Quarterly Securities Report(The English translation of the “Shihanki-Houkokusho”
for the first quarter of the 69th term)from December 1, 2017
to February 28, 2018TOSEI CORPORATION
4-2-3, Toranomon, Minato-ku, Tokyo, Japan(E04021)
This is an English translation prepared for the convenience of non-resident shareholders by translating the Quarterly Securities
Report (Shihanki-Houkokusho) submitted to the Director of the Kanto Local Finance Bureau of the Ministry of Finance ofJapan on April 10, 2018. Should there be any inconsistency between the translation and the official Japanese text, the latter shallprevail.

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

Overview of the Tosei Group .......................................................................................................... 1
1. Trends in principal management benchmarks ..........................................................................................1
2. Business description .................................................................................................................................1
II. Review of operations ....................................................................................................................... 2
1. Business and other risks ...........................................................................................................................2
2. Important operational contracts, etc. ........................................................................................................2
3. Analysis of financial position, operating results and cash flows..............................................................2
III. Filing company ................................................................................................................................. 8
1. Information on the Company (Tosei)’s shares, etc. .................................................................................8(1) Total number of authorized shares, etc. ................................................................................................ 8(2) Status of stock acquisition rights .......................................................................................................... 8(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause ..... 8(4) Details of rights plan ............................................................................................................................. 8(5) Trends in total number of issued shares, share capital, etc. .................................................................. 8(6) Status of major shareholders ................................................................................................................. 8(7) Status of voting rights ........................................................................................................................... 9
2. Status of Officers .....................................................................................................................................9
IV. Accounting...................................................................................................................................... 10
1. Condensed Quarterly Consolidated Financial Statements .....................................................................11(1) Condensed Consolidated Statement of Financial Position.................................................................. 11(2) Condensed Consolidated Statement of Comprehensive Income......................................................... 12(3) Condensed Consolidated Statement of Changes in Equity ................................................................. 13(4) Condensed Consolidated Statement of Cash Flows ............................................................................ 14(5) Notes to Condensed Quarterly Consolidated Financial Statements .................................................... 15
2. Other ......................................................................................................................................................20

B. Information on Guarantee Companies, etc. of Filing Company ....................................20[Quarterly Review Report of Independent Auditors]

[Cover]Document to be filed:

Quarterly Securities Report

Provisions to base upon:

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

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

April 10, 2018

Business year:

First quarter of the 69th term (from December 1, 2017 to February
28, 2018)

Company name (Japanese):

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

Title and name of representative:

Seiichiro Yamaguchi, President and CEO

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

Telephone number:+81-3-3435-2865

Contact person:

Noboru Hirano, Director and CFO

Place of contact:

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

Telephone number:+81-3-3435-2865

Contact person:

Noboru Hirano, Director and CFO

Places where the document to be filed isTokyo Stock Exchange, Inc.

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

A.
I.

Company Information
Overview of the Tosei Group

1. Trends in principal management benchmarks
Term

68th termFirst three months

69th termFirst three months

68th term

Accounting period

From December 1, 2016
to February 28, 2017

From December 1, 2017
to February 28, 2018

From December 1, 2016
to November 30, 2017

14,677,393

18,310,040

57,754,328

3,658,783

4,150,290

9,049,467

2,500,571

2,847,530

6,155,169

2,528,738

2,875,292

6,165,615

42,487,774

47,980,486

46,158,867

120,715,227

124,675,580

122,550,281

51.79

58.92

127.48－58.75

127.41

35.2

38.5

37.7

1,779,446

4,485,532

7,089,159

61,711(1,483,704)(18,800)(1,952,393)(1,852,521)(4,962,180)

21,529,928

24,898,923

23,750,239

Revenue(¥ thousand)Profit before tax(¥ thousand)Profit attributable to owners of the parent(¥ thousand)Comprehensive income for the period
attributable to owners of the parent(¥ thousand)Total equity(¥ thousand)Total assets(¥ thousand)Basic earnings per share(¥)
Diluted earnings per share(¥)
Ratio of equity attributable to owners of theparent to total assets(%)
Net cash from (used in) operating activities(¥ thousand)Net cash from (used in) investing activities(¥ thousand)Net cash from (used in) financing activities(¥ thousand)Cash and cash equivalents at end of period(¥ thousand)Notes: 1. Filing company’s trends in principal management benchmarks are not disclosed as the Company prepares quarterly
consolidated financial statements.
2. Revenue does not include consumption taxes.
3. Diluted earnings per share for the 68th term First three months is not presented because there were no potential sharesthat have dilutive effects.
4. The above indexes are based on the quarterly consolidated financial statements and consolidated financial statementsthat were prepared in compliance with the International Financial Reporting Standards (hereinafter “IFRS”).

2. Business description
During the three months ended February 28, 2018, there were no significant changes in business activities
operated by the Tosei Group (the Company and its subsidiaries and affiliates) from the previous fiscal year.
With respect to changes in principal subsidiaries and affiliates, Masuda Kenzai-ten Co., Ltd. was acquired
through M&A transaction and have been included in the scope of consolidation.

1

II.

Review of operations

1. Business and other risks
There were no business and other risks that newly arose during the three months ended February 28, 2018.
In addition, there were no significant changes in “Business and other risks” described in the annual securities
report for the previous fiscal year.

