(%) ,006 5,900. Ordinary income Ordinary income Return on equity ( ) ( ) (%) (%) (%) Year ended Nov. 30, 2007 Year ended Nov.

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1 Summary of Consolidated Financial Statements for the Year Ended November 30, 2007 January 11, 2008 These financial statements have been prepared for reference only in accordance with accounting principles and practices generally accepted in Japan. Tosei Corporation Stock exchange listings: Tokyo, Second Section Code number: 8923 Head office location: Tokyo Use of U.S. accounting standards: No Representative: Seiichiro Yamaguchi, President and CEO Phone: Contact: Noboru Hirano, Director and CFO Start of distribution of dividends: February 27, 2008 (scheduled) General Manager of Financial Division Ordinary general shareholders meeting: February 26, 2008 Submission of Securities Report (Yuka Shoken Hokokusho): (scheduled) February 27, 2008 (scheduled) 1. Consolidated Operating Results for the Year Ended November 30, 2007 (1) Revenues and Income Note: All amounts are rounded down to the nearest million yen. (Percentages represent change compared with the previous fiscal year.) Revenues Operating income Ordinary income Net income ( million) Change ( million) Change ( million) Change ( million) Change Year ended Nov. 30, 2007 Year ended Nov. 30, ,085 24,741 (%) ,006 5,900 (%) ,949 5,323 (%) Earnings Earnings per Ordinary income Ordinary income Return on equity per share share (diluted) / Total assets / Revenues ( ) ( ) (%) (%) (%) Year ended Nov. 30, 2007 Year ended Nov. 30, , , , , (Reference) Equity in earnings (loss) of affiliates: Year ended November 30, 2007: million (Year ended November 30, 2006: million) 4,557 2,737 (2) Financial Position Total assets ( million) Net assets ( million) Net worth ratio (%) Book value per share ( ) As of Nov. 30, 2007 As of Nov. 30, ,922 60,136 19,252 15, , , (Reference) Net assets: Year ended November 30, 2007: 19,252 million (Year ended November 30, 2006: 15,229 million) (%) (3) Cash Flow Year ended Nov. 30, 2007 Year ended Nov. 30, 2006 Net cash used in operating activities ( million) (19,543) (10,857) Net cash provided by (used in) investing activities ( million) (2,066) 471 Net cash provided by financing activities ( million) 20,312 14,339 Cash and cash equivalents at end of period ( million) 5,181 6, Dividends Dividends per share ( ) Interim Year-end Full year Total dividends ( million) Payout ratio (%) Dividend on equity ratio (%) Year ended Nov. 30, , , Year ending Nov. 30, , , Year ending Nov. 30, 2008 (Projected) 3, , Projected Results for the Year Ending November 30, 2008 (December 1, 2007 November 30, 2008) (Percentages represent change compared with the same period of the previous fiscal year) Revenues Operating income Ordinary income Net income Earnings per share ( million) (%) ( million) (%) ( million) (%) ( million) (%) ( ) Six months ending May 31, , , , , , Year ending Nov. 30, , , , , ,

2 4. Other (1) Changes in major subsidiaries during the period (changes in specified subsidiaries due to change in the scope of consolidation and application of equity method): No (2) Changes in accounting rules, procedures, presentation method, etc. for the Consolidated Financial Statements (a) Changes in consolidated accounting methods: Yes (b) Changes other than (a) above: No (3) Number of shares issued and outstanding (common stock) (a) Number of shares issued and outstanding at end of period (including treasury stock): Year ended November 30, 2007: 376,840 shares, Year ended November 30, 2006: 376,838 shares (b) Treasury stock at end of period: Year ended November 30, 2007: shares, Year ended November 30, 2006: shares (Reference) Summary of Nonconsolidated Results 1. Nonconsolidated Results for the Year Ended November 30, 2007 (1) Revenues and Income (Percentages represent change compared with the previous fiscal year.) Revenues Operating income Ordinary income ( million) Change (%) ( million) Change (%) ( million) Change (%) Year ended Nov. 30, 2007 Year ended Nov. 30, ,690 22, ,747 5, ,821 5, Year ended Nov. 30, 2007 Year ended Nov. 30, 2006 Net income Earnings per share Diluted earnings per share ( million) Change (%) ( ) ( ) 4, , , , , , (2) Financial Position Total assets ( million) Net assets ( million) Net worth ratio (%) Book value per share ( ) As of Nov. 30, 2007 As of Nov. 30, ,992 51,220 18,787 15, , , Note: Cautionary Remark Regarding Forward-Looking Statements The above projections are forward-looking statements based on currently available information, and therefore contain elements of uncertainty. Actual performance may differ from projections due to changes in operating conditions. See 1. Results and Financial Condition (1) Analysis of Results 2) Outlook for the Year Ending November 30, 2008 on page 5 for matters concerning the above projections. 2

