropriatemanner.

(3)

Discovery of resources; or(k)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-19

SGX-ST LISTING MANUAL RULE

The information will not cause misunderstanding regarding
investment decisions; and(3)

The TSE shall prescribe necessary matters concerning
examination of disclosure of corporate information which a listedcompany carries out pursuant to the provisions of this section as
the Guidelines Concerning Listed Company Compliance, etc.

In addition to the matters referenced in the preceding three
items, the appropriateness of disclosure is not lacking.

The information to be disclosed is not lacking information
deemed to be significant to investors’ investment decisions;

(2)

(4)

The contents of the information to be disclosed do not containfalse statements;(1)

Where a listed company carries out disclosure of corporate
information pursuant to the provisions of this section, it shallobserve the matters provided in the following items:

Rule 413. Explanation of Corporate Information to the Exchange
Where a listed company carries out disclosure of corporate information
pursuant to the provisions of Rules 402 through 411-2, it shall make priorexplanation of the details pertaining to such disclosure to the TSE.

2.

1.

Rule 412. Examination, etc. of Disclosure of Corporate Information

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-20

901

The objective of this Chapter is to guard against the risk thatinterested persons could influence the issuer, its subsidiaries or
associated companies, to enter into transactions with interested
persons that may adversely affect the interests of the issuer or its
shareholders.

Part I – Scope of Chapter

Chapter 9 Interested Person Transactions

SGX-ST LISTING MANUAL RULE

Where such fact is disclosed by such listed company or the TSE
has decided to request such listed company to submit a reportprescribed in Rule 502, Paragraph 1, the TSE shall cancel thedesignation. In this case, the TSE shall publicize that fact and thereason for the cancellation.

2.

Japanese law and the TSE Rules do not have comparable rules which
specifically regulate transactions with interested persons, and do not
require such interested person transactions to be subject toshareholders’ approval. However, certain provisions under the TSE
Rules or Japanese law with respect to (i) disclosure of related party
transactions and (ii) conflict of interests may fulfil similar functions as
Chapter 9 of the Listing Manual.

Where the TSE deems that a listed company does not immediately
carry out disclosure of corporate information on the basis of theprovisions of Chapter 4, Section 2 of the TSE Securities Listing
Regulations and it is necessary to make it known that such fact is
not disclosed as specified by the TSE Securities Listing
Enforcement Rules, the TSE shall designate all or part of the listed
securities issued by such listed company as a Disclosure In
Question security. In this case, the TSE shall publicize that fact andthe reason for the designation.

1.

Rule 506. Designation as Disclosure In Question Securities andCancellation of Designation

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-21

903

902

the economic and commercial substance of the interested
person transaction, instead of legal form and technicality.

(2)

Apart from the rules in this Chapter, an issuer must also observe
applicable requirements in Chapter 10.

objective of this Chapter; and(1)

In applying these rules, regard must be given to:

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

TSE Rules do not directly refer to Related Party Transactions. However,where timely disclosure is required of the company for certaintransactions under Rule 402 of the TSE Securities Listing Regulations,such as third-party allotment of shares, business alliances, business
transfers, transfers or acquisition of fixed assets, etc., whereby details
on the relationship between the company and the counterparty isdisclosed under the relevant press release, it is a requirement todisclose whether such counterparty is a related party of the company orotherwise.

Under the FIEA and related regulations, details regarding material
Related Party Transactions undertaken by a company for the previous
fiscal year shall be disclosed under the notes to the relevant financial
statements for such fiscal year. Details disclosed would include the typeof related party, the name (and, in the case where the related party is not
an individual, the address) of such related party, the relationship of such
related party with the company, cross-holding of shares between such
related party and the company, nature of transaction, value oftransaction, terms of transaction including decision-making policy
regarding such terms, etc.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-22

904

(3)

a subsidiary of the issuer that is not listed on the Exchangeor an approved exchange; oran associated company of the issuer that is not listed on
the Exchange or an approved exchange, provided that thelisted group, or the listed group and its interested
person(s), has control over the associated company.

(b)

(c)

the lending or borrowing of money, the guaranteeing orproviding security for a debt incurred or the indemnifying ofa guarantor for guaranteeing or providing security; andthe forgiving of a debt, the releasing of or neglect inenforcing an obligation of another, or the assuming of theobligations of another.

(a)

(b)

“financial assistance” includes:

the issuer;“entity at risk” means:

(2)

(a)

“approved exchange” means a stock exchange that has rules
which safeguard the interests of shareholders against interested
person transactions according to similar principles to this
Chapter.

(1)

For the purposes of this Chapter, the following definitions apply:

Part II – Definitions

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-23

(4)

(d)

the trustee-manager or controlling unitholder of thebusiness trust; or

(ii)

(i)

a director, chief executive officer or controllingshareholder of the investment manager (s) (or any
equivalent) of the investment fund;In the case of an investment fund which is not a REIT or
business trust, “interested person” means:(iii) an associate of any of the persons or entities in (i) or(ii) above.

a director, chief executive officer, or controllingshareholder of the trustee-manager of the businesstrust;(i)

In the case of a business trust, “interested person” means:(c)an associate of any such director, chief executive
officer, or controlling shareholder.

(ii)

In the case of a REIT, “interested person” shall have themeaning defined in the Code on Collective Investment
Schemes issued by the MAS.

a director, chief executive officer, or controllingshareholder of the issuer; or(i)

In the case of a company, “interested person” means:

(b)

(a)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-24

the investment manager(s) (or any equivalent), thetrustee or controlling unitholder of the investment
fund; orthe provision or receipt of services;

the issuance or subscription of securities;

the granting of or being granted options; andthe establishment of joint ventures or joint investments;

(c)

(d)

(e)

(f)

whether or not in the ordinary course of business, and whether
or not entered into directly or indirectly (for example, throughone or more interposed entities).

the acquisition, disposal or leasing of assets;(b)

the provision or receipt of financial assistance;“transaction” includes:

(6)

(a)

“interested person transaction” means a transaction between an
entity at risk and an interested person.

(5)(iii) any associate of any of the persons or entities in (i) or(ii) above.

(ii)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSE-25

Rule 905(1) and (2) does not apply to any transaction below$100,000.

(3)

(2)

5% of the group’s latest audited net tangible assets, whenaggregated with other transactions entered into with the sameinterested person during the same financial year. However, atransaction which has been approved by shareholders, or isthe subject of aggregation with another transaction that has
been approved by shareholders, need not be included in any
subsequent aggregation.

(b)

Rule 906(1) does not apply to any transaction below $100,000.

5% of the group’s latest audited net tangible assets; or(a)906(1) An issuer must obtain shareholder approval for any interested
person transaction of a value equal to, or more than:If the aggregate value of all transactions entered into with thesame interested person during the same financial year amounts to
3% or more of the group’s latest audited net tangible assets, theissuer must take an immediate announcement of the latest
transaction and all future transactions entered into with that sameinterested person during that financial year.

(2)

905(1) An issuer must make an immediate announcement of any interested
person transaction of a value equal to, or more than, 3% of thegroup’s latest audited net tangible assets.

Part III – General Requirements

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-26

908

Aggregate value of allinterested persontransactions during thefinancial year underreview (excludingtransactions less than$100,000 andtransactions conductedunder shareholders’mandate pursuant toRule 920)

Aggregate value of allinterested persontransactions conductedunder shareholders’mandate pursuant toRule 920 (excludingtransactions less than$100,000)(1)

Transactions between an entity at risk and interested persons
who are members of the same group are deemed to betransactions between the entity at risk with the same interested
person.

In interpreting the term “same interested person” for the purpose ofaggregation in Rules 905 and 906, the following applies:

Name ofinterested person

No equivalent provision.

No equivalent provision.

907

An issuer must disclose the aggregate value of interested persontransactions entered into during the financial year under review in its
annual report. The name of the interested person and thecorresponding aggregate value of the interested person transactions
entered into with the same interested person must be presented in
the following format:

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSSGX-ST LISTING MANUAL RULE

E-27

909

If an interested person, (which is a member of a group) is listed,
its transactions with the entity at risk need not be aggregatedwith transactions between the entity at risk and other interested
persons of the same group, provided that the listed interested
person and other listed interested persons have boards the
majority of whose directors are different and are not accustomed
to act on the instructions of the other interested persons andtheir associates and have audit committees whose members arecompletely different.

In the case of a partly-owned subsidiary or associated company,
the value of the transaction is the issuer’s effective interest inthat transaction;

In the case of a joint venture, the value of the transaction
includes the equity participation, shareholders’ loans andguarantees given by the entity at risk; and

(1)

(2)

The value of a transaction is the amount at risk to the issuer. This is
illustrated by the following examples:

As an example, Entity-At-Risk A, Listed B and Listed C are all
subsidiaries of Ultimate D. Listed B, Listed C and Ultimate D haveboards, the majority of whose directors are different and are notaccustomed to act on the instructions of Ultimate D and its associates
and have audit committees whose members are completely different.
Transactions between Entity-At-Risk A and Listed B need not be
aggregated with transactions between Entity-At-Risk A and Listed Cor with transactions between Entity-At-Risk A and Ultimate D.

(2)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSE-28

In the case of borrowing of funds from an interested person, thevalue of the transaction is the interest payable on the borrowing.
In the case of lending of funds to an interested person, the valueof the transaction is the interest payable on the loan and thevalue of the loan.

An announcement relating to any sale or proposed sale of units of theissuer or those of its entity at risk’s property projects must state thename of the project, the name of each purchaser, the unit number, thesale price and the percentage discount given.

In deciding on any sale of units of its property projects to an issuer’s
interested persons or a relative of a director, chief executive officer orcontrolling shareholder, an issuer’s board of directors must be
satisfied that the terms of the sale(s) are not prejudicial to theinterests of the issuer and its minority shareholders. The audit
committee must review and approve the sale(s) and satisfy itself thatthe number and terms of the sale(s) are fair and reasonable and are
not prejudicial to the interests of the issuer and its minority
shareholders.

912

An issuer is required to comply with Rule 905 for a sale orproposed sale of any units of its non-local property projects, or
those of its entity at risk, to its interested person.

911

(2)

910(1) An issuer must announce a sale or proposed sale of any units of its
local property projects or those of its entity at risk to an interested
person or a relative of a director, chief executive officer orcontrolling shareholder within two weeks of the sale or proposedsale, regardless of whether the sale or proposed sale is required to
be announced under Rule 905.

Part IV – Sale of Property Units(3)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-29

An interested person and any nominee of the interested person must
abstain from voting on all resolutions to approve the sales or
proposed sales to the interested persons.

914

915

A payment of dividends, a subdivision of shares, an issue of
securities by way of a bonus issue, a preferential offer, or an
off-market acquisition of the issuer’s shares, made to allshareholders on a pro-rata basis, including the exercise ofrights, options or company warrants granted under the
preferential offer.

The grant of options, and the issue of securities pursuant to theexercise of options, under an employees’ share option scheme
approved by the Exchange.

A transaction between an entity at risk and an investee
company, where the interested person’s interest in the investee
company, other than that held through the issuer, is less than5%.

A transaction in marketable securities carried out in the open
market where the counterparty’s identity is unknown to theissuer at the time of the transaction.

(1)

(2)

(3)

(4)

The following transactions are not required to comply with Rules 905,
906 and 907:

Part V – Exceptions

No equivalent provision.

Where a sale or proposed sale to an issuer’s interested person
requires shareholder approval, the issuer must obtain the approval
within six weeks of the date of the sale or proposed sale.

913

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSSGX-ST LISTING MANUAL RULE

E-30

916

the sale prices are applied consistently to all customers orclass of customers.

(b)

The receipt of financial assistance or services from a financial
institution that is licenced or approved by the Monetary Authorityof Singapore, on normal commercial terms and in the ordinary
course of business.

Director’sfeesandremuneration,
andemployment
remuneration (excluding “golden parachute” payments).

(7)

(8)

(1)

The entering into, or renewal of a lease or tenancy of real
property of not more than 3 years if the terms are supported byindependent valuation.

The following transactions are not required to comply with Rule 906:

The provision of financial assistance or services by a financial
institution that is licenced or approved by the Monetary Authorityof Singapore, on normal commercial terms and in the ordinary
course of business.

Such transactions include telecommunication and postal
services, public utility services, and sale of fixed price goods atretail outlets.

the goods or services are sold or rendered based on a fixed
or graduated scale, which is publicly quoted; and(a)A transaction between an entity at risk and an interested person
for the provision of goods or services if:

(6)

(5)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-31

(3)

(2)

the issuer confirms by an announcement that its audit
committee is of the view that the risks and rewards of thejoint venture are in proportion to the equity of each joint
venture partner and the terms of the joint venture are notprejudicial to the interests of the issuer and its minority
shareholders; andthe interested person does not have an existing equity
interest in the joint venture prior to the participation of theentity at risk in the joint venture.

(b)

(c)

the issuer confirms by an announcement that its audit
committee is of the view that:(c)the provision of the loan is not prejudicial to theinterests of the issuer and its minority shareholders;andthe interested person does not have an existing equity
interest in the joint venture prior to the participation of theentity at risk in the joint venture; and

(b)

(i)

the loan is extended by all joint venture partners inproportion to their equity and on the same terms;(a)The provision of a loan to a joint venture with an interested
person if:

the risks and rewards are in proportion to the equity of eachjoint venture partner;(a)

Investment in a joint venture with an interested person if:

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-32

(5)

(4)

the risks and rewards of the joint venture are inproportion to the equity of each joint venture partner
and the terms of the joint venture are not prejudicial tothe interests of the issuer and its minority
shareholders.

an explanation of the basis for selection of thewinning bid; and(ii)

both the listed bidder (or if the bidder is unlisted, its listedparent company) and listed awarder (or if the awarder isunlisted, its listed parent company) have boards, themajority of whose directors are different and are notaccustomed to act on the instructions of the interested
person or its associates and have audit committees whose
members are completely different.

the prices of all bids submitted;(i)the awarder entity at risk announces following information:(a)the bidder entity at risk announces the prices of all bids
submitted; andThe receipt of a contract which was awarded by way of publictender, by an interested person if:

(b)

(a)

The award of a contract by way of public tender to an interested
person if:(ii)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-33

both the listed bidder (or if the bidder is unlisted, its listedparent company) and listed awarder (or if the awarder isunlisted, the listed parent company) have boards, themajority of whose directors are different and are notaccustomed to act on the instructions of the interested
person or its associates and have audit committees whose
members are completely different.

917

The rationale for, and benefit to, the entity at risk.

(a)

(3)

(4)

whether or not the audit committee of the issuer is of theview that the transaction is on normal commercial terms,
and is not prejudicial to the interests of the issuer and its
minority shareholders; orthat the audit committee is obtaining an opinion from an
independent financial adviser before forming its view,which will be announced subsequently.

(i)

(ii)

A statement:

Details of the transaction including relevant terms of thetransaction, and the bases on which the terms were arrived at.

Details of the interested person transacting with the entity at risk,
and the nature of that person’s interest in the transaction.

(2)

(1)

An announcement under Rule 905 must contain all of the following
information:

Part VI – Announcement Requirements(b)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-34

Where the issuer accepts a profit guarantee or a profit forecast(or any covenant which quantifies the anticipated level of future
profits) from the vendor of businesses/assets, the information
required in Rule 1013(1). The issuer must also comply with Rule1013(3).

(6)

If a transaction requires shareholder approval, it must be obtained
either prior to the transaction being entered into or, if the transaction
is expressed to be conditional on such approval, prior to thecompletion of the transaction.

In a meeting to obtain shareholder approval, the interested person
and any associate of the interested person must not vote on the
resolution, nor accept appointments as proxies unless specificinstructions as to voting are given.

918

919

Part VII – Shareholder Approval

The current total for the financial year of all transactions with theparticular interested person whose transaction is the subject of
the announcement and the current total of all interested persontransactions for the same financial year.

Transactions that satisfy Rule 916(1), (2) and (3) are notrequired to comply with Rule 917(4)(a).

(5)

(b)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-35

(b)

(a)

announce the aggregate value of transactions conductedpursuant to the general mandate for the financial periods
which it is required to report on pursuant to Rule 705
within the time required for the announcement of suchreport. The disclosure must be in the form set out in Rule
907.

(ii)

(i)

the class of interested persons with which the entity atrisk will be transacting;A circular to shareholders seeking a general mandate must
include:disclose the general mandate in the annual report, giving
details of the aggregate value of transactions conductedpursuant to the general mandate during the financial year.
The disclosure must be in the form set out in Rule 907;
and

(i)

An issuer must:920(1) An issuer may seek a general mandate from shareholders forrecurrent transactions of a revenue or trading nature or thosenecessary for its day-to-day operations such as the purchase andsale of supplies and materials, but not in respect of the purchase orsale of assets, undertakings or businesses. A general mandate is
subject to annual renewal.

Part VIII – General Mandate

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-36

(c)

the nature of the transactions contemplated under the
mandate;the independent financial adviser’s opinion on whether
the methods or procedures in (iv) are sufficient to ensurethat the transactions will be carried out on normal
commercial terms and will not be prejudicial to theinterests of the issuer and its minority shareholders;(i)the methods or procedurestransaction prices have notshareholder approval; andfor determining thechanged since last

An independent financial adviser’s opinion is not required forthe renewal of a general mandate provided that the audit
committee confirms that:(viii) a statement that the interested person will abstain, andhas undertaken to ensure that its associates will abstain,from voting on the resolution approving the transaction.

(vii) a statement from the issuer that it will obtain a freshmandate from shareholders if the methods or proceduresin (iv) become inappropriate; and(vi) an opinion from the audit committee if it takes a different
view to the independent financial adviser;(v)(iv) the methods or procedures for determining transaction
prices;(iii) the rationale for, and benefit to, the entity at risk;(ii)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-37

The first annual general meeting of the issuer following
listing; or

The first anniversary of the listing date.

(a)

(b)

If the information in Rule 920(1)(b) is included in a prospectus
issued in connection with a listing of an issuer, the issuer maytreat a general mandate as having been given. The mandate will
be effective until the earlier of the following:Transactions conducted under a general mandate are notseparately subject to Rules 905 and 906.

the methods or procedures in Rule 920(1)(c)(i) aresufficient to ensure that the transactions will be
carried out on normal commercial terms and will not
be prejudicial to the interests of the issuer and its
minority shareholders.

921

details of the interested person transacting with the entity atrisk, and the nature of that person’s interest in the transaction.

details of the transaction (and all other transactions which are
the subject of aggregation pursuant to Rule 906) including
relevant terms of the transaction, and the bases on which theterms were arrived at.

the rationale for, and benefit to, the entity at risk.

(1)

(2)

(3)

Except in the case of a general mandate, if shareholder approval isrequired, the circular to shareholders must include:

Part IX – Circular Requirements

(2)

(d)

(ii)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-38

(4)

(b)

(a)

is prejudicial to the interests of the issuer and its
minority shareholders.

(ii)

the consideration for the purchase or sale is in
cash;

an independent professional valuation has beenobtained for the purpose of the purchase or saleof such property; andthe valuation of such property is disclosed in thecircular.

••purchase or sale of any real property where:

(ii)

•

the issue of shares pursuant to Part IV of Chapter 8,or the issue of other securities of a class that isalready listed, for cash.