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

3. Analysis of financial position, operating results and cash flows
Any forward-looking statements included in the following descriptions are based on the best estimates or
judgment of the Tosei Group as of February 28, 2018.
(1) Analysis of operating results
During the three months ended February 28, 2018, the Japanese economy continued to recover. A
moderate recovery is expected to continue going forward, backed by stable personal consumption,
expansion of favorable corporate earnings, and increasing exports, despite concerns over downside risks offinancial policy trends in Europe and the U.S., and geopolitical risks in Asia.
In the real estate industry where Tosei Group operates, domestic real estate transactions by listedcompanies and other such entities for the full year 2017 rose 14.4% year on year to ¥4.5775 trillion. While
sales with the aim of locking in profits increased due to rising real estate prices, transactions were active
owing to the demand for property acquisition from investors preferring stable rent income despite low
investment returns. The high demand for real estate investment from investors is likely to continue forsome time, with the prospect that monetary easing policies are to be sustained by the Bank of Japan(according to a survey by a private research institute).
In the Tokyo metropolitan area condominium market, the number of units sold in the full year 2017
increased 0.4% year on year to 35,898. Under the effects of rising construction costs and high land prices,
the average selling price soared to ¥59.08 million, an increase of 7.6% year on year, only second to the¥61.23 million recorded in 1990. The sluggish sales of some suburban properties resulted in the averagecontract rate for the first month at 68.1% (a decrease of 0.7 percentage points year on year), slightly below
the 70% threshold from which market conditions are viewed as favorable. However, about 38,000 units(an increase of 5.9% year on year) are expected to be sold in the full year 2018, due to the solid sales ofproperties in the central Tokyo area and near stations, as well as the anticipated recovery of suburban unit
sales as a result of the rush in demand caused by the increase in consumption taxes scheduled to take effectin October 2019 (according to a survey by a private research institute).
In the Tokyo metropolitan area build-for-sale detached house market, due to the soaring sales prices of
newly built condominiums, a part of end-user demand flowed into the undervalued detached house market.
As a result, housing starts in the full year 2017 rose 2.2% year on year to 62,028 units (according to asurvey by the Ministry of Land, Infrastructure, Transport and Tourism).
The office leasing market of Tokyo’s five business wards has been performing favorably. The vacancy
rate as of January 2018 declined by 0.6 percentage points from 3.7% year on year to 3.1%, and the averageasking rent was ¥19,338 per tsubo (1 tsubo = 3.3m2), a 4.1% increase year on year, and increased for the49th consecutive month. An upsurge in supply of large-scale office buildings can be anticipated in 2018,
and the vacancy rate is expected to deteriorate, but corporate interest in expanding offices and their needfor relocation and integration are expected to remain strong. As a result, the average asking rent in thesecond half of 2018 is expected to remain in an uptrend (according to a survey by a private research
institute).
In the real estate securitization market, the total value of assets under management as of December 31,
2017 was ¥16.5 trillion in J-REITs (an increase of ¥1.0 trillion year on year). In an environment where realestate prices remain persistently high, property acquisitions continue to progress despite at a gradual pace,
and the market scale expanded to ¥32 trillion, including ¥15.8 trillion of value under management inprivate placement funds (as of June 30, 2017) (according to a survey by a private research institute).
2

Amid this operating environment, in the Revitalization Business, the Group made steady progress inselling assets such as income-generating office buildings and apartments, while in the Development
Business, the Group pushed ahead with sales of detached houses. In addition, other than normal
acquisition methods, the Group also utilized an acquisition method of M&A, proactively acquiring
income-generating properties and land for development as future sources of income.
As a result, consolidated revenue for the three months ended February 28, 2018 totaled ¥18,310 million(up 24.7% year on year), operating profit was ¥4,341 million (up 13.4%), profit before tax was ¥4,150
million (up 13.4%), and profit for the period was ¥2,847 million (up 13.9%).
Performance by business segment is shown below.
Revitalization Business
During the three months ended February 28, 2018, the segment sold 13 properties it had renovated,
including Nishidai Tosei Building (Itabashi-ku, Tokyo), Kichichoji Ito Building (Musashino-shi, Tokyo),
Kunitachi 219 Building (Kunitachi-shi, Tokyo) and T-Rhythmic SOKA (Soka-shi, Saitama). In addition,
the segment sold 4 units in the Restyling Business from Hilltop Yokohama Negishi (Yokohama-shi,
Kanagawa).
During the three months ended February 28, 2018, it also acquired a total of 17 income-generating
office buildings and apartments and three land lots for renovation and sales purposes.
As a result, revenue in this segment was ¥14,425 million (up 31.9% year on year) and the segment profit
was ¥3,793 million (up 11.0%).
Development Business
During the three months ended February 28, 2018, the segment focused on the sale of detached houses,
for which there was firm demand. The segment sold 17 detached houses including THE Palms Court
Kashiwa Hatsuishi (Kashiwa-shi, Chiba) , THE Palms Court Kamakura Shiromeguri (Kamakura-shi,
Kanagawa), THE Palms Court Mitaka Shimorenjyaku (Mita-shi, Tokyo).
During the three months ended February 28, 2018, it also acquired one land lot for condominium project
and land lot for 20 detached houses.
As a result, revenue in this segment was ¥766million (down 20.9% year on year) and the segment loss
was ¥145 million (in comparison with segment loss of ¥173 million in the same period of the previous
fiscal year ).
Rental Business
During the three months ended February 28, 2018, while the segment sold 7 buildings of its inventory
assets held for leasing purposes, it newly acquired 16 apartment. In addition, the segment made efforts tolease vacancies out following acquisitions and also focused on leasing activities for its existing non-current
assets and inventory assets.
As a result, revenue in this segment was ¥1,396 million (down 5.1% year on year) and the segment
profit was ¥630 million (down 4.6%).
Fund and Consulting Business
During the three months ended February 28, 2018, while ¥3,250 million was subtracted from thebalance of assets under management (Note), due mainly to property dispositions by funds, ¥72,279 million
was added to the balance of Assets under management ¥552,208 for the end of the previous fiscal year,
due mainly to new asset management contracts of large projects the segment obtained. The balance ofassets under management as of February 28, 2018, was ¥621,237 million. The acquisition of such large
project contracts increased asset management fees and contributed to revenue.
As a result, revenue in this segment was ¥674 million (up 43.7% year on year) and the segment profit
was ¥377 million (up 136.5%).
Note: The balance of assets under management includes the balance of assets that were subject to consulting contracts, etc.