3 1. Results and Financial Condition (1) Analysis of Results 1) Consolidated Results for the Year Ended November 30, 2007 With regard to the Japanese economy in the year ended November 30, 2007, although the outlook is for gradual expansion amid ongoing growth of exports backed by rising overseas demand and the continuing increase in capital investment, the effects of the US subprime crisis, high raw materials prices and regulatory tightening called for caution. In the real estate industry, where the Tosei Group operates, there are concerns about a slowdown in market growth due to the US subprime crisis with the increasingly stronger connection to global financial markets, as well uncertainty regarding the effects on corporate performance of tightened regulatory oversight including enforcement of the revised Building Standards Law and the Financial Instruments and Exchange Law. On the other hand, because of economic expansion, according to publicly disclosed land prices as of August 2007, the nationwide average assessed value increased for the second consecutive year; in Tokyo, in particular, residential, commercial and industrial land prices rose an average of 17.1 percent year-on-year (source: National Tax Agency report). In the real estate trading market, the number of sales disclosed by listed companies in the first half fell 12.4 percent year-on-year, but in monetary terms sales rose 20.2 percent, to 2,351.7 billion from 1,956.1 billion. The main reason was that while the number of sales decreased due to such factors as intensifying competition in real estate acquisition and lower yields resulting from higher real estate prices, there was a large number of high-value property purchases in major city centers for redevelopment and office building reconstruction (source: private-sector survey). The supply of condominium units for sale in the greater Tokyo area was expected to be around 60,000 units, the lowest in 14 years, and the closing rate was below 70 percent for the four months from August, indicating weak performance. This was likely because consumers held back due to the increase in sales prices caused by increases in land and construction costs (source: private-sector survey). In the market for leased office space in Tokyo s 23 wards, both the vacancy rate and rents were favorable, driven by strong business results, especially of large corporations in inner-city areas. The vacancy rate was 1.8 percent as of November 2007, a 0.8 percentage point decline from December 2006, and the average rent rose 6.0 percent over the same period to 13,540 per tsubo (3.3m 2 ) (source: private-sector survey). On the other hand, in the market for leased residential space in the greater Tokyo area, when indexed to September 2005 levels, rent increases for offices showed substantial year-on-year growth of 11.5 percent, whereas growth was flat for residential properties at 0.2 percent (source: private-sector survey). The market for securitized real estate slumped on sluggish REIT indexes and a significant slowdown in new J-REIT listings. However, other factors indicate the attractiveness of real estate investment. As of June 30, 2007, the balance of domestic private funds totaled 6.7 trillion and the balance of J-REITs totaled 6.1 trillion; including global funds managed by foreign firms, total assets under management had grown to 16.3 trillion. Further, Tokyo has high yield spreads in comparison with cities in other major developed countries (source: private-sector survey). In the property management market, office building management grew a substantial 4.6 percent year-on-year to 3.9 trillion as of March 2007 (source: private-sector survey). This was because building management demand, which had been flat, expanded to keep pace with increasing construction demand resulting from the domestic economic recovery and mainly inner-city redevelopment projects. In the real estate-backed loan and merger and acquisition (M&A) markets, where the Tosei Group conducts its alternative investment business, competition has intensified for profitable high-value-added products due to solid progress in the disposal of non-performing loans (NPLs), with major financial institutions having largely disposed of theirs. In addition, while the number of M&As from April to September 2007 declined 2.0 percent year-on-year to 1,308, on a monetary basis M&As rose 10 percent year-on-year to 4.7 trillion (source: private-sector survey). This appears to be due to continued active industry reorganization and the large size of transactions. In this operating environment, under its new mission, to create new value and inspiration in all aspects of real estate as a global-minded group of seasoned professionals, and aiming to restore the value of real estate with a focus on the 23 wards of Tokyo, the Tosei Group worked to increase its overall corporate value by increasing synergy among its six businesses. These include the four businesses of Tosei Corporation the revitalization and fund businesses, which are Tosei Corporation s growth areas, the development business, in which the Company has solid expertise, and the rental business as well as the Group company businesses of property management and alternative investment. As a result of these efforts, in the year ended November 30, 2007, consolidated revenues were 40,085 million, an increase of 62.0 percent compared with the previous fiscal year, operating income was 9,006 million, an increase of 52.6 percent, ordinary income was 7,949 million, an increase of 49.3 percent and net income was 4,557 million, an increase of 66.5 percent. 3

4 Segment results were as follows. Revitalization During the fiscal year, the revitalization business sold a total of 22 properties it had revitalized, including the Ueno Tosei Building in Daito Ward, Tokyo, the Sendagaya Building in Shibuya Ward, Tokyo and the Tonegi Building in Chiyoda Ward, Tokyo. As a result, segment revenues were 24,310 million, an increase of 55.3 percent compared with the previous fiscal year, and operating income was 7,286 million, an increase of 80.3 percent. Development During the fiscal year, the development business sold a total of 151 condominium units in Tokyo at THE Palms Setagaya Sakura in Setagaya Ward, THE Palms Honkomagome in Bunkyo Ward, THE Palms Yoga in Setagaya Ward, and THE Palms Den-en-chofu in Ota Ward. As a result, segment revenues were 8,781 million, an increase of percent compared with the previous fiscal year, and operating income was 823 million, an increase of 60.4 percent. Rental During the fiscal year, segment revenues increased 83.8 percent compared with the previous fiscal year to 3,375 million, and segment operating income increased 65.5 percent to 1,630 million due to the increase in rental revenues because of steady purchases of real estate for sale and continuing high occupancy rates at rental properties included in Tosei s portfolio of owned assets. Fund During the fiscal year, segment revenues were 1,119 million, a decrease of 20.3 percent compared with the previous fiscal year, and operating income was 586 million, a decrease of 47.5 percent. Income included acquisition fees and asset management fees from assets under management, which increased due to steady purchases of properties by funds for which Tosei provides asset management services. The decreases in revenues and income were due to such factors as the absence of brokerage fees received in the previous fiscal year. The balance of assets under management is growing, and asset management fees are increasing as a result. Property Management During the fiscal year, segment revenues increased 33.9 percent compared with the previous fiscal year to 2,238 million, segment operating income increased 6.3 percent to 129 million and managed properties totaled 438. In the office building management business, changes in building ownership resulted in contract cancellations. As a result of efforts to conclude new contracts, Tosei managed 300 properties including office buildings and parking lots as of October 31, In the condominium management business, Tosei managed 138 properties as of October 31, 2007, including a complex that another company built for resale to end-users and new contracts to manage rental condominiums. Alternative Investment During the fiscal year, the Tosei Group acquired projects that maximized its capacity to restore the value of real estate and collected debts. Proactive initiatives in the real estate M&A market included the acquisition of two companies holding real estate but lacking successors. Further, the Group recorded income from its turnaround assistance of Tokyo Onsen Co., Ltd., including collection of debts and interest. As a result, segment revenues were 260 million, a decrease of 22.4 percent compared with the previous fiscal year, and operating income was 131 million, a decrease of 52.5 percent. 4

