Annual Securities Report (Pursuant to Article 24, paragraph (1) of the Financial Instruments and Exchange Act)
(The English translation of the
“Yukashoken-Houkokusho” for the 63rd term)
from December 1, 2011
to November 30, 2012
TOSEI 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
Annual Securities Report (YUKASHOKEN-HOKOKUSHO) submitted to the Director of the Kanto Local
Finance Bureau of the Ministry of Finance of Japan on February 28, 2013 pursuant to Article 24, paragraph
(1) of the Financial Instruments and Exchange Act. Should there be any inconsistency between the translation
and the official Japanese text, the latter shall prevail.
Table of Contents
Cover
A. Company Information .......................................................................................................... 1
I. Overview of the Tosei Group ........................................................................................................ 1 1. Trends in principal management benchmarks ......................................................................................... 1 2. History ..................................................................................................................................................... 3 3. Business description ................................................................................................................................ 4 4. Status of subsidiaries and affiliates .......................................................................................................... 6 5. Status of employees ................................................................................................................................. 7
II. Review of operations ...................................................................................................................... 8 1. Overview of operating results .................................................................................................................. 8 2. Status of production, orders received and sales ..................................................................................... 11 3. Issues to be addressed ............................................................................................................................ 12 4. Business and other risks ........................................................................................................................ 15 5. Important operational contracts, etc. ..................................................................................................... 20 6. Research and development activities ..................................................................................................... 20 7. Analysis of financial position, operating results and cash flow position ............................................... 21
III. Facilities ........................................................................................................................................ 24 1. Outline of capital expenditures .............................................................................................................. 24 2. Main facilities ........................................................................................................................................ 24 3. Plans for new installation and retirement of facilities ........................................................................... 24
IV. Filing company ............................................................................................................................. 25 1. Information on the Company (Tosei)’s shares ...................................................................................... 25
(1) Total number of shares authorized, etc. ............................................................................................. 25 (2) Status of subscription rights to shares ............................................................................................... 25 (3) Exercise of bond certificates with subscription rights to shares with exercise price amendment
clause ................................................................................................................................................. 25 (4) Details of rights plan ......................................................................................................................... 25 (5) Trends in total number of shares issued, capital stock, etc. ............................................................... 25 (6) Shareholder composition ................................................................................................................... 26 (7) Status of major shareholders ............................................................................................................. 26 (8) Status of voting rights........................................................................................................................ 27 (9) Stock options ..................................................................................................................................... 27
2. Acquisition of treasury stock ................................................................................................................. 28 3. Dividend policy ..................................................................................................................................... 29 4. Trends in share price .............................................................................................................................. 29 5. Status of officers .................................................................................................................................... 30 6. Status of corporate governance, etc. ...................................................................................................... 33
V. Accounting .................................................................................................................................... 44 1. Consolidated financial statements, etc. .................................................................................................. 45
(1) Consolidated financial statements ..................................................................................................... 45 (2) Others ................................................................................................................................................ 84
2. Non-consolidated financial statements, etc. .......................................................................................... 85 (1) Non-consolidated financial statements .............................................................................................. 85 (2) Principal assets and liabilities .......................................................................................................... 105 (3) Others .............................................................................................................................................. 107
VI. Outline of filing company’s business concerning shares ........................................................ 108
VII. Reference information on filing company ................................................................................ 109 1. Information on filing company’s parent company .............................................................................. 109 2. Other reference information ................................................................................................................ 109
B. Information on Guarantee Companies, etc. of Filing Company .................................. 110 [Independent Auditors’ Audit Report and Internal Control Audit Report]
[Independent Auditors’ Audit Reports] [Management’s Report on Internal Control]
[Cover]
Document to be filed: Annual Securities Report
Provisions to base upon: Article 24, paragraph (1) of the Financial Instruments and Exchange
Act
Filing to: Director-General of the Kanto Local Finance Bureau
Date of filing: February 28, 2013
Business year: 63rd term (from December 1, 2011 to November 30, 2012)
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: +81-3-3435-2864
Contact person: Noboru Hirano, Director and CFO
Place of contact: 4-2-3, Toranomon, Minato-ku, Tokyo, Japan
Telephone number: +81-3-3435-2864
Contact person: Noboru Hirano, Director and CFO
Places where the document to be filed is
available for public inspection:
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi-kabutocho, Chuo-ku, Tokyo)
A. Company Information
I. Overview of the Tosei Group
1. Trends in principal management benchmarks
(1) Management benchmarks (consolidated)
Term 59th term 60th term 61st term 62nd term 63rd term
Accounting period Year ended
Nov. 30, 2008
Year ended
Nov. 30, 2009
Year ended
Nov. 30, 2010
Year ended
Nov. 30, 2011
Year ended
Nov. 30, 2012
Net Sales
(¥ thousand) 51,041,015 33,629,805 26,449,540 24,759,291 24,539,823
Ordinary income
(¥ thousand) 6,376,990 656,285 803,134 1,574,500 2,274,369
Net income
(¥ thousand) 3,463,965 108,249 421,606 751,982 1,405,395
Comprehensive income
(¥ thousand) – – – 748,839 1,404,469
Net assets
(¥ thousand) 21,887,249 22,253,707 24,455,632 24,976,051 26,152,100
Total assets
(¥ thousand) 78,309,499 62,235,110 62,682,616 59,967,603 64,732,965
Net assets per share
(¥) 58,081.02 56,151.60 53,532.16 54,671.33 57,245.65
Net income per share
(¥) 9,192.14 285.38 974.63 1,646.05 3,076.34
Net income per share
(diluted)
(¥)
– – – – –
Equity ratio
(%) 27.9 35.7 39.0 41.6 40.4
Return on equity (ROE)
(%) 16.8 0.5 1.8 3.0 5.5
Price earnings ratio (PER)
(Times) 1.72 74.99 33.30 11.36 11.65
Cash flows from operating
activities
(¥ thousand)
14,099,704 12,233,935 (1,625,695) 6,017,729 (1,005,254)
Cash flows from investing
activities
(¥ thousand)
959,332 392,585 (178,765) (116,149) 17,300
Cash flows from financing
activities
(¥ thousand)
(12,886,593) (12,090,510) 735,439 (4,416,563) 2,090,871
Cash and cash equivalents at
end of period
(¥ thousand)
7,354,299 7,890,310 6,821,288 8,306,305 9,410,622
Number of employees
[Separately, average number
of temporary employees]
(Person)
225
[174]
191
[146]
206
[167]
220
[200]
220
[228]
Notes: 1. Net sales do not include consumption taxes.
2. Net income per share (diluted) are not presented because there were no potential shares.
- 1 -
(2) Filing company’s management benchmarks (non-consolidated)
Term 59th term 60th term 61st term 62nd term 63rd term
Accounting period Year ended Nov.
30, 2008
Year ended Nov.
30, 2009
Year ended Nov.
30, 2010
Year ended Nov.
30, 2011
Year ended Nov.
30, 2012
Net sales
(¥ thousand) 41,085,825 30,524,223 23,230,287 20,719,445 19,423,088
Ordinary income
(¥ thousand) 5,647,430 671,986 809,414 1,601,947 1,975,626
Net income
(¥ thousand) 3,056,390 133,714 433,363 993,517 1,141,163
Capital stock
(¥ thousand) 4,148,020 4,452,807 5,454,673 5,454,673 5,454,673
Total number of
shares issued
(Shares)
376,840 395,840 456,840 456,840 456,840
Net assets
(¥ thousand) 21,014,875 21,406,799 23,620,480 24,382,434 25,296,620
Total assets
(¥ thousand) 74,012,141 58,198,165 58,871,182 56,313,964 61,016,621
Net assets per share
(¥) 55,766.04 54,012.08 51,704.06 53,371.94 55,373.04
Dividends per share
(¥)
[Interim dividends per share]
(¥)
1,000.00
[–]
500.00
[–]
500.00
[–]
500.00
[–]
600.00
[–]
Net income per share
(¥) 8,110.58 352.51 1,001.81 2,174.76 2,497.95
Net income per share
(diluted) (¥) – – – – –
Equity ratio
(%) 28.4 36.7 40.1 43.3 41.5
Return on equity (ROE)
(%) 15.4 0.6 1.9 4.1 4.6
Price earnings ratio (PER)
(Times) 1.95 60.71 32.39 8.60 14.35
Dividend payout ratio
(%) 12.3 141.8 49.9 23.0 24.0
Number of employees
[Separately, average number
of temporary employees]
(Person)
144
[–]
114
[–]
116
[–]
123
[–]
116
[–]
Notes: 1. Net sales do not include consumption taxes.
2. Net income per share (diluted) are not presented because there were no potential shares.
- 2 -
2. History
Date Details of change
February 1950 Established as Yukari Kogyo Co., Ltd. with purpose of engaging in restaurant business at location of 514
Oaza Oita, Oita-shi, Oita Prefecture, Japan (Capital: ¥500,000)
April 1952 Moved head office to Kameido, Koto-ku, Tokyo
June 1964 Added real estate trading, brokerage, rental and management businesses to scope of business purpose
May 1968 Moved head office to Sotokanda, Chiyoda-ku, Tokyo
July 1969 Changed trade name to Yukari Co., Ltd.