(i)however, the opinion from an independent financial adviser
is not required for the following transactions. Instead, an
opinion from the audit committee in the form required inRule 917(4)(a) must be disclosed:

is on normal commercial terms; and(i)an opinion in a separate letter from an independent
financial adviser who is acceptable to the Exchange stating
whether the transaction (and all other transactions which
are the subject of aggregation pursuant to Rule 906):

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-39

a statement that the interested person will abstain, and has
undertaken to ensure that its associates will abstain, from voting
on the resolution approving the transaction.

(7)

The Exchange will not comment on any announcement required by
the provisions of this Chapter prior to its release.

The Exchange will not entertain any application for waiver of any ofthe provisions of this Chapter.

922

923

Part X – Procedures

Where the issuer accepts a profit guarantee or a profit forecast(or any covenant which quantifies the anticipated level of future
profits) from the vendor of businesses/assets, the information
required in Rules 1013(1) and 1013(2), and a statement
confirming that it will comply with Rule 1013(3).

all other information known to the issuer or any of its directors,
that is material to shareholders in deciding whether it is in theinterests of the issuer to approve the transaction. Suchinformation includes, from an economic and commercial point ofview, the true potential costs and detriments of, or resulting
from, the transaction, including opportunity costs, taxationconsequences, and benefits forgone by the entity at risk.

(6)

(8)

an opinion from the audit committee, if it takes a different viewto the independent financial adviser.

(5)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-40“transaction” refers to the acquisition or disposal of assets by anissuer or a subsidiary that is not listed on the Exchange or an
approved Exchange, including an option to acquire or dispose of
assets. It excludes an acquisition or disposal which is in, or inconnection with, the ordinary course of its business or of arevenue nature.

“assets” includes securities and business undertaking(s).

“net assets” means total assets less total liabilities.

“net profits” means profit or loss before income tax,
minority interests and extraordinary items.

(a)

(b)

(1)

(2)

(3)

1002 Unless the context otherwise requires:

Part II – Definitions

1001 This Chapter sets out the rules for transactions by issuers, principally
acquisitions and realisations. It does not matter whether theconsideration paid or received is cash, shares, other securities, otherassets, or any combination of these. This Chapter also describes howtransactions are classified, what the requirements are forannouncements, and whether a circular and shareholder approval isrequired.

Part I – Scope of Chapter

Chapter 10 Acquisitions and Realisations

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-41“market capitalisation” of the issuer is determined by multiplying
the number of shares in issue by the weighted average price ofsuch shares transacted on the market day preceding the date of
the sale and purchase agreement.

“market value” means the weighted average price of the issuer’s
shares transacted on the market day preceding the date of thesale and purchase agreement.

the net asset and net profit figures used for comparison
with the transaction(s) under consideration will be takenfrom the latest announced consolidated accounts. The
Exchange may allow the issuer’s net asset value or net
profit to be adjusted to take into account any transaction(s)completed subsequent to the latest announced
consolidated accounts provided that adequate information
about such transaction(s) has already been announced toshareholders.

(1)

in the case of unlisted shares, the net asset value
represented by such shares; andin the case of listed shares, the market value represented
by such shares.

(a)

(b)

In any acquisition or disposal of shares, the value will beassessed by reference to:1003 In determining the basis of valuation of a transaction, the Exchange
will apply the following rules:

Part III – Basis of Valuation

(5)

(4)

(c)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-42

Where the consideration is in the form of shares, the value of theconsideration shall be determined by reference either to themarket value of such shares or the net asset value represented
by such shares, whichever is higher.

(3)

Major transactions; andVery substantial acquisitions or reverse takeovers.

(c)

(d)

1005 In determining whether a transaction falls into category (a), (b), (c) or(d) of Rule 1004, the Exchange may aggregate separate transactions
completed within the last 12 months and treat them as if they were
one transaction.

Discloseable transactions;Non-discloseable transactions;

(b)

(a)

1004 Transactions are classified into the following categories:

Part IV – Classification of Transactions

In any acquisition or disposal of assets other than shares, thevalue will be assessed by reference to the book value of theassets or, if a valuation has been carried out for the purpose of
the acquisition or disposal, the market value of the assets.

(2)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-43

The aggregate value of the consideration given or received,
compared with the issuer’s market capitalisation based on the
total number of issued shares excluding treasury shares.

(c)(2) Where the disposal of an issuer’s interest in a subsidiary isundertaken in conjunction with an issue of shares by thatsubsidiary, the relative figures in Rule 1006 must be computed
based on the disposal and the issue of shares.

1007(1) If any of the relative figures computed pursuant to Rule 1006 is anegative figure, this Chapter may still be applicable to thetransaction at the discretion of the Exchange, and issuers should
consult the Exchange.

The number of equity securities issued by the issuer as
consideration for an acquisition, compared with the number of
equity securities previously in issue.

The net profits attributable to the assets acquired or disposed of,compared with the group’s net profits.

(b)

(d)

The net asset value of the assets to be disposed of, comparedwith the group’s net asset value. This basis is not applicable toan acquisition of assets.

(a)1006 A transaction may fall into category (a), (b), (c) or (d) of Rule 1004
depending on the size of the relative figures computed on thefollowing bases:

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-44

the value of assets acquired or disposed of as required inRule 1010(5).

(b)

Particulars of the assets acquired or disposed of, including thename of any company or business, where applicable;

A description of the trade carried on, if any;

(1)

(2)

1010 Where any of the relative figures computed on the bases set out in
Rule 1006 exceeds 5% but does not exceed 20%, an issuer must,after terms have been agreed, immediately announce the following:

Part VI – Discloseable Transactions

1009 If the consideration is satisfied wholly or partly in securities for which
listing is being sought, the issuer must announce the transaction assoon as possible after the terms have been agreed, stating theinformation set out in Part VI.

details of the consideration as required in Rule 1010(3); and(a)(2) However, if the issuer wishes to announce the transaction, theannouncement must include:1008(1) Unless Rule 703, 905 or 1009 applies, no announcement of thetransaction is required if all of the relative figures computed on thebases set out in Rule 1006 amount to 5% or less.

Part V – Non-Discloseable Transactions

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSE-45

The net profits attributable to the assets being acquired or
disposed of. In the case of a disposal, the amount of any gain orloss on disposal;

The effect of the transaction on the net tangible assets per shareof the issuer for the most recently completed financial year,
assuming that the transaction had been effected at the end ofthat financial year;

The effect of the transaction on the earnings per share of theissuer for the most recently completed financial year, assumingthat the transaction had been effected at the beginning of that
financial year;

(7)

(8)

(9)

The value (book value, net tangible asset value and the latest
available open market value) of the assets being acquired or
disposed of, and in respect of the latest available valuation, thevalue placed on the assets, the party who commissioned thevaluation and the basis and date of such valuation;(5)

In the case of a disposal, the excess or deficit of the proceeds
over the book value, and the intended use of the sale proceeds.
In the case of an acquisition, the source(s) of funds for theacquisition;

Whether there are any material conditions attaching to thetransaction including a put, call or other option and details
thereof;(4)(6)

The aggregate value of the consideration, stating the factors
taken into account in arriving at it and how it will be satisfied,including the terms of payment;(3)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-46

1011 Where a sale and purchase agreement is entered into, or a valuationis conducted on the assets to be acquired, the issuer must include astatement in the announcement that a copy of the relevant
agreement, or valuation, report is available for inspection during
normal business hours at the issuer’s registered office for 3 months
from the date of the announcement.

(13) The relative figures that were computed on the bases set out in
Rule 1006.

(12) Details of any service contracts of the directors proposed to beappointed to the issuer in connection with the transaction; and(11) Whether any director or controlling shareholder has any
interest, direct or indirect, in the transaction and the nature ofsuch interests;(10) The rationale for the transaction including the benefits which are
expected to accrue to the issuer as a result of the transaction;

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-47

Details of the principal assumptions including commercial
assumptions upon which the forecast is based;

Confirmation from the issuer’s auditors that they have reviewed
the bases and assumptions, accounting policies andcalculations for the forecast, and setting out their report on thebases, assumptions, policies and calculations;

A report from the issuer’s financial adviser, if one is appointed,
confirming that it is satisfied that the forecast has been stated by
the directors after due and careful enquiry. If no such adviser
has been appointed in connection with the transaction, theissuer must submit a letter from the board of directors
confirming that the forecast has been made by them after due
and careful enquiry.

(a)

(b)

(c)

1012 Where the announcement in Rule 1010 contains a profit forecast,which may include any statement which quantifies the anticipatedlevel of future profits, the issuer must announce the following
additional information:

SGX-ST LISTING MANUAL RULE
No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-48

The views of the board of directors of the issuer in accepting
the profit guarantee or the profit forecast and the factors
taken into consideration and basis for such a view;

The principal assumptions including commercial bases andassumptions upon which the quantum of the profit guaranteeor the profit forecast is based;

The manner and amount of compensation to be paid by thevendor in the event that the profit guarantee or the profit
forecast is not met and the conditions precedent, if any, andthe detailed basis for such a compensation; andThe safeguards put in place (such as the use of a banker’s
guarantee) to ensure the issuer’s right of recourse in theevent that the profit guarantee or the profit forecast is not met,
if any.

(a)

(b)

(c)

(d)

1013(1) Where an issuer enters into a discloseable transaction, a majortransaction, a very substantial acquisition or a reverse takeoverand accepts a profit guarantee or a profit forecast (or any covenant
which quantifies the anticipated level of future profits) from avendor of assets/business, the issuer’s announcement in Rule
1010 must contain information on the profit guarantee or the profit
forecast, including the following:

SGX-ST LISTING MANUAL RULE
No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-49

Where the profit guarantee or the profit forecast has beenmet, the issuer should immediately announce this via
SGXNET. Where the profit guarantee or the profit forecast
has not been met, the issuer should immediately announce
via SGXNET the following:(3) (a)The variance between the profit guarantee or the profit
forecast and the actual profit, and the reason for thevariance;

A statement by the financial advisor to the issuer as towhether or not they are of the view that the transaction is on
normal commercial terms and is not prejudicial to the interestof the issuer and its shareholders.

(b)

(i)

A confirmation from the auditors of the business/assets to beacquired that they have reviewed the bases and assumptions,accounting policies and calculations for the profit guarantee or
the profit forecast, and their opinion on the bases,
assumptions, policies and calculations; and(a)(2) With reference to Rule 1013(1), where the transaction is a majortransaction, a very substantial acquisition or a reverse takeover,the shareholders’ circular must contain the information in Rule1013(1) and the following:

For the avoidance of doubt, the term “profit guarantee” can only be
used for transactions where the vendor will compensate the issuer
in cash for any shortfall in the level of profits when it provides aquantifiable anticipated level of future profits.

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-50

Where there is any material variation or amendment in theterms of an agreement, the issuer must immediately make anannouncement of such a variation. Where such a variation
prejudices the issuer, the board of directors of the issuer must
disclose the basis for the acceptance of such a variation.

(2) A major transaction must be made conditional upon approval byshareholders in general meeting. A circular containing the information in
Rule 1010 must be sent to all shareholders. This rule does not apply inthe case of an acquisition of profitable assets if the only limit breached is
Rule 1006(b). In ascertaining whether or not the issuer is required toseek shareholders’ approval for the transaction, the issuer should referto the general principles set out in Practice Note 10.1. Where the issuer
is unclear, the issuer should consult and clarify with the Exchange assoon as possible.

1014(1) Where any of the relative figures as computed on the bases set out in
Rule 1006 exceeds 20%, the transaction is classified as a majortransaction. The issuer must, after terms have been agreed,
immediately announce the information required in Rules 1010, 1011,
1012 and 1013, where applicable.

Part VII – Major Transactions(b)

any variation of the rights of the issuer; and(iii) the possible course(s) of action by the issuer to protect theinterests of the shareholders of the issuer, if any.
Notwithstanding this, the issuer must provide timely
updates on the specific course of action including its
progress and outcome of the action.

(ii)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-51

the reasons for the non-completion or rescission of thetransaction;

the financial impact of the non-completion or rescission on
the issuer; andthe possible course(s) of action to protect the interests of theshareholders of the issuer. Notwithstanding this, the issuer
must provide timely updates on the specific course of action
including its progress and outcome.

(a)

(b)

(c)

(4) Where a major transaction is not completed or is rescinded by any
party to the transaction due to any reason, the issuer must
immediately announce via SGXNET the following:Notwithstanding that the disposal of property may be considered to
be in the ordinary course of business, the REIT/property trust will
have to comply with Rule 1010.

(3) In the case of REITs and property trusts, a disposal of properties
is considered to be in its ordinary course of business, provided thatthe relative figures as computed on the bases set out in Rule 1006
do not exceed 50% based on the aggregate value of all disposals
in the last twelve months. In the event any of the relative figures
calculated under Rule 1006 on an aggregated basis is 50% or
more, the REIT/property trust must seek unitholders’ approval
under Rule 1014.

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-52

(2)

the latest three years of proforma financial information of
the assets to be acquired.

(ii)

The acquisition must be made conditional upon the approval ofshareholders and the approval of the Exchange.

the information required in Rules 1010, 1011, 1012 and
1013, where applicable; and(i)Where an acquisition of assets (whether or not the acquisition
is deemed in the issuer’s ordinary course of business) is one
where any of the relative figures as computed on the bases set
out in Rule 1006 is 100% or more, or is one which will result ina change in control of the issuer, the transaction is classified asa very substantial acquisition or reverse takeover respectively.
The issuer must, after terms have been agreed, immediately
announce the following:

For very substantial acquisition, the target business to beacquired must be profitable and meets the requirement in Rule210(4)(a), and the enlarged group must comply with therequirements in Rule 210(5) and (6). The issuer must appoint a
competent and independent valuer to value the target business.
The Exchange may approve the very substantial acquisition
unconditionally or subject to condition(s), or may reject, as it
thinks appropriate.

(b)1015(1)(a)Part VIII – Very Substantial Acquisitions or Reverse Takeovers

SGX-ST LISTING MANUAL RULE

(y)

••

(r)

••

(1)

Request for a bid or any other onerous acquisition to compete witha takeover bid prescribed in the first sentence of the preceding (x)pertaining to a stock, etc. prescribed in Article 27-2, Paragraph 1 of
the FIEA whose issuer is such listed company or an act to collecta stock, etc. as prescribed in the relevant enforcement ordinancepertaining to such stock, etc. (hereinafter referred to as a “takeoverbid, etc.” in this Sub-item (y)) or an announcement of an opinion ora representation to shareholders concerning a takeover bid, etc.;

Transfer or acquisition of fixed assets (meaning fixed assets
referenced in Article 2, Item 22 of the Corporation Tax Act (Act No. 34
of 1965); the same shall apply hereinafter);

Where a body which decides a listed company’s businessexecution makes a decision on carrying out any of the matters
enumerated in the following (a) through (ap) (including cases
where the body makes a decision that it will not carry out matterspertaining to such decision):

Rule 402 Disclosure of Corporate Information
Where a listed company falls under any of the following items (excluding
those which the TSE deems as matters whose effect on investors’
investment decisions is of minor significance, such as cases which fallunder the criteria specified by the TSE Securities Listing Enforcement
Rules), the listed company must disclose details immediately pursuant
to the provisions of the TSE Securities Listing Enforcement Rules:

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-53

(d)

Where the consideration for the acquisition of assets by theissuer is to be satisfied by the issue of shares, the price pershare of the issuer after adjusting for any share consolidationmust not be lower than S$0.50.

This is also applicable to very substantial acquisition.

associates of any person in (i).

(ii)

The requirements specified in Rules 227, 228 and 229 areapplicable to:(c)persons who are existing controlling shareholders or
who will become controlling shareholders of the issuer
as a result of the asset acquisition; andThe reference to “invitation shares” in Rule 210(1)(a) means
the minimum prescribed public float based on the total
number of issued shares excluding treasury shares of theenlarged group, being 25% for SGX Mainboard issuers.

(b)

(i)

The requirements in Rule 210(1), (2)(a) or (b) or (c), (3), (4),(5), (6), (7), Part VIII of Chapter 2 and if applicable, Rule 210(8)or 222. The issuer must appoint a competent and independent
valuer to value the incoming business. For the avoidance of
doubt, any profit guarantee granted by the vendors will not betaken into consideration for the purpose of compliance with
Rule 210(2);(a)(3) For reverse takeover, the incoming business and the enlarged
group must comply with the following requirements:

SGX-ST LISTING MANUAL RULE

There is no equivalent provision except for the matters relating to thedisclosure of substantial acquisitions in the TSE Securities Listing
Regulations.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-54

A compliance checklist for the information required in Rule1015(5); andDeclaration by each director, controlling shareholder, andexecutive officer of the acquired company(ies), including
officers occupying a managerial position and above who is arelative of any director or controlling shareholder in the form
set out in paragraph 8, Part VII of the Fifth Schedule, Securities
and Futures (Offers of Investments) (Shares and Debentures)
Regulations 2005, as amended from time to time. For very
substantial acquisition, declaration by each new director,
controlling shareholder, and executive officer must be
submitted.

(b)

(c)

Information required by Rule 1010, 1011, 1012, 1013 and Part
II of Chapter 6 of the Listing Manual, where applicable;

An accountants’ report on the assets to be acquired and theenlarged group. Rule 609 applies to the accountant’s report;

A statement by the directors in the form set out in Rule 610(3);
and

(a)

(b)

(c)

(5) In relation to the assets to be acquired, the shareholders’ circular
must contain the following:

A compliance checklist for Rule 210 or Rule 222, whichever isapplicable;(a)(4) The issuer must submit the following:

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-55

A statement by the financial adviser(s) in the form set out inparagraph 3(d) of Appendix 8.2.

the issuer has satisfied the Exchange that it meets theadmission requirements set out in Rule 1015(3)(a) and (b).

(b)

the reasons for the non-completion or rescission of thetransaction;

the financial impact of the non-completion or rescission on
the issuer; andthe possible course(s) of action to protect the interests of theshareholders of the issuer. Notwithstanding this, the issuer
must provide timely updates on the specific course of action
including its progress and outcome.

(a)

(b)

(c)

(9) Where a very substantial acquisition or reverse takeover is notcompleted or is rescinded by any party to the transaction due toany reason, the issuer must immediately announce via SGXNET
the following:(8) Rule 113(2) applies to an issuer which is the subject of a reverse
takeover, with the necessary adaptations.

(7) Rule 1015 does not apply in the case of an acquisition of profitableasset(s) if the only limit breached is Rule 1006(b).

the information required in Rule 1010 has been announced(unless the only information missing is insignificant); and(a)(6) The Exchange may suspend the securities of the issuer until:(d)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-56

No equivalent provision.

No equivalent provision.

1017 The Exchange normally applies the same criteria for assessment of
IPO to reverse takeovers and may modify any requirement in this
Chapter or impose additional requirements if it considers it
appropriate, taking into account the rationale for the acquisition, thenature of the issuer’s business and its track record.

1018 Cash Companies(a)Place 90% of its cash and short-dated securities (including
existing cash balance and the consideration arising from thedisposal(s) undertaken by the issuer) in an account opened
with and operated by an escrow agent which is part of any
financial institution licensed and approved by the Monetary
Authority of Singapore. The amount that is placed in theescrow account cannot be drawn down until the completion of
the acquisition of a business which is able to satisfy the
Exchange’s requirements for a new listing, except for
payment of expenses incurred in a reverse takeover
approved by shareholders and pro-rata distributions toshareholders; andIf the assets of an issuer consist wholly or substantially of cash
or short-dated securities, its securities will normally besuspended. The suspension will remain in force until the issuer
has a business which is able to satisfy the Exchange’s
requirements for a new listing, and all relevant information has
been announced. Upon completion of the disposal of its
operations and/or assets, the issuer must:

No equivalent provision.