5 2 Outlook for the Year Ending November 30, 2008 The Tosei Group projects a market correction phase in its operating environment due to uncertain international financial and capital markets and overseas economic trends stemming from the US subprime crisis. Despite concerns about such factors as regulatory tightening, stagnant real estate financing and decreased liquidity due to high land and construction costs, the Japanese urban real estate market is thought to be undervalued compared with those in other developed countries. Tosei therefore forecasts medium-to-long-term stable growth in the real estate market, once participants have polarized. In this environment, the Tosei Group s goal is steady growth through a focus on small and medium-sized properties, which is a large-scale market with comparatively low competition, while proactively engaging in transactions for highly profitable large-scale properties. At the same time, based on the Financial Instruments and Exchange Law, Tosei will take steps to obtain necessary registrations and establish a strict internal control system. In addition, the Tosei Group will choose from the diverse array of financing techniques with realistic exit strategies resulting from synergy among its businesses to accurately meet future market needs, thus implementing its medium-term management plan and maximizing corporate value. Forecast of Consolidated Results for the Year Ending November 30, 2008 (Millions of yen) (Percentages represent change compared with the previous fiscal year.) Year ended Year ending Increase Increase November 30, 2007 November 30, 2008 % Revenues 40,085 56,872 16, Operating income 9,006 13,843 4, Ordinary income 7,949 12,090 4, Net income 4,557 6,733 2, Forecast of Consolidated Results by Segment for the Year Ending November 30, 2008 Revitalization Development Rental Fund Property Management Alternative Investment Total Eliminations or Corporate (Millions of yen) Consolidated Revenues 41,181 6,925 3,187 1,211 2,778 1,994 57,277 (405) 56,872 Operating income 13, , ,677 (2,834) 13,843 (2) Analysis of Financial Position 1) Assets, Liabilities and Net Assets as of November 30, 2007 Total consolidated assets at November 30, 2007 increased 26,785 million from a year earlier to 86,922 million. Primary factors included an increase in real estate for sale totaling 15,053 million and an increase in real estate for sale in progress totaling 7,810 million. Total liabilities increased 22,763 million from a year earlier to 67,669 million. Primary factors included an increase in short-term borrowings due to an increase in purchases. Net assets increased 4,022 million from a year earlier to 19,252 million. Primary factors included an increase of 4,030 million in retained earnings. 2) Consolidated Cash Flow for the Year ended November 30, 2007 Cash and cash equivalents as of November 30, 2007 decreased 1,303 million from the end of the previous fiscal year to 5,181 million. While income before income taxes for the year ended November 30, 2007 totaled 7,960 million, the Tosei Group used cash to support new purchases of properties in the revitalization and development businesses. Cash flows for the fiscal year and related factors are as follows. Cash Flows from Operating Activities Net cash used in operating activities totaled 19,543 million, an 80.0 percent increase compared with the previous fiscal year. Primary factors included an increase in inventories due to new acquisitions of properties in the revitalization and development businesses. Cash Flows from Investing Activities Net cash used in investing activities totaled 2,066 million, compared with net cash provided by investing activities totaling 471 million in the previous fiscal year. This was primarily due to an increase in guarantee deposits in the revitalization business and the acquisition of equity in a newly consolidated subsidiary in the 5

6 alternative investment business. Cash Flows from Financing Activities Net cash provided by financing activities was 20,312 million, an increase of 41.7 percent compared with the previous fiscal year, primarily because increases and decreases in debt due to sales and purchases in the revitalization and development businesses. (Reference) Trends in cash flow indicators Year ended Nov. 30, 2005 Year ended Nov. 30, 2006 Year ended Nov. 30, 2007 Net worth ratio (%) Net worth ratio on market value basis (%) Cash current debt coverage ratio (years) Interest coverage ratio (times) Net worth ratio: Net assets/total assets Net worth ratio on market value basis: Market capitalization/total assets Cash current debt coverage ratio: Interest-bearing debt/cash flows from operating activities Interest coverage ratio: Cash flows from operating activities/interest expenses Notes: 1. All indicators are calculated using consolidated financial figures. 2. Market capitalization is calculated by multiplying the number of shares issued and outstanding as of November 30, 2007 by the closing stock price on the same day. 3. The cash current debt coverage ratio employs cash flows from operating activities. 4. Interest-bearing debt includes all debt listed in the consolidated balance sheets on which interest is paid. 5. The cash current debt coverage ratio is not presented as of November 30, 2005, November 30, 2006, or November 30, 2007, because operating activities used net cash for the periods ending on those dates. (3) Fundamental Earnings Distribution Policy Tosei s fundamental earnings distribution policy is to strive to continuously provide stable dividends while comprehensively considering operating results, the future operating environment and progress in its business plan to balance dividends with the need for internal capital resources to generate long-term growth in corporate value by taking advantage of highly profitable business opportunities. For the year ending November 30, 2008, the final year of the Growing Up 2008 medium-term management plan, Tosei aims to achieve a nonconsolidated payout ratio of 20 percent. For the year ended November 30, 2007 (the 58th Period), Tosei plans to pay cash dividends per share of 2,200. For the year ending November 30, 2008 (the 59th Period), Tosei is aiming to achieve a consolidated cash payout ratio of 20 percent and projects cash dividends per share of 3,500. (4 and Other Risks Risks that have the potential to affect the performance, stock price and financial position of the Tosei Group include, but are not limited to, the issues discussed below. Forward-looking statements represent Tosei Group judgments as of November 30, The Tosei Group maintains a policy of recognizing the potential for risks to occur and working to preclude them or manage them if they arise. 1. Environment (a) Revitalization and Development (i) Effects of Real Estate Market Conditions The Tosei Group s core revitalization and development businesses purchase properties on their own account, and typically take six months to two years until they sell the properties after increasing their value or developing them. During that time, changes in the general economy, such as trends in land prices, interest rates and fiscal policy, may occur, and any resulting deterioration of conditions in the real estate market could have an impact on the Tosei Group s operating results and financial position. (ii) Changes in Results due to Timing of Property Transfer These two businesses book property sales amounts as revenues, and therefore the amount per transaction is large. In addition, because the two businesses book revenues upon transfer of the property, any delay in transferring the property could affect the Tosei Group s operating results and financial position. In particular, the presence or absence of transfers of large-scale properties in the fourth quarter could cause a considerable change in revenues and income. (iii) Construction Delays and Increased Construction Costs due to Natural Disasters, Etc. The Tosei Group makes efforts to draw up a rational yearly budget using the buildup method based on concrete purchasing and sales plans. However, construction delays and the accompanying increase in construction/renovation costs due to natural disasters or other unforeseen events have the potential to affect the 6