March 1973 Obtained license of building lots and buildings transaction business (License Number: Governor of
Tokyo (1) No. 24043)
March 1983 Changed trade name to Tosei Building Co., Ltd.
April 1986 Moved head office to Iwamoto-cho, Chiyoda-ku, Tokyo
October 1994 Started sales of condominiums of “THE Palms” series
September 1995 Established Kanda Awaji-cho Building Co., Ltd.
March 1996 Changed trade name to Tosei Fudosan Co., Ltd.
April 1996 Launched revitalization business
December 1996 Moved head office to Kanda Awaji-cho, Chiyoda-ku, Tokyo
December 1997 Launched contract work, including repair and restoration, incidental to building management business
upon obtaining license of specified construction business (License Number: Governor of Tokyo (Special-
9) No. 107905)
July 1999 Started sales of detached houses of “Palms Court” series
February 2001 Launched asset management business upon registering general real estate investment advisory business
(Registration Number: Minister of Land, Infrastructure, Transport and Tourism No. 127)
March 2001 Merged with KabushikiKiasha. Konmasa Shoten, Nihon Kogyo Jutaku Kabushiki Kaisha. and Hidaka
Kogyo Kabushiki.Kaisha. by absorption-type merger using LBO (leveraged buyout) technique
April 2001 Registered first-class architectural firm (Registration Number: Governor of Tokyo No. 46219)
November 2001 Span off Building Management Division engaged in building management services and transferred it to
Tosei Community Co., Ltd. (currently consolidated subsidiary Tosei Community Co., Ltd., Japanese
name of which has changed with English name unchanged)
December 2001 Established Securitization Business Division to realize full-scale entry into real estate securitization
business
August 2002 Structured “Argo Fund,” a private placement fund investing in trust beneficiary rights in rental
condominiums, as our first real estate investment fund
December 2002 Merged with our subsidiary Kanda Awaji-cho Building Co., Ltd. by absorption-type merger
February 2004 Registered shares as over-the-counter securities at Japan Securities Dealers Association
September 2004 Obtained license of real estate specified joint enterprise (License Number: Governor of Tokyo No. 58)
December 2004 Cancelled registration as over-the-counter securities at Japan Securities Dealers Association and listed
shares on Jasdaq Securities Exchange (later delisted shares in January 2008)
March 2005 Established Tosei Revival Investment Co., Ltd. (currently consolidated subsidiary Tosei Revival
Investment Co., Ltd., Japanese name of which has changed with English name unchanged)
April 2005 Made Tosei Community Co., Ltd. (currently consolidated subsidiary Tosei Community Co., Ltd.,
Japanese name of which has changed with English name unchanged) a consolidated subsidiary by
acquiring its shares
September 2005 Established Tosei REIT Advisors, Inc. (currently consolidated subsidiary Tosei Asset Advisors, Inc.)
October 2006 Changed trade name to Tosei Corporation and moved head office to Toranomon, Minato-ku, Tokyo
November 2006 Listed shares on Second Section of Tokyo Stock Exchange
September 2007 Registered type II financial instruments business and investment advisory and agency business
(Registration Number: Director-General of Kanto Local Finance Bureau (Kinsho) No. 898)
September 2009 Launched “Restyling business” as a new business model of revitalization business
September 2011 Listed shares on First Section of Tokyo Stock Exchange
January 2012 Established Tosei Singapore Pte. Ltd.
- 3 -
3. Business description
The Tosei Group is composed of Tosei Corporation (“Tosei” or the “Company”) and 7 subsidiaries (6
consolidated 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 subsidiaries and/or affiliates conducting those
operations are as follows.
Segment Operations Main
Companies
Revitalization
Business
The Tosei Group acquires office buildings, commercial facilities, rental condominiums and other
properties whose asset value has declined, boosts their value though “value-up plans” (*) judged to
best match the characteristics of the properties’ areas and tenant requirements, and sells them as
revitalized real estate to buyers including investors, real estate funds and individual end users. In
the “Restyling Business,” the Group acquires income-producing condominium complexes and sells
units in them to end users after boosting the value of common and private areas (the Group
continues to hold and manage occupied units as rental properties).
The Tosei Group’s “value-up” activities go beyond just renewing properties and involve
realizing comprehensive regenerations of their values. This entails not only improving the
convenience and functionality of properties but also focusing on providing satisfaction to owners
and giving end users a sense of pride.
(*) Plans primarily look 10 or 20 years ahead and consist of improved designs to refurbish internal
and external elements that have deteriorated or become obsolete, functional improvement of
facilities including refurbishment, adding new functions to premises and equipment and
conversions, and boosting lease income by such means as renting out vacant space, collecting
overdue rent and raising rent.
Tosei
Corporation
Development
Business
In the main districts of Tokyo, which form the Tosei Group’s core operating area, there is a mixture
of needs for office, commercial and residential space and other uses, and these different uses create
significant differences between land values. Tosei verifies the characteristics of land it acquires
including area, shape, intended purpose, relevant needs, rent, and selling price. Based on this, Tosei
carries out development and new construction to maximize the value of the land, and then sells
whole complexes or individual units.
The Group is able to respond to diverse needs by developing office buildings, commercial
buildings (T’s BRIGHTIA series) and mixed-use buildings, residential condominiums (the Palms
series), as well as detached housing (Palms Court series). Once development is complete or tenants
have been found, the properties are sold to buyers including investors, real estate funds and end
users.
Tosei
Corporation
Rental
Business
The Tosei Group has expanded the scope of its business primarily in the main districts of Tokyo by
acquiring office buildings, apartment buildings, stores and parking lots, and renting them out to end
users and others.
As a landlord, the Tosei Group is capable of swiftly gathering accurate information on tenant
needs to further enhance “value-up plans” by reflecting these needs.
Tosei
Corporation
Fund
Business
The Tosei Group conducts business as a type II financial instruments business as well as an
investment advisory and agency business and an investment management business as provided for
in the Financial Instruments and Exchange Act. Specifically, in addition to such work as
purchasing, selling and brokering trust beneficiary rights in accordance with a wide variety of
investor needs, the Group provides advice regarding the acquisition, holding and disposition of
properties, and asset management services for real estate funds that carry out discretionary
investment.
The Tosei Group’s management approach is to provide high distributions to investors by taking
full advantage of its “value-up,” leasing and maintenance capabilities with the aim of maximizing
rental income and reducing its own rent costs. Revenues are primarily derived from accession fees
upon the purchase of properties and asset management fees for properties held.
Tosei
Corporation
Tosei Asset
Advisors, Inc
Property
Management
Business
This business carries out comprehensive property management that meets a wide variety of real
estate needs including administration, facility management, cleaning and security for condominium
complexes, office buildings and facilities, building and equipment repair work in the private
portions of condominium complexes and office interior renovation contracting.
In the management of condominium complexes, this business makes full use of the knowhow it
has accumulated over a number of years to provide consulting and advice to condominium unit
owners and condominium management associations, and provides total support to associations
from their launch to helping them operate smoothly once they are started up.
With respect to managing office buildings, in order to streamline the operations of building
owners, the business provides meticulous management services including building maintenance
and the management of equipment, water supply and drainage, sanitation and cleaning. The
business also maintains the asset values of buildings by implementing precise maintenance plans
regarding the age-related deterioration of buildings.
Tosei
Community
Co., Ltd.
- 4 -
Segment Operations Main
Companies
Alternative
Investment
Business
This business invests in real estate collateralized claims and acquires collateral through the
collection and payment in substitution by negotiating with mortgaged property owners/debtors, and
acquires businesses including companies with real estate holdings and real estate business
operators. The business also utilizes the knowhow of the Tosei Group to boost the value of the real
estate it acquires before selling it.
Tosei Revival
Investment
Co., Ltd.
A schematic diagram of the businesses of the Tosei Group is shown below.
.
Land
Buildings
Beneficiary
rights to trusts
Purchase
Bidding
Tosei
Corporation
Revitalization
Business
Development
Business
Rental
Business
Fund
Business
“Value-up” Revitalized real
estate
Developed real
estate
Sale
Rental
End users
Investors
REITs
Funds
Investors Investment
Dividends
Real estate
funds
Investment advisor and
agency
Type II financial
instruments business
Tosei Asset Advisors,
Inc.
Fund Business
* Wholly owned subsidiary
Tosei Community Co.,
Ltd.
Property
Management
Business
Property management
Building maintenance
Managed properties Management Funds
Building owners
Tenants
Real estate
collateralized
loans
Companies with
real estate
holdings
Purchase
M&A
Tosei Revivial
Investment Co., Ltd.