Property Management Business
During the three months ended February 28, 2018, the segment made efforts to win new contracts and3maintain existing contracts. Consequently, the total number of properties under management was 660 as ofFebruary 28, 2018, an increase of 61 from February 29, 2017, with the total comprising 390 officebuildings, hotels, schools and other such properties, and 270 condominiums and apartments.
As a result, revenue in this segment was ¥974 million (up 17.7% year on year) and segment profit was¥108 million (up 43.0%).
Other
During the three months ended February 28, 2018, revenue in this segment was ¥72 million (there wasno segment revenue in the same period of the previous fiscal year) and the segment profit was ¥6 million(in comparison with segment profit of ¥0 million in the same period of the previous fiscal year).
(2) Analysis of financial position
As of February 28, 2018, total assets were ¥124,675 million, an increase of ¥2,125 million comparedwith November 30, 2017, while total liabilities were ¥76,695 million, an increase of ¥303 million.
This was primarily due to an increase in inventories, an increase in trade and other payables.
Total equity increased by ¥1,821 million to ¥47,980 million, mainly due to an increase in retained
earnings and payment of cash dividends.
(3) Analysis of cash flows
Cash and cash equivalents (hereinafter “cash”) as of February 28, 2018 totaled ¥24,898 million, up¥1,148 million compared with November 30, 2017.
The cash flows for the three months ended February 28, 2018 and factors contributing to those amounts
are as follows:
Cash Flows from Operating Activities
Net cash provided by operating activities totaled ¥4,485 million (up 152.1% year on year). This ismainly due to profit before tax of ¥4,150 million and income taxes paid of ¥1,019 million.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥1,483 million (in comparison with segment Net cash
provided by investing activities of ¥61 million in the same period of the previous fiscal year). This is
primarily due to purchase of investments in subsidiaries resulting in change in scope of consolidation of¥1,335 million.
Cash Flows from Financing Activities
Net cash used in financing activities totaled ¥1,852 million (down 5.1% year on year)This mainlyreflects ¥9,815 million in the repayments of non-current borrowings and ¥1,157 million in cash
dividends paid, despite ¥9,032 million in proceeds from non-current borrowings.
(4) Operational and financial issues to be addressed
During the three months ended February 28, 2018, there was no significant change in issues to beaddressed by the Tosei Group.
The Company has set the basic policy regarding the persons who control the decision-making on thefinancial and business policies of the Company. The contents of basic policy (matters set forth in Article
118, item 3 of the Ordinance for Enforcement of the Companies Act) are as follows:a.Contents of basic policy
The Company believes that the persons who control decisions on the Company’s financial andbusiness policies need to be persons who fully understand the details of the Company’s financial andbusiness affairs and the source of the Company’s corporate value and who will make it possible tocontinually and persistently ensure and enhance the Company’s corporate value and, in turn, thecommon interests of its shareholders.
The Company believes that ultimately its shareholders as a whole must make the decision on any
4proposed acquisition that would involve a change of control of the Company. Also, the Company will
not reject a large-scale acquisition of the shares in the Company if it will contribute to the corporate
value of the Company and, in turn, the common interests of its shareholders.
Nonetheless, there are some forms of large-scale acquisition of shares that benefit neither the corporate
value of the target company nor the common interests of its shareholders including those with a purposethat would obviously harm the corporate value of the target company and the common interests of its
shareholders, those with the potential to substantially coerce shareholders into selling their shares; thosethat do not provide sufficient time or information for the target company’s board of directors andshareholders to consider the details of the large-scale acquisition, or for the target company’s board of
directors to make an alternative proposal and those that require the target company to discuss ornegotiate with the acquirer in order to procure more favorable terms for shareholders than thosepresented by the acquirer.
It is particularly necessary and essential for the persons who make decisions on the Company’s
financial and business policies to (i) maintain the system under which the Company group covers with
its comprehensive capability the five business fields and peripheral fields that allow the “integration ofreal estate and finance,” which leads to maximization of the potential of the Company group, (ii)maintain employees who support those businesses with knowledge and experience specializing in realestate and finance, etc., (iii) maintain the Company’s trust in the real estate industry that has been built
up over a long period of time based on the establishment of the ability and information networks
supporting various value creation technologies, and (iv) master knowhow that enables comprehensive
business. Unless the acquirer of a proposed large-scale acquisition of the shares in the Company
understands the source of the corporate value of the Company as well as the details of financial andbusiness affairs of the Company and would ensure and enhance these elements over the medium-to-long
term, the corporate value of the Company and, in turn, the common interests of its shareholders would be
harmed.
The Company believes that persons who would make a large-scale acquisition of the shares in the
Company in a manner that does not contribute to the corporate value of the Company or the common
interests of its shareholders would be inappropriate as persons that control decisions on the Company’s
financial and business policies. The Company believes that it is necessary to ensure the corporate valueof the Company and, in turn, the common interests of its shareholders by taking necessary andreasonable countermeasures against a large-scale acquisition by such persons.
b.Overview of special measures to realize the basic policy
The Company group newly formulated a medium-term management plan called “Seamless Growth2020” (the targeted period of the plan is three years from December 2017 to November 2020), kicking
off in the fiscal year ending November 30, 2018. The major policy of the plan is “to continue growth as aGroup to build a firm position as an original comprehensive real estate company,” under which we aim
to establish new income-generating business, while targeting further growth of the five existing
businesses and increases in their operating profit. In addition, we will endeavor to increase profits fromthe Rental, Fund and Consulting and Property Management Businesses, which are positioned as thestable businesses, to enable a structural balance between profits from the Revitalization andDevelopment Businesses so as to reinforce our resilience to changes in the business environment. On thefinancial front, we will enhance funding capabilities, through methods such as the extension ofborrowing periods to maintain a sound financial structure as the infrastructure that supports the
expansion of business scale, while aiming at effective investments. In addition, as the composition of theCompany group’s trade diversifies in line with the expanding business scale, we will further enhance thequality of internal control, namely, compliance, risk management, and disclosure, to establish an
optimum corporate governance structure.
Furthermore, we recognize that human resources that are the most important assets of the Company,
and to leverage these assets, we will drive ahead with the development of next-generation executives, allofficers and employees and the fostering of human resources for the improvement of productivity, while
increasing the satisfaction of employees of the entire Group. At the same time, we will strive to establish
a corporate brand befitting the firm position as a group of original comprehensive real estate companies
and reinforce the attractiveness of our product brand that will be trusted by the market.