1016 Where the assets being acquired are listed on the Exchange, Rule1015(3)(a) is not applicable.

(1)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSSGX-ST LISTING MANUAL RULE

E-57

(2)

Provide monthly valuation of its assets and utilization of
cash, and quarterly updates of milestones in obtaining a
new business to the market via SGXNET.

The period of the moratorium must commence from thedate shareholders approve the disposal of business, up to
and including the completion date of the acquisition of abusiness which is able to satisfy the Exchange’s
requirements for a new listing.

(d)

The Exchange will proceed to remove an issuer from the Official
List if it is unable to meet the requirements for a new listing within
12 months from the time it becomes a cash company. The issuer
may apply to the Exchange for a maximum 6-month extension to
the 12-month period if it has already signed a definitive
agreement for the acquisition of a new business, of which theacquisition must be completed in the 6-month extension period.
The extension is subject to the issuer providing information toinvestors on its progress in meeting key milestones in thetransaction. In the event the issuer is unable to meet its
milestones or complete the relevant acquisition despite the timeextension granted, no further extension will be granted and theissuer will be required to delist and a cash exit offer in accordancewith Rule 1309 be made to the issuers’ shareholders within 6months.

Contractual undertakings from the issuer’s directors,
controlling shareholders, chief executive officer and theirassociates to observe a moratorium on the transfer or
disposal of all their interests, direct and indirect, in the
securities of the issuer; and(c)Taking the above compliance into account, the Exchange may
allow continued trading in a cash company’s securities on acase-by-case basis, subject to:(b)

SGX-ST LISTING MANUAL RULE

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-58

If the option is exercisable at the discretion of the issuer and theexercise terms are fixed at the time of grant, shareholder
approval must be obtained at the time of grant of the option.

If the option is exercisable at the discretion of the issuer and theexercise terms are not fixed, but are based on factors existing at
the time of exercise, the issuer must obtain shareholder
approval at the time of exercise of the option. At the time ofacquisition or grant of the option, the issuer must make anappropriate announcement.

(2)

(3)

1020 Where an issuer, which had originally qualified for a listing of its equity
securities under Chapter 2, intends to set up an investment fund or
undertake any business(es) in investment fund management, which inaggregate, exceeds 50% of the issuer’s net asset value, the issuer
must demonstrate to the Exchange that it satisfies the listing
requirements for investment funds stipulated in Chapter 4 before it
takes any steps to undertake such a business, whether through atransaction or a series of transactions.

Part X – Undertaking Business in Investment Fund Management

If the option is not exercisable at the discretion of the issuer,shareholder approval must be obtained at the time of grant of
the option.

(1)1019 The following rules apply to options to acquire or dispose of assets:

Part IX – Options to Acquire or Dispose of Assets

SGX-ST LISTING MANUAL RULE

No equivalent provision.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-59

the powers of the Exchange with regard to trading halt,suspension and delisting of an issuer by the Exchange.

(2)(3) A trading halt may be changed to a suspension by the Exchange at
any time.

(2) The trading halt cannot exceed 3 market days or such short
extension as the Exchange agrees.

1302(1) The Exchange may at any time grant a trading halt to enable theissuer to disclose material information or suspend trading of thelisted securities of an issuer at the request of the issuer. The
Exchange is not required to act on the request.

Part II – Trading Halt and Voluntary Suspension

the requirements relating to trading halt, voluntary suspension
and withdrawal by the issuer from the Exchange’s Official List;
and

(1)

1301 This Chapter sets out:

Part I – Scope of Chapter

Chapter 13 Trading Halt, Suspension and Delisting

SGX-ST LISTING MANUAL RULE

Rule 4 Notification of Trading Halt and Removal of Halt
When the TSE halts trading in a listed security or removes a trading halt,
it shall notify the issuer of such listed security of this fact.

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-60

when an application is filed with a court for the liquidationof the issuer (or significant subsidiary) and the amount of
the debt alleged is significant; or(b)

Where the issuer is unable to continue as a going concern or
unable to demonstrate to the Exchange and its shareholders
that it is able to do so, including the following circumstances:(3)

when an application is filed with a court to place the issuer(or significant subsidiary) under judicial management; orWhere there is a change in the issuer’s assets that produces asituation where its assets consist wholly or substantially of cash
or short-dated securities, as provided in Rule 1018;

(2)

(a)

If the percentage of an issuer’s total number of issued shares
excluding treasury shares held in public hands falls below 10%,
as provided in Rule 723. In a take-over situation, where theOfferor succeeds in garnering acceptances exceeding 90% of
the issuer’s total number of issued shares excluding treasury
shares, thus causing the percentage of an issuer’s total number
of issued shares excluding treasury shares held in public hands
to fall below 10%, the Exchange will suspend trading of thelisted securities of the issuer only at the close of the take-overoffer;(1)1303 The Exchange may at any time suspend trading of the listed
securities of an issuer in any of the following circumstances:

Part III – Suspension of Trading

SGX-ST LISTING MANUAL RULE

Where the TSE deems that the state of trading in a security isabnormal or that this is likely or where the TSE deems that
continuing trading is not appropriate from the viewpoint of the
management of trading;
Where a malfunction occurs to the trading system, or where theTSE deems that continuing trading is difficult due to a failure of the
facilities of the TSE pertaining to trading of a security, and othercases; and

(3)

(4)

Where the TSE deems it necessary to make it aware to the publicthat it may cancel a trade.

Where information on a certain security or issuer that may have asignificant effect on investors’ investment decisions is revealed anddetails of such information are not clear and/or the TSE deems it
necessary to make details aware to the public;

(2)

(5)

Where a bond or a convertible bond is redeemed by a drawing and
the TSE deems that a trade suspension is necessary;(1)

Rule 29 of the TSE Business Regulations (Suspension of Trading)In cases referenced in each of the following items, the TSE may suspend
trading of a security as prescribed by the TSE:

While there is no equivalent provision, under Rule 29 of the TSE
Business Regulations, the TSE may suspend trading in certain
designated circumstances as follows.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-61

Where, in the opinion of the Exchange, it is necessary or
expedient in the interest of maintaining a fair, orderly andtransparent market;

Where, in the opinion of the Exchange, it is appropriate to do so;orWhere the Exchange releases an announcement in relation to
the issuer which, in the opinion of the Exchange, is market
sensitive.

(5)

(6)

(7)

submit a proposal (or proposals) to the Exchange with a view toresuming trading in its securities (“resumption proposals”) within
12 months of the date of suspension. If no resumption proposals
are received to enable trading to resume within 12 months of thedate of suspension, the Exchange may remove the issuer fromthe Official List; andimplement the resumption proposals within 6 months from thedate the Exchange indicates that it has no objection to theresumption proposals. If the resumption proposals have notbeen implemented within the 6 months, the Exchange may
remove the issuer from the Official List. The issuer is expected
to provide monthly valuation of its assets and utilisation of cash
and updates of milestones in completing the relevanttransactions to the market via SGXNET.

(1)

(2)

1304 If an issuer is suspended under Rule 1303(3), it must:

Where the issuer is unable or unwilling to comply with, or
contravenes, a listing rule;

when the issuer is unable to reasonably assess its financial
position and inform the market accordingly.

(4)

(c)

SGX-ST LISTING MANUAL RULE

No equivalent provision.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-62

the issuer is unable or unwilling to comply with, or contravenes,
a listing rule;in the opinion of the Exchange, it is necessary or expedient in
the interest of maintaining a fair, orderly and transparent market;

in the opinion of the Exchange, it is appropriate to do so; orthe issuer has no listed securities.

(1)

(2)

(3)

(4)

1305 The Exchange may remove an issuer from its Official List (without theagreement of the issuer) if:

Part IV – Delisting

SGX-ST LISTING MANUAL RULE

1.

(2)

(1)

Where the number of tradable shares is less than 2,000
units as of the end of a business year of a listedcompany and the number does not reach at least 2,000
units within a year;
Where the market capitalization of the tradable sharesis less than 500 million yen as of the end of a businessyear of a listed company and the number does notreach at least 500 million yen within a year; provided,
however, that where the general market condition
rapidly deteriorates and the TSE deems that thiscriterion is not appropriate, the TSE shall specify thecriterion on a case by case basis; or

(a)

(b)

Tradable shares: Where any of the following (a) through (c)is met; provided, however, that the same shall not apply tocases where the TSE Securities Listing Enforcement Rules
specify otherwise:

Number of shareholders: Where the number of shareholders
is less than 400 as of the end of a business year of a listedcompany and the number does not reach at least 400 within
a year; provided, however, that the same shall not apply tocases where the TSE Securities Listing Enforcement Rules
specify otherwise;

Where a listed domestic stock, etc. on the TSE Main Markets falls
under any of the following items, it shall be delisted. Details of eachsuch item in this case shall be provided by the TSE Securities
Listing Enforcement Rules:

Rule 601 Delisting Criteria for Listed Domestic Companies

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-63

SGX-ST LISTING MANUAL RULE

(3)

Where the number of tradable shares is less than 5% of
the total number of a listed stock, etc. as of the end ofa business year of a listed company and the listedcompany does not submit a scheduled plan of public
offering, secondary offering or distribution by a day
specified by the TSE Securities Listing Enforcement
Rules.

Where the average monthly trading volume of a listed
stock, etc. for each year ending December 31 is lessthan ten (10) units; orWhere no trade has been made for three (3) months
before the end of every month;

(a)

(b)

Trading volume: Where the following (a) or (b) is met; provided,
however, that the same shall not apply to cases where public
offering, secondary offering or off-auction distribution is carriedout as specified by the TSE Securities Listing Enforcement
Rules within three (3) months after the following (a) or (b) is
met:

(c)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-64

SGX-ST LISTING MANUAL RULE
(4)

(b)

(a)

Where the market capitalization of said stock, etc. is lessthan the amount obtained by multiplying the number of thelisted stock, etc. by two (2) and does not reach at least
such amount within three (3) months;

Where the market capitalization is less than one (1)billion yen and does not reach at least one (1) billion
yen within nine (9) months (or three (3) months if adocument containing the present status of thebusiness, future development, improvement ofbusiness plan and other matters deemed necessary by
the TSE is not submitted to the TSE within three (3)months); provided, however, that where the generalmarket condition rapidly deteriorates and the TSE
deems that this criterion is not appropriate, othercriteria shall apply as specified by the TSE on a case bycase basis; orMarket capitalization: Where the following (a) or (b) is met:

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-65

SGX-ST LISTING MANUAL RULE

Liabilities in excess of assets: Where a listed company has
liabilities in excess of assets as of the end of the businessyear and the liabilities in excess of assets is not cleared
within a year; provided, however, that this means cases
where the liabilities in excess of assets are not cleared within
two (2) years if such listed company plans to clear theliabilities in excess of assets within a year counting from a
day when such year passes by carrying out rehabilitation
proceedings or reorganization proceedings on the basis of
the provisions of laws or liquidation based on “Guidelines forPrivate Liquidation” of the Early Business Rehabilitation
Study Group (limited to cases deemed appropriate by the
TSE);
Suspension of bank transactions: Where a bill, etc. issued bya listed company is dishonored and its bank transactions are
suspended or their suspension becomes certain;
Bankruptcy proceedings, rehabilitation proceedings orreorganization proceedings: Where a listed company
become necessary to enter its bankruptcy proceedings,
rehabilitation proceedings or reorganization proceedings on
the basis of the provisions of laws or where it falls under asituation corresponding to these. In this case, it means
circumstances
where
the
company
disclosesareconstruction plan prescribed by the TSE Securities Listing
Enforcement Rules and the market capitalization does notreach at least one (1) billion yen for a month counting fromthe day following the day on which such reconstruction planis disclosed;

(5)

(6)

(7)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-66

SGX-ST LISTING MANUAL RULE

Where a listed company carries out an absorption-typemerger of an unlisted company or an act specified by
the TSE Securities Listing Enforcement Rules as an act
classified as this (hereinafter referred to as an“absorption-type merger, etc.” in this Sub-item (a)):
Where the TSE deems that such listed company is nota substantial surviving company and such listedcompany (meaning the entity specified by the TSE
Securities Listing Enforcement Rules as an unlistedcompany which is the party involved before an
absorption-type merger, etc.) does not satisfy thecriteria specified by the TSE Securities Listing
Enforcement Rules within three (3) years; orWhere a company is listed subject to Rule 208, Item 1,
Item 3, or Item 5 (excluding cases where all parties in amerger by creating a new company, stock transfer, or
demerger by creating a new company are listedcompanies);
Where the TSE deems that a listed company asprescribed by Rule 208, Item 1, Item 3 or Item 5 is nota substantial surviving company pertaining to suchcompany, and such company (meaning the entityprescribed by the TSE Securities Listing Enforcement
Rules as an unlisted company which is subject to an
examination before Rule 208, Item 1, Item 3 or Item 5 ismet) does not satisfy the criteria specified by the TSE
Securities Listing Enforcement Rules within three (3)years;(b)(c)

Inappropriate merger, etc.: In cases of the following (a) or(b.), where the TSE deems that such (a) or (b) is met:

(9)
(a)

Suspension of business activities: Where a listed company
suspends its business activities or where it falls into asituation corresponding to this;(8)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-67

SGX-ST LISTING MANUAL RULE

Delay in submission of a securities report or a quarterly
report: Where a securities report or a quarterly report towhich an audit report or a quarterly review report as
specified in Article 3, Paragraph 1 of the Cabinet Office
Ordinance on Audit Certification prepared by two (2) or morecertified public accountants or an audit firm is attached(including an audit report or a quarterly review reportpertaining to certification corresponding to audit certification
by an entity corresponding to a certified public accountant or
an audit firm) is not submitted to the Prime Minister, etc.
within a month after a period specified in Article 24,
Paragraph 1 or Article 24-4-7, Paragraph 1 of the FIEA
passes (within three (3) months in the event that such
submission delay is due to reasons not attributable to thelisted company such as act of providence);(a)

Where a listed company makes a false statement in asecurities report, etc. and, in addition, the TSE deems
that its effect is material; or(11) False statement or adverse opinion, etc.: Where thefollowing (a) or (b) is met:

(10)(9)-2 Damage to Sound Transactions with Controlling
Shareholder: Where there is a change of a controllingshareholder due to third-party allotment, when the TSE
deems there is considerable damage to sound transactions
with the controlling shareholder within the coming 3 years;

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-68

SGX-ST LISTING MANUAL RULE

Breach of listing agreement, etc.: Where a listed company
has committed a material breach of the listing agreement asprescribed by the TSE Securities Listing Enforcement Rules,
where a listed company has committed a material breach as
to matters taken on oath in the Written Oath submitted
pursuant to the provisions of Rule 204, Paragraph 1, Rule
211, Paragraph 1, Rule 301, Paragraph 3, Rule 307,
Paragraph 2, or Rule 312, Paragraph 3 of the TSE Securities
Listing Regulations, or where a listed company ceases to bea party to the listing agreement;
Entrustment to shareholder services agents: Where a listedcompany (excluding a listed company falling under theproviso of Rule 205, Item 8) has come not to entrust
shareholder services to a shareholder services agent
approved by the TSE or it has become certain to be so;(13)

Concerning an audit report attached to financial
statements, etc. or a quarterly review report attached toquarterly financial statements, etc. of a listed company,
where certified public accountants state an “adverse
opinion” or a fact that “opinions are not expressed” inan audit report (excluding cases caused by an event
which is not attributable to the listed company including
an act of providence, etc.; the same shall apply
hereinafter in this (b)), and a “negative conclusion” or afact that “conclusions are not expressed” in a quarterly
review report (including an “opinion that the interim
financial statements, etc. do not provide useful
information” or a fact that “opinions are not expressed”
in cases of a specified business company) and, in
addition, the TSE deems that such fact has a material
impact;(12)(b)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-69

SGX-ST LISTING MANUAL RULE(20) Others: In addition to each of the preceding items, where theTSE deems that delisting of such security is appropriate for the
public interest or the protection of investors.

(19) Involvement of Anti-Social Forces: Where it has become
clear that a listed company has relationships prescribed in
the TSE Securities Listing Enforcement Rules as those inwhich the listed company is involved with anti-social forces,
when the TSE deems that such condition has considerably
damaged shareholders and investors trust in the market;(18) Whole acquisition: Where a listed company acquires all
shares pertaining to such stock;(17) Unreasonable restriction on shareholders’ rights: Where thedetails of shareholders’ rights and their exercise are
unreasonably restricted as specified by the TSE Securities
Listing Enforcement Rules;(16) Handling by a designated book-entry transfer institution: Where
said issue ceases to be subject to the book-entry transfer
operation of a designated book-entry transfer institution;(15) Becoming a wholly-owned subsidiary: Where a listedcompany becomes a wholly-owned subsidiary of anothercompany by share exchange or share transfer;(14) Restriction on transfer of shares: Where a listed company
imposes a restriction on stock transfer pertaining to suchsecurity of a listed company; provided, however, that the same
shall not apply to cases where a restriction is imposed
concerning stock transfer on the basis of the provisions of a
special law specified by the TSE Securities Listing
Enforcement Rules and the details of the restriction are
deemed not to hinder trading in the market of the TSE;

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSE-70

the resolution to delist the issuer has been approved by amajority of at least 75% of the total number of issued shares
excluding treasury shares held by the shareholders present andvoting, on a poll, either in person or by proxy at the meeting (theissuer’s directors and controlling shareholder need not abstain
from voting on the resolution); andthe resolution has not been voted against by 10% or more of thetotal number of issued shares excluding treasury shares held by
the shareholders present and voting, on a poll, either in personor by proxy at the meeting.

(2)

(3)

(1)

a reasonable exit alternative, which should normally be in cash,
should be offered to (a) the issuer’s shareholders and (b)holders of any other classes of listed securities to be delisted.

1309 If an issuer is seeking to delist from the Exchange:

1308 Rules 1307(1), (2) and (3) do not apply to a delisting pursuant to a
voluntary liquidation or a scheme of arrangement.

the issuer convenes a general meeting to obtain shareholder
approval for the delisting;(1)1307 The Exchange may agree to an application by an issuer to delist fromthe Exchange if:

1306 If the Exchange exercises its power to remove an issuer from the
Official List, the issuer or its controlling shareholder(s) must comply
with the requirements of Rule 1309. For purposes of Rule 1309, areasonable exit offer may include a voluntary liquidation of theissuer’s assets and distribution of cash back to shareholders.

SGX-ST LISTING MANUAL RULE

3.

2.

1.

Where a listed company makes an application specified in thepreceding paragraph, such listed company shall submit a “Written
Confirmation” predetermined by the TSE which is prepared by amanaging trading participant.

The TSE shall conduct an examination whether or not a listed
security is in conformity with the criteria specified by the TSE
Securities Listing Enforcement Rules as prescribed by Rule 601,
Paragraph 1, Item 9 herein (including cases falling under Rule 602,
Paragraph 1, Item 1, Paragraph 2, Item 3 of the same rule, Rule603, Paragraph 1, Item 6, Paragraph 1, Item 2 of the preceding ruleor Paragraph 2, Item 1 of the same rule; the same shall apply
hereinafter in this rule) based on an application from a listedcompany. If such application has not been made (including cases
where it is clear such application will not be made), the TSE shalldeem that the listed company falls under Rule 601, Paragraph 1,
Item 9.