Alternative
Investment Business
“Value-up”
Research title
Revitalize
Real estate
collateralized loans
Real estate acquired by
accepting substitute
performances
Stock of companies with
real estate holdings
Collection
Sale
Property sale
Investors
End users
Debtors
Property management
Investment management
business
Investment advisor and
agency
Type II financial
instruments business
* Wholly owned subsidiary
* Wholly owned subsidiary
- 5 -
4. Status of subsidiaries and affiliates
Name Location
Capital or
investment in
capital
(¥ thousand)
Principal business
Holding rate
of voting
rights (%)
Relationship
(Consolidated subsidiaries)
Tosei Community Co., Ltd.
(Note 4)
Minato-ku,
Tokyo 99,500
Property Management
Business 100.0
Managing the
Company’s real
estate holdings
Interlocking
directorate
Tosei Asset Advisors, Inc. Minato-ku,
Tokyo 100,000 Fund Business 100.0
Interlocking
directorate
Tosei Singapore Pte. Ltd. Singapore 18,747 Fund Business 100.0
Tosei Revival Investment
Co., Ltd.
Minato-ku,
Tokyo 50,000
Alternative Investment
Business 100.0
Interlocking
directorate
Hestia Capital Limited
Company.
(Note 2)
Minato-ku,
Tokyo 3,000
Alternative Investment
Business
100.0
(100.0)
Green House Limited
Company.
(Note 2, 3)
Minato-ku,
Tokyo 24,600
Alternative Investment
Business
100.0
(100.0)
Notes: 1. Descriptions in the “Principal business” column are names of segments.
2. The figures in parentheses in the “Holding rate of voting rights” column are indirect holding rates included in the
figures outside the parentheses.
3. Green House Limited Company. is currently under liquidation.
4. Net sales of Tosei Community Co., Ltd. (excluding net sales among the consolidated companies) exceed 10% of
consolidated net sales.
Major profit/loss information (¥ thousand)
(1) Net sales 3,859,237
(2) Ordinary income 75,314
(3) Net loss 1,130
(4) Net assets 582,071
(5) Total assets 1,371,320
- 6 -
5. Status of employees
(1) Consolidated companies
(As of November 30, 2012)
Segment Number of employees (Person)
Revitalization Business 35 [ – ]
Development Business 24 [ – ]
Rental Business 13 [ – ]
Fund Business 45 [ – ]
Property Management Business 65 [228]
Alternative Investment Business 1 [ – ]
Corporate (common) 37 [ – ]
Total 220 [228]
Notes: 1. The number of employees indicates the number of working employees, and the average number of temporary
employees during this fiscal year is given in brackets separately.
2. The number of employees in the “Corporate (common)” row is the number of those belonging to the administrative
department.
(2) Filing company (Tosei)
(As of November 30, 2012)
Number of employees
(Person) Average age (Year old)
Average years of service
(Year)
Average annual salary
(¥ thousand)
116 36.5 5.0 7,159
Segment Number of employees (Person)
Revitalization Business 35
Development Business 24
Rental Business 13
Fund Business 7
Corporate (common) 37
Total 116
Notes: 1. The number of employees indicates the number of working employees.
2. Average annual salary includes bonuses and surplus wages.
3. The number of employees in the “Corporate (common)” row is the number of those belonging to the administrative
department.
(3) Status of labor union
A labor union has not been formed. The Company maintains stable relations with its employees.
- 7 -
II. Review of operations
1. Overview of operating results
(1) Operating results
During the year ended November 30, 2012 (December 1, 2011 to November 30, 2012), the Japanese
economy began to recover, supported by factors such as government policies and earthquake rebuilding
demand. Recently, however, the economy has shown signs of weakness due to a slowdown in overseas
economies such as Europe and China. The economic outlook is likely to remain uncertain against a
continued backdrop of instability in financial markets and deflationary risk in Japan.
In the real estate sector, where the Tosei Group operates, the total value of property acquisitions by J-
REITs and other real estate funds reached roughly ¥750 billion between January and the end of October
2012, the highest level for four years. This reflected active buying driven by overseas fund flows into the
domestic real estate market on expectations that real estate prices have bottomed. As a result, in the first
half of fiscal 2012, the number of real estate transactions rebounded to 329 and real estate transaction
value recovered to ¥853.3 billion, returning to the level seen in the first half of fiscal 2010 before the
Great East Japan Earthquake (market research company data). In addition, from January 2010 to October
2012, the closing rate for condominium sales contracts in the greater Tokyo area essentially remained
above the 70% level, which is viewed as a key indicator of favorable conditions in the condominium
market. From January 2012 to October 2012, the number of condominium units supplied in the greater
Tokyo area totaled 33,763 units, an increase of 2,074 units compared with the previous year (market
research company data).
In the market for leased office buildings in Tokyo’s five business wards, the average vacancy rate
increased at a modest pace in fiscal 2012, peaking at 9.43% at the end of June (up 0.62 percentage points
year on year). The rate then saw a sustained improvement in the four months from July, falling back to
8.74% at the end of October due to progress with contract closings for new and existing buildings. The
average asking rent for the same five wards continued to decline slowly, falling to ¥16,628/tsubo (1
tsubo=3.3m2) as of the end of October 2012, a decline of ¥383 year on year (market research company
data).
In the market for securitized real estate, the balance of assets under management by real estate funds as
of the end of June 2012 totaled ¥27.0 trillion, an increase of ¥0.9 trillion from the end of December 2011.
This included an increase of ¥0.4 trillion to ¥8.7 trillion for J-REITs and a rise of ¥0.5 trillion to ¥18.3
trillion for private placement funds due to an upturn in activity in the real estate investment market and
improving conditions for fund procurement (market research company data).
In this operating environment, the Tosei Group faced delays in selling some of the Restyling properties
in the Revitalization business, but the Group sold five properties it had refurbished. The development
business handed over two condominiums and registered strong sales contracts for detached houses. In
purchasing, the Group continued to focus on acquiring residential properties and land for residential
properties, demand for which has become stronger, and it also resumed full-scale investment in office
buildings and other properties for the Revitalization business. We also set up our first overseas base with
the establishment of a local subsidiary in Singapore, and concluded a membership contract with NAI
Global, a network of global commercial real estate brokers as well. The Group plans to reinforce its
relationships with overseas investors going forward.
As a result, for the year under review, net sales totaled ¥24,539 million (a decrease of 0.9% compared
with the previous year), operating income was ¥3,030 million (an increase of 26.9%), ordinary income
was ¥2,274 million (an increase of 44.5%), and net income was ¥1,405 million (an increase of 86.9%).
Segment results were as follows:
Revitalization Business
During the year under review, the Company sold a total of 106 units in the Restyling properties. The
properties sold included Hilltop Yokohama Negishi (Yokohama City, Kanagawa Prefecture), Hilltop
Yokohama Higashi Terao (Yokohama City, Kanagawa Prefecture), Estage Kaminoge (Setagaya Ward,
Tokyo), and Glenpark Ikedayama (Shinagawa Ward, Tokyo). In addition, the Company sold five
properties it had refurbished, including Uchikanda Kitahara Building (Chiyoda Ward, Tokyo) and
Belmidor Ebisu (Shibuya Ward, Tokyo).
As a result, net sales in this segment totaled ¥5,980 million, a decline of 50.3% compared with the
previous year.
- 8 -
Also, due to the adoption of the Accounting Standard for Measurement of Inventories (the LCM
method), the Company reduced the book value of two office buildings after lowering its projection for
rental income for the vacant portion of the buildings. Book value for the two buildings was reduced by
¥265 million and charged to cost of sales. As a result, segment profit was ¥390 million, a decrease of
79.3% compared with the previous year.
Development Business
During the year under review, the Company focused on selling newly built condominiums and detached
houses, demand for which is strong. The Company sold a total of 154 newly built condominium units in
properties such as THE Palms Tsukishima Luna Garden (Chuo Ward, Tokyo) and THE Palms
Takadanobaba (Shinjuku Ward, Tokyo). The Company also sold 24 detached houses at Palms Court
Setagaya Okamoto (Setagaya Ward, Tokyo), Palms Court Hatsudai (Shibuya Ward, Tokyo), and Palms
Court Koishikawa (Bunkyo Ward, Tokyo).
As for office buildings, the Company sold Nihonbashi Hongokucho Tosei Building (Chuo Ward,
Tokyo).
As a result, net sales in this segment came to ¥10,985 million, an increase of 109.0% compared with
the previous year, and segment profit came to ¥2,318 million (segment loss in the previous year was ¥22
million).
Rental Business
During the year under review, the Company focused on leasing activities for its noncurrent assets and
inventories and worked to maintain occupancy rates. As a result, segment net sales were essentially steady
compared with the previous year.
As a result, net sales in this segment were ¥2,446 million, a decrease of 0.5% compared with the
previous year, and segment profit was ¥1,192 million, an increase of 0.8%.
Fund Business
During the year under review, the balance of assets under management grew steadily, but total asset
management fees declined due to a drop in the level of fees charged.
As a result, net sales in this segment were ¥776 million, a decrease of 44.4% compared with the
previous year while segment profit was ¥184 million, a decrease of 71.8%.
The main reason for the sharp decline in segment income year on year was the absence of brokerage
fees and other income related to large-scale transactions that were booked in the previous year.