5

c.Overview of measures to prevent decisions on the Company’s financial and business policies from being
controlled by persons deemed inappropriate according to the basic policy
The plan is a measure to prevent decisions on the Company’s financial and business policies frombeing controlled by persons deemed inappropriate under the above basic policy, and its objective is toensure and enhance the Company’s corporate value and, in turn, the common interests of its shareholders.
The plan stipulates procedures that must be followed in any cases of purchase, etc. of share certificates,etc. of the Company ((i) a purchase or other acquisition that would result in the holding ratio of sharecertificates, etc. (kabuken tou hoyuu wariai)of a holder (hoyuusha) totaling at least 20% of the sharecertificates, etc. issued by the company; or (ii) a tender offer (koukai kaitsuke) that would result in theparty conducting the tender offer’s ownership ratio of share certificates, etc. and the ownership ratio ofshare certificates, etc. of a person having a special relationship totaling at least 20% of the sharecertificates, etc. issued by the Company; or (iii) any similar action to (i) or (ii) above)
In practical terms, the acquirer must provide the Company a statement of undertaking (acquirer’s
statement) and an acquisition document that includes essential information, etc. before making theacquisition, etc.
Upon receiving these documents, the independent committee, while obtaining independent expert
advice, will conduct its consideration of the acquisition terms; collection of information on materials
such as the management plans and business plans of the acquirer and the Company’s board of directors
and comparison thereof; consideration of any alternative plan presented by the Company’s board of
directors, and the like; and discussion and negotiation with the acquirer. The Company will disclose
information in a timely manner.
When (i) the acquisition is not in compliance with the procedures prescribed in the plan or (ii) it
threatens to cause obvious harm to the corporate value of the Company, and, in turn, to the common
interests of shareholders, (iii) and it is reasonable to implement the gratis allotment of stock acquisitionrights, the independent committee will recommend the implementation the gratis allotment of stockacquisition rights to the Company’s board of directors. In addition, when a meeting of shareholders isconvened to confirm the intent of the Company’s shareholders, the Company’s board of directors will
respond to the shareholders’ intent. These stock acquisition rights will be allotted with an exercise
condition that does not allow, as a general rule, the acquirer to exercise the rights and an acquisition
provision to the effect that the Company may acquire the stock acquisition rights in exchange for sharesin the Company from persons other than the acquirer. The Company’s board of directors, in exercising
its role under the Companies Act, will pass a resolution relating to the implementation or nonimplementation of the gratis allotment of stock acquisition rights, respecting the recommendation of the
Independent Committee to the maximum extent. In addition, when a meeting of shareholders isconvened to confirm the intent of the Company’s shareholders, the Company’s board of directors will
respond to the shareholders’ intent. If the procedures for the plan have commenced, the acquirer must
not effect an acquisition until and unless the Company’s board of directors resolves not to trigger theplan. The effective period of the plan expires at the conclusion of the ordinary general meeting ofshareholders for the last fiscal year ending within three years after the conclusion of the 68th Ordinary
General Meeting of Shareholders. However, if, before the expiration of the effective period, theCompany’s board of directors resolves to abolish the plan, the plan will be abolished at that time.
d.Decisions by the Company’s board of directors regarding specific measures and reasons therefor
Company’s board of directors deems that the new medium-term management plan and other measures
such as the efforts to enhance the corporate value and the strengthening of corporate governance were
establishedas specific measures to continuously and sustainably enhance the corporate value of theCompany and, in turn, the common interests of its shareholders, and that these are truly in accordancewith the basic policy, not detrimental to the common interests of the Company’s shareholders and not forthe purpose of maintaining the positions of the Company’s corporate officers.
In addition, the Company’s board of directors deems that the plan is not detrimental to the common
interests of the Company’s shareholders, not for the purpose of maintaining the positions of theCompany’s corporate officers, and in accordance with the basic policy based on the following reasoning:approval from the general meeting of shareholders must be obtained for its renewal; its effective period
is stipulated as a maximum of three years and it can be abolished at any time by the resolution of theCompany’s board of directors; an independent committee, which is composed of members who are
independent from the management of the Company, has been established; in the event that the plan’s
6countermeasures are triggered, the Company must obtain a resolution by the independent committee
when making a decision for triggering the countermeasures in the plan, and the plan fully satisfies thethree principles set out in the Guidelines Regarding Takeover Defense for the Purposes of Protection andEnhancement of Corporate Value and Shareholders’ Common Interests released by the Ministry of
Economy, Trade and Industry and the Ministry of Justice on May 27, 2005.
(5) Research and development activities
No item to report.