The TSE shall conduct examinations on whether or not areconstruction plan is as specified by the TSE Securities Listing
Enforcement Rules and on the market capitalization as prescribedin Rule 601, Paragraph 1, Item 7 herein (including cases fallingunder Rule 602, Paragraph 1, Item 1, Paragraph 2, Item 3 of thesame rule, Rule 603, Paragraph 1, Item 6, Rule 604, Paragraph 1,
Item 2, or Rule 604, Paragraph 2, Item 1 of the same) based on an
application from a listed company. If such application has not been
made, the TSE shall deem that the listed company falls under Rule
601, Paragraph 1, Item 7.

Rule 605 Application for Examination, etc. Pertaining to Delisting

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-71

the issuer should normally appoint an independent financial
adviser to advise on the exit offer.

1310 This Part applies to issuers listed on the SGX Mainboard, except forinvestment funds (whether constituted as collective investment
schemes or otherwise), real estate investment trusts, business trusts,
global depository receipts and companies with secondary listings on
the Exchange.

Part V – Watch-List(2)

SGX-ST LISTING MANUAL RULE

The TSE may request a listed company to submit a report ormaterials which should serve as useful reference or provide anyother cooperation for such examination if the TSE deems it
necessary for examinations in Paragraph 1 and Paragraph 2.

No equivalent provision.

Rule 611 Designation of Securities to be Delisted
Where a listed stock, etc. is decided to be delisted, the TSE may
designate such listed stock, etc. as a security to be delisted for a period
until the day before the delisting day pursuant to the provisions of the
TSE Securities Listing Enforcement Rules to make investors aware ofthat fact.

Rule 610 Designation of Securities Under Supervision
Where a listed stock, etc. is likely to be delisted, the TSE may designate
such listed stock, etc. as a security under supervision to make investors
aware of that fact pursuant to the provisions of the TSE Securities
Listing Enforcement Rules.

Rule 608 Delisting Application
Where a listed company makes an application for delisting a listed stock,etc. issued by itself, it shall submit “Delisting Application Form”
predetermined by the TSE.

4.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

E-72

an average daily market capitalisation of less than $40 million
over the last 120 market days on which trading was notsuspended or halted. For the purpose of this rule, trading isdeemed to be suspended or halted if trading is ceased for a fullmarket day.

(2)1312 Upon recording a pre-tax loss for the third consecutive financial year
(based on the latest announced full year consolidated accounts
excluding exceptional or non-recurrent income and extraordinary
items), an issuer must immediately announce the fact through the
SGXNet. The announcement must provide the information as set out
in Appendix 13.1.

pre-tax losses for the three (3) most recently completed
consecutive financial years (based on the latest announced fullyear consolidated accounts, excluding exceptional or nonrecurrent income and extraordinary items); andWhere the TSE deems that a listed company does not fallunder Rule 601, Paragraph 1, Item 9-2, Item 11, Item 12, Item
19, or Item 20 herein (including cases where it falls under
Rule 602, Paragraph 1, Item 1, Paragraph 2, Item 3 of thesame rule, Rule 603, Paragraph 1, Item 6, Rule 604,
Paragraph 1, Item 2, or Paragraph 2, Item 1 of the same rule)
after having deemed that it is likely that such company does
so qualify.
Where the TSE deems it will not recognize improvement in theexecution of improvement measures and operating conditions
in a listed company which has submitted an improvement
report according to provisions of Paragraph 3 of the following
rule (including cases where these provisions are appliedmutatis mutandis in Rule 503, Paragraph 7).

(1)

(2)

The TSE may, in the cases provided in the following items, and, in
addition, where the TSE deems that improvement of the internalmanagement system, etc. of such listed company is highly
necessary, designate the listed stock, etc. issued by such listedcompany as a Security on Alert.

No equivalent provision.

1.

Rule 501 Designation and Cancellation of Designation of Securities
on Alert

1311 The Exchange will place an issuer on the watch-list, if it records:(1)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSSGX-ST LISTING MANUAL RULE

E-73

for the period in which it remains on the watch-list, provide themarket with a quarterly update on its financial situation,
including its future direction, or other material development that
may have a significant impact on its financial position. If any
material development occurs between the quarterly updates, it
must be announced immediately.

(2)

(1)

the issuer records consolidated pre-tax profit for the most recently
completed financial year (based on the latest full year consolidated
audited accounts, excluding exceptional or non-recurrent income
and extraordinary items) and has an average daily market
capitalisation of $40 million or more over the last 120 market dayson which trading was not suspended or halted. For the purpose ofthis rule, trading is deemed to be suspended or halted if trading isceased for the full market day; or1314 An issuer on the watch-list may apply to the Exchange for its removalfrom the watch-list if it satisfies any one of the following requirements:

Immediately announce the fact through the SGXNet; andA listed company which is the issuer of a listed stock, etc.
designated as a security on alert pursuant to the provisions ofParagraph 1 shall accurately report on enquired mattersimmediately, where the TSE makes an inquiry of the internalmanagement system, etc. of such listed company after deeming it
necessary.

A listed company which is the issuer of a listed stock, etc.
designated as a security on alert pursuant to the provisions of thepreceding paragraph shall promptly submit a document specified
by the TSE Securities Listing Enforcement Rules that contains thestatus of the internal management system, etc. (hereinafterreferred to as a “Written Confirmation of Internal Management
System”) on each anniversary of such designation.

3.

Where the TSE deems that there is no problem in the internalmanagement system, etc. on the basis of the substance, etc. of theWritten Confirmation of Internal Management System submitted
pursuant to the provisions of the preceding paragraph, the TSEshall cancel the designation.

Rule 501 Designation and Cancellation of Designation of Securities
on Alert

4.

••

2.

Rule 501 Designation and Cancellation of Designation of Securities
on Alert

1313 If an issuer is placed on the watch-list, it must:(1)

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONSSGX-ST LISTING MANUAL RULE

E-74

cumulative consolidated pre-tax profit of at least $7.5
million for the last three years, and a minimum pre-tax
profit of $1 million for each of those three years; orcumulative consolidated pre-tax profit of at least $10
million for the last one or two years. Rule 210(3)(a) applies
to the last one year or last two years as the case may be.

(a)

(b)

the issuer satisfies Rule 210(3) and either one of the following
requirements:

No equivalent provision.

No equivalent provision.

1316 While the issuer remains on the watch-list, trading in its securities willcontinue, unless a trading halt or a suspension is, or has beenpreviously effected.

EQUIVALENT JAPANESE LAW/TSE SECURITIES LISTINGREGULATIONS

1315 An issuer must take active steps to meet the requirements of Rule1314. If the issuer fails to submit an application pursuant to Rule 1314
within 24 months of the date on which it was placed on the watch-list,
the Exchange may either remove the issuer from the Official List, or
suspend trading of the listed securities of the issuer (without theagreement of the issuer) with a view to removing the issuer from the
Official List.

The Exchange may approve the application, or reject the application
if the Exchange is of the opinion that there are other factors thatjustify the continued inclusion of the issuer in the watch-list.

(2)

SGX-ST LISTING MANUAL RULE

APPENDIX FOUR ARTICLES OF INCORPORATIONOur Articles of Incorporation are in Japanese. The version of our Articles of Incorporation hereinhas been translated into English for convenience only and should not be construed as an exact
representation of our Articles of Incorporation in Japanese.
Chapter 1: General Provisions
Article 1. Trade Name
The Company shall be referred to as Tosei Corporation in Japanese and as Tosei Corporation in
English (hereinafter the “Company”).
Article 2. Purpose
The purpose of the Company shall be to engage in the following businesses:(i)

Selling and buying, leasing, intermediation, management, and appraisal of real estate;(ii)

Contracting, planning, and management of building, carpentry, plastering, scaffolding, civilengineering, and concrete-work projects; stonework, roofing, electrical work, piping, tiling,bricklaying, and block-work projects; and steel metal work, steel structure work, reinforcing
steel work, glass work, painting, waterproofing, interior finishing, machinery and applianceinstallation, heat insulation, telecommunication, fitting, fire equipment, and landscaping
projects;(iii) Contracting of maintenance and management, cleaning, and security of buildings andannexed equipment and instruments;(iv) Non-life insurance agency business;(v)

Insurance agency business under the Automobile Liability Security Act;(vi) Investment advisory services for real estate;(vii) Investment management business, investment trust business, and investment corporation
organizational businesses under the Act on Investment Trusts and Investment Corporations;(viii) Businesses under the Real Estate Specified Joint Enterprise Act;(ix) Investment business in financial assets, such as real estate securitization products, claims,
and securities;(x)

Second financial instruments business under the Financial Instruments and Exchange Act;(xi) Investment advisory and agency business provided for in the Financial Instruments andExchange Act;(xii) Lending of money, guarantee of debt, and other financial services; and(xiii) Any other business incidental or relating to the businesses referred to in any of the foregoing
items.

F-1

Article 3. Location of Head Office
The head office of the Company shall be located in Minato-ku, Tokyo.
Article 4. Organs
The Company shall have the following organs in place in addition to the General Meeting of
Shareholders and Directors:(i)

Board of Directors(ii)

Statutory Auditors(iii) Board of Statutory Auditors(iv) Accounting Auditors
Article 5. Method of Public Notice
The Company shall issue its public notices electronically. However, in the event that an accident
or other unavoidable reason prevents the Company from being able to issue an electronic public
notice, the Company shall post an announcement in the Nihon Keizai Shimbun newspaper.
Chapter 2: Shares
Article 6. Total Number of Authorized Shares
The total number of shares authorized to be issued by the Company shall be one million and five
hundred thousand (1,500,000).
Article 7. Acquisition of the Company’s Own Shares
Pursuant to the provision of Article 165, Paragraph 2, of the Japanese Companies Act, theCompany may acquire its own shares using market transactions or certain other specified
methods by a resolution at its Board of Directors’ meeting.
Article 8. Share Handling Regulations
In addition to laws, regulations, or these Articles of Incorporation, the handling and fees
associated with the Company’s shares and procedures relating to shareholders’ rights shall beprescribed by the Share Handling Regulations established by the Board of Directors of theCompany.
Article 9. Shareholder Registrar(1)

The Company shall have a shareholder registrar in place.

(2)

The shareholder registrar and place of business shall be determined by a resolution of theBoard of Directors.

(3)

The preparation and retention of the shareholder registry and the ledger of stock acquisitionrights of the Company, as well as any other business relating to the shareholder registry andthe ledger of stock acquisition rights, shall be entrusted to the shareholder registrar and shallnot be handled by the Company.

F-2

Chapter 3: General Meeting of Shareholders
Article 10. Convocation(1)

An Ordinary General Meeting of Shareholders of the Company shall be convened in
February of each year, and an Extraordinary General Meeting of Shareholders shall be
convened whenever the need arises.

(2)

The General Meeting of Shareholders of the Company shall be convened within the wardsof Tokyo.

Article 11. Record Date for Ordinary General Meeting of Shareholders
The record date for the Ordinary General Meeting of Shareholders of the Company shall be
November 30 of each year.
Article 12. Proxy Voting(1)

A shareholder may exercise voting rights by appointing a shareholder who holds Company
voting rights to act as a proxy.

(2)

A shareholder or a proxy shall submit to the Company a document that certifies the authorityof representation at each General Meeting of Shareholders convened.

Article 13. Convenor and Chairperson(1)Unless otherwise provided for by laws and regulations, the president-and-director shallconvene a General Meeting of Shareholders by a resolution of the Board of Directors’
meeting, and shall act as chairperson to such General Meeting of Shareholders.

(2)

When the president-and-director is unable to act as chairperson, due to an accident or othersuch circumstances, one of the other directors shall act in lieu of the president-and-director
in the order of priority determined in advance by the Board of Directors.

Article 14. Internet-Based Disclosure and Deemed Provision of Reference Documents for the
General Meeting of Shareholders
At the time of convening a General Meeting of Shareholders, the Company may provide its
shareholders with information on matters that should be stated or indicated in the reference
documents for the General Meeting of Shareholders, business reports, financial statements, andconsolidated financial statements, by disclosing the said information on the Internet pursuant to
the provisions of the applicable Ordinance of the Ministry of Justice and may deem it as theprovision of the information to shareholders.
Article 15. Resolution Method(1)

Unless otherwise provided for by laws and regulations or these Articles of Incorporation, theresolution of a General Meeting of Shareholders shall be adopted by the majority of the votesof shareholders present who are entitled to exercise their voting rights.

(2)

The resolution prescribed in Article 309, Paragraph 2, of the Japanese Companies Act shallbe adopted by two-thirds or more of the votes at a General Meeting of Shareholders at which
one-third or more of the votes of the shareholders entitled to exercise voting rights arepresent.

F-3

Article 16. Minutes of General Meeting of Shareholders
The minutes of the General Meeting of Shareholders shall be prepared as prescribed by theapplicable laws and regulations.
Chapter 4: Directors and Board of Directors
Article 17. Number of Directors
The number of directors of the Company shall be six (6) or less.
Article 18. Election and Dismissal of Directors(1)

Directors shall be elected and dismissed by a resolution adopted at a General Meeting of
Shareholders.

(2)

Directors shall be elected by a resolution adopted by a majority of the votes at a General
Meeting of Shareholders at which one-third or more of the votes of the shareholders entitled
to exercise voting rights are present.

(3)

A resolution to elect directors shall not be based on a cumulative vote.

(4)

Directors shall be dismissed by a resolution adopted by two-thirds or more of the votes at a
General Meeting of Shareholders at which a majority of the votes of the shareholders entitled
to exercise voting rights are present.

Article 19. Terms of Office for Directors(1)

The terms of office for directors shall continue until the conclusion of the Ordinary General
Meeting of Shareholders for the last fiscal year that ends within two years from the time of
their election.

(2)

The term of office for a director elected as an additional member of the Board or as a
substitute shall continue until the terms of office for the other directors expire.

Article 20. Convenor and Chairperson(1)Unless otherwise provided for by laws and regulations, the president-and-director shallconvene a Board of Directors’ meeting and act as chairperson.

(2)

When the president-and-director is unable to act as chairperson, due to an accident or othersuch circumstances, one of the other directors shall act in lieu of the president-and-director
in the order of priority determined in advance by the Board of Directors.

(3)

A notice of convocation of the Board of Directors’ meeting shall be issued to each director
and each statutory auditor at least three days prior to the date of the meeting. However, thisperiod may be shortened in urgent cases.

(4)

If the consent of all directors and statutory auditors has been obtained, a Board of Directors’
meeting may be held without formal convocation.

Article 21. Representative Directors
Representative directors shall be appointed by a resolution at a Board of Directors’ meeting. The
president-and-director, however, must serve as representative director.
F-4

Article 22. Executive Directors
The Board of Directors shall, via its resolution, appoint one president-and-director from among thedirectors, and may appoint one or more chairman-and-directors, vice-presidents-and-directors,
senior managing directors, and managing directors from among the directors whenever the needarises.
Article 23. Resolution Method(1)

A resolution at a Board of Directors’ meeting shall be adopted by a majority of the votes ofthe directors present at the meeting at which a majority of the directors entitled to participate
in the vote are present.

(2)

When the requirements specified in Article 370 of the Japanese Companies Act have been
fulfilled, the Company shall deem that a resolution of the Board of Directors has been made.

Article 24. Minutes of Board of Directors’ Meetings
The minutes of a Board of Directors’ meeting shall be prepared as prescribed by the applicablelaws and regulations, and the directors and the statutory auditors present at the meeting shall sealand sign their documents by hand or electronically.
Article 25. Board of Directors’ Regulations
In addition to the relevant laws and regulations as well as these Articles of Incorporation, mattersrelating to the Board of Directors’ meetings shall be governed by the Board of Directors’Regulations established by the Board of Directors of the Company.
Article 26. Compensation, etc., for Directors
Remuneration, bonuses, and other economic benefits that the directors receive from the Company
as compensation for the execution of their duties (hereinafter referred to as the “Compensation,etc.”) shall be determined by a resolution of a General Meeting of Shareholders.
Article 27. Exemption of Directors from Liability(1)

Pursuant to the provision of Article 426, Paragraph 1, of the Japanese Companies Act, theCompany may release directors (including former directors) from damage liability attributable
to their negligence in executing their duties, within the limits of the relevant laws andregulations, by a resolution of the Board of Directors.

(2)

Pursuant to the provision of Article 427, Paragraph 1, of the Japanese Companies Act, theCompany may enter into a contract with outside directors to limit damage liability attributable
to their negligence in executing their duties. However, the limit of liability pursuant to thecontract shall be the amount prescribed by the relevant laws and regulations.

Chapter 5: Statutory Auditors and Board of Statutory Auditors
Article 28. Number of Statutory Auditors
The number of statutory auditors of the Company shall be four (4) or less.

F-5

Article 29. Election of Statutory Auditors(1)

Statutory auditors of the Company shall be elected by a resolution adopted at a General
Meeting of Shareholders.

(2)

Statutory auditors of the Company shall be elected by a resolution adopted by a majority ofthe votes at a General Meeting of Shareholders at which one-third or more of theshareholders entitled to exercise voting rights are present.

Article 30. Terms of Office for Statutory Auditors(1)

The terms of office for statutory auditors shall continue until the conclusion of the Ordinary
General Meeting of Shareholders for the last fiscal year that ends within four years from thetime of their election.

(2)

The term of office for a statutory auditor elected as a substitute for a statutory auditor who
has resigned before his/her term of office expires shall continue until the term of office for the
statutory auditor who has resigned expires.

Article 31. Full-Time Statutory Auditors
By its resolution, the Board of Statutory Auditors shall appoint full-time statutory auditors fromamong its statutory auditors.
Article 32. Notice of Convocation of Board of Statutory Auditors’ Meeting(1)

A notice of convocation of a Board of Statutory Auditors’ meeting shall be issued to eachstatutory auditor at least three days prior to the date of the meeting. However, this period may
be shortened in urgent cases.

(2)

If the consent of all statutory auditors has been obtained, a Board of Statutory Auditors’
meeting may be held without formal convocation.

Article 33. Resolution Method
A resolution of the Board of Statutory Auditors shall be adopted by a majority of the votes of thestatutory auditors present at a meeting unless otherwise specifically prescribed by the relevantlaws or regulations.
Article 34. Minutes of Board of Auditors’ Meetings
The minutes of a Board of Auditors’ meeting shall be prepared as prescribed by the applicablelaws and regulations, and the corporate auditors present at the meeting shall seal and sign their
documents by hand or electronically.
Article 35. Board of Statutory Auditors’ Regulations
In addition to the relevant laws and regulations as well as these Articles of Incorporation, mattersrelating to the Board of Statutory Auditors’ meetings shall be governed by the Board of Statutory
Auditors’ Regulations established by the Board of Statutory Auditors of the Company.

F-6

Article 36. Compensation, etc., to Statutory Auditors
Compensation, etc., for statutory auditors shall be determined by a resolution of a General
Meeting of Shareholders.
Article 37 Exemption of Statutory Auditors from Liability(1)

Pursuant to Article 426, Paragraph 1, of the Japanese Companies Act, the Company may
release statutory auditors (including former statutory auditors) from damage liability
attributable to their negligence in executing their duties, within the limits of the relevant laws
and regulations, by a resolution of the Board of Directors.