As of November 30, 2012, the balance of assets under management* totaled ¥311,335 million.
*Note: The balance of assets under management includes a part of the balance of assets that were
subject to consulting contracts, etc. based on the Company’s internal rules.
Property Management Business
During the year under review, the number of office buildings, parking lots and schools under management
declined by two properties year on year to 306, while the number of condominiums and rental apartments
increased by 13 properties to 216. As a result, the total number of properties under management increased
by 11 year on year to 522.
As a result, although net sales in this segment rose year on year, increasing by 2.5% to ¥3,512 million,
segment profit was down 34.7% to ¥68 million, as allowance for doubtful accounts regarding certain
transactions were recorded in general and administrative expenses.
Alternative Investment Business
During the year under review, the Company focused on the sale of properties acquired through M&A and
the leasing of properties that the Company acquired through the collection and payment in substitution.
As a result, net sales in this segment came to ¥838 million, an increase of 363.7% compared with the
previous year, and segment profit was ¥59 million (segment loss in the previous year was ¥190 million).
(2) Cash flows
Cash and cash equivalents (hereinafter “cash”) as of November 30, 2012 totaled ¥9,410 million, an
increase of ¥1,104 million from the end of the previous year, as a result of ¥2,172 million in income
- 9 -
before income taxes and minority interests and ¥15,777 million in proceeds from long-term loans payable
despite a decrease of ¥4,129 million due to an increase in inventories and ¥13,841 million in repayment of
long-term loans payable.
The respective cash flow positions and the factors thereof for the year under review are as follows.
Cash Flows from Operating Activities
Net cash used in operating activities totaled ¥1,005 million (net cash provided by operating activities
totaled ¥6,017 million in the previous year). This is a result of an increase due to the recording of ¥2,172
million in income before income taxes and minority interests and a decrease of ¥4,129 million due to an
increase in inventories.
Cash Flows from Investing Activities
Net cash provided by investing activities totaled ¥17 million (net cash used in investing activities totaled
¥116 million in the previous year). This is primarily due to proceeds from sales of property, plant and
equipment totaling ¥216 million and purchase of property, plant and equipment totaling ¥140 million.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled ¥2,090 million (net cash used in financing activities in
the previous year was ¥4,416 million). This mainly reflected ¥15,777 million in proceeds from long-term
loans payable related to the purchase of new properties, and ¥13,841 million in repayment of long-term
loans payable related to the sale of properties.
- 10 -
2. Status of production, orders received and sales
(1) Actual production
As the Tosei Group’s principle business activities are revitalization, development, rental, fund, property
management and alternative investment businesses, it is difficult to define “actual production.”
Accordingly, the Company does not report actual production.
(2) Actual orders received
As the Tosei Group does not receive orders for production, the Company does not report actual orders
received.
(3) Actual sales
Consolidated actual sales for each segment in the year under review are shown below.
Segment
Year ended November 30, 2012
(Dec. 1, 2011 to Nov. 30, 2012) Comparison with
the previous fiscal year
(%) Amount (¥ thousand)
Revitalization Business 5,980,183 49.7
Development Business 10,985,270 209.0
Rental Business 2,446,682 99.5
Fund Business 776,723 55.6
Property Management Business 3,512,228 102.5
Alternative Investment Business 838,736 463.7
Total 24,539,823 99.1
Notes: 1. Transactions between segments were eliminated.
2. The above amounts do not include consumption taxes.
- 11 -
3. Issues to be addressed
(1) Description of present issues to be addressed
As of the end of the year under review, the following issues have been identified as needing to be
addressed.
In the real estate sector, where the Tosei Group operates, the real estate trading market is showing
signs of further recovery. The market in the greater Tokyo area has largely recovered from the stagnation
triggered by the Great East Japan Earthquake and overseas funds are flowing into the real estate market on
expectations that prices have bottomed.
In this operating environment, the Tosei Group has developed and started implementing “Next Stage
2014,” its current three-year medium-term management plan. The year ended November 30, 2012 was the
plan’s first year.
Under this management plan, the Group aims to become a world-class real estate firm by setting three
key policies: expand and grow the existing six business segments, move into overseas markets, and
reform the management infrastructure.
In order to expand and grow the existing six business segments, the Group will carefully monitor the
constantly changing trends in the real estate market and continuously respond to customer needs. To
achieve this, the Group will reinforce the revitalization and development businesses further, with a
particular focus on expanding business with end users and investors. In the Fund business, the Group will
aim to benefit from an upturn in the investment market by increasing the balance of assets under
management and expanding fee income. In particular, it will seek to capture opportunities of the
establishment of new funds.
As part of moves into overseas markets, the Group will work to reinforce relationships with global
investors in the Fund business and other segments. In January 2012, the Group established Tosei
Singapore Pte. Ltd. as a local subsidiary. The following November, it concluded a membership contract
with NAI Global, a network of global commercial real estate brokers. Membership of this network will
give the Tosei Group opportunities to diversify its real estate portfolio. We plan to step up efforts to
generate earnings from these initiatives.
In order to reform the management infrastructure, the Group aims to build an organization and
infrastructure that supports the development of human resources and the implementation of strategy,
maintain a sound financial structure, and establish an organization capable of meeting the challenges of
globalization and a disclosure system.
While tackling these areas under its three key policies, the Group will also continue to place emphasis
on compliance, risk management, and timely and appropriate disclosure in order to create a world-class
management structure by stepping up efforts to enhance group-wide corporate governance.
(2) Fundamental policy on what the person(s) should be like to control the determination of the
financial and business policies of the Company
a. Contents of basic policy
The Company believes it is necessary for persons who control decision making regarding the
Company’s financial and business policies to have a sufficient understanding of the details of the
financial and business affairs of the Company and the source of its corporate value, and for such persons
to make it possible to continuously and sustainably ensure and enhance the Company’s corporate value
and, in turn, the common interests of its shareholders.
The Company also believes that decisions regarding takeover propositions involving a change of
control of the Company should ultimately be taken by the shareholders of the Company as a whole.
Furthermore, the Company will not reject a large-scale acquisition of the shares of the Company if it
will contribute to the corporate value of the Company and, in turn, the common interests of its
shareholders.
Nevertheless, 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. Such acquisitions
include those with a purpose that would obviously harm the corporate value of the target company and
the common interests of its shareholders, those with the potential to substantially coerce shareholders
into selling their shares; those that do not provide sufficient time or information for the target
company’s board of directors and shareholders to consider the details of the large-scale acquisition, or
for the target company’s board of directors to make an alternative proposal, and those that require the
target company to discuss or negotiate with the acquirer in order to procure more favorable terms for
shareholders than those presented by the acquirer.
- 12 -
In particular, it is necessary and essential for the Company to (i) maintain the system under which
the Company internally covers the six business fields that allow the “integration of real estate and
finance,” which leads to maximization of the potential of the Tosei Group, (ii) maintain employees who
support that system with specialist knowledge and experience of real estate and finance, (iii) maintain
trust in the Company in the real estate industry, which has been built up over a long period of time
based on the establishment of ability and information networks supporting various value creation
technologies, and (iv) have an understanding of 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 the financial and business affairs of the
Company and would ensure and enhance these elements over the medium-to-long term, the corporate
value of the Company and, in turn, the common interests of its shareholders would be harmed.
The Company believes that persons who would make a large-scale acquisition of the shares in the
Company in a manner that does not contribute to the corporate value of the Company or the common
interests of its shareholders would be inappropriate as persons that control decisions on the Company’s
financial and business policies. The Company believes that it is necessary to ensure the corporate value
of the Company and, in turn, the common interests of its shareholders by taking necessary and
reasonable countermeasures against a large-scale acquisition by such persons.
b. Overview of the special measures to realize the basic policy
Because the Tosei Group was fully aware of the fact that as a listed company on the First Section of the
Tokyo Stock Exchange it would be required to demonstrate even higher standards of behavior, dignity
and the like from external parties in the future, the Company, aiming to move to the next stage,
established a new medium-term management plan called “Next Stage 2014” (the targeted period of the
plan is three years from December 2011 to November 2014) and commenced its efforts under the plan
from the previous fiscal year. Under the new medium-term management plan, although the Company
faces an external environment that is dramatically changing due to the financial crisis and the Great East
Japan Earthquake, in order to realize further progress as a company intending to make continuous
innovation, the Company will create new value and inspiration in all aspects of real estate in a wider
business field than in the past by (i) further strengthening each segment currently owned by the
Company group including expansion of the business for end users in Japan, (ii) making new steps
toward starting business abroad with broader global perspectives and (iii) reform its management
infrastructure.
The Company group has previously taken measures to strengthen corporate governance, such as the
appointment of an outside directors (two members), the invitation of all corporate auditors (four
members) from outside the company, the notification of two outside directors and four outside corporate
auditors (six members in total) as “independent directors and/or corporate auditors” in accordance with
the “Principles of Corporate Governance for Listed Companies” of the Tokyo Stock Exchange, the
reinforcement of the business execution function by the introduction of the executive officer system,
and the establishment of the corporate governance board, and will in the future endeavor to further
strengthen corporate governance as a listed company on the First Section of the Tokyo Stock Exchange.