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

b.

Class

Total number of authorized shares

Ordinary shares

150,000,000

Total

150,000,000

Number of shares issued
Number of issued
shares(Shares: as ofFebruary 28, 2018)

Number of issued
shares(Shares: as ofthe date of filing:
April 10, 2018)

Ordinary shares

48,469,500

48,472,500

Total

48,469,500

48,472,500

Class

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

Note: Shares issued through the exercise of stock acquisition rights between April 1, 2018 and the submission date of thisQuarterly Securities Report are not included under “Number of shares issued.”(2) Status of stock acquisition rights
No item to report.
(3) Exercise of bond certificates with stock acquisition rights with exercise price amendment clause
No item to report.
(4) Details of rights plan
No item to report.
(5) Trends in total number of issued shares, share capital, etc.
Date

Fluctuation in
the number ofissued shares(Shares)

Balance ofissued shares

Fluctuation inshare capital

Balance ofshare capital

Fluctuation incapitalreserves(¥ thousand)(Shares)(¥ thousand)(¥ thousand)From December 1, 2017
185,500
48,469,500
94,4196,515,812
94,419to February 28, 2018
Notes: The increase in the number outstanding common shares is due to the exercise of stock options.

(6) Status of major shareholders
There is no item to report due to the reporting period being a first quarter of a fiscal year.

8

Balance ofcapitalreserves(¥ thousand)
6,599,287

(7) Status of voting rights
The following status of voting rights is prepared based on the shareholder registry as of November 30,
2017, which is the latest record date, as the information as of February 28, 2018 is not yet available.
a.

Issued shares(As of February 28, 2018)
Classification

Number of shares(Shares)Number of voting rights

Details

–

–

–

–

–

–

–

–

–

–

–

–

Shares without voting rights
Shares with restricted voting rights(Treasury shares, etc.)
Shares with restricted voting rights(Other)Shares with full voting rights(Treasury shares, etc.)

Tosei’s standard class ofshares with no rights
limitations

Shares with full voting rights(Other)Ordinary shares
48,281,700

482,817

Shares less than one unit

Ordinary shares
2,300

–

–

48,284,000––

482,817–

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

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

b.

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

Total numberof shares held
(Shares)(As of February 28, 2018)
Percentage of number of shares
held in the total number of issued
shares (%)

Name ofshareholder

Address

Number of shares
held under own
name (Shares)

–

–

–

–

–

–

Total

–

–

–

–

–

Note: As of February 28, 2018, the company own 46 treasury shares due to purchase of fractional unit shares.

2. Status of Officers
There was no change in Officers during the three months ended February 28, 2018 after the filing date ofannual securities report for the previous fiscal year.

9IV. Accounting
1. Preparation policy of the condensed quarterly consolidated financial statements
The condensed quarterly consolidated financial statements of the Company have been prepared inaccordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” under theprovision of Article 93 of the “Ordinance on Terminology, Forms and Preparation Methods of Quarterly
Consolidated Financial Statements” (Cabinet Office Ordinance No. 64 of 2007).
2. Audit attestation
The condensed quarterly consolidated financial statements for the first quarter of the fiscal year ending
November 30, 2018 (from December 1, 2017 to February 28, 2018) and for the first three months of the
fiscal year ending November 30, 2018 (from December 1, 2017 to February 28, 2018) were reviewed by
Shinsoh Audit Corporation pursuant to Article 193-2, paragraph 1 of the Financial Instruments andExchange Act.

10

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

8
8

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

8
8

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

8
8

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

8
8

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

11

As of November 30, 2017

As of February 28, 2018

23,750,239
2,148,608
59,718,614
26,37624,898,923
2,529,217
60,159,672
28,312

85,643,839

87,616,125

5,305,652
28,359,547
83,544
1,751,463
859,731517,587
28,914

5,292,502
28,367,347
77,943
1,798,778
911,348582,620
28,91436,906,441

37,059,454

122,550,281

124,675,580

4,278,612
6,449,040
732,961484,671

4,311,991
8,105,066
1,070,794
168,603

11,945,287

13,656,454

3,280,020
60,674,335
472,574
19,197－3,569,262
58,377,341
431,186
6,704
654,144

64,446,127

63,038,639

76,391,414

76,695,094

6,421,392
6,464,240
33,209,210－
64,024

6,515,812
6,523,308
34,849,640(61)
91,786

46,158,867

47,980,486

46,158,867

47,980,486

122,550,281

124,675,580

(2) Condensed Consolidated Statement of Comprehensive Income(¥ thousand)Three months ended
February 28, 2017