7 Tosei Group s operating results and financial position. (b) Rental In the rental business, a source of stable revenue for the Tosei Group, changes in general economic conditions or interest rates, the emergence of competing properties, or the occurrence of declines in rental fees or large numbers of vacancies due to natural disasters or other events have the potential to affect the Tosei Group s operating results and financial position. (c) Fund (i) Management Performance of Funds The fund business, which plays a significant role in the growth and positioning of the Tosei Group, earns fees as an asset manager by locating real estate properties that match the needs of investors, managing fund assets, raising the value of the real estate, conducting lease-up activities and then selling it. Therefore, asset management capability plays a role in the performance of the real estate funds, and the Tosei Group has accumulated expertise in both real estate and finance. Even though the real estate funds are strictly investment products predicated on the responsibility of investors, and Tosei makes no warranty and accepts no liability regarding the funds performance, in the event that rental conditions or other aspects of the real estate properties do not achieve the performance that investors expect, Tosei s reputation as an asset management company may decline, which could have an impact on the Tosei Group s operating results and financial position. (ii) Changes in Investor Trends due to Fiscal Policy, Etc. Real estate funds are one means of investment, and the Tosei Group s operating results and financial position could be affected if investors withdraw from or refrain from investing in real estate funds due to changes in fiscal policies or the global economy. (d) Property Management (i) Decline of Management Commission Costs Currently, management commission costs for condominiums and office buildings are continuing their downward trend due to increasing competition with other companies and cost-reduction pressure from customers. The Tosei Group is making efforts to raise efficiency and cut management contracting costs, but further reductions in management commission costs or a surge in contract cancellations have the potential to affect the Tosei Group s operating results and financial position. (ii) Workplace Accidents, Etc. The Tosei Group has obtained ISO 9001 certification for its business execution and provision of services. Although the Group is striving to enhance its business quality and services, unpredictable accidents, defects in construction or facilities, problems with services, or other incidents of a scale that could impact society have the potential to affect the Tosei Group s operating results and financial position. (e) Alternative Investment The alternative investment business, the incubation business of the Tosei Group, primarily purchases real estate-backed NPL funds and invests in M&As of real estate-owning companies. However, the inability to acquire real estate-backed NPL funds in a shrinking market for non-performing loans, the failure of M&As of real estate-owning companies to take place, or the inability to recover capital invested in acquired loans or companies as planned have the potential to affect the operating results and financial position of the Tosei Group. 2. Reliance on Interest-Bearing Debt and Interest Rates The Tosei Group procures debt financing, primarily from financial institutions, to fund expenses associated with business activities including acquisition of land and buildings and construction. Consequently, the ratio of interest-bearing debt to total assets is consistently at a certain level. Increases in interest rates typically increase fund procurement costs, and therefore have the potential to affect the Tosei Group s operating results and financial position. In procuring funds, the Tosei Group does not rely on any particular financial institution. Rather, the Group negotiates with multiple financial institutions to obtain the best financing terms. Unexpected changes in the operating environment and other factors that might impede access to funding could delay projects or render them untenable, which could affect the operating results and financial position of the Tosei Group. 3. Areas (a) Competitive Conditions The Tosei Group s primary market is the 23 wards of Tokyo, and the Group invests primarily in small and medium-sized properties. The Group has flexibly mobilized the information and know-how of its six businesses to conduct synergistic business operations. However, acquisition of properties has the potential to become increasingly competitive because of continued brisk activity in real-estate transactions and foreign investors strong willingness to invest in the 23 wards of Tokyo. The Tosei Group has maintained and enhanced its competitiveness by exercising 7

8 its advantage of specialization in the Tokyo market. However, if acquisition of properties becomes difficult due to excessive competition, this has the potential to affect the operating results and financial position of the Tosei Group. (b) Occurrence of Disasters The occurrence of a natural disaster such as a major earthquake in Tokyo, which is believed likely to happen in the future, destructive storm or flood, or a human disaster such as war, terrorism or fire, could cause substantial losses in the value of the real estate the Group invests in, manages, develops and controls, and therefore has the potential to affect the Tosei Group s results and financial position. 4. Legal Regulations (a) Legal Regulations In addition to the Company Law and regulations in the Financial Instruments and Exchange Law that apply to listed companies, the main legal regulations pertaining to the businesses of the Tosei Group are as follows. If these legal regulations are strengthened in the future, the cost of legal compliance measures could increase. Segment Name Revitalization Development Rental Fund Property Management Main Legal Regulations Real Estate Transaction Law National Land Use Plan Law City Planning Law Building Standards Law Construction Law Architect Law Housing Quality Assurance Law Financial Instruments and Exchange Law Investment Trust and Investment Corporation Law (amended Investment Trust Law) Real Estate Specific Joint Enterprise Law Trust Law Law on Securitization of Assets Real Estate Investment Advisory Registration Rules Intermediate Corporation Law Real Estate Transaction Law Law Concerning Proper Condominium Management Law Concerning Assurance of Sanitary Environments in Buildings Security Service Law Fire Service Law Construction Law (b) Licenses and Permits, Etc. The Tosei Group s businesses have obtained the following related permits in accordance with the laws listed above. The operating results and financial position of the Tosei Group could be affected if revision of laws or other issues impede ongoing operations in businesses relevant to these licenses. Moreover, while the Tosei Group has not operated in a manner that could result in the revocation of licenses or permits or the suspension of business operations, the operating results and financial position of the Tosei Group could be affected in the event that cause for such revocation or suspension arises. (i) Revitalization, Development, Rental and Fund Name of License or Permit Authority Expiration Content of License or Permit Real Estate License Governor of Tokyo March 23, 2012 Tokyo Governor s License (11) No General Real Estate Investment Minister of Land, February 28, General Advisory Registration Infrastructure and 2011 Transport First Class Architect s Office Governor of Tokyo April 10, 2011 Tokyo Governor s Registration (No. License 46219) Specified Construction Governor of Tokyo December 9, Tokyo Governor s License (Special 19) License 2012 No Real Estate Specific Joint Governor of Tokyo Tokyo Governor, No. 58 Enterprise Permit Registered Financial Instrument Kanto Financial Kanto Financial Bureau Chief (Financial 8