Specifically, the Company group will focus on putting into practice actions based on a high-level
awareness of compliance through raising awareness from the level of “role model” to that of “ideal” in
accordance with the Compliance Principles of the Company, thorough implementation of risk
management by correctly understanding and analyzing risks involved in corporate activities, continuous
performance of accountability to various stakeholders including investors by promptly publicly
disclosing correct corporate information under the spirit of fair disclosure, and other efforts for
strengthening corporate governance.
c. Overview of the measures to prevent decisions on the Company’s financial and business policies from
being controlled by persons deemed inappropriate under the basic policy
The plan is a measure to prevent decisions on the Company’s financial and business policies from being
controlled by persons deemed inappropriate under the above basic policy, and its objective is to ensure
and enhance the Company’s corporate value and, in turn, the common interests of its shareholders.
The plan stipulates procedures 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 share certificates, etc. (kabuken tou hoyuu wariai)of a holder (hoyuusha) totaling at least 20% of
the share certificates, etc. issued by the company; or (ii)a tender offer (koukai kaitsukei) that would
- 13 -
result in the party conducting the tender offer’s ownership ratio of share certificates, etc. and the
ownership ratio of share certificates, etc. of a person having a special relationshiop totaling at least 20%
of the share certificates, 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 the
acquisition, 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 acquisition
rights, the independent committee will recommend the implementation the gratis allotment of stock
acquisition rights to the Company’s board of directors.
In addition, when a meeting of shareholders is convened 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 shares in 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 non-implementation 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 is convened 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 the plan. The effective period of the plan
expires at the conclusion of the ordinary general meeting of shareholders for the last fiscal year ending
within three years after the conclusion of the 62nd Ordinary General Meeting of Shareholders. However,
if, before the expiration of the effective period, the Company’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 thereof
Company’s board of directors deems that the new medium-term management plan and other measures
such as the efforts to enhance the corporate value and the strengthening of corporate governance were
established as specific measures to continuously and sustainably enhance the corporate value of the
Company and, in turn, the common interests of its shareholders, and that these are truly in accordance
with the basic policy, not detrimental to the common interests of the Company’s shareholders and not
for the 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 the
Company’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 the Company’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 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 the three principles set out in the Guidelines Regarding Takeover Defense for the Purposes of
Protection and Enhancement of Corporate Value and Shareholders’ Common Interests released by the
Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005.
- 14 -
4. Business 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, 2012. 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) Business environment
1) Revitalization Business and Development Business
(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 several 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 Business Results due to Timing of Property Transfer
These two businesses book property sales amounts as sales, and therefore the amount per transaction
is large. In addition, because the two businesses book sales 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 every quarter could cause a
considerable change in sales and income.
(iii) Construction Delays and Increased Construction Costs due to Natural Disasters, Etc.
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 Tosei Group’s operating results and financial position.
(iv) Application of Accounting Standard for Measurement of Inventories
The Company adopted “Accounting Standard for Measurement of Inventories” (ASBJ Statement No.
9, July 5, 2006) for inventories held for sale. As a result, inventories held at year-end are written down
if fair value (net realizable value) is lower than acquisition cost, and the loss on the write-down of the
difference is then charged as the cost of sales. In the future, the Company will lower the book values
of inventories if fair value (net realizable value) is lower than acquisition cost due to deterioration in
financial or real estate market conditions or other cause, and the resulting loss could have an impact
on the Tosei Group’s operating results and financial position.
2) Rental Business
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.
3) Fund Business
(i) Management Performance of Funds
The fund business, which plays a significant role in the growth and positioning of the Tosei Group,
earns fees in compensation for asset management including locating real estate properties that match
the needs of investors, raising their value, conducting lease-up activities and then selling them.
Therefore, asset management advisory and other capabilities play a role in the performance of the real
estate funds, and the Tosei Group has accumulated expertise in both real estate and finance.
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 in the event that rental conditions or other
aspects of the real estate properties which Tosei provides discretionary investment, management and
advises on do not achieve the performance expected by investors.
(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, or if funds can no longer continue due to funding
- 15 -
problems.
(iii) Compensation in Connection with Non-recourse Loans
A special purpose company operated by a real estate fund that is managed by the Tosei Group may
borrow funds via a non-recourse loan (debt can only be collected from income and sale proceeds of
underlying real estate collateral. Also known as a limited recourse loan) when acquiring real estate. In
this case, the Tosei Group, in its capacity as asset manager, may be held liable to compensate for
damages, etc. incurred by the lender on the grounds of fraud or unlawful acts, environmental pollution
or other incident resulting from willful intent or gross negligence by interested parties on the borrower
side such as the borrower or the asset manager, in connection with the non-recourse loan. This
liability is generally no guarantee of performance of the loan obligation but if such damage did occur
as a result of gross negligence on the part of the Tosei Group, the Company or the Tosei Group may
assume liability for compensation.
4) Property Management Business
(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
workplace 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.
5) Alternative Investment Business
The alternative investment business, primarily purchases real estate collateralized loans and invests in
M&As of real estate-owning companies. However, the inability to acquire real estate-collateralized
loans 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, on a project-by-project
basis, 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 addition, lump-sum repayments due to conflicts with financial covenants on partial loans, delays of
project sales, and lower-than-expected sales revenues also have the potential to affect the operating results
and financial position of the Tosei Group.
In procuring funds, the Tosei 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.
<Balance of Interest-Bearing Debt>
Term 59th term 60th term 61st term 62nd term 63rd term
Accounting period Year ended
Nov. 30, 2008
Year ended
Nov. 30, 2009
Year ended
Nov. 30, 2010
Year ended
Nov. 30, 2011
Year ended
Nov. 30, 2012
Balance of Interest-Bearing Debt
(¥ million) 47,631 35,296 34,264 30,075 32,401
Total Assets (¥ million) 78,309 62,235 62,682 59,967 64,732
LTV (%) 60.8 56.7 54.7 50.2 50.0
- 16 -
(3) Business areas
1) Competitive Conditions
The Tosei Group’s primary market is the 23 wards of Tokyo, and the Group purchases and sells
primarily 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, declines in selling
prices of properties due to price competition caused by the recent decline in real estate transactions and
deterioration of foreign investment have the potential to affect the operating results and financial
position of the Group.
2) 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
1) Legal regulations
In addition to the Companies Act and regulations in the Financial Instruments and Exchange Act 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. Main Legal Regulations
• Building Lots and Buildings Transaction Business Act
• National Land Use Planning Act
• City Planning Act
• Building Standards Act
• Construction Business Act
• Act on Architects and Building Engineers
• Housing Quality Assurance Act
• Financial Instruments and Exchange Act
• Act on Sales, etc. of Financial Products
• Real Estate Specified Joint Enterprise Act
• Trust Business Act
• Act on Investment Trust and Investment Corporations
• Act on Securitization of Assets
• Real Estate Investment Advisory Business Registration Rules
• Law for Execution of Warranty against Housing Defects
• Act on Prevention of Transfer of Criminal Proceeds
• Act on Advancement of Proper Condominium Management
• Act on Maintenance of Sanitation in Buildings
• Security Services Act
• Fire and Disaster Management Act
• Act on the Rational Use of Energy
• Money Lending Business Act
- 17 -
2) Licenses and permits, etc.
The Tosei Group’s businesses have obtained the following related permits in accordance with the laws
listed above. As Tosei Group works to observe the current requirements imposed by administrative laws
and local ordinances, there has not been any issue that could result in the revocation of licenses or
permits. However, the business activities of the Group could profoundly be affected in the event that
revocation of licenses or permits occurred due to violation of law.
Moreover, an adverse change in any of the above laws may lead to a negative impact on the
operating results or financial position of the Group.
Tosei Corporation
Name of License
or Permit Authority
Content of License or
Permit
Expiration Rescission, Cancellation
or Other Reasons
Real Estate Business License
Governor of Tokyo
Tokyo Governor’s
License (12)
No. 24043
March 23, 2017
When the license has been obtained through wrongful means, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings Transaction Business Act)
Real Estate Investment
Advisory Business
Registration
Minister of
Land,
Infrastructure, Transport and
Tourism
General–127 February 28,
2016
When the registration has been made through wrongful
means, or the provisions of causes for disqualification of
officers, etc. become applicable, the registration shall be rescinded. (Article 30 of the Real Estate Investment
Advisory Business Registration Rules)
Specified Construction Business License
Governor of Tokyo
Tokyo Governor’s
License
(Special–24) No. 107905
December 9, 2017
When a situation arises so that there is no fulltime officer or employee in the company who has experience of being
engaged for five (5) years or more in specified
construction business, the permission shall be rescinded. (Article 29 of the Construction Business Act)
First Class Architect’s
Office License
Governor of
Tokyo
Tokyo
Governor’s
Registration (No. 46219)
April 9, 2016 When the registration has been made through wrongful
means, or the provisions of causes for disqualification of
the first-class registered architect, etc. become applicable, the registration shall be rescinded. (Article 26 of the Act
on Architects and Building Engineers)
Real Estate Specific Joint Enterprise Permit
Governor of Tokyo
Tokyo Governor, No.