(2)

Pursuant to the provision of Article 427, Paragraph 1, of the Japanese Companies Act, theCompany may enter into a contract with outside statutory auditors to limit damage liability
attributable to their negligence in executing their duties. However, the limit of liability
pursuant to the contract shall be the amount prescribed by the relevant laws and regulations.

Chapter 6: Accounting Auditor
Article 38. Election of Accounting Auditor
An accounting auditor shall be elected by a resolution of a General Meeting of Shareholders.
Article 39. Term of Office for Accounting Auditor(1)

The term of office for an accounting auditor shall continue until the conclusion of the Ordinary
General Meeting of Shareholders for the last fiscal year that ends within one year from thetime of his or her election.

(2)

Unless otherwise resolved at the Ordinary General Meeting of Shareholders in the preceding
paragraph, the accounting auditor shall be deemed as being reelected at such meeting.

Article 40. Compensation, etc., for Accounting Auditor
Compensation, etc., for an accounting auditor shall be determined by the representative director
with the consent of the Board of Statutory Auditors.
Chapter 7: Accounting
Article 41. Fiscal YearThe fiscal year of the Company shall begin on December 1 of each year and end on November
30 of the following year.
Article 42. Record Date for Year-End Dividends
The record date for year-end dividends from surplus of the Company shall be November 30 ofeach year.
Article 43. Interim Dividends
The Company may distribute interim dividends by a resolution of the Board of Directors as of therecord date of May 31 of each year.

F-7

Article 44. Exclusion from Dividends(1)

If the dividend property is monetary, the Company shall be exempted from its obligation to
pay dividends when said property is not claimed after the lapse of three full years from thedate of commencement of payment.

(2)Interest shall not be accrued on unpaid year-end dividends and interim dividends.

Chapter 8: Takeover Defense
Article 45. Takeover Defense(1)

The General Meeting of Shareholders may resolve to adopt, exercise, maintain, and abolishtakeover defense measures.

(2)

The takeover defense measures in the preceding paragraph shall refer to those measuresintended to make it difficult to accomplish a takeover the Company, including the issuanceor allotment of shares or share options for purposes other than business purposes such as
fund-raising, which are adopted by the Company prior to the commencement of a takeoveragainst the Company for the purpose of protecting and enhancing the corporate value of theCompany and the common interests of shareholders.

(3)

When deciding matters relating to the issuance or allotment of share options as part of
takeover defense measures, the Company may put in place all or part of the following:(a)

Certain persons specified in the takeover defense measures (hereinafter referred to as
the “Non-Qualified Persons”) shall not exercise the share options.

(b)

The Company may acquire share options only from persons other than the NonQualified Persons and deliver the Company’s shares in exchange.

(c)

The Company may acquire share options from the Non-Qualified Persons and deliver
the Company’s shares, new share options, bonds, cash, or other considerations in
exchange.

F-8

APPENDIX GCOMPARISON BETWEEN TOSEI CORPORATION’S ARTICLES OFINCORPORATION AND APPENDIX 2.2 OF THE LISTING MANUALTOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(1)

Capital(a)

The total number of issued preference
shares shall not exceed the total
number of issued ordinary sharesissued at any time.

There is no equivalent provision in our Articles ofIncorporation.

(b)

The rights attaching to shares of aclass other than ordinary shares must
be expressed.

There is no equivalent provision in our Articles ofIncorporation.

(c)

Whether the company has power toissue further preference capitalranking equally with, or in priority topreference shares already issued
must be expressed.

There is no equivalent provision in our Articles ofIncorporation.

(d)Preference shareholders must havethesamerightsasordinaryshareholders as regards receiving
notices, reports and balance sheets,
and attending general meetings of theissuer. Preference shareholders mustalso have the right to vote at any
meeting convened for the purpose of
reducing the capital, or winding up, or
sanctioning a sale of the undertakingof the issuer, or where the proposition
to be submitted to the meeting directly
affects their rights and privileges, orwhen the dividend on the preference
shares is in arrear for more than six
months.

There is no equivalent provision in our Articles ofIncorporation.

(e)Capital paid on shares in advance of
calls shall not, whilst carrying interest,
confer a right to participate in profits.

There is no equivalent provision in our Articles ofIncorporation.

G-1

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(f)

Subject to any direction to thecontrary that may be given by thecompany in the general meeting or
except as permitted under the
Exchange’s listing rules, all newshares shall, before issue, be offeredto such persons who as at the date of
the offer are entitled to receive notices
from the company of general
meetings in proportion, as far as
circumstances admit, to the amount of
the existing shares to which they areentitled. The offer shall be made bynotice specifying the number ofshares offered, and limiting a timewithin which the offer, if not accepted,
will be deemed to be declined. Afterthe expiration of the aforesaid time oron the receipt of an intimation from theperson to whom the offer is made that
he declines to accept the shares
offered, the directors may dispose of
those shares in a manner as they
think most beneficial to the company.
The directors may likewise dispose of
any new shares which (by reason of
the ratio which the new shares bear toshares held by persons entitled to anoffer of new shares) cannot, in theopinionof
the
directors,beconveniently offered under thisprovision.

There is no equivalent provision in our Articles ofIncorporation.

(g)

Subject to the provisions of theCompanies Act, if any sharecertificates shall be defaced, wornout, destroyed, lost or stolen, it may
be renewed on such evidence being
produced and a letter of indemnity (ifrequired) being given by theshareholder,transferee,personentitled, purchaser, member companyof the Exchange or on behalf of
its/their client(s) as the directors of thecompany shall require, and in thecase of defacement or wearing out, ondelivery of the old certificate and inany case on payment of such sum notexceeding two dollars as the directors
may from time to time require. In thecase of destruction, loss or theft, ashareholder or person entitled towhom such renewed certificate isgiven shall also bear the loss and pay
to the company all expenses
incidental to the investigations by thecompany of the evidence of such
destruction or loss.

There is no equivalent provision in our Articles ofIncorporation.

G-2

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(2)

Certificate

Every member shall be entitled to receive
sharecertificatesinreasonable
denominations for his holding and where acharge is made for certificates, suchcharge shall not exceed two dollars.

There is no equivalent provision in our Articles ofIncorporation.

(3)

Forfeiture and Lien(a)

The company’s lien on shares anddividends from time to time declared
in respect of such shares, shall be
restricted to unpaid calls andinstalments upon the specific sharesin respect of which such monies aredue and unpaid, and to such amounts
as the company may be called uponby law to pay in respect of the sharesof the member or deceased member.

There is no equivalent provision in our Articles ofIncorporation.

(b)

If any shares are forfeited and sold,
any residue after the satisfaction of
the unpaid calls and accrued interest
and expenses, shall be paid to theperson whose shares have been
forfeited,or
his
executors,
administrators or assignees or as hedirects.

There is no equivalent provision in our Articles ofIncorporation.

(4)

Transfer and Transmission(a)

The company will accept forregistration a transfer in the form
approved by the Exchange.

There is no equivalent provision in our Articles ofIncorporation.

(b)

Any fee charged on the transfer of
securities shall not exceed two dollars
per transfer.

There is no equivalent provision in our Articles ofIncorporation.

(c)

There shall be no restriction on thetransfer of fully paid securities except
where required by law or by the Rules,
Bye-Laws or Listing Rules of the
Exchange.

There is no equivalent provision in our Articles ofIncorporation.

(d)

Any articles which entitle a company
to refuse to register more than three
persons as joint holders of a sharemust be expressed to exclude thecase of executors or trustees of a
deceased shareholder.

There is no equivalent provision in our Articles ofIncorporation.

G-3

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(5)

Modification of Rights

The repayment of preference capital otherthan redeemable preference capital, or any
alteration of preference shareholders’rights, may only be made pursuant to a
special resolution of the preference
shareholders concerned, provided always
that where the necessary majority for sucha special resolution is not obtained at themeeting, consent in writing if obtained fromthe holders of three-fourths of thepreference shares concerned within twomonths of the meeting, shall be as valid
and effectual as a special resolution carriedat the meeting.
(6)

Borrowing Powers

The scope of the borrowing powers of theboard of directors shall be expressed.
(7)

There is no equivalent provision in our Articles ofIncorporation.

There is no equivalent provision in our Articles ofIncorporation.

Meetings

The notices convening meetings shallspecify the place, day and hour of themeeting, and shall be given to allshareholders at least fourteen days
(excluding the date of notice and the dateof meeting) before the meeting. Where
notices contain special resolutions, theymust be given to shareholders at least
twenty-one days (excluding the date ofnotice and the date of meeting) before themeeting. Any notice of a meeting called toconsider special business shall beaccompanied by a statement regarding theeffect of any proposed resolutions in
respect of such businesses. At least
fourteen days’ notice of every such meetingshall be given by advertisement in the dailypress and in writing to each stock
exchange on which the company is listed.
(8)

Voting and Proxies(a)A holder of ordinary shares shall beentitled to be present and to vote at
any general meeting in respect of any
share or shares upon which all calls
due to the company have been paid.

There is no equivalent provision in our Articles ofIncorporation.

There is no equivalent provision in our Articles ofIncorporation.

G-4

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(b)

In the case of joint holders of shares,
any one of such persons may vote,but if more than one of such persons
is present at a meeting, the person
whose name stands first on theRegister of Members shall alone beentitled to vote.

There is no equivalent provision in our Articles ofIncorporation.

(c)

A proxy need not be a member of thecompany.

Article 12. Proxy Voting(1) A shareholder may exercise voting rights byappointing a shareholder who holds
Company voting rights to act as a proxy.
It is understood that this article implies that a
proxy shall be limited to a shareholder of thecompany.

(d)

An instrument of proxy shall bedeemed to confer authority to demandor join in demanding a poll.

Article 12. Proxy Voting(2) A shareholder or a proxy shall submit to theCompany a document that certifies theauthority of representation at each General
Meeting of Shareholders convened.

(e)

A proxy shall be entitled to vote on ashow of hands on any matter at any
general meeting.

Article 12. Proxy Voting(1) A shareholder may exercise voting rights byappointing a shareholder who holds
Company voting rights to act as a proxy.

(9)

Directors(a)All the directors of the company shallbe natural persons.

There is no equivalent provision in our Articles ofIncorporation.

(b)

Where provision is made for the
directors to appoint a person as adirector either to fill a casual vacancy,
or as an addition to the board, any
director so appointed shall hold office
only until the next annual general
meeting of the company, and shallthen be eligible for re-election.

Article 19. Terms of Office for Directors(1) The terms of office for directors shallcontinue until the conclusion of the Ordinary
General Meeting of Shareholders for thelast fiscal year that ends within two years
from the time of their election.

Fees payable to non-executive
directors shall be by a fixed sum, andnot by a commission on or apercentage of profits or turnover.
Salariespayabletoexecutive
directors
may
notincludeacommission on or a percentage ofturnover.

Article 26. Compensation, etc., for Directors
Remuneration, bonuses, and other economic
benefits that the directors receive from theCompany as compensation for the execution of
their duties (hereinafter referred to as the“Compensation, etc.”) shall be determined by aresolution of a General Meeting of Shareholders.

(c)

(2)

G-5

The term of office for a director elected as
an additional member of the Board or as a
substitute shall continue until the terms ofoffice for the other directors expire.

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(d)

Fees payable to directors shall not be
increased except pursuant to a
resolution passed at a general
meeting, where notice of the proposed
increase has been given in the notice
convening the meeting.

Article 26. Compensation, etc., for Directors
Remuneration, bonuses, and other economic
benefits that the directors receive from theCompany as compensation for the execution of
their duties (hereinafter referred to as the“Compensation, etc.”) shall be determined by aresolution of a General Meeting of Shareholders.
For the determination of the amount of directors’fees, a resolution of shareholders meeting will be
required regardless of whether the amount will
be increased or decreased in comparison withthe amount determined previously.

(e)

A director shall not vote in regard to
any contract or proposed contract orarrangement in which he has directly
or indirectly a personal materialinterest.

(f)[Deleted](g)

The office of a director shall become
vacant should he become of unsoundmind or bankrupt during his term ofoffice.

There is no equivalent provision in our Articles ofIncorporation.

(h)

A person who is not a retiring director
shall be eligible for election to office of
director at any general meeting if
some member intending to propose
him has, at least eleven clear days
before the meeting, left at the office ofthe company a notice in writing duly
signed by the nominee, giving his
consent to the nomination andsignifying his candidature for theoffice, or the intention of such member
to propose him. In the case of aperson recommended by the directors
for election, nine clear days’ notice
only shall be necessary. Notice ofeach and every candidature forelection to the board of directors shallbe served on the registered holders ofshares at least seven days prior to themeeting at which the election is totake place.

There is no equivalent provision in our Articles ofIncorporation.

There is no equivalent provision in our Articles ofIncorporation.

G-6

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(i)

Where a managing director or aperson holding an equivalent position
is appointed for a fixed term, the term
shall not exceed five years.

Article 19. Terms of Office for Directors(1) The terms of office for directors shallcontinue until the conclusion of the Ordinary
General Meeting of Shareholders for thelast fiscal year that ends within two years
from the time of their election.

(j)

A managing director or a person
holding an equivalent position shall be
subject to the control of the board.

Article 21. Representative Directors
Representative directors shall be appointed by aresolution at a Board of Directors’ meeting. The
president-and-director, however, must serve as
representative director.

(k)

The continuing directors may act
notwithstanding any vacancy in theboard, provided that if their number isreduced below the minimum number
fixed by or pursuant to the regulationsof the company, the continuing
directors
may,
exceptinanemergency, act only for the purpose ofincreasing the number of directors tosuch minimum number, or to summon
a general meeting of the company.

There is no equivalent provision in our Articles ofIncorporation.

(l)

A director may appoint a person
approved by a majority of his codirectors to act as his alternate,provided that any fee paid by thecompany to the alternate shall be
deductedfromthat
director’s
remuneration. No director may act as
an alternate director of the company.
A person may not act as an alternate
director for more than one director of
the company.

There is no equivalent provision in our Articles ofIncorporation.

(m) Where two directors form a quorum,
the chairman of a meeting at which
only such a quorum is present, or atwhich only two directors arecompetent to vote on the matter atissue, shall not have a casting vote.

There is no equivalent provision in our Articles ofIncorporation.

(n)

There is no equivalent provision in our Articles ofIncorporation.

Where a director is disqualified fromacting as a director in any jurisdiction
for reasons other than on technicalgrounds, he must immediately resignfrom the board.

G-7

TOSEI CORPORATION’S ARTICLES OFINCORPORATION (TRANSLATED)APPENDIX 2.2 REQUIREMENTS(10) Accounts
The interval between the close of anissuer’s financial year and the date of its
annual general meeting (if any) shall not
exceed four months.

Article 41. Fiscal YearThe fiscal year of the Company shall begin on
December 1 of each year and end on
November 30 of the following year.
Article 10. Convocation(1) AnOrdinary
GeneralMeetingof
Shareholders of the Company shall be
convened in February of each year, and an
Extraordinary
GeneralMeetingof
Shareholders shall be convened whenever
the need arises.

(11) Winding Up
The basis on which shareholders would
participate in a distribution of assets on awinding up shall be expressed.

There is no equivalent provision in our Articles ofIncorporation.

G-8

APPENDIX H

LIST OF PAST AND PRESENT PRINCIPAL DIRECTORSHIPS
The principal present directorships, other than those held in our Company and the principal past
directorships in the last five years preceding the Latest Practicable Date, of each of our Directors
and the Statutory Auditors, are as follows:
Name
Directors

Present directorships

Past directorships

Seiichiro Yamaguchi

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Zeus Capital Limited

NilGroup Companies

Group Companies

Tosei Asset Advisors, Inc.

Tosei Asset Management, Corp.
Tosei Revival Investment Co.,
Ltd

Other Companies

Other Companies

Nil

Nil

Katsuhito Kosuge

Noboru Hirano

Group Companies

Group Companies
1

Goro Kamino

1

Tosei Community Co., Ltd.
Tosei Revival Investment Co.,
Ltd.

Nil

Other Companies

Other Companies

Nil

Nil

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Chubu Gas Co., Ltd.
Gastec Services Inc.
Japan Post Holdings Co., Ltd.
Musashi Seimitsu Industry Co.,Ltd.
Sala Cars Japan Co., Ltd.
Sala Corporation
Sala House Co., Ltd.
Toyohashi Cable Network Inc.

System Location Co., Ltd.

Mr. Hirano is a statutory auditor of Tosei Community Co., Ltd.

H-1

Name
Directors

Present directorships

Past directorships

Kenichi Shotoku

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Corporate Catalyst (India)
Private Limited
Kodomo Mirai Land 2
P&E Directions Asia Pte. Ltd.
P&E Directions Inc. 1
Roki Group Holdings Co., Ltd
Roki Techno Co., Ltd. 1
SCS Global Consulting (M) Sdn.
Bhd.
SCS Global Consulting
Myanmar Ltd.
SCS Global Consulting (HK)
LimitedSCS Global Financial Advisory
Pte. Ltd.
SCS Global Holdings Pte. Ltd.
SCS Global Tax Consulting
Corporation
Tmsuk International Pte. Ltd.

Analog Pte. Ltd.
Corp8 Energy
Daiichi Seiun Kabushiki Kaisha(translated name)
Katsura Opto Systems Co., Ltd. 3
Neo-Morgan Laboratory Pte.
Ltd.
Nutty Bavarian Asia Pte. Ltd.
Nutty Bavarian Singapore Pte.
Ltd.
O-RID Co. Ltd.
O-RID Global BPO Pte. Ltd.
Resonet Singapore Pte. Ltd.
RF Co., Ltd.
SCS Global PAC
SCS Global Professionals (S)Pte. Ltd.
Straits Global Assets Pte. Ltd.
Ystream Pte. Ltd.

1

Mr. Shotoku is a statutory auditor of P&E Directions Inc. and Roki Techno Co., Ltd.

2

Mr. Shotoku is an auditor of Kodomo Mirai Land, which is a specified non-profit organisation in Japan.

3

Mr. Shotoku was a statutory auditor of Katsura Opto Systems Co., Ltd.

H-2

Name
Directors

Present directorships

Past directorships

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Nil

Nil

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Nil

Nil

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Nil

J-COACH Corporation 1
Nippon Carbon Co., Ltd. 1

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Nil

Nil

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Reference Group Holdings
LimitedRG Asset Management
Company Limited
RG Asset Management K.K.

RG Asset Management
International (BVI) Limited
RG Asset Management Services
LimitedRG Financial Services Limited(Philippines) Inc.
RG Offshore Financial Services
Ltd. Philippines, Inc.

Group Companies

Group Companies

Nil

Nil

Other Companies

Other Companies

Nil

Nil

Statutory Auditors
Yasuhiro Honda

Masao Harada

3

Yutaka Kitamura 2

Shigeru Yamagishi 3

Tatsuki Nagano

Osamu Doi 2

1

Mr. Kitamura was a statutory auditor of Nippon Carbon Co., Ltd. and J-COACH Corporation.

2

As at the date of lodgment of this Prospectus, Masao Harada and Shigeru Yamagishi are retiring and not seeking
re-election as Statutory Auditors of our Company at our AGM on 26 February 2013. Yutaka Kitamura and Osamu
Doi are standing for election as Statutory Auditors of our Company at our AGM on 26 February 2013, which will beheld before the registration of the Prospectus.

H-3

This page has been intentionally left blank.