9 (Type 2 Financial Instrument, Advisor and Agency) Bureau Instruments) No. 898 (ii) Property Management Name of License or Permit Authority Expiration Content of License or Permit Condominium Management Minister of Land, Infrastructure and May 21, 2012 Minister of Land, Infrastructure and Transport (2) No Transport Real Estate License Governor of Tokyo September 28, 2011 Tokyo Governor s License (2) No First-Class Architect s Office Governor of Tokyo January 14, Tokyo Governor s Registration (No. License Building Environmental Health Comprehensive Management Company ) Governor of Tokyo October 3, 2013 Tokyo Section 19, No. 273 General Building License Governor of Tokyo March 10, 2008 Tokyo Governor s License (General 14) No Security Service License Tokyo Public Safety Commissioner October 4, 2011 Security Service Law Authorization No (c) Accounting Standards and Tax System (i) Changes in Accounting Standards and the Real Estate Tax System Changes regarding accounting standards and the real estate tax system could cause increases in the cost of holding, acquiring and selling assets, and therefore have the potential to affect the operating results and financial position of the Tosei Group. In particular, as a result of the Application Guidelines for Fixed Asset Impairment Accounting, announced by the Accounting Standards Board of Japan on October 31, 2003, asset impairment accounting is applied for fiscal years beginning on or after April 1, Consequently, there is a possibility that the Tosei Group could incur asset impairment losses. (ii) Scope of Consolidation of Real Estate Funds Consolidation or non-consolidation of real estate funds in which Tosei conducts asset management is determined individually on the basis of the extent of Tosei s control over and influence on the investment partnership. Changes in interpretation of consolidation that affect accounting auditors opinions and cause a change in the scope of consolidation of the Tosei Group have the potential to affect the operating results and financial position of the Tosei Group. 5. Defect Liability and After-Sale Service Under the Real Estate Transaction Law, real estate businesses assume liability for defects when they sell a property to parties other than real estate businesses, regardless of whether the property is new or second-hand. Under the Housing Quality Assurance Law, real estate businesses are obligated to provide a 10-year warranty on the main structural components of the building for new properties. In addition, the Tosei Group provides customers with an after-sale service warranty (valid for 1-10 years, depending on the item) according to the Group s After-Sale Service Standards. The Tosei Group conducts quality checks through its Architect Planning Department, and also works to mitigate business risks by taking measures such as requiring vendors and construction companies to provide an after-sale service warranty equivalent to that of the Tosei Group. However, if for some reason a defect arises in a property supplied by the Tosei Group, and the Group is unable to impose the defect liability on the vendor, or the vendor or contractor is incapable of fulfilling the warranty, the Tosei Group would incur additional expenses, which have the potential to affect the operating results and financial position of the Tosei Group. 6. Human Resources Because of the characteristics of the Tosei Group s businesses, people are an extremely important management resource, and further securing high-caliber personnel, educating them to master Tosei s unique competencies and developing management candidates are essential to accomplishing the medium-term management plan. The inability of the Tosei Group to secure or train the personnel that it requires, or the departure of management currently in office, has the potential to affect the operating results and financial position of the Tosei Group. 7. Medium-Term Management Plan The Tosei Group is working diligently to meet the targets of its medium-term management plan, GROWING UP 2008, which covers the period from December 1, 2005 to November 30, The plan includes fixed numerical targets, and the Group regularly checks progress while working to reach these targets, which were set on 9

10 the basis of information gathering and analysis believed to be proper when the plan was established. However, the Group may not be able to gather all necessary information, or may be unable to reach the targets due to changes in the business environment or various other factors. 8. Revisions to the Building Standards Law Under the Revised Building Standards Law, which came into effect on June 6, 2007, new buildings now require examinations by designated institutions to confirm that they conform to specified structural calculations. The longer period prior to the start of construction, the increase in costs and other factors caused by these examinations could affect the Group s business results and financial position. 9. Personal Information Protection In its businesses, the Tosei Group holds the personal information of many customers, including property buyers, building owners and tenants. The volume of personal information the Group holds is expected to increase along with future business expansion. In line with the Personal Information Protection Law, the Group has strengthened its information management system and takes thorough measures to manage personal information. However, the release or leak of personal information held by the Tosei Group to outside parties due to unforeseen circumstances, or the release or leak of material corporate information to outside parties due to the retirement of employees who use such information could cause a loss of trust in the Tosei Group, and thus have the potential to affect the Group s operating results and financial position. 10. Other When purchasing a second-hand property, the Tosei Group surveys the building s structure, use of asbestos, soil pollution and other elements. However, business execution may be temporarily suspended or prolonged if buildings are demolished because their structural design data has not been saved or they contain asbestos, or due to soil improvement or other measures. Such suspension of business has the potential to affect the operating results and financial position of the Tosei Group. 10

11 2. Overview of the Tosei Group The Tosei Group is composed of Tosei Corporation ( Tosei or the Company ) and 16 subsidiaries. Its main businesses are the revitalization business, the development business, the rental business, the fund business, the property management business, and the alternative investment business. The operations of each business segment and the main affiliates and other companies conducting those operations are as follows. Segment Operations Main Companies Tosei acquires properties whose asset value has declined, increases their value through value-up plans that best match Tosei Corporation local characteristics and user needs, and resells them to Pegasus Capital, Ltd. investors, individual end-users and corporations as revitalized real estate. Value-up plans include increasing the physical value of the property itself in ways such as improving utilities and upgrading IT, communications and other infrastructure. They also encompass intangible improvements that increase the profitability of the property and satisfaction of the owner or user, such as increasing the occupancy rate through leasing, improving the aesthetic design and resolving legal issues. Tosei s value-up plans take cost performance into account, based on multi-faceted studies. Value up activities do not end with renewal. Tosei works to comprehensively restore property value by focusing on providing property owners with satisfaction and end-users with pride in addition to improving convenience and functionality. Revitalization Development Rental Fund Property Management To maximize purchased property values, Tosei s development business determines business plans based on a wide range of verified site development plans. Tosei handles a diverse lineup of projects that capitalize on the particular characteristics of each property, ranging from medium-sized to large-scale developments including commercial facilities centered on office buildings and condominium complexes. This business designs office buildings, condominiums and commercial facilities for sale to investors and real estate funds and condominiums (THE Palms Series) and detached housing (THE premium Court and THE Palms Court Series) for individual sale to end-users. As of November 30, 2007, the Tosei Group owns 67 office buildings, condominium complexes and other properties primarily in the 23 wards of Tokyo, which it rents to end-users as office, residential and commercial space, and for parking. As a landlord, the Tosei Group can quickly gather accurate information on tenant needs, which contributes to further enhancing value up plans to reflect those needs and improving asset management capabilities in the fund business. For real estate funds structured with investor participation, the Tosei Group locates, surveys and provides other services for properties that match investor needs. It also provides funds with advice on the purchase, ownership and disposal of properties. To offer high dividends to investors, the Tosei Group manages funds by making full use of its value up, leasing and maintenance capabilities to maximize rental income and cut costs. Core revenues include acquisition fees when new properties are purchased and asset management fees for properties held. Tosei Community Co., Ltd. conducts comprehensive property management to meet a variety of real estate needs, including administration, facility management, cleaning and security for condominium complexes and office buildings and facilities, specialized building and utilities repair work for units in condominiums complexes and office buildings, and office interior renovation contracting. Based on many years of experience in managing 11 Tosei Corporation Tosei Corporation Tosei Community Co., Ltd. Pegasus Capital, Ltd. Tosei Corporation Tosei REIT Advisors, Inc. Tosei Asset Management Corp. Tosei Community Co., Ltd.