58
– When license of the building lots and buildings transaction business has been rescinded, or the provisions
of causes for disqualification of officers, etc. become
applicable, the authorization shall be rescinded. (Article 36 of the Real Estate Specified Joint Enterprise Act)
Registered Financial
Instrument Business (Type 2 Financial
Instrument Business,
Advisor and Agency)
Kanto
Financial Bureau
Kanto Financial
Bureau Chief (Financial
Instruments)
No. 898
– When the registration has been made through wrongful
means, or there is a risk of insolvency in the light of capital or operation or the status of property, the
registration shall be rescinded. (Article 52 of the
Financial Instruments and Exchange Act)
Tosei Asset Advisors, Inc.
Name of License
or Permit Authority
Content of
License or Permit
Expiration Rescission, Cancellation or
Other Reasons
Real Estate Business
License
Governor of
Tokyo
Tokyo
Governor’s License (2)
No. 85736
April 7, 2016 When the license has been obtained through wrongful
means, or the provisions of causes for disqualification of officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)
Registered Financial Instrument Business
(Investment
Management Business, Type 2 Financial
Instrument Business,
Advisor and Agency)
Kanto Financial
Bureau
Kanto Financial Bureau Chief
(Financial
Instruments) No. 363
– When the registration has been made through wrongful means, or there is a risk of insolvency in the light of
capital or operation or the status of property, the
registration shall be rescinded. (Article 52 of the Financial Instruments and Exchange Act)
License for
discretionary proxy in
realty trading
Minister of
Land,
Infrastructure, Transport and
Tourism
Minister of
Land,
Infrastructure, Transport and
Tourism No. 52
– When the authorization has been obtained through
wrongful means, or damages have been caused to another
party in the course of business, the authorization shall be rescinded. (Article 67-2 of the Building Lots and
Buildings Transaction Business Act)
- 18 -
Tosei Community Co., Ltd.
Name of License
or Permit Authority
Content of
License or Permit
Expiration Rescission, Cancellation
or Other Reasons
Real Estate Business
License
Governor of
Tokyo
Tokyo
Governor’s
License (3) No. 80048
September 28,
2016
When the license has been obtained through wrongful
means, or the provisions of causes for disqualification of
officers, etc. become applicable, the license shall be rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)
General Construction Building License
Governor of Tokyo
Tokyo Governor’s
License
(General–19) No. 119534
March 10, 2013
When a situation arises so that there is no fulltime officer or employee in the company who has experience of being
engaged for five (5) years or more in general construction
business, the permission shall be rescinded. (Article 29 of the Construction Business Act)
Specified Construction
Business License
Governor of
Tokyo
Tokyo
Governor’s
License (Special–19)
No. 119534
March 10,
2014
When a situation arises so that there is no fulltime officer
or employee in the company who has experience of being
engaged for five (5) years or more in specified construction business, the permission shall be rescinded.
(Article 29 of the Construction Business Act)
First Class Architect’s Office License
Governor of Tokyo
Tokyo Governor’s
Registration
(No. 49526)
January 14, 2014
When the registration has been made through wrongful means, or the provisions of causes for disqualification of
the first-class registered architect, etc. become applicable,
the registration shall be rescinded. (Article 26 of the Act on Architects and Building Engineers)
Condominium
Management Business
Minister of
Land, Infrastructure,
Transport and
Tourism
Minister of
Land, Infrastructure,
Transport and
Tourism (3) No. 030488
May 21, 2017 When the registration has been made through wrongful
means, or the provisions of causes for disqualification of officers, etc. become applicable, the registration shall be
rescinded. (Article 83 of the Act on Advancement of
Proper Condominium Management)
Building
Environmental
Health Comprehensive Management Company
Governor of
Tokyo
Tokyo
Governor’s
License (Comprehensiv
e 19) No. 273
October 3,
2013
When the registration has been made through wrongful
means, or the provisions of causes for disqualification of
officers, etc. become applicable, the registration shall be rescinded. (Article 12-4 of the Act on Maintenance of
Sanitation in Buildings)
Security Service License
Tokyo Public Safety
Commissioner
Security Service Law
Authorization
No. 30002591
October 14, 2016
When the recognition has been obtained through wrongful means, or the provisions of causes for
disqualification are applicable, the recognition shall be
rescinded. (Article 8 of the Security Services Act)
Tosei Revival Investment Co., Ltd.
Name of License
or Permit Authority
Content of
License or Permit
Expiration Rescission, Cancellation
or Other Reasons
Real Estate Business
License
Governor of
Tokyo
Tokyo
Governor’s License (2)
No. 88903
February 22,
2018
When the license has been obtained through wrongful
means, or the provisions of causes for disqualification of officers, etc. become applicable, the license shall be
rescinded. (Article 66 of the Building Lots and Buildings
Transaction Business Act)
Money Lending Business Registration
Governor of Tokyo
Tokyo Governor, (1)
No. 31311
March 16, 2013
When the registration has been made through wrongful means, or the provisions of causes for disqualification are
applicable, the registration shall be rescinded. (Article
24-6-5 of the Money Lending Business Act)
3) 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.
(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.
- 19 -
(5) Defect liability and after-sale service
Under the Building Lots and Buildings Transaction Business Act, 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 Act, real estate businesses are
obligated to provide a 10-year warranty on the main structural components of the building for new
properties. The Law for Execution of Warranty against Housing Defects, which came into effect on
October 1, 2009, requires businesses providing new properties to take out insurance that any of insurance
companies designated by the Minister of Land, Infrastructure, Transport and Tourism offers on new
properties, etc. 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 Architectural Design and 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) Personal information protection
In its revitalization business, development business, rental business, fund business, property management
business and alternative investment business, the Tosei Group holds the personal information of many
customers, including persons involved in these businesses. The volume of personal information the Group
holds is expected to increase along with future business expansion. In line with the Act on the Protection
of Personal Information, the Group has established regulations for managing information assets, trained
its employees, strengthened its information management system and taken thorough measures to manage
personal information. However, the release or leak of personal information or material corporate
information held by the Tosei Group to outside parties due to unforeseen circumstances 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.
(8) 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, for example, a building’s structural design data has not been saved, a building that
contains asbestos is demolished, or the results of the soil pollution survey show that soil improvement is
necessary. Such suspension of business has the potential to affect the operating results and financial
position of the Tosei Group.
5. Important operational contracts, etc.
None
6. Research and development activities
None
- 20 -
7. Analysis of financial position, operating results and cash flow position
Analysis of financial position, operating results and cash flow position for the year ended November 30, 2012
is as follows. Forward-looking statements included in this section are based on information available to the
Group’s management as of November 30, 2012.
(1) Important accounting policies and estimates
The financial statements of the Tosei Group are prepared in accordance with Japanese Generally Accepted
Accounting Principles (“Japanese GAAP”). For significant accounting policy for the presentation of these
consolidated financial statements, please refer to “Significant matters in preparing consolidated financial
statements” in V. Accounting, 1. Consolidated financial statements, etc., (1) Consolidated financial
statements.
(2) Analysis of financial position
The consolidated financial position at the end of the year under review was as follows. Total assets
increased 7.9% compared with the end of the previous year to ¥64,732 million, liabilities rose 10.3% to
¥38,580 million, and net assets rose 4.7% to ¥26,152 million. The equity ratio was 40.4%, compared with
41.6% at the end of the previous year.
(Current assets)
At the end of the year under review, the balance of current assets was ¥49,133 million, an increase of
¥5,225 million compared with the end of the previous year. This was mainly attributable to a ¥1,104
million increase in cash and deposits, which were due to robust sales, and a ¥4,141 million increase in real
estate for sale in the Tosei Group’s mainstay Revitalization Business and Real Estate Development
Business.
(Noncurrent assets)
At the end of the year under review, the balance of noncurrent assets was ¥15,599 million, down ¥460
million compared with the end of the previous year. This was mainly due to a ¥787 million decrease in
deferred tax assets.
(Current liabilities)
At the end of the year under review, the balance of current liabilities was ¥11,284 million, up ¥2,493
million compared with the end of the previous year. This was mainly due to a ¥1,569 million increase in
short-term interest-bearing debt that accompanied active purchasing in the Revitalization Business and
Real Estate Development Business.
(Noncurrent liabilities)
At the end of the year under review, the balance of noncurrent liabilities was ¥27,296 million, up ¥1,095
million compared with the end of the previous year. This was mainly due to a ¥750 million increase in
long-term interest bearing debt.
(Net assets)
Net assets were ¥26,152 million, an increase of ¥1,176 million compared with the end of the previous year.
This was mainly due to a ¥1,176 million increase in retained earnings.
(3) Analysis of operating results
For the year under review, operating results were as follows. Net sales declined 0.9% year on year to
¥24,539 million, ordinary income rose 44.5% to ¥2,274 million, and net income rose 86.9% to ¥1,405
million.