APPENDIX ITERMS, CONDITIONS AND PROCEDURES
FOR APPLICATION AND ACCEPTANCE[Applications are invited for the subscription for and/or purchase of the Offering Shares at the
Maximum Offering Price of S$[●] per Offering Share on the terms and conditions set out below (the“Instructions”) and in the Application Form to be used for the purpose of the Offering and whichforms part of the Prospectus or, as the case may be, the Electronic Applications.
Investors applying for the Offering Shares by way of Application Forms or Electronic Applications
are required to pay the Maximum Offering Price of S$[●] per Offering Share, subject to a refundof the full amount or, as the case may be, the balance of the application monies (in each casewithout interest or any share of revenue or other benefit arising therefrom) where (i) an applicationis unsuccessful, (ii) an application is rejected or accepted in part only, (iii) an application is fullyor partially successful and there are excess monies arising from the difference between theOffering Price and the Maximum Offering Price should the Offering Price be lower than the
Maximum Offering Price, or (iv) if the Offering does not proceed for any reason.
(1)

Your application must be made in lots of one (1) Offering Share or integral multiples
thereof. Your application for any other number of Offering Shares will be rejected.

(2)

You may apply for the Public Offer Shares during the period commencing at 9.00 a.m. on [●]2013 and expiring at 12.00 noon on [●] 2013. The Public Offer period may be extended or
shortened to such date and/or time as the Company may, in consultation with the Sole Global
Coordinator, Issue Manager and Underwriter, decide, subject to all applicable laws andregulations and the rules of the SGX-ST.

(3)Your application for the Public Offer Shares may be made by way of the printed WHITE
Application Forms or by way of ATMs belonging to each of the Participating Banks, namely
DBS Bank Ltd. (including POSB), Oversea-Chinese Banking Corporation Limited and United
Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited. (“ATM Electronic
Application”), the Internet Banking (“IB”) websites of the Participating Banks (“Internet
Electronic Application”) or through the DBS mobile banking platform (“mBanking
Application”).
Applications for the Offering Shares under the Placement (the “Placement Shares”) may
only be made by way of the printed BLUE Placement Shares Application Forms or such otherforms of application as the Sole Global Coordinator, Issue Manager and Underwriter deems
appropriate.
Internet Electronic Applications through the IB websites of the relevant Participating Banks
shall together with the ATM Electronic Applications and the mBanking Applications, bereferred to as “Electronic Applications”.

(4)

You must be in Singapore at the time of making the application for the Public Offer.

(5)

YOU MAY NOT USE YOUR CPF FUNDS TO APPLY FOR THE OFFERING SHARES.

(6)

Only one (1) application may be made for the benefit of one (1) person for the Public Offer
Shares in his own name. Multiple applications for the Public Offer Shares will be rejected,
except in the case of applications by approved nominee companies where each application
is made on behalf of a different beneficiary.

I-1

You may not submit multiple applications for the Public Offer Shares via the Application
Form, ATM Electronic Application, Internet Electronic Application or mBanking Application. A
person who is submitting an application for the Public Offer Shares by way of the Application
Form may not submit another application for the Public Offer Shares by way of an ATM
Electronic Application, Internet Electronic Application or mBanking Application and viceversa.
A person, other than an approved nominee company, who is submitting an application for the
Public Offer Shares in his own name should not submit any other applications for the Public
Offer Shares, whether on a printed Application Form or through an ATM Electronic
Application, Internet Electronic Application or mBanking Application, for any other person.
Such separate applications will be deemed to be multiple applications and shall be rejected.
Joint or multiple applications for the Public Offer Shares shall be rejected. Persons
submitting or procuring submissions of multiple applications for the Public Offer
Shares may be deemed to have committed an offence under the Penal Code, Chapter
224 of Singapore and the Securities and Futures Act, and such applications may bereferred to the relevant authorities for investigation. Multiple applications or those
appearing to be or suspected of being multiple applications (other than as provided
herein) will be liable to be rejected at our discretion.
(7)

Applications from any person under the age of 18 years, undischarged bankrupts, sole
proprietorships, partnerships, chops, non-corporate bodies or joint Securities Accountholders of CDP will be rejected.

(8)Multiple applications may be made in the case of applications by any person for (i) thePlacement Shares only (via the Application Forms or such other term of application as theSole Global Coordinator, Issue Manager and Underwriter may in its absolute discretion deem
appropriate), or (ii) the Placement Shares together with a single application for the Public
Offer Shares.

(9)

Applications from any person whose addresses (furnished in their printed Application Forms
or, in the case of ATM Electronic Applications, Internet Electronic Applications or mBanking
Applications, contained in the records of the relevant Participating Bank, as the case may be)bear post office box numbers will be rejected. No person acting or purporting to act on behalfof a deceased person is allowed to apply under the Securities Account with CDP in the
deceased’s name at the time of the application.

(10) The existence of a trust will not be recognised. Any application by a trustee or trustees must
be made in his/her or their own name(s) and without qualification or, where the application
is made by way of a printed Application Form by a nominee, in the name(s) of an approved
nominee company or approved nominee companies after complying with paragraph 12
below.
(11) Nominee applications may only be made by approved nominee companies. Approved
nominee companies are defined as banks, merchant banks, finance companies, insurancecompanies, licenced securities dealers in Singapore and nominee companies controlled bythem. Applications made by nominees other than approved nominee companies will berejected.
(12) If you are not an approved nominee company, you must maintain a Securities Accountwith CDP in your own name at the time of your application. If you do not have an
existing Securities Account with the CDP in your own name at the time of application,
your application will be rejected (if you apply by way of an Application Form) or you
will not be able to complete your application (if you apply by way of an Electronic
Application). If you have an existing Securities Account with CDP but fail to provide
your CDP Securities Account number or provide an incorrect CDP Securities Accountnumber in your Application Form or in your Electronic Application, as the case may be,
your application is liable to be rejected.
I-2

(13) Subject to paragraph 15,16 & 17 below, your application is liable to be rejected if yourparticulars such as name, National Registration Identity Card (“NRIC”) or passport number
or company registration number, nationality and permanent residence status, and CDP
Securities Account number provided in your Application Form, or in the case of an Electronic
Application, contained in the records of the relevant Participating Bank at the time of yourElectronic Application, as the case may be, differ from those particulars in your Securities
Account as maintained by CDP. If you have more than one (1) individual direct Securities
Account with the CDP, your application shall be rejected.
(14) If your address as stated in the Application Form or, in the case of an Electronic
Application, contained in the records of the relevant Participating Bank, as the casemay be, is different from the address registered with CDP, you must inform CDP ofyour updated address promptly, failing which the notification letter on successful
allocation from CDP will be sent to your address last registered with CDP.
(15) The Prospectus and its accompanying documents (including these Instructions and theApplication Form) have not been registered in any jurisdiction other than in Singapore. The
distribution of the Prospectus and its accompanying documents (including these Instructions
and the Application Form) may be prohibited or restricted (either absolutely or unless various
securities requirements, whether legal or administrative, are complied with) in certain
jurisdictions under the relevant securities laws of those jurisdictions. Without limiting thegenerality of the foregoing, neither the Prospectus (including its accompanying documents(including these Instructions and the Application Form)) nor any copy thereof may be taken,transmitted, published or distributed, directly or indirectly, in whole or in part, into or in the
United States or to any U.S. Person (as defined in Regulation S (“Regulation S”) under the
U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”)), including any U.S.
resident, or any partnership or corporation organised or incorporated under the laws of theUnited States or any state or territory thereof, or any trust of which any trustee is a U.S.
person, or any agency or branch of a foreign entity located in the United States. Any failure
to comply with this restriction may constitute a violation of securities laws in the UnitedStates and in other jurisdictions.
The Prospectus and its accompanying documents (including these Instructions and theApplication Form) are not an offer of, or invitation by or on behalf of the Company tosubscribe for and/or purchase, securities for sale in the United States nor are they an offer
or invitation by or on behalf of the Company to subscribe for and/or purchase securities inany jurisdiction in which such offer is not authorised or to any person to whom it is unlawful
to make such an offer or invitation, including U.S. persons within the meaning of Regulation
S. The Offering Shares may not be offered or sold in the United States absent registrationor an exemption from registration under the U.S. Securities Act. The Company does notintend to register any portion of the Offering Shares in the United States or conduct a public
offering of securities in the United States.
For a further description of certain restrictions on the offer, sale or transfer of the Offering
Shares, see the section entitled “Plan of Distribution – Distribution and Selling Restrictions”
of this Prospectus.
The Company reserves the right to reject any applications for Offering Shares where
the Company believes or has reason to believe that such applications may violate thesecurities laws or any applicable legal or regulatory requirements of any jurisdiction.
No person in any jurisdiction outside Singapore receiving the Prospectus or its
accompanying documents (including these Instructions and the Application Form) may treat
the same as an offer or invitation to subscribe for and/or purchase any Offering Shares
unless such an offer or invitation could lawfully be made without compliance with any
regulatory or legal requirements in those jurisdictions.

I-3

(16) The Company reserves the right to reject any application which does not conform strictly tothe instructions set out in the Prospectus, these Instructions and the Application Form, which
does not comply with the instructions of the Electronic Applications, in the ATM, IB websites
and mobile banking interface of the relevant Participating Banks, or with the terms andconditions of the Prospectus or, in the case of an application by way of an Application Form,
which is illegible, incomplete, incorrectly completed or which is accompanied by an
improperly drawn up or improper form of remittance.
(17) The Company further reserves the right to treat as valid any applications not completed or
submitted or effected in all respects in accordance with the instructions set out in the
Prospectus, these Instructions and the Application Form or the instructions of the Electronic
Applications and in the ATMs, IB websites and mobile banking interface of the relevant
Participating Banks, and also to present for payment or other processes all remittances at
any time after receipt and to have full access to all information relating to, or deriving from,such remittances or the processing thereof.
Without prejudice to the rights of the Company, the Sole Global Coordinator, Issue Manager
and Underwriter, as agent of the Company, has been authorised to accept, for and on behalfof the Company, such other forms of application as the Sole Global Coordinator, Issue
Manager and Underwriter may, in consultation with the Company, deem appropriate.
(18) The Company reserves the right to reject or to accept, in whole or in part, or to scale down
or to ballot, any application, without assigning any reason therefor, and none of theCompany, the Sole Global Coordinator, Issue Manager and Underwriter will entertain any
enquiry and/or correspondence on the decision of the Company. This right applies toapplications made by way of Application Forms and by way of Electronic Applications and bysuch other forms of application as the Sole Global Coordinator, Issue Manager andUnderwriter may, in consultation with the Company, deem appropriate. In deciding the basisof allocation, the Company will give due consideration to the desirability of allocating theOffering Shares to a reasonable number of applicants with a view to establishing anadequate market for the Shares.
(19) The Offering Shares may be reallocated between the Placement and the Public Offer in theevent of excess applications in one or a deficit of applications in the other.
(20) In the event that the Company lodges a supplementary or replacement prospectus(“Relevant Document”) pursuant to the Securities and Futures Act or any applicablelegislation in force from time to time prior to the close of the Offering, and the Offering Shares
have not been issued, the Company will (as required by law), at the sole and absolute
discretion of the Company, either:(a)within two (2) days (excluding any Saturday, Sunday or public holiday) from the date of
the lodgment of the Relevant Document, give you notice in writing of how to obtain, or
arrange to receive, a copy of the same and provide you with an option to withdraw yourapplication and take all reasonable steps to make available within a reasonable period
the Relevant Document to you if you have indicated that you wish to obtain, or havearranged to receive, a copy of the Relevant Document;(b)within seven (7) days of the lodgment of the Relevant Document give you a copy of theRelevant Document and provide you with an option to withdraw your application; or(c)deem your application as withdrawn and cancelled and refund your application monies(without interest or any share of revenue or other benefit arising therefrom) to you withinseven (7) days from the lodgment of the Relevant Document.

I-4

Any applicant who wishes to exercise his option under paragraphs 20(a) and 20(b) above towithdraw his application shall, within 14 days from the date of lodgment of the Relevant
Document, notify the Company whereupon the Company shall, within seven (7) days fromthe receipt of such notification, return all monies in respect of such application (without
interest or any share of revenue or other benefit arising therefrom).
In the event that the Offering Shares have already been issued at the time of the lodgmentof the Relevant Document but trading has not commenced, the Company will (as required bylaw), at the sole and absolute discretion of the Company, either:(i)

within two (2) days (excluding Saturday, Sunday or public holiday) from the date of thelodgment of the Relevant Document, give you notice in writing of how to obtain, or
arrange to receive, a copy of the same and provide you with an option to return to theCompany the Offering Shares which you do not wish to retain title in and take allreasonable steps to make available within a reasonable period the Relevant Document
to you if you have indicated that you wish to obtain, or have arranged to receive, a copyof the Relevant Document; or(ii)

within seven (7) days from the lodgment of the Relevant Document give you a copy of
the Relevant Document and provide you with an option to return the Offering Shares
which you do not wish to retain title in; or(iii) deem the issue and transfer of the Offering Shares as void and refund your payment for
the Offering Shares (without interest or any share of revenue or other benefit arising
therefrom) within seven (7) days from the lodgment of the Relevant Document.
Any applicant who wishes to exercise his option under paragraphs 20(i) and 20(ii) above toreturn the Offering Shares issued to him shall, within 14 days from the date of lodgment of
the Relevant Document, notify us of this and return all documents, if any, purporting to beevidence of title of those Offering Shares, whereupon the Company shall, subject tocompliance with applicable laws and the Articles of Incorporation of the Company, withinseven (7) days from the receipt of such notification and documents, pay to him all monies
paid by him for the Offering Shares without interest or any share of revenue or other benefit
arising therefrom and at his own risk, and the Offering Shares issued to him shall be deemed
to be void.
Additional terms and instructions applicable upon the lodgment of the Relevant Document,
including instructions on how you can exercise the option to withdraw, may be found in such
Relevant Document.
(21) As the JASDEC works on a scripless basis, Shares will be registered in the name of CDP or
its nominee and will be forwarded only to CDP. It is expected that CDP will send to you, atyour own risk, within 15 Market Days after the close of the Public Offer, and subject to thesubmission of valid applications and payment for the Offering Shares, a statement of accountstating that your Securities Account has been credited with the number of Offering Shares
allocated to you. This will be the only acknowledgement of application monies received andis not an acknowledgement by the Company. You irrevocably authorise CDP to complete andsign on your behalf as transferee or renouncee any instrument of transfer and/or otherdocuments required for the issue or transfer of the Offering Shares allocated to you. Thisauthorisation applies to applications made both by way of Application Forms and by way ofElectronic Applications and such other forms of application as the Sole Global Coordinator,
Issue Manager and Underwriter may, in consultation with the Company, deem appropriate.
(22) You irrevocably authorise CDP to disclose the outcome of your application, including thenumber of Offering Shares allocated to you pursuant to your application, to the Company, theSole Global Coordinator, Issue Manager and Underwriter and any other parties so authorisedby the Company and the Sole Global Coordinator, Issue Manager and Underwriter.
I-5

(23) Any reference to “you” or the “Applicant” in this section shall include a person, a corporation,
an approved nominee company and trustee applying for the Offering Shares by way of an
Application Form or by way of Electronic Application or such other forms of application as theSole Global Coordinator, Issue Manager and Underwriter may, in consultation with theCompany, deem appropriate.
(24) By completing and delivering an Application Form and, in the case of an ATM Electronic
Application, by pressing the “Enter” or “OK” or “Confirm” or “Yes” key or any other relevant
key on the ATM or, in the case of an Internet Electronic Application or mBanking Application,by clicking “Submit” or “Continue” or “Yes” or “Confirm” or any other relevant button on the
IB website screen or the mobile banking interface in accordance with the provisions herein,
you:
(a)

irrevocably offer, agree and undertake to subscribe for and/or purchase the number ofOffering Shares specified in your application (or such smaller number for which theapplication is accepted) at the Offering Price for each Offering Share and agree that you
will accept such number of Offering Shares as may be allocated to you, in each caseon the terms of, and subject to the conditions set out in, the Prospectus and the Articles
of Incorporation of the Company;(b)agree that, in the event of any inconsistency between the terms and conditions forapplication set out in the Prospectus and the Application Form and those set out in the
IB websites, ATMs or the mobile banking interface of the Participating Banks, the terms
and conditions set out in the Prospectus shall prevail;(c)in the case of an application under the Public Offer by way of an Application Form, an
ATM Electronic Application, Internet Electronic Application or mBanking Application,agree that the aggregate Offering Price for the Offering Shares applied for is due andpayable to the Company upon application;(d)warrant the truth and accuracy of the information contained, and representations anddeclarations made, in your application, and acknowledge and agree that suchinformation, representations and declarations will be relied on by the Company indetermining whether to accept your application and/or whether to allocate any Offering
Shares to you;(e)agree and warrant that, if the laws of any jurisdictions outside Singapore are applicableto your application, you have complied with all such laws and none of the Company or
the Sole Global Coordinator, Issue Manager and Underwriter, will infringe any such laws
as a result of the acceptance of your application;(f)agree and confirm that you are outside the United States; and(g)understand that the Offering Shares have not been and will not be registered under the
Securities Act or the securities laws of any state of the United States and may not be
offered or sold in the United States except pursuant to an exemption from or in atransaction subject to the registration requirements of the U.S. Securities Act andapplicable state securities laws. There will be no public offer of the Offering Shares in
the United States. Any failure to comply with this restriction may constitute a violationof the United States securities laws.

(25) Acceptances of applications will be conditional upon, inter alia, the Company being satisfied
that:
(a)

permission has been granted by the SGX-ST to deal in and for the quotation of all theissued Shares and the Offering Shares;

I-6

(b)

the Placement Agreement and the Management and Underwriting Agreement, referred
to in the section on “Plan of Distribution” in the Prospectus, have become unconditionaland have not been terminated; and(c)the Authority has not served a stop order which directs that no or no further Shares towhich the Prospectus relates be allotted or issued (“Stop Order”).

(26) In the event that a Stop Order in respect of the Shares is served by the Authority or othercompetent authority, and:(a)the Offering Shares have not been issued, all applications shall (as required by andsubject to applicable laws) be deemed to be withdrawn and cancelled and the Company
shall refund the application monies (without interest or any share of revenue or otherbenefit arising therefrom) to you within 14 days of the date of the Stop Order; or(b)in the case where the Offering Shares have been issued to the applicants but tradingof our Shares on the Main Board of the SGX-ST has not commenced, the issue of theOffering Shares pursuant to the Offering is required by the Securities and Futures Act
to be deemed void. However, since the issue of the Offering Shares would have been
duly completed under Japanese law, our Company may not be able to selectively pay
applicants all monies paid by them for the Offering Shares without being in breach ofJapanese law. As our Shares will not be tradable on the SGX-ST in the case of a Stop
Order, successful applicants who have had the Offering Shares issued to them will haveto trade such Shares on the TSE. Please see “Risk Factors – Investors may not obtain
the return of their application monies if our Shares are not listed on the SGX-ST” and“Clearance and Settlement” for more information.