12 Alternative Investment condominiums, Tosei Community offers consulting and advice to holders of comparted-ownership and condominium associations, and provides total support from the startup to the smooth operation of condominium associations. Tosei Community maintains the asset value of aging office buildings with accurate maintenance plans offering meticulous services that rationalize building owner management, such as maintenance engineering and management of utilities, water supply and drainage sanitation and cleaning. As of October 31, 2007, Tosei Community manages a total of 438 properties. Tosei Revival Investment Co., Ltd. invests in real estate-backed NPL funds and collects debt or acquires mortgaged properties as payment in kind, by negotiating with mortgaged property owners/debtors. It also acquires properties through M&As of companies with real estate holdings and other companies associated with real estate and applies the Group s know-how to increase the value of acquired properties before selling them. Tosei Revival Investment Co., Ltd. A schematic diagram of the businesses of the Tosei Group is shown below. Revitalization End-users Land Buildings Beneficiary rights to trusts Tosei Corporation Development Rental Value up Sale Rental Investors R E I Ts Funds Fund Asset Management Real estate funds Investors Intermediary Corporation Salesperson Property management Tosei REIT Advisors, Inc. Tosei Asset Management, Corp. Fund Pegasus Capital, Ltd. Tosei Community Co., Ltd. Property Management Property Management Real estate-backed nonperforming loan (NPL) funds Mortgage guarantee companies Purchase M & A Tosei Revival Investment Co., Ltd. Alternative Investment Investors 12

13 3. Management Policies (1) Basic Management Policy The Tosei Group s mission is to create new value and inspiration in all aspects of real estate as a global-minded group of seasoned professionals. With constant commitment to quality construction, the Group works to contribute to society and increase its corporate value by restoring the value of real estate from a view 10 to 20 years in the future by integrating real estate and finance in its six businesses: revitalization, development, rental, funds, property management and alternative investment. (2) Performance Targets and Medium-to-Long-Term Management Strategies The Tosei Group is committed to meeting the targets of GROWING UP 2008, its medium-term management plan for the period December 1, 2005 to November 30, Under a fundamental policy that enhancing corporate value requires both increased earnings and improvements in management quality, this plan is aimed at strengthening the Group s business base and building a foundation for further growth by doubling the scale of business in terms of revenues and income and establishing its corporate brand. The Tosei Group has revised numerical targets announced as of December 25, 2007 because it has steadily exceeded its initial targets for consolidated revenues and consolidated ordinary income. Performance Targets for the Year Ending Nov. 30, 2008 Year ending Nov. 30, 2008 (Initial) 13 Year ending Nov. 30, 2008 (Revised) Consolidated revenues 40.5 billion 56.8 billion Consolidated ordinary income 6.0 billion 12.0 billion Ordinary income ratio 14.8% 21.3% Net worth ratio 30.0% 25.2% Return on equity ROE 18.3% 30.4% Return on total assets (ROA) 5.5% 7.2% Fund asset balance billion billion Note: Numerical targets are forward-looking statements based on currently available information, and therefore contain elements of uncertainty. Actual performance may differ from targets due to changes in business conditions. (3) Tasks to Be Addressed The Tosei Group is addressing the following tasks to double the scale of business and establish the corporate brand, two main themes of the medium-term management plan. I. Tasks to Double the Scale of (a) Increase Property Purchases to Expand Existing In the 23 wards of Tokyo, the Tosei Group s business area, competition is intensifying to acquire land, used office buildings, rental condominiums and other properties. The Tosei Group will work to strengthen its purchasing capabilities by accelerating decision-making through personnel enhancement to further strengthen its existing purchasing information network, swift response to information received and management and use of a database including examples of actual transactions. (b) Provide High-Value-Added and Distinctive Products by Enhancing Development and Value Up Capabilities The development business environment is growing increasingly severe. It is becoming increasingly difficult to purchase the properties needed to provide high-value-added and distinctive products by enhancing development and value up capabilities, and building costs are rising with broader purchasing costs. Meanwhile, acquiring building certification and other procedures take longer under the revised Building Standards Law, which is further exacerbating the situation. However, even under these circumstances, providing end-users and investors with products that meet their needs will become important for securing adequate income. The Tosei Group combines capabilities in developing family- to singles-oriented condominiums, office buildings, commercial buildings and single-family dwellings with the value up capabilities of renovation, renewal, conversion, and improving the design and profitability of older properties. The Group will provide appealing products by further increasing these capabilities to determine optimal use and investment efficiency on an individual property basis. (c) Expand the Fund As of June 30, 2006, the total asset balance of real estate funds in Japan, including J-REITs, private funds and domestic invested real estate assets of foreign private funds, was estimated to have reached 16.3 trillion. As of November 30, 2007, with growth including listings of 42 J-REITs, the domestic market for securitized real estate is expected to continue to expand, even compared to markets in Europe and North America. However, due to the September 2008 implementation of the Financial Instruments and Exchange Law, Tosei must make necessary registrations and prepare a strict internal control system within the grace period. In addition, Tosei sees little chance of an influx of funds into the real estate market and anticipates that weaker players will continue to be forced out of the market. Tosei will quickly prepare a strict Group internal control system based on the

14 permissions acquired by subsidiaries under Article 6 of the former Investment Trust Law; also, the Tosei Group, including subsidiaries, will quickly make necessary registrations, including for investment management businesses. Tosei plans to expand its business in the intensely competitive market by making full use of the Group s comprehensive strengths including structural improvements, property purchasing, asset management and property management. (d) Achieve Stable Procurement of Capital Among the various businesses that the Tosei Group conducts revitalization, development and alternative investment require large amounts of capital for real estate, real-estate-backed NPLs and other purchases. The Group also makes long-term investments in the rental business. To promote and expand these businesses, the Group must use outside capital efficiently but stably. The Group will work to provide timely financing by structuring syndicated loans, using commitment contracts and through other means that meet particular capital needs. II. Tasks to Establish the Corporate Brand (a) Enhance Corporate Governance The Tosei Group is committed to maintaining its social significance by establishing a corporate brand that offers shareholders, employees, customers and all other stakeholders a combination of innovation and challenge and security and reliability. To achieve this, the Group considers enhancing corporate governance most important. It especially focuses on the three main areas of instilling awareness of compliance, strengthening risk management and practicing timely disclosure. The entire Group, from top management to Group employees, will work to strengthen its organizational structure toward establishing an internal control system, as called for in the Company Law and the Financial Instruments and Exchange Law. (b) Secure and Train Capable Personnel Human resources sustain the Tosei Group s organization and drive the further growth and development of its businesses. As such, securing and training capable personnel to expand the organization is considered an extremely important task. In the past, the majority of recruits have been mid-career hires, but the Group intends to strengthen hiring of university graduates, who will be given experience in a wide range of tasks in order to become the Group s future workforce. (4) Other Important Management Matters None 14