Three months ended
February 28, 2018

14,677,393

18,310,040

Cost of revenue

9,187,899

12,119,236

Gross profit

5,489,493

6,190,803

Selling, general and administrative expenses

1,791,178

1,877,793

Other income

147,287

93,983

Other expenses

17,581

65,572

3,828,021

4,341,420

Finance income

32,85340,191

Finance costs

202,091

231,322

Profit before tax

3,658,783

4,150,290

Income tax expense

1,158,212

1,302,759

Profit for the period

2,500,571

2,847,530

286(6,006)

16,22532,864

Net change in fair values of cash flow hedges

11,655903

Subtotal

28,166

27,762Other comprehensive income for the period, net oftax

28,166

27,762

2,528,738

2,875,292

2,500,571

2,847,530

2,528,738

2,875,292

Notes
Revenue

Operating profit

5

5

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

Total comprehensive income for the period

Profit attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent

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

7

51.79

58.92

Diluted earnings per share (yen)

7

–

58.75

12

(3) Condensed Consolidated Statement of Changes in Equity
Three months ended February 28, 2017 (December 1, 2016 – February 28, 2017)(¥ thousand)Totalequityattributableto ownersof parent

Total
equitySharecapitalCapitalreserves

Retainedearnings

TreasurysharesOther
components of equity

Balance at December
1, 2016

6,421,392

6,418,823

28,120,304－

49,56241,010,083

41,010,083

Profit for the period－－

2,500,571－－

2,500,571

2,500,571

Other comprehensive
incomeTotal comprehensive
income for the period
Amount oftransactions withownersIssuance of newsharesPurchase of treasury
shares－－－－28,16628,16628,166－－2,500,571－

28,1662,528,738

2,528,738

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－ (1,062,248)－－ (1,062,248) (1,062,248)

Notes

Dividends of surplus

6

Share-based payment－

11,200－－－

11,200

11,200

Balance at February
28, 2017

6,421,392

6,430,024

29,558,628－

77,72942,487,774

42,487,774

Three months ended February 28, 2018 (December 1, 2017 – February 28, 2018)(¥ thousand)Totalequityattributableto ownersof parent

Total
equitySharecapitalCapitalreserves

Retainedearnings

TreasurysharesOther
components of equity

Balance at December
1, 2017

6,421,392

6,464,240

33,209,210－

64,024

46,158,867

46,158,867

Profit for the period－－

2,847,530－－

2,847,530

2,847,530

Other comprehensive
incomeTotal comprehensive
income for the period
Amount oftransactions withownersIssuance of newsharesPurchase of treasury
shares－－－－

27,762

27,762

27,762－－

2,847,530－

27,762

2,875,292

2,875,292

94,41954,132－－－

148,551

148,551

－

－

－

(61)

－

(61)

(61)

－

－ (1,207,100)－－ (1,207,100) (1,207,100)

Notes

Dividends of surplus

6

Share-based payment

－

4,935

－

－

－

4,935

4,935

Balance at February
28, 2018

6,515,812

6,523,308

34,849,640(61)

91,78647,980,486

47,980,486

13

(4) Condensed Consolidated Statement of Cash Flows(¥ thousand)
Notes
Cash flows from operating activities
Profit before tax
Depreciation expense
Increase (decrease) in provisions and retirement
benefits obligations
Interest and dividend income
Interest expenses
Gain on sales of stocks of subsidiaries and affiliates
Loss on retirement of property, plant and equipment
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade and other payables
Other, net

Three months ended
February 28, 2017

Three months ended
February 28, 2018

3,658,783
94,2804,150,290
147,371(267,470)(358,663)(32,853)
202,091(123,505)(40,191)
231,322－
89,352609,676(345,820)
17,645－608
10,361
1,632,647(205,424)(102,982)

SubtotalInterest and dividend income received
Income taxes paid

3,902,180
32,852(2,155,586)

5,465,339
39,477(1,019,283)

Net cash from (used in) operating activities

1,779,446

4,485,532

95,000(1,424)(162,150)
(285)
7,153

－
(12,025)(134,642)(1,940)84,071

－

18

19

－

(1,335,115)

39,328－61,711(1,483,704)

35,2007,981,000(8,742,029)－(1,009,932)(215,718)(913)

143,000
9,032,500(9,815,555)
148,371(1,157,717)(202,145)(975)(1,952,393)(1,852,521)(111,235)
21,640,866

1,149,306
23,750,239

297

(622)