This shall not apply where only an interim Stop Order has been served.
(27) In the event that an interim Stop Order in respect of the Shares is served by the Authority orother competent authority, no Share shall be issued to you until the Authority revokes theinterim Stop Order.
(28) The Authority is not able to serve a Stop Order in respect of the Shares if the Shares havebeen issued and listed on the SGX-ST and trading in them has commenced.
(29) Additional terms and conditions for applications by way of Application Forms are set out inthe section entitled “Additional Terms and Conditions for Applications for Offering Sharesusing the Application Forms” on pages I-8 to I-11 of these Instructions.
(30) Additional terms and conditions for applications by way of Electronic Applications are set out
in the section entitled “Additional Terms and Conditions for Electronic Applications” on pages
I-12 to I-16 of these Instructions.
(31) All payments in respect of any application for the Public Offer Shares and all refunds where(a) an application is rejected or accepted in part only, or (b) the Offering does not proceed
for any reason, shall be made in Singapore dollars.
(32) All payments in respect of any application for the Placement Shares and all refunds where(a) an application is rejected or accepted in part only, or (b) the Offering does not proceed
for any reason, shall be made in Singapore dollars.
(33) No application will be held in reserve.

I-7

(34) The Prospectus is dated [●] 2013. No Offering Shares will be allotted or allocated on thebasis of the Prospectus later than six (6) months after the date of the Prospectus.
(35) In the event of any changes in the closing date of the Public Offer or the time period during
which the Public Offer is opened, the Company will publicly announce the same through a
SGXNET announcement to be posted on the Internet at the SGX-ST website
http://www.sgx.com or through a paid advertisement in one or more major Singapore
newspapers.
Additional Terms and Conditions for Applications for Offering Shares using the Application
Forms
Applications by way of an Application Form shall be made on, and subject to the terms andconditions of the Prospectus (including these Instructions and the Application Form), including but
not limited to the terms and conditions set out below, as well as those set out under the section
on “Terms, Conditions and Procedures for Application and Acceptance” on pages I-1 to I-8 of these
Instructions as well as the Articles of Incorporation of the Company.
(1)

Applications for the Offering Shares must be made using the printed WHITE Application
Forms and printed WHITE official envelopes “A” and “B”, accompanying and forming part of
the Prospectus.
Without prejudice to the rights of the Company, the Sole Global Coordinator, Issue Manager
and Underwriter, as agent of the Company, has been authorised to accept, for and on behalfof the Company, such other forms of application, as the Sole Global Coordinator, Issue
Manager and Underwriter may (in consultation with the Company) deem appropriate.
Your attention is drawn to the detailed instructions contained in the Application Form and theProspectus for the completion of the Application Form, which must be carefully followed. The
Company reserves the right to reject applications which do not conform strictly to the
instructions set out in the Application Form, these Instructions and the Prospectus or
which are illegible, incomplete, incorrectly completed or which are accompanied by
improperly drawn remittances or improper forms of remittances.

(2)

You must complete your Application Form in English. Please type or write clearly in ink using
BLOCK LETTERS.

(3)

You must complete all spaces in your Application Form except those under the heading “FOROFFICIAL USE ONLY” and you must write the words “NOT APPLICABLE” or “N.A.” in any
space that is not applicable.

(4)

Individuals, corporations, approved nominee companies and trustees must give their names
in full. If you are an individual, you must make your application using your full name as it
appears on your NRIC (if you have such an identification document) or in your passport and,in the case of a corporation, in your full name as registered with a competent authority. If you
are not an individual, you must complete the Application Form under the hand of an official
who must state the name and capacity in which he signs the Application Form. If you are a
corporation completing the Application Form, you are required to affix your Common Seal (ifany) in accordance with your Memorandum and Articles of Association or equivalentconstitutive documents of the corporation. If you are a corporate applicant and yourapplication is successful, a copy of your Memorandum and Articles of Association orequivalent constitutive documents must be lodged with the Share Registrar of the Company.
The Company reserves the right to require you to produce documentary proof ofidentification for verification purposes.

I-8

(5)

(a) You must complete Sections A and B and sign page 1 of the Application Form.
(b)

You are required to delete either paragraphs 7(a) or 7(b) on page 1 of the Application
Form. Where paragraph 7(a) is deleted, you must also complete Section C of the
Application Form with particulars of the beneficial owner(s).

(c)

If you fail to make the required declaration in paragraphs 1 or 5, as the case may be,on page 1 of the Application Form, your application is liable to be rejected.

(6)

You (whether an individual or corporate applicant, whether incorporated or unincorporated
and wherever incorporated or constituted) will be required to declare whether you are a
citizen or permanent resident of Singapore or a corporation in which citizens or permanent
residents of Singapore or any body corporate constituted under any statute of Singapore
have an interest in the aggregate of more than 50% of the issued share capital of or interestsin such corporation. If you are an approved nominee company, you are required to declarewhether the beneficial owner of the Offering Shares is a citizen or permanent resident ofSingapore or a corporation, whether incorporated or unincorporated and whereverincorporated or constituted, in which citizens or permanent residents of Singapore or any
body corporate incorporated or constituted under any statute of Singapore have an interestin the aggregate of more than 50% of the issued share capital of or interests in suchcorporation.

(7)

Monies paid in respect of unsuccessful applications are expected to be returned (without
interest or any share of revenue or other benefit arising therefrom) to you by ordinary post,in the event of oversubscription for the Offering Shares, within 24 hours of the balloting (orsuch shorter period as the SGX-ST may require), at your own risk. Where your applicationis rejected or accepted in part only, the full amount or the balance of the application monies,
as the case may be, will be refunded (without interest or any share of revenue or otherbenefit arising therefrom) to you by ordinary post at your own risk within 14 Market Days after
the close of the Public Offer, PROVIDED THAT the remittance accompanying suchapplication which has been presented for payment or other processes has been honoured
and the application monies received in the designated share issue account. If the Offering
does not proceed for any reason, the full amount of application monies (without interest or
any share of revenue or other benefit arising therefrom) will be returned to you by ordinary
post at your own risk, within three Market Days after the Offering is discontinued.

(8)

Capitalised terms used in the Application Form and defined in the Prospectus shall bear themeanings assigned to them in the Prospectus.

(9)

By completing and delivering the Application Form, you agree that:(a)in consideration of the Company having distributed the Application Form to you and bycompleting and delivering the Application Form before the close of the Public Offer:(i)your application is irrevocable;(ii)

your remittance will be honoured on first presentation and that any monies
returnable may be held pending clearance of your payment without interest or any
share of revenue or other benefit arising therefrom; and(iii) you represent and agree that you are not a U.S. person (within the meaning ofRegulation S);

I-9

(b)

all applications, acceptances or contracts resulting therefrom under the Public Offer
shall be governed by and construed in accordance with the laws of Singapore and thatyou irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;(c)in respect of the Offering Shares for which your application has been received and not
rejected, acceptance of your application shall be constituted by written notification by oron behalf of the Company and not otherwise, notwithstanding any remittance being
presented for payment by or on behalf of the Company;(d)you will not be entitled to exercise any remedy of rescission for misrepresentation at
any time after acceptance of your application;(e)reliance is placed solely on information contained in the Prospectus and none of theCompany, the Sole Global Coordinator, Issue Manager and Underwriter or any otherperson involved in the Offering shall have any liability for any information not contained
therein;(f)

you consent to the disclosure of your name, NRIC/passport number or company
registration number, address, nationality, permanent resident status, Securities Accountnumber, and Share application amount to the Registrar, CDP, Securities Clearing
Computer Services (Pte) Ltd (“SCCS”), the SGX-ST, the Company and the Sole Global
Coordinator, Issue Manager and Underwriter (the “Relevant Parties”);(g)

you irrevocably agree and undertake to subscribe for and/or purchase the number ofOffering Shares applied for as stated in the Application Form or any smaller number ofsuch Offering Shares that may be allocated to you in respect of your application. In theevent that the Company decides to allocate any smaller number of Offering Shares or
not to allocate any Offering Shares to you, you agree to accept such decision as final;
and

(h)

you irrevocably authorise CDP to complete and sign on your behalf as transferee or
renounce any instrument of transfer and/or other documents required for the issue ortransfer of the Offering Shares that may be allotted to you.

Applications for the Public Offer Shares(1)Your application for the Public Offer Shares by way of printed Application Forms must be
made using the WHITE Application Form and WHITE official envelopes “A” and “B”.

(2)

You must:(a)

enclose the WHITE Application Form, duly completed and signed, together with correct
remittance for the full amount payable at the Offering Price in Singapore currency inaccordance with the terms and conditions of the Prospectus and the WHITE Application
Form, in the WHITE official envelope “A” provided;(b)

in appropriate spaces on the WHITE official envelope “A”:
(i)write your name and address;(ii)

state the number of Public Offer Shares applied for;(iii) tick the relevant box to indicate form of payment; and(iv) affix adequate Singapore postage;
I-10

(c)

SEAL THE WHITE OFFICIAL ENVELOPE “A”;

(d)write, in the special box provided on the larger WHITE official envelope “B” addressed
to [Tosei Corporation, c/o Daiwa Capital Markets (Singapore) Limited, 6 Shenton Way,
#26-08, DBS Building Tower Two, Singapore 068809], the number of Offering Shares
you have applied for;(e)insert the WHITE official envelope “A” into the WHITE official envelope “B” and seal the
WHITE OFFICIAL ENVELOPE “B”; and(f)affix adequate Singapore postage on the WHITE official envelope “B” (if dispatching byordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY
HAND the documents at your own risk to [Tosei Corporation, c/o Daiwa Capital Markets(Singapore) Limited, 6 Shenton Way, #26-08, DBS Building Tower Two, Singapore
068809], so as to arrive by 12.00 noon on [●] 2013 or such other date(s) and time(s) as
the Company may, in consultation with the Sole Global Coordinator, Issue Manager andUnderwriter, agree. Courier services or Registered Post must NOT be used.

(3)

Applications that are illegible, incomplete or incorrectly completed or accompanied by
improperly drawn remittances or which are not honoured upon their first presentation are
liable to be rejected.

(4)

ONLY ONE (1) APPLICATION should be enclosed in each envelope. No acknowledgementof receipt will be issued for any application or remittance received.

Applications for the Placement Shares(1)Your application for the Placement Shares MUST be made using the BLUE Placement
Shares Application Form or such other forms of application as the Sole Global Coordinator,
Issue Manager and Underwriter deems appropriate. ONLY ONE APPLICATION should be
enclosed in each envelope.

(2)

The completed BLUE Placement Shares Application Form and your remittance inaccordance with the terms and conditions of the Prospectus and its accompanying
documents for the full amount payable in respect of the number of Placement Shares appliedfor, with your name, CDP Securities Account number and address written clearly on thereverse side, must be enclosed and sealed in an envelope to be provided by you. You must
affix adequate Singapore postage (if despatching by ordinary post) and thereafter, the sealed
envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at yourown risk to [Tosei Corporation, c/o Daiwa Capital Markets Singapore Limited, 6
Shenton Way, #26-08, Tower Two, Singapore 068809] so as to arrive by 12.00 noon on[●] 2013 or such other date and time as the Company may, with the agreement of theSole Global Coordinator, Issue Manager and Underwriter decide. Local Urgent Mail or
Registered Post must NOT be used.

(3)

No acknowledgement of receipt will be issued for any application or remittance received.

(4)

Applications that are illegible, incomplete or incorrectly completed or accompanied by
improperly drawn remittances or improper forms of remittance or which are not honoured
upon their first presentation are liable to be rejected.

I-11

Additional Terms and Conditions for Electronic Applications
Electronic Applications shall be made on and subject to the terms and conditions of theProspectus, including but not limited to the terms and conditions set out below and those under
the section “Terms, Conditions and Procedures for Application and Acceptance” on pages I-1 toI-8 of these Instructions as well as the Articles of Incorporation of the Company.
(1)

The procedures for Electronic Applications are set out on the ATM screens of the relevant
Participating Banks (in the case of ATM Electronic Applications), the IB website screens of
the relevant Participating Banks (in the case of Internet Electronic Applications) and themobile banking interface (in the case of mBanking Applications). Currently, DBS Bank is the
only Participating Bank through which mBanking Applications may be made.

(2)

For illustration purposes, the procedures for Electronic Application for Public Offering Sharesthrough ATMs, IB websites and the mobile banking interface of DBS Bank (together the“Steps”) are set out in pages I-17 to I-20 of these Instructions. The Steps set out the actions
that you must take at ATMs, IB websites or the mobile banking interface of DBS Bank tocomplete an Electronic Application. The actions that you must take at the ATMs, or the IB
websites of the other Participating Banks are set out on the ATM screens or the IB website
screens of the respective Participating Banks. Please read carefully the terms and conditionsof the Prospectus, the Steps and the terms and conditions for Electronic Applications set out
below before making an Electronic Application.

(3)

Any reference to “you” or the “Applicant” in these Additional Terms and Conditions forElectronic Applications and the Steps shall refer to you making an application for Public Offer
Shares through an ATM of one (1) of the relevant Participating Banks or the IB website of a
Participating Bank or the mobile banking interface of DBS Bank.

(4)

Application for the Public Offer Shares by way of Electronic Applications may incur anadministrative fee and/or such related charges as stipulated by the Participating Banks fromtime to time.

(5)

If you are making an ATM Electronic Application:(a)

You must have an existing bank account with and be an ATM cardholder of one (1) of
the Participating Banks. An ATM card issued by one (1) Participating Bank cannot be
used to apply for Public Offer Shares at an ATM belonging to other Participating Banks.

(b)

You must ensure that you enter your own Securities Account number when using
the ATM card issued to you in your own name. If you fail to use your own ATM cardor do not key in your own Securities Account number, your application will be rejected.
If you operate a joint bank account with any of the Participating Banks, you must ensurethat you enter your own Securities Account number when using the ATM card issued toyou in your own name. Using your own Securities Account number with an ATM card
which is not issued to you in your own name will render your ATM Electronic Application
liable to be rejected.

(c)Upon the completion of your ATM Electronic Application, you will receive an ATM
transaction slip (“Transaction Record”), confirming the details of your ATM Electronic
Application. The Transaction Record is for your retention and should not be submittedwith any printed Application Form.

I-12

(6)

(7)

If you are making an Internet Electronic Application or a mBanking Application:(a)

You must have an existing bank account with, and a User Identification (“User ID”) as
well as a Personal Identification Number (“PIN”) given by, the relevant Participating
Bank.

(b)

You must ensure that the mailing address of your account selected for the application
is in Singapore and you must declare that the application is being made in Singapore.
Otherwise, your application is liable to be rejected. In connection with this, you will be
asked to declare that you are in Singapore at the time you make the application.

(c)Upon the completion of your Internet Electronic Application through the IB website of
the relevant Participating Bank or the mobile banking interface of DBS Bank, there will
be an on-screen confirmation (“Confirmation Screen”) of the application which can be
printed out or captured by you for your record. This printed record or screen capture of
the Confirmation Screen is for your retention and should not be submitted with any
printed Application Form.

In connection with your Electronic Application for Public Offer Shares, you are required toconfirm statements to the following effect in the course of activating the Electronic
Application:(a)that you have received a copy of the Prospectus (in the case of ATM Electronic
Applications) and have read, understood and agreed to all the terms and conditions ofapplication for the Public Offer Shares and the Prospectus (including these Instructions)prior to effecting the Electronic Application and agree to be bound by the same;(b)that you consent to the disclosure of your name, NRIC/passport number, address,
nationality, permanent resident status, CDP Securities Account number and Shareapplication amount (the “Relevant Particulars”) from your account with the relevant
Participating Bank to the Relevant Parties; and(c)where you are applying for the Public Offer Shares, that this is your only application for
the Public Offer Shares and it is made in your name and at your own risk.

Your application will not be successfully completed and cannot be recorded as a completed
transaction unless you press the “Enter” or “OK” or “Confirm” or “Yes” or any other relevant
key in the ATM or click “Confirm” or “OK” or “Submit” or “Continue” or “Yes” or any otherrelevant button on the website screen or mobile banking interface. By doing so, you shall betreated as signifying your confirmation of each of the three (3) statements above. In respectof statement 7(b) above, your confirmation, by pressing the “Enter” or “OK” or “Confirm” or“Yes” or any other relevant key in the ATM or click “Confirm” or “OK” or “Submit” or “Continue”
or “Yes” or any other relevant button, shall signify and shall be treated as your written
permission, given in accordance with the relevant laws of Singapore, including Section 47(2)of the Banking Act, Chapter 19 of Singapore, to the disclosure by that Participating Bank of
the Relevant Particulars of your account(s) with that Participating Bank to the Relevant
Parties.
(8)

By making an Electronic Application, you confirm that you are not applying for the
Public Offer Shares as a nominee of any other person and that any Electronic
Application that you make is the only application made by you as the beneficial owner.
You should make only one (1) Electronic Application for Public Offer Shares and may
not make any other application for Public Offer Shares, whether at the ATMs, the IB
websites of any Participating Bank, the mobile banking interface of DBS Bank or via

I-13

the Application Forms. If you have made an application for Public Offer Shares via an
Application Form, you shall not make an Electronic Application for Public Offer Sharesand vice versa.
(9)You must have sufficient funds in your bank account with your Participating Bank at the time
you make your ATM Electronic Application, Internet Electronic Application or mBanking
Application, failing which such Electronic Application will not be completed. Any ATM
Electronic Application, Internet Electronic Application or mBanking Application which does
not conform strictly to the instructions set out in the Prospectus or on the screens of theATMs, on the IB website of the relevant Participating Bank or the mobile banking interfaceof DBS Bank, as the case may be, through which your ATM Electronic Application, Internet
Electronic Application or mBanking Application is being made shall be rejected.

(10) You irrevocably agree and undertake to subscribe for and/or purchase and to accept the
number of Public Offer Shares applied for as stated on the Transaction Record or theConfirmation Screen or any lesser number of such Public Offer Shares that may be allocatedto you in respect of your Electronic Application. In the event that the Company decides toallocate any lesser number of such Public Offer Shares or not to allocate any Public Offer
Shares to you, you agree to accept such decision as final. If your Electronic Application is
successful, your confirmation (by your action of pressing the “Enter” or “OK” or “Confirm” or“Yes” or any other relevant key in the ATM or click “Confirm” or “OK” or “Submit” or “Continue”
or “Yes” or any other relevant button on the Internet screen or the mobile banking interfaceof DBS) of the number of Public Offer Shares applied for shall signify and shall be treated as
your acceptance of the number of Public Offer Shares that may be allocated to you.
(11) The Company will not keep any application in reserve. Where your Electronic Application is
unsuccessful, the full amount of the application monies will be returned (without interest or
any share of revenue or other benefit arising therefrom) to you by being automaticallycredited to your account with your Participating Bank, within 24 hours of the balloting (orsuch shorter period as the SGX-ST may require) provided that the remittance in respect ofsuch application which has been presented for payment or other processes has beenhonoured and the application monies received in the designated share issue account.
Where your Electronic Application is rejected or accepted in part only, the balance of
the application monies, as the case may be, will be returned (without interest or any
share of revenue or other benefit arising therefrom) to you by being automaticallycredited to your account with your Participating Bank, within 14 Market Days after theclose of the Public Offer provided that the remittance in respect of such application
which has been presented for payment or other processes has been honoured and theapplication monies received in the designated share issue account.
If the Offering does not proceed for any reason, the full amount of application monies(without interest or any share of revenue or other benefit arising therefrom) will be returned
to you within three (3) Market Days after the Offering is discontinued.
Responsibility for timely refund of application monies (whether from unsuccessful or partiallysuccessful Electronic Applications or otherwise) lies solely with the respective Participating
Banks. Therefore, you are strongly advised to consult your Participating Bank as to the statusof your Electronic Application and/or the refund of any money to you from an unsuccessfulor partially successful Electronic Application, to determine the exact number of Public Offer
Shares, if any, allocated to you before trading the Shares on the SGX-ST. None of the
SGX-ST, CDP, SCCS, the Participating Banks, the Company and the Sole Global
Coordinator, Issue Manager and Underwriter assume any responsibility for any loss that may
be incurred as a result of you having to cover any net sell positions or from buy-in procedures
activated by the SGX-ST.
I-14

(12) If your ATM Electronic Application, Internet Electronic Application or mBanking Application is
unsuccessful, no notification will be sent by the relevant Participating Bank.
Applicants who make ATM Electronic Applications through the ATMs of the following
Participating Banks may check the provisional results of their ATM Electronic Applications asfollows:

Bank

Operating
Hours

Service
expectedfrom

Telephone

Other Channels

DBS Bank Ltd.
(including POSB)(“DBS Bank”)

1800 339 6666(for POSB
account holders)
1800 111 1111
(for DBS
account holders)IB http://www.dbs.com(1)24 hours aday

Evening of
the balloting
day

Oversea-Chinese
Banking
Corporation
Limited (“OCBC”)

1800 363 3333

ATM/IB
http://www.ocbc.com (2)24 hours aday

Evening of
the ballotingday

United Overseas
Bank Limited andits subsidiary, Far
Eastern Bank
Limited (“UOB
Group”)

1800 222 2121

ATM (Other Transactions
24 hours a– “IPO Enquiry”)/IB
day
http://www.uobgroup.com(3)Evening of
the ballotingday

Notes:(1)

Applicants who have made Internet Electronic Applications through the IB website of DBS Bank or mBanking
Applications through the mobile banking interface of DBS Bank may also check the results of theirapplications through the same channels listed in the table above in relation to ATM Electronic Applications
made at the ATMs of DBS Bank.