15 4. Consolidated Financial Statements (1) Consolidated Balance Sheets ASSETS I Current assets 1. Cash *2 2. Notes and accounts receivable 3. Marketable securities 4. Real estate for sale *2 5. Real estate for sale in progress *2 6. Purchased receivables *2 7. Supplies 8. Deferred tax assets 9. Other *2 Less: Allowance for doubtful accounts As of November 30, ,181, ,671 10,000 35,830,995 27,074,286 1,032,809 2, ,784 1,582,387 (6,652) (Thousands of yen, rounded down to the nearest thousand) As of Year-on-Year November 30, 2006 Change 6,644, ,028 10,000 20,777,754 19,263,618 1,985, ,700 2,235,725 (11,989) Total current assets 71,631, ,384, ,247,381 II Fixed assets 1. Tangible fixed assets: (1) Buildings and structures *2 Less accumulated depreciation (2) Machinery, equipment and vehicles Less accumulated depreciation (3) Tools and furniture Less accumulated depreciation (4) Land *2 (5) Construction in progress 4,750,310 (722,694) 2,824,232 (695,471) 4,027,615 2,128, ,655 96,840 (72,132) (40,915) 72,522 55,925 9,393,132 6,136 5,905,971 Total tangible fixed assets 13,499, ,090, ,408, Intangible fixed assets (1) Goodwill (2) Software (3) Telephone rights 66,964 88,097 1,889 61,173 1,889 Total intangible fixed assets 156, , , Investments and other assets: (1) Investment in securities *1 (2) Loans receivable (3) Deferred tax assets (4) Other Less: Allowance for doubtful accounts 93,063 2, ,009 1,265, ,905 2,619 82, ,670 (14) (15) Total investments and other assets 1,634, , ,035,822 Total fixed assets 15,290, ,752, ,538,540 Net assets 86,922, % 60,136, % 26,785,922 15

16 LIABILITIES I Current liabilities: 1. Notes and accounts payable 2. Short-term borrowings *2 3. Bonds due within one year 4. Long-term debt due within one year *2,4,5 5. Income taxes payable 6. Advance received 7. Accrued bonuses to employees 8. Accrued bonuses to officers 9. Other (Thousands of yen, rounded down to the nearest thousand) As of November 30, 2007 As of November 30, 2006 Year-on-Year Change 689,472 3,626,000 24,000 1,181, ,000 24,000 41,937,056 2,743, ,800 51,669 1,436,610 12,975,196 1,985, ,617 10,390 20, ,466 Total current liabilities 50,620, ,632, ,988,604 II Long-term liabilities: 1. Bonds 2. Long-term debt *2,5 3. Deferred tax liabilities 4. Accrued severance costs 5. Accrued retirement benefits to officers 6. Consolidation adjustment 7. Negative goodwill 8. Other 274,000 13,829,583 23,122 42, ,280 9,033 2,649, ,000 24,340,039 23,122 34, ,778 4,299 1,383,672 Total long-term liabilities 17,049, ,274, (9,225,396) Total liabilities 67,669, ,906, ,763,207 NET ASSETS I Shareholders equity 1. Common stock 4,148, ,148, Additional paid-in capital 4,231, ,231, Retained earnings 10,872, ,841, ,030,732 Total shareholders equity 19,251, ,220, ,030,749 II Valuation, foreign currency and other adjustments 1. Unrealized gain on securities , (8,034) Total valuation, foreign currency and other adjustments , (8,034) Total net assets 19,252, ,229, ,022,715 Total liabilities and net assets 86,922, % 60,136, % 26,785,922 16

17 (2) Consolidated Statements of Operations (Thousands of yen, rounded down to the nearest thousand) Year ended November 30, 2007 Year ended November 30, 2006 Year-on-Year Change I. Revenues 40,085, % 24,741, % 15,343,960 II. Cost of revenues 27,968, ,584, ,384,133 Gross profit 12,117, ,157, ,959,827 III. Selling, general and administrative expenses *1 3,110, ,256, ,015 Operating income 9,006, ,900, ,105,811 IV. Non-operating income: 1. Interest income 2. Dividend income 3. Refund of earnest money at cancellation 4. Gain on adjustment of debts 5. Refund of consumption tax 6. Amortization of consolidation adjustment 7. Amortization of negative goodwill 8. Miscellaneous income 11,550 2,971 9,597 13,600 2,719 22, ,000 1,228 7,241 Total non-operating income 63, , (46,567) V. Non-operating expenses: 1. Interest expense 2. Interest on bonds 3. Share transfer expense 4. Amortization of bond issue expense 5. Commissions paid 6. Miscellaneous losses 1,094,819 4, , ,213 4,893 33,858 6,514 35,728 15,797 Total non-operating expenses 1,120, , ,254 Ordinary income 7,949, ,323, ,625,990 VI. Extraordinary gains: 1. Gain on reversal of allowance for doubtful accounts 2. Refund at contract cancellation 3. Gain on sale of investment securities 508 4,814 11, ,561 Total extraordinary gains 16, , ,769 VII. Extraordinary losses: 1. Loss on retirement of fixed assets *2 2. Loss on sale of equity investments 3. Other 1,831 3,630 25,483 2,730 Total extraordinary losses 5, , (22,751) Income before income taxes and Tokumei Kumiai investment expense 7,960, ,297, ,663,510 Tokumei Kumiai investment expense (107) (0.0) 452 Income before income taxes 7,960, ,297, ,663,057 Income taxes Current income taxes Deferred income taxes 3,946,665 (544,129) 2,657,701 (97,452) Total income taxes 3,402, ,560, ,287 Net income 4,557, ,737, ,820,770 17

18 (3) Consolidated Statements of Changes in Net Assets Year ended November 30, 2007 Common stock Shareholders equity Additional paid-in capital Retained earnings Total shareholders equity Valuation, foreign currency and other adjustments Total valuation, Unrealized foreign currency gain on and other securities adjustments Total net assets Balance at November 30, 2006 (thousands of yen) 4,148,011 4,231,487 6,841,289 15,220,788 8,932 8,932 15,229,720 Changes during the year Issuance of new shares Dividends from retained earnings (527,573) (527,573) (527,573) Increase due to decrease in consolidated subsidiaries Net income 4,557,882 4,557,882 4,557,882 Change in items other than shareholders equity during the year (net) (8,034) (8,034) (8,034) Total changes during the year (thousands of yen) 8 8 4,030,732 4,030,749 (8,034) (8,034) 4,022,715 Balance at November 30, 2007 (thousands of yen) 4,148,020 4,231,495 10,872,021 19,251, ,252,435 Year ended November 30, 2006 Common stock Shareholders equity Additional paid-in capital Retained earnings Total shareholders equity Valuation, foreign currency and other adjustments Total valuation, Unrealized foreign currency gain on and other securities adjustments Total net assets Balance at November 30, 2005 (thousands of yen) 1,966,096 2,049,572 4,270,144 8,285,813 7,783 7,783 8,293,597 Changes during the year Issuance of new shares 2,181,915 2,181,915 4,363,830 4,363,830 Dividends from retained earnings (155,186) (155,186) (155,186) Bonuses to officers from retained earnings (10,780) (10,780) (10,780) Net income 2,737,111 2,737,111 2,737,111 Change in items other than shareholders equity during the year (net) 1,148 1,148 1,148 Total changes during the year (thousands of yen) 2,181,915 2,181,915 2,571,145 6,934,975 1,148 1,148 6,936,123 Balance at November 30, 2006 (thousands of yen) 4,148,011 4,231,487 6,841,289 15,220,788 8,932 8,932 15,229,720 18

19 (4) Consolidated Statements of Cash Flows I Cash flows from operating activities Income before income taxes Depreciation Amortization of consolidation adjustment Amortization of goodwill Amortization of negative goodwill Increase in allowances Interest and dividend income Interest expenses Tokumei Kumiai (private equity) investments Increase in notes and accounts receivable Decrease (increase) in purchased receivables Increase in inventories Decrease (increase) in advance payment (Decrease) increase in notes and accounts payable Increase (decrease) in advance received Increase in deposits received Other (Thousands of yen, rounded down to the nearest thousand) Year ended Nov. 30, 2007 Year ended Nov. 30, 2006 Year-on-Year Change 7,960, ,332 3,524 (2,719) 75,570 (14,521) 1,099,658 (9,213) (83,342) 881,421 (26,759,205) 1,212,700 (492,974) (511,817) 1,248,097 (387,314) 5,297, ,170 (1,228) 70,585 (1,419) 595,106 (87,131) (118,815) (262,278) (14,980,728) (474,530) 809, , ,586 (17,943) Subtotal (15,334,384) (8,506,375) (6,828,008) Receipts of interest and dividends Payments of interest Payments of income taxes 38,934 (1,052,049) (3,195,865) 23,236 (618,383) (1,755,790) Net cash used in operating activities (19,543,365) (10,857,313) (8,686,051) II Cash flows from investing activities Decrease (increase) in time deposits Purchases of property and equipment Purchases of intangible assets Investments in securities Sales of investments in securities Collection of investments in securities Acquisition of equity in newly consolidated subsidiary *2,3 159,420 (148,957) (39,938) (51,000) 21, ,347 (500,467) (19,408) (89,566) (39,053) (6,000) 4, ,941 Payment of loan receivables Purchases of investments Increase in guarantee deposits Other (650,000) (1,069) (1,000,642) (16,150) (5,130) (85,809) Net cash provided by (used in) investing activities (2,066,218) 471,935 (2,538,154) III Cash flows from financing activities Net increase in short-term borrowings Proceeds from long-term debt Repayments of long-term debt Redemption of bonds Proceeds from new stock issue Cash dividends paid 2,667,646 45,121,200 (26,927,200) (24,000) 17 (525,201) (3,480,000) 25,482,000 (11,645,468) (194,000) 4,329,971 (153,121) Net cash provided by financing activities 20,312,461 14,339,382 5,973,078 IV Net increase in cash and cash equivalents (1,297,122) 3,954,004 (5,251,127) V Cash and cash equivalents at beginning of the year 6,484,856 2,530,851 3,954,004 VI Decrease in cash and cash equivalents of subsidiaries removed from consolidation (5,878) (5,878) VII Cash and cash equivalents at end of year *1 5,181,855 6,484,856 (1,303,000) 19

20 Segment Information 1. Segment Information (December 1, 2006 November 30, 2007) Sales and operating income: Revenue from operations: (1) Outside customers (2) Intersegment Revitalization 24,310,030 Development 8,781,821 Rental 3,375,387 39,936 Fund 1,119,381 27,669 (Thousands of yen, rounded down to the nearest thousand) Property Management 2,238, ,660 Alternative Investment 260,476 Total 40,085, ,266 Eliminations or Corporate (584,266) Consolidated 40,085,596 Total revenues 24,310,030 8,781,821 3,415,323 1,147,050 2,755, ,476 40,669,862 (584,266) 40,085,596 Operating expenses 17,023,841 7,957,851 1,784, ,364 2,625, ,535 30,080, ,226 31,078,796 Operating income 7,286, ,969 1,630, , , ,940 10,589,292 (1,582,492) 9,006,799 Assets, depreciation and capital expenditures: Assets 41,752,835 20,276,486 14,435, , ,602 3,914,276 81,603,566 5,318,807 86,922,374 Depreciation 394,594 3,579 7, ,498 39, ,332 Capital expenditures 96,475 7,952 19, ,219 25, ,602 Notes: 1. Method of Classification es are based on the classifications used by internal management. 2. Principal es of Each Segment Revitalization Development Rental Fund Segment Principal Supply of revitalized real estate to corporations, real estate funds and individuals for the purpose of investment or asset management Construction and supply of condominiums and detached housing to real estate funds and individuals through scrap and build activities Rental of offices and condominiums to end users Asset management and property mediation for real estate funds Maintenance management and operational management of office Property Management buildings, condominiums, etc. Investment in real estate-backed non-performing loan funds and Alternative Investment real estate-owning companies, and structuring of and consulting for these funds 3. Unallocatable operating expenses included in Eliminations or Corporate were 1,560,322 thousand, and mainly consisted of expenses related to the general and administrative divisions of the reporting companies. 4. Unallocatable assets included in Eliminations or Corporate were 5,357,529 thousand, and mainly consisted of surplus funds (cash and cash equivalents) and assets related to the administrative division of the Company. 20