21,529,928

24,898,923

Cash flows from investing activities
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of investment properties
Purchase of intangible assets
Collection of available-for-sale financial assets
Proceeds from sales of available-for-sale financial
assetsCollection of loans receivable
Purchase of investments in subsidiaries resulting inchange in scope of consolidation
Proceeds from sales of investments in subsidiaries
resulting in change in scope of consolidation
Net cash from (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in current borrowings
Proceeds from non-current borrowings
Repayments of non-current borrowings
Proceeds from issuance of new shares
Cash dividends paid
Interest expenses paid
Other, net
Net cash from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate change on cash and cash
equivalents
Cash and cash equivalents at end of period14－(5) Notes to Condensed Quarterly Consolidated Financial Statements
1. Reporting entity
Tosei Corporation (hereinafter, the “Company”) is a share company located in Japan whose shares arelisted on the First Section of the Tokyo Stock Exchange and the Mainboard of Singapore Exchange. The
Company’s condensed quarterly consolidated financial statements for the three months ended February
28, 2018 have been prepared in respect of the Company and its consolidated subsidiaries (hereinaftercollectively, the “Group”). The Group engages in the following five business operations: Revitalization
Business, Development Business, Rental Business, Fund and Consulting Business and Property
Management Business. The operations of each business segment are presented in “5. Segment
information” in the notes.
2. Basis of preparation(1) Compliance with IFRS
Since the Company qualifies as a “Designated International Financial Reporting Standards specified
company” as provided in Article 1-2 of the “Ordinance on Terminology, Forms and Preparation
Methods of Quarterly Consolidated Financial Statements” (Cabinet Office Ordinance No. 64 of 2007),
its condensed quarterly consolidated financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34 “Interim Financial Reporting” under the provision of
Article 93 of the “Ordinance on Terminology, Forms and Preparation Methods of Quarterly
Consolidated Financial Statements” (Cabinet Office Ordinance No. 64 of 2007).
These condensed quarterly consolidated financial statements were approved by Seiichiro Yamaguchi,
the Company’s President and CEO, and Noboru Hirano, Director and CFO, on April 6, 2018.
(2) Basis of measurement
The condensed quarterly consolidated financial statements have been prepared on the historical costbasis except for assets and liabilities measured at fair value.
(3) Presentation currency and unit amountThe condensed quarterly consolidated financial statements in this report are presented in Japaneseyen, the Company’s functional currency. All financial information presented in Japanese yen isrounded down to the nearest thousand yen.
3. Significant accounting policies
Significant accounting policies that the Group applies in condensed quarterly consolidated financial
statements are the same as the accounting policies used in the consolidated financial statements for theprevious fiscal year.
4. Significant accounting estimates and judgments requiring estimates
The preparation of the condensed quarterly consolidated financial statements in compliance with IFRS
requires the management of the Group to make judgments, estimates and assumptions that affect theapplication of accounting policies and the amounts of assets, liabilities, revenue and expenses. However,actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting
estimates are recognized in the period in which the estimates are changed and in future periods in which
the change will affect.
5. Segment information
The Group’s reportable segments are components of the Group about which separate financial
information is available that the Board of Directors regularly conducts deliberations to determine theallocation of management resources and to assess the performance. The Group draws up comprehensive
strategies for each of the following five business segments and conducts business activities accordingly;“Revitalization Business”, “Development Business”, “Rental Business”, “Fund and Consulting
15

Business”, and “Property Management Business”. In the Revitalization Business, the Group acquires theproperties whose asset values have declined, renovates, and resells them. In the Development Business,
the Group sells condominium units and detached houses to individual customers as well as apartment
and office buildings to investors. In the Rental Business, the Group rents office buildings and apartments.
The Fund and Consulting Business mainly provides asset management services for the properties placed
in real estate funds. The Property Management Business provides comprehensive property management
services.
The Group’s revenue and profit/loss by reportable segment are as follows:
Three months ended February 28, 2017
(December 1, 2016 – February 28, 2017)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Revenue from externalcustomers

10,939,298

969,058

1,471,596

468,943

828,497－－

14,677,393

Intersegment revenue－－

10,780

16,118286,813－(313,712)－

10,939,298

969,058

1,482,376

485,061

1,115,311－(313,712) 14,677,393

3,417,519(173,472)

660,837

159,698

75,813555(312,931)

Other

Adjustment

Total

Revenue

Total
Segment profit or loss

3,828,021

Finance income/costs, net(169,237)

Profit before tax

3,658,783

Three months ended February 28, 2018
(December 1, 2017 – February 28, 2018)(¥ thousand)Reportable Segments
Revitalization Development
Business
Business

RentalBusiness

Fund andConsulting
Business

Property
Management
Business

Revenue from externalcustomers

14,425,414

766,192

1,396,841

674,070

974,951

72,570－18,310,040

Intersegment revenue－－

38,015

13,089255,711－(306,817)－

14,425,414

766,192

1,434,857

687,159

1,230,663

72,570(306,817) 18,310,040

3,793,912(145,430)

630,458

377,635

108,427

6,408(429,990)

Other

Adjustment

Total

Revenue

Total
Segment profit or loss

4,341,420

Finance income/costs, net(191,130)

Profit before tax

4,150,290

16

6. Dividends
Dividends paid in the three months ended February 28, 2017 and February 28, 2018 are as follows:
Three months ended February 28, 2017
Resolution

Dividends per share(¥)

Ordinary General Meetingof Shareholders held on
February 24, 2017

Total dividends(¥ thousand)

22

1,062,248

Record date

Effective dateNovember 30, 2016

February 27, 2017

Three months ended February 28, 2018
Resolution

Dividends per share(¥)

Ordinary General Meetingof Shareholders held on
February 27, 2018

Total dividends(¥ thousand)25

1,207,100

Record date

Effective dateNovember 30, 2017

February 28, 2018

7. Earnings per share
Three months ended
February 28, 2017
Profit attributable to owners of the parent (¥ thousand)Net income used to figure diluted net income per share(¥ thousand)
Weighted average number of outstanding ordinary shares(shares)
The number of increased ordinary shares used to figure
diluted earnings per share (shares)
The weighted-average number of ordinary shares used tofigure diluted earnings per share (shares)
Basic earnings per share (¥)

Three months ended
February 28, 2018

2,500,571

2,847,530－

2,847,530

48,284,000

48,328,491－

138,124－

48,466,615

51.79

58.92

－

58.75

Diluted net income per share (¥)

Notes: 1. Basic earnings per share is calculated by dividing profit attributable to owners of the parent, by the weighted average
number of outstanding ordinary shares during the reporting period.
2. Diluted earnings for consolidated results for the first quarter ended February 28, 2017 per share is not presented
because there were no potential shares that have dilutive effects.