(2)

Applicants who have made Electronic Applications through the ATMs or the IB website of OCBC Bank may
check the results of their applications through OCBC Personal Internet Banking, OCBC ATMs or OCBC Phone
Banking services.

(3)

Applicants who have made Electronic Applications through the ATMs or the IB website of UOB Group may
check the results of their applications through UOB Personal Internet Banking, UOB ATMs or UOB Phone
Banking services.

(13) ATM Electronic Applications shall close at 12.00 noon on [●] 2013 or such other date(s) andtime(s) as the Company may, in consultation with the Sole Global Coordinator, Issue
Manager and Underwriter, agree. All Internet Electronic Applications and mBanking
Applications must be received by 12.00 noon on [●] 2013, or such other date(s) and time(s)as the Company may, in consultation with the Sole Global Coordinator, Issue Manager andUnderwriter, agree. Internet Electronic Applications and mBanking Applications are deemed
to be received when they enter the designated information system of the relevant
Participating Bank.
(14) You are deemed to have irrevocably requested and authorised the Company to:(a)register the Public Offer Shares, as the case may be, allocated to you in the name of
CDP for deposit into your Securities Account;(c)return or refund (without interest or any share of revenue earned or other benefit arising
therefrom) the application monies, should your Electronic Application be rejected byautomatically crediting your bank account with your Participating Bank, with the
I-15

relevant amount within 24 hours (or such shorter or longer period as the SGX-ST may
require) after balloting, or within three (3) Market Days if the Public Offer does notproceed for any reason, after the close or discontinuation (as the case may be) of the
Public Offer, PROVIDED THAT the remittance in respect of such application which has
been presented for payment or such other processes has been honoured andapplication monies received in the designated share issue account; and(d)return or refund (without interest or any share of revenue or other benefit arising
therefrom) the balance of the application monies, should your Electronic Application berejected or accepted in part only by automatically crediting your bank account with yourParticipating Bank, at your own risk, with the relevant amount within 14 Market Days
after the close of the Public Offer, PROVIDED THAT the remittance in respect of suchapplication which has been presented for payment or such other processes has beenhonoured and application monies received in the designated share issue account.

(15) You irrevocably agree and acknowledge that your Electronic Application is subject to risks ofelectrical, electronic, technical and computer-related faults and breakdown, fires, acts of God
and other events beyond the control of the Participating Banks, the Company and/or the Sole
Global Coordinator, Issue Manager and Underwriter, and if, in any such event the Company,
the Sole Global Coordinator, Issue Manager and Underwriter and/or the relevant
Participating Bank do not receive your Electronic Application, or any data relating to yourElectronic Application or the tape or any other devices containing such data is lost, corrupted
or not otherwise accessible, whether wholly or partially for whatever reason, you shall bedeemed not to have made an Electronic Application and you shall have no claim whatsoever
against the Company, the Sole Global Coordinator, Issue Manager and Underwriter and/or
the relevant Participating Bank for any Public Offer Shares applied for or for any
compensation, loss or damage.
(16) The existence of a trust will not be recognised. Any Electronic Application by a trustee must
be made in his own name and without qualification. The Company shall reject any application
by any person acting as nominee (other than approved nominee companies).
(17) All your particulars in the records of your Participating Bank at the time you make yourElectronic Application shall be deemed to be true and correct and your Participating Bankand the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been
any change in your particulars after making your Electronic Application, you must promptly
notify your Participating Bank.
(18) You should ensure that your personal particulars as recorded by both CDP and the relevant
Participating Bank are correct and identical, otherwise, your Electronic Application is liable
to be rejected. You should promptly inform CDP of any change in address, failing which thenotification letter on successful allocation will be sent to your address last registered with
CDP.
(19) By making and completing an Electronic Application, you are deemed to have agreed that:(a)in consideration of the Company making available the Electronic Application facility,
through the Participating Banks acting as agents of the Company, at the ATMs and IB
websites of the relevant Participating Banks and the mobile banking interface of DBS
Bank:
(i)

your Electronic Application is irrevocable;

I-16

(ii)

your Electronic Application, the acceptance by the Company and the contract
resulting therefrom under the Public Offer shall be governed by and construed inaccordance with the laws of Singapore and you irrevocably submit to thenon-exclusive jurisdiction of the Singapore courts; and(iii) you represent and agree that you are not a U.S. person (within the meaning ofRegulation S);(b)none of CDP, the Company, the Sole Global Coordinator, Issue Manager andUnderwriter and the Participating Banks shall be liable for any delays, failures or
inaccuracies in the recording, storage or in the transmission or delivery of data relating
to your Electronic Application due to breakdowns or failure of transmission, delivery orcommunication facilities or any risks referred to in paragraph (15) above or to any cause
beyond their respective controls;(c)in respect of the Public Offer Shares for which your Electronic Application has beensuccessfully completed and not rejected, acceptance of your Electronic Application
shall be constituted by written notification by or on behalf of the Company and nototherwise, notwithstanding any payment received by or on behalf of the Company;(d)you will not be entitled to exercise any remedy for rescission for misrepresentation at
any time after acceptance of your application;(e)reliance is placed solely on information contained in the Prospectus and that none of theCompany, the Sole Global Coordinator, Issue Manager and Underwriter and any otherperson involved in the Offering shall have any liability for any information not contained
therein; and(f)you irrevocably agree & undertake to subscribe for the number of Public Offer Shares
applied for as stated in your Electronic Application or any smaller number of such Public
Offer Shares that may be allocated to you in respect of your Electronic Application. In
the event the Company decide to allocate any smaller number of such Public Offer
Shares to you or not to allocate any Public Offer Shares to you, you agree to accept
such decision as final.

Steps for ATM Electronic Applications for Public Offer Shares through ATMs of DBS Bank
(including POSB ATMs)
Instructions for ATM Electronic Applications will appear on the ATM screens of the respective
Participating Bank. For illustration purposes, the steps for making an ATM Electronic Application
through a DBS or POSB ATM are shown below. Certain words appearing on the screen are inabbreviated form (“A/C”, “amt”, “appln”, “&”, “I/C”, “No.”, “SGX” and “Max” refer to “Account”,“amount”, “application”, “and”, “NRIC”, “Number”, “SGX-ST” and “Maximum”, respectively).
Instructions for ATM Electronic Applications on the ATM screens of Participating Banks (other than
DBS (including POSB)), may differ slightly from those represented below.
Steps
1:

Insert your personal DBS or POSB ATM Card.

2:

Enter your Personal Identification Number.

3:

Select “MORE SERVICES”.

4:

Select language (for customers using multi-language card).
I-17

5:

Select “ESA-IPO SHARE/SGS/INVESTMENTS”.

6:

Select “ELECTRONIC SECURITY APPLN (IPOS/BOND/ST-NOTES/SECURITIES)”.

7:

Read and understand the following statements which will appear on the screen:•(IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUS
REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) THE OFFER OF
SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, OR ACCOMPANIED
BY, A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AND IFAPPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/DOCUMENT OR PROFILE STATEMENT) WHICH CAN BE OBTAINEDFROM ANY DBS/POSB BRANCH IN SINGAPORE AND, WHERE APPLICABLE, THE
VARIOUS PARTICIPATING BANKS DURING BANKING HOURS, SUBJECT TO
AVAILABILITY.

•(IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUS
REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) ANYONEWISHING TO ACQUIRE THESE SECURITIES (OR UNITS OF SECURITIES) SHOULD
READ THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS
SUPPLEMENTED OR REPLACED, IF APPLICABLE) BEFORE SUBMITTING HISAPPLICATION WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE
PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR
REPLACED, IF APPLICABLE). A COPY OF THE PROSPECTUS/DOCUMENT OR
PROFILE STATEMENT, AND IF APPLICABLE, A COPY OF THE REPLACEMENT OR
SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT HAS
BEEN LODGED WITH AND REGISTERED BY THE MONETARY AUTHORITY OF
SINGAPORE WHO ASSUMES NO RESPONSIBILITY FOR ITS OR THEIRCONTENTS.

•(IN THE CASE OF A SECURITIES OFFERING THAT DOES NOT REQUIRE A
PROSPECTUS TO BE REGISTERED WITH THE MONETARY AUTHORITY OF
SINGAPORE) THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) MAY BE
MADE
IN A NOTICEPUBLISHEDIN A NEWSPAPER AND/OR A
CIRCULAR/DOCUMENT DISTRIBUTED TO SECURITY HOLDERS. ANYONEWISHING TO ACQUIRE SUCH SECURITIES (OR UNITS OF SECURITIES) SHOULD
READ THE NOTICE/CIRCULAR/DOCUMENTS BEFORE SUBMITTING HISAPPLICATION, WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE
NOTICE/CIRCULAR/DOCUMENT.
PRESS THE “ENTER”
UNDERSTOOD.

KEY TO

8:

Select “TOSEI” to display details.

9:

Press the “ENTER” key to acknowledge:•

CONFIRM THAT YOU

HAVEREAD ANDYOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THE
APPLICATION AND (WHERE APPLICABLE) PROSPECTUS, DOCUMENT OR
PROFILE STATEMENT, AND IF APPLICABLE, THE REPLACEMENT OR
SUPPLEMENTARY PROSPECTUS/DOCUMENT, PROFILE STATEMENT, NOTICE
AND/OR CIRCULAR.

I-18

•

YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NO., ADDRESS,NATIONALITY, CDP SECURITIES A/C NO., CPF INVESTMENT A/C NO. AND
SECURITY APPLN AMOUNT FROM YOUR BANK A/C(S) TO SHARE REGISTRARS,
SGX, SCCS, CDP, CPF AND THE ISSUER/VENDOR(S).

•FOR FIXED AND MAX PRICE SECURITIES APPLICATION, THIS IS YOUR ONLYAPPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK.

•THE PRICE FOR EACH SHARE IS PAYABLE IN FULL ON APPLICATION.

•

FOR TENDER SECURITIES APPLICATION, THIS IS YOUR ONLY APPLICATION AT
THE SELECTED TENDER PRICE AND IT IS MADE IN YOUR OWN NAME AND ATYOUR OWN RISK.

•YOU ARE NOT A US PERSON AS REFERRED TO IN (WHERE APPLICABLE) THE
PROSPECTUS, DOCUMENT, PROFILE STATEMENT, REPLACEMENT OR
SUPPLEMENTARY PROSPECTUS/DOCUMENT, PROFILE STATEMENT, NOTICE
AND/OR CIRCULAR.

•

THERE MAY BE A LIMIT ON THE MAXIMUM NUMBER OF SECURITIES THAT YOU
CAN APPLY FOR SUBJECT TO AVAILABILITY. YOU MAY BE ALLOCATED A SMALLERNUMBER OF SECURITIES THAN YOU APPLIED FOR OR (IN THE CASE OF ANEARLIER CLOSURE UPON FULL SUBSCRIPTION) YOUR APPLICATION MAY BE
REJECTED IF ALL THE AVAILABLE SECURITIES HAVE BEEN FULLY ALLOCATEDTO EARLIER APPLICANTS.

10: Select your nationality.
11:

Select the DBS account (Autosave/Current/Savings/Savings Plus) or the POSB account(Current/Savings) from which to debit your application monies.

12: Enter the number of securities you wish to apply for using cash.
13: Enter or confirm (if your CDP Securities Account number has already been stored in DBS’
records) your own 12-digit CDP Securities Account number. (Note: This step will be omitted
automatically if your Securities Account number has already been stored in DBS’ record)
14: Check the details of your securities application, your NRIC or passport number, CDP
Securities Account number, number of securities and application amount on the screen andpress the “ENTER” key to confirm your application.
15: Remove the Transaction Record for your reference and retention only.

I-19

Steps for Internet Electronic Applications for Public Offer Shares through the IB Website of
DBS Bank
For illustrative purposes, the steps for making an Internet Electronic Application through the DBS
IB website are shown below. Certain words appearing on the screen are in abbreviated form(“A/C”, “&”, “amt”, “I/C” and “No.” refer to “Account”, “and”, “Amount”, “NRIC” and “Number”,
respectively).
Steps
1:

Click on DBS website (http://www.dbs.com).

2:

Login to Internet banking.

3:

Enter your User ID and PIN.

4:

Select “Electronic Security Application (ESA)”.

5:

Click “Yes” to proceed and to warrant, inter alia, that you are currently in Singapore, you haveobserved and complied with all applicable laws and regulations and that your mailingaddress for DBS Internet Banking is in Singapore, and that you are not a U.S. person (assuch term is defined in Regulation S under the United States Securities Act of 1933 as
amended).

6:

Select your country of residence and click “I confirm”.

7:

Click on “TOSEI” and click the “Submit” button.

8:

Click on “I Confirm” to confirm, inter alia:•

You have read, understood and agreed to all terms of application and theProspectus/Document or Profile Statement and if applicable, the Supplementary or
Replacement Prospectus/Document or Profile Statement.

•

You consent to disclose your name, I/C or Passport No., address, nationality, CDP
Securities Account No., CPF Investment Account No. (if applicable) and securities
application amount from your DBS/POSB Account(s) to registrars of securities, SGX,
SCCS, CDP, CPF Board and issuer/vendors.

•

You are not a U.S. Person (as such term is defined in Regulation S under the UnitedStates Securities Act of 1933, as amended).

•

You understand that the securities mentioned herein have not been and will not beregistered under the United States Securities Act of 1933 as amended (the “US
Securities Act”) or the securities laws of any state of the United States and may not be
offered or sold in the United States or to, or for the account or benefit of any “U.S.
Person” (as defined in Regulation S under the US Securities Act) except pursuant to an
exemption from or in a transaction subject to, the registration requirements of the US
Securities Act and applicable state securities laws. There will be no public offer of the
securities mentioned herein in the United States. Any failure to comply with thisrestriction may constitute a violation of the United States securities laws.

•

This application is made in your own name and at your own risk.

I-20

9:

•

For FIXED/MAX price securities application, this is your only application. For TENDER
price securities application, this is your only application at the selected tender price.

•

For FOREIGN CURRENCY securities subject to the terms of the issue, please note thefollowing: the application monies will be debited from your bank account in S$, basedon the Bank’s prevailing board rates at the time of application. Any refund monies willbe credited in S$ based on the Bank’s prevailing board rates at the time of refund. The
different prevailing board rates at the time of application and the time of refund of
application monies may result in either a foreign exchange profit or loss or application
monies may be debited and refund credited in S$ at the same exchange rate.

•

For 1ST-COME-1ST-SERVE securities, the number of securities applied for may be
reduced, subject to availability at the point of application.

Fill in details for share application and click “I confirm”.

10: Check the details of your share application, your I/C/passport number and click “OK” toconfirm your application.
11:

Print the Confirmation Screen (optional) for your reference and retention only.

Steps for mBanking Applications for the Public Offer Shares through the mBanking
interface of DBS BankFor illustrative purposes, the steps for making an mBanking Application are shown below. Certain
words appearing on the screen are in abbreviated form (“A/C”, “amt”, “&”, “I/C”, “SGX” and “No.”refer to “Account”, “amount”, “and”, “NRIC”, “SGX-ST” and “Number” respectively).
Steps
1:

Login to DBS Bank mBanking application using your User ID and PIN. Select “Investment
Services”.

2:

Select “Electronic Securities Application”.

3:

Select “Yes” to proceed and to warrant, inter alia, that you are currently in Singapore, youhave observed and complied with all applicable laws and regulations and that your mailingaddress for DBS Internet Banking is in Singapore and that you are not a U.S. person (as suchterm is defined in Regulation S under the United Securities Act of 1933 as amended).

4:

Select your country of residence.

5:

Select “TOSEI”.

6:

Select “Yes” to confirm, inter alia:(a)

You have read, understood and agreed to all terms of application and theProspectus/Document or Profile Statement and if applicable, the Supplementary or
Replacement Prospectus/Document or Profile Statement.

(b)

You consent to disclose your name, I/C or passport number, address, nationality, CDP
Securities Account number, CPF Investment Account number (if applicable) andsecurities application amount from your DBS/POSB Account(s) to registrars of
securities, SGX, SCCS, CDP, CPF Board and issuer/vendor(s).

I-21

(c)

You are not a U.S. Person (as such term is defined in Regulation S under the UnitedStates Securities Act of 1933, as amended).

(d)

You understand that the securities mentioned herein have not been and will not beregistered under the United States Securities Act of 1933 as amended or the securities
laws of any state of the United States and may not be offered or sold in the UnitedStates or to, or for the account or benefit of any “U.S. person” (as defined in Regulation
S under the US Securities Act) except pursuant to an exemption from or in a transaction
subject to, the registration requirements of the US Securities Act and applicable state
securities laws. These will be no public offer of the securities mentioned herein in the
United States. Any failure to comply with this restriction may constitute a violation of theUnited States securities laws.

(e)This application is made in your own name and at your own risk.

(f)

For FIXED/MAX price securities application, this is your only application. For TENDER
price securities application, this is your only application at the selected tender price.

(g)

FOR FOREIGN CURRENCY Securities, subject to the terms of the issue, please notethe following: the application monies will be debited from your bank account in S$,
based on the Bank’s prevailing board rates at the time of application. Any refund monies
will be credited in S$ based on the Bank’s prevailing board rates at the time of refund.
The different prevailing board rates at the time of application and the time of refund of
application monies may result in either a foreign exchange profit or loss or application
monies may be debited and refund credited in S$ at the same exchange rate.
FOR 1ST-COME-1ST-SERVE securities, the number of securities applied for may be
reduced, subject to availability at the point of application.

8:

Fill in details for share application and select “Submit”.

9:

Check the details of your share application, your IC/Passport No. and select “Confirm” toconfirm your application.

10: Where applicable, capture Confirmation Screen (optional) for your reference and retention
only.]

I-22

TOPPAN VITE PTE. LTD. SIP1302007