(Net sales)
In the year under review, net sales were ¥24,539 million, a decline of ¥219 million compared with the
previous year. For net sales by segment, please refer to “(1) Operating results” in “II. Review of
- 21 -
operations, 1. Overview of operating results.”
(Cost of sales and gross profit)
In the year under review, cost of sales was ¥18,291 million, down ¥998 million compared with the
previous fiscal year due to a decline in net sales. In addition, valuation losses of ¥267 million (¥894
million in the previous year) were recorded as cost of sales due to the application of the “Accounting
Standard for Measurement of Inventories.” As a result, gross profit was ¥6,248 million, an increase of
¥778 million compared with the previous year.
The gross profit margin was 25.5%, up from 22.1% in the previous year.
(Selling, general and administrative expenses and operating income)
In the year under review, selling, general and administrative expenses were ¥3,217 million, an increase of
¥137 million compared with the previous year. This was mainly due to a ¥124 million increase in
personnel expenses.
As a result, operating income in the year under review was ¥3,030 million, an increase of ¥641 million
compared with the previous year.
(Non-operating income or loss and ordinary income)
In the year under review, non-operating income was ¥22 million, a decrease of ¥49 million compared with
the previous year, and non-operating expenses were ¥779 million, a decrease of ¥107 million. The main
reason for the decline in operating expenses was a ¥110 million decrease in interest expenses due to a
decrease in the interest rate on loans.
As a result, ordinary income was ¥2,274 million, an increase of ¥699 million compared with the
previous year.
(Extraordinary gains or losses and income before income taxes and minority interests)
In the year under review, extraordinary loss was ¥102 million, an increase of ¥65 million compared with
the previous year. The main factors for the extraordinary loss was the reporting of ¥76 million in
contributions for withdrawing from the pension fund of the consolidated subsidiaries, Tosei Community
Co., Ltd.
As a result, income before income taxes and minority interests was ¥2,172 million, an increase of ¥634
million compared with the previous year.
(Income taxes and net income)
In the fiscal year under review, income taxes were ¥766 million, a decrease of ¥18 million compared with
the previous fiscal year.
As a result, net income was ¥1,405 million, an increase of ¥653 million compared with the previous
year.
(4) Analysis of cash flow position
For the cash flow position for the fiscal year under review, please refer to “2 Cash flows” in “II. Review
of operations, 1. Overview of operating results.”
In addition, trends of cash-flow indicators are shown below.
Term 60th term 61st term 62nd term 63rd term
Accounting period Year ended
Nov. 30, 2009
Year ended
Nov. 30, 2010
Year ended
Nov. 30, 2011
Year ended
Nov. 30, 2012
Equity ratio (%) 35.7 39.0 41.6 40.4
Equity ratio on a market value basis (%) 13.6 23.7 14.2 25.3
Interest-bearing debt to cash flows ratio
(years)
2.9 – 5.0 –
Interest coverage ratio (times) 12.5 – 6.8 –
Equity ratio: Net assets/Total assets
Equity ratio on market value basis: Market capitalization/Total assets
Interest-bearing debt to cash flows ratio: Interest-bearing debt/Cash flows
Interest coverage ratio: Cash flows /Interest expenses
Notes: 1. All indicators are calculated using consolidated financial figures.
- 22 -
2. Market capitalization is calculated based on the number of shares issued and outstanding, excluding treasury stock.
3. The debt redemption period 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. Debt redemption period and interest coverage ratio are not presented for the fiscal year ended November 30, 2010 and
the fiscal year ended November 30, 2012 because cash flows from operating activities were negative.
(5) Issue recognition of the management and future policies
In the Tosei Group’s operating environment, the economy overall has entered a recovery phase, supported
by earthquake rebuilding demand and government policies. However, the outlook remains uncertain due
to a slowdown in overseas economies, such as the financial crisis in Europe and the sluggish Chinese
economy. In the real estate sector, the market in the greater Tokyo area has largely recovered from the
downturn caused by the Great East Japan Earthquake, and overseas funds are flowing into the real estate
market on expectations that prices have bottomed. Against this backdrop, J-REITs and other players are
becoming increasingly active in the market and the recovery in real estate prices is gaining momentum.
In this environment, in the Revitalization business, the Company will continue to work to sell existing
condominium units for appropriate prices in the “Restyling Business,” which will enter its fourth year of
operations in the year ending November 30, 2013. In income-generating real estate for investors, which is
becoming an increasingly active field, the Company will step up property purchases and revitalize and sell
properties rapidly.
In the Development business, the Company will focus on selling new condominiums and detached
houses scheduled for completion during the next year, as well as step up operations at its new Kichijoji
Center and Ikebukuro Center, opened in the year under review. It will also actively purchase prime land.
The Company will also work to steadily expand its fee business, which generates stable income
without relying on asset growth.
In the Fund business, the Company will continue to capture more business for managing fund assets,
an area it has been developing since the financial crisis, as investment funds switch to contractors to
manage their assets. Tosei will also aim to establish new funds, with a particular focus on stepping up
activities at its subsidiary in Singapore. In addition, the Company will more actively promote its
consulting business (CRE operations), which helps to improve the profitability of real estate owned by
other companies.
In the Property Management business, the Company will work to boost the level of stable fee income
by increasing the number of properties under management, leveraging the expertise it has built up through
its wholly owned subsidiary Tosei Community Co., Ltd.
- 23 -
III. Facilities
1. Outline of capital expenditures
In the year ended November 30, 2012, we made capital expenditures totaling ¥140 million. A major portion of
this amount was due to renovation work on properties in the Real Estate Rental Business. During the year
under review, there were no material transactions related to the retirement or sale etc. of facilities.
2. Main facilities
(1) Filing company (Tosei)
(As of November 30, 2012)
Office name
(Location) Segment Description
Book value (¥ thousand)
Number of employees
(Person)
Buildings
and
structures
Land (Size m2)
Other Total
Head office
(Minato-ku, Tokyo)
Supervising
administration facilities
Office facilities 1,064,715 2,219,719
(633.53) 35,698 3,320,132 116
Leasing property
(13 properties in Chiyoda-
ku, Tokyo, etc.)
Rental Business Rental Building, stores, etc.
2,881,123 7,247,887
(12,744.77) 2,376 10,131,387 –
Total – – 3,945,839 9,467,606
(13,378.30) 38,074 13,451,520 116
Note: The above amounts do not include consumption taxes.
(2) Domestic subsidiaries
(As of November 30, 2012)
Company name
Office name (Location)
Segment Description
Book value (¥ thousand)
Number of
employees
(Person)
Buildings
and structures
Land
(Size m2) Other Total
Tosei Community
Co., Ltd.
Leasing property
(1 property in
Arakawa-ku, Tokyo)
Property Management
Business
Rental
condominium 167,556
235,123
(485.51) – 402,679 –
Tosei
Revival
Investment Co., Ltd.
Leasing property (2 properties in
Arakawa-ku, Tokyo, etc.)
Alternative Investment
Business
Rental Building 356,988 329,261
(592.19) 109 686,359 –
Note: The above amounts do not include consumption taxes.
3. Plans for new installation and retirement of facilities
None
- 24 -
IV. Filing company
1. Information on the Company (Tosei)’s shares
(1) Total number of shares authorized, etc.
a. Total number of shares authorized
Class Total number of shares authorized (Share)
Common stock 1,500,000
Total 1,500,000
b. Number of shares issued
Class
Number of shares
issued
(Share; as of
Nov. 30, 2012)
Number of shares
issued
(Share; as of
the date of filing:
Feb. 28, 2013)
Name of financial instruments
exchange where the stock of Tosei is
traded or the name of authorized
financial instruments firms
association where Tosei is registered
Details
Common stock 456,840 456,840 Tokyo Stock Exchange
(First Section)
No unit share
system is adopted.
Total 456,840 456,840 – –
(2) Status of subscription rights to shares
None
(3) Exercise of bond certificates with subscription rights to shares with exercise price amendment
clause
None
(4) Details of rights plan
None
(5) Trends in total number of shares issued, capital stock, etc.
Date
Fluctuation in
the number of
shares issued
(Shares)
Balance of
shares issued
(Shares)
Fluctuation in
capital stock
(¥ thousand)
Balance of
capital stock
(¥ thousand)
Fluctuation in
capital reserve
(¥ thousand)
Balance of
capital reserve
(¥ thousand)
Dec. 1, 2008
to Nov. 30, 2009
(Note)
19,000 395,840 304,787 4,452,807 304,787 4,536,283
Dec. 1, 2009
to Nov. 30, 2010
(Note)
61,000 456,840 1,001,866 5,454,673 1,001,866 5,538,149
Note: The increases were due to the exercise of subscription rights to shares.
- 25 -
(6) Shareholder composition
(As of November 30, 2012)
Category
Shareholder composition Shares
less than
one unit
(Share)
Public
sector Financial
institutions
Financial instruments
business
operators
Other
corporations
Foreign investors Individuals,
etc. Total
Companies,
etc. Individuals
Number of
shareholders
(Person)
– 23 28 42 91 7 5,812 6,003 –
Number of shares held
(Unit)
– 80,943 7,746 61,181 78,816 169 227,985 456,840 –
Holding rate of shares
(%)
– 17.72 1.70 13.39 17.25 0.04 49.90 100.00 –
Note: The number of “Other corporations” includes 4 shares in the name of Japan Securities Depository Center, Inc.
(7) Status of major shareholders
(As of November 30, 2012)
Name of shareholder Address
Number of shares
held (Share)
Percentage of number of shares held in the
total number of
shares issued (%)
Seiichiro Yamaguchi Shibuya-ku, Tokyo, Japan 138,855 30.39
Zeus Capital Limited 2-22-26-103 Uehara, Shibuya-ku, Tokyo, Japan
60,000 13.13
Japan Trustee Services Bank, Ltd. (Trust
Account) 1-8-11, Harumi, Chuo-ku, Tokyo, Japan 40,446 8.85
The Master Trust Bank of Japan, Ltd. (Trust Account)
2-11-3, Hamamatsucho, Minato-ku, Tokyo, Japan
13,482 2.95
Bank of New York GCM Client Account JPRD
ISG (FE-AC)
(Standing proxy: Settlement Services Department The Bank of Tokyo-Mitsubishi
UFJ, Ltd.)
PETERBOROUGH COURT 133 FLEET
STREET LONDON EC4A 2BB UNITED KINGDOM
(2-7-1 Marunouchi, Chiyoda-ku, Tokyo,
Japan)
11,527 2.52
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account
(Standing proxy: Mizuho Corporate Bank, Ltd., Settlement Sales Department)
WOOLGATE HOUSE, COLEMAN STREET LONDON EC2P 2HD,
ENGLAND
(4-16-13, Tsukishima, Chuo-ku, Tokyo, Japan)
10,297 2.25
State Street Bank and Trust Company 505104
(Standing proxy: Mizuho Corporate Bank, Ltd.,
Settlement Sales Department)
P. O. BOX 351 BOSTON
MASSACHUSETTS 02101 U.S.A. (4-16-13, Tsukishima, Chuo-ku, Tokyo,
Japan)
7,630 1.67
RBC ISB A/C LUX NON
RESIDENT/DOMESTIC RATE (Standing proxy: Citibank Japan Ltd.)
14 PORTE DE FRANCE, ESCH-SUR-
ALZETTE, LUXEMBOURG, L-4360 (2-3-14 Higashi-shinagawa, Shinagawa-ku,
Tokyo, Japan)
4,176 0.91
SBI SECURITIES Co., Ltd. 1-6-1 Roppongi, Minato-ku, Tokyo, Japan) 4,053 0.88
SUMITOMO LIFE INSURANCE COMPANY
(Special account)
(Standing proxy: Japan Trustee Services Bank, Ltd.)
7-18-24 Tsukiji, Chuo-ku, Tokyo, Japan
(1-8-11 Harumi, Chuo-ku, Tokyo, Japan)
3,976 0.87
Total – 294,442 64.45
Note: The Company received a copy of the Change Report of the Significant Share Holdings Report dated May 17, 2012,
which purport that SPARX Asset Management Co., Ltd. held 23,562 shares of Tosei shares as of May 15, 2012.
However, as the Company could not confirm the number of shares effectively held by SPARX Asset Management Co.,
Ltd., its name was not included in the list of major shareholders above.
The substance of the copy of the Significant Share Holdings Report is as follows:
Large volume holder SPARX Asset Management Co., Ltd.
Address Tennoz First Tower, 2-2-4 Higashi-shinagawa, Shinagawa-ku, Tokyo, Japan
Share certificates, etc. held 23,562
Holding ratio of share certificates, etc. 5.16%
- 26 -
(8) Status of voting rights
a. Shares issued
(As of November 30, 2012)
Classification Number of shares
(Share) Number of voting rights Details
Shares without voting rights – – –
Shares with restricted voting rights
(Treasury stock, etc.) – – –
Shares with restricted voting rights
(Other) – – –
Shares with full voting rights
(Treasury stock, etc.) – – –
Shares with full voting rights
(Other)
Common stock
456,840 456,840
Tosei’s standard class of
shares with no rights
limitations
Shares less than one unit – – –
Total number of shares issued 456,840 – –
Total number of voting rights – 456,840 –
Note: The number of “Shares with full voting rights (Other)” includes 4 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 stock, etc.
(As of November 30, 2012)
Name of shareholders Address
Number of
shares held
under own name
(Share)
Number of
shares held under
the name of
others
(Share)
Total number of
shares held
(Share)
Percentage of
number of shares
held in the total
number of shares
issued
(%)
– – – – – –
Total – – – – –
(9) Stock options
None
- 27 -
2. Acquisition of treasury stock
[Class of shares] None
(1) Acquisition by resolution of the General Meeting of Shareholders
None
(2) Acquisition by resolution of the Board of Directors
None
(3) Items not based on resolutions of the General Meeting of Shareholders or Board of Directors
None
(4) Status of disposal and ownership of acquired treasury stock
None
- 28 -
3. Dividend 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.
It is also a basic policy of Tosei to pay a year-end dividend annually, determined by the General Meeting
of Shareholders. Based on the above policy, Tosei decided to pay an annual dividend of ¥600 per share for the year under
review. As a result, the Company’s consolidated dividend payout ratio came to 19.5% for the year ended
November 30, 2012. Tosei plans to use its internal reserves for future business expansion and to strengthen the management
structure.
Tosei’s articles of incorporation stipulate that “Tosei may pay interim dividends to shareholders with the
record date of May 31 each year, upon a resolution by the Board of Directors.” The dividend for the year ended November 30, 2012 is as follows.
Resolution date Total amount of dividends
(¥ thousand)
Dividends per share
(¥)
Ordinary General Meeting of
Shareholders held on Feb. 26, 2013 274,104 600
4. Trends in share price
(1) Highest and lowest share prices for the most recent 5 years by term
Term 59th term 60th term 61st term 62nd term 63rd term
Accounting
period
Year ended
Nov. 30, 2008
Year ended
Nov. 30, 2009
Year ended
Nov. 30, 2010
Year ended
Nov. 30, 2011
Year ended
Nov. 30, 2012
Highest (¥) 74,700
45,000 44,700 23,490
37,650 * 69,200 ** 43,000
Lowest (¥) 12,500
8,600 18,610 18,020
18,800 * 55,400 ** 19,810
Note: The highest and lowest share prices shown above were the share prices listed on the Second Section of Tokyo Stock
Exchange from November 22, 2006 to August 31, 2011, and on the First Section of Tokyo Stock Exchange from
September 1, 2011. The highest and lowest share prices prefixed by one asterisk in the 59th term were prices on the
Jasdaq Securities Exchange, and the highest and lowest share prices prefixed by two asterisks in the 62nd term were
prices on the Second Section of Tokyo Stock Exchange.
(2) Monthly highest and lowest share prices for the most recent 6 months
Month Jun. 2012 Jul. 2012 Aug. 2012 Sep. 2012 Oct. 2012 Nov. 2012
Highest (¥) 31,700 33,900 30,700 27,890 31,900 37,650
Lowest (¥) 24,070 28,400 26,610 23,580 26,060 29,700
Note: The highest and lowest prices were prices on the First Section of Tokyo Stock Exchange.
- 29 -
5. Status of officers
Title Post Name Date of birth Career summary Term of
office
Number of
shares held
(Share)
President
and CEO
President
and CEO
Seiichiro
Yamaguchi Jan. 5, 1961
Apr. 1983 Entered Mitsui Real Estate Sales Co.,
Ltd. (the predecessor of Mitsui Fudosan Realty
Co., Ltd.)
Note 3 138,855
Apr. 1986 Entered Tosei-Shoji Corporation
Aug. 1990 Director of the Company
Jun. 1994 President and Representative Director of the Company (current position)
Dec. 1995 Representative Director of Palms
Community Management Co. Ltd. (the
predecessor of Tosei Community Co., Ltd.)
Jul. 2004 President and CEO of the Company
(current position)
Director
COO Senior
Executive
Officer of
Business Division; in
charge of
Asset Solutions 1
and 2, Asset Solutions
Business
Promotion Department,
and
Architecture Planning
Department;
and General Manager of
Asset
Solutions Business
Promotion
Department
Katsuhito Kosuge
Jul. 17, 1960
Apr. 1983 Entered Tokyu Construction Co., Ltd.
Note 3 2,000
Apr. 1986 Entered Tosei-Shoji Corporation
Jan. 1996 Director of the Company
Dec. 2000 Managing Director of the Company
Jul. 2004 Director and Managing Executive
Officer of the Company
Sep. 2005 Representative Director of Tosei
Revival Investment Co., Ltd.
Feb. 2006 COO Senior Executive Officer of the Company
Oct. 2007 Representative Director of Tosei Asset
Management, Corp.
Apr. 2008 Director of Tosei