8. Financial instrumentsi) Fair values and carrying amounts
Fair values of financial assets and liabilities and their carrying amounts presented in the condensed
consolidated statement of financial position are as follows:(¥ thousand)As of November 30, 2017

As of February 28, 2018

Carrying
amountFair value

Carrying
amountFair value

Cash and cash equivalents

23,750,239

23,750,239

24,898,923

24,898,923

Available-for-sale financial assets

1,751,463

1,751,463

1,798,778

1,798,778

Trade and other receivables

3,008,339

3,008,339

3,440,565

3,440,565

Trade and other payables

7,558,632

7,558,632

7,881,254

7,881,254

Borrowings

67,123,376

67,133,900

66,482,407

66,493,268

17

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

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

Fair values measured at a price quoted in an active market
Fair values calculated directly or indirectly using an observable price except for level 1
Fair values calculated through valuation techniques, including inputs that are not based on
observable market data(¥ thousand)As of November 30, 2017
Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

1,276,317－

475,145

1,751,463

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

13,770－13,770

As of February 28, 2018
Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

1,323,691－

475,087

1,798,778

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

12,436－

12,43618

Reconciliation of financial assets classified in level 3 at the beginning of the period with those at theend of the period is as follows:(¥ thousand)Three months ended
February 28, 2018
Balance at beginning of period

475,145－

Acquisition
Comprehensive income
Profit (loss)(58)－

Disposal
Balance at end of period

475,087

9. Business combinations
In the three months ended February 28, 2018, the Group engaged in the following business combinations.
(Acquisition of Masuda Kenzai-ten Co., Ltd)On December 26, 2017, the Company acquired 100% of the shares in Masuda Kenzai-ten Co., Ltd,
company owning income-generating properties mainly in Toda-shi, Saitama and Fuchu-shi Tokyo, andengaging in the rental business.
The Group is stepping up its activities to acquire future sources of income. This M&A activity was
performed as part of the acquisition methods therefor.
The fair values of consideration paid, assets acquired and liabilities assumed as of the acquisition datewere as follows:
Amount (Thousands of yen)
Fair value of consideration paid (Note)

2,017,155

Fair values of assets acquired and liabilities assumed
Current assets

2,737,726[Of which, cash and cash equivalents][682,039]

Non-current assets

15,251

Current liabilities(181,895)

Non-current liabilities(484,252)

Net assets

2,086,829

Gain on negative goodwill(69,674)

Total
Note: Consideration paid was in cash.

2,017,155

As stated above, gain on negative goodwill ¥69,674 thousand is attributable to the net asset (subtracting“the fair values of liabilities assumed” from “fair values of assets acquired”) exceeded “the fair value ofconsideration paid”. It is recorded as “other income” in the Condensed Consolidated Statement ofComprehensive Income.
The fair values of assets acquired and liabilities assumed were calculated by taking into overall
consideration financial and asset conditions examined through third-party due diligence.
19

Acquisition costs related to these business combinations, of ¥60,720 thousand, were recorded as “otherexpenses.” in Condensed Consolidated Statement of Comprehensive Income.
Profit and loss information and pro forma profit and loss information for these business combinations
after the acquisition date are not stated, as its amount of impact on the condensed quarterly consolidated
financial statements is immaterial.

10. Significant subsequent events
No item to report.

2. Other
No item to report.

B.

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

20

(Translation)
Quarterly Review Report of Independent Auditors
April 6, 2018

To the Board of Directors of
Tosei Corporation
Shinsoh Audit Corporation
Designated and Engagement Partner,
Certified Public Accountant:
Takayuki Sakashita(Seal)

Designated and Engagement Partner,
Certified Public Accountant:
Atushi Iijima(Seal)

Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we havereviewed the condensed quarterly consolidated financial statements of Tosei Corporation included in the“Accounting” section, namely, the condensed consolidated statements of financial position, comprehensive
income, changes in equity, and cash flows, as well as their notes, for the first quarter (December 1, 2017 to
February 28, 2018) and the first three-month period (December 1, 2017 to February 28, 2018) of the fiscal year
from December 1, 2017 to November 30, 2018.
Management’s Responsibility for the Condensed Quarterly Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these condensed quarterly
consolidated financial statements in conformity with International Accounting Standard 34 “Interim
Financial Reporting” under the provision of Article 93 of the Ordinance on Terminology, Forms andPreparation Methods of Quarterly Consolidated Financial Statements of Japan; this includes the design,
implementation, and maintenance of internal control as management determines is necessary to enable thepreparation and fair presentation of condensed quarterly consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express a conclusion from an independent perspective on these condensed
quarterly consolidated financial statements based on our quarterly review as independent auditor. We
conducted our review in conformity with quarterly review standards generally accepted in Japan.
A quarterly review consists principally of making inquiries, primarily of management and persons
responsible for financial and accounting matters, and applying analytical procedures and other quarterly
review procedures. Such a review is substantially less in scope than an audit conducted in conformity
with auditing standards generally accepted in Japan.
We believe that we have obtained the evidence to provide a basis for our conclusion.
Auditor’s Conclusion
In our quarterly review, we have concluded that the condensed quarterly consolidated financial
statements referred to above are in conformity with International Accounting Standard 34 “Interim
Financial Reporting”, and nothing has come to our attention that causes us to believe that they do not
fairly present, in all material respects, the financial positions of the Company and its consolidated
subsidiaries as of February 28, 2018, and the consolidated results of their operations and their cash flows
for the three-month period then ended.

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

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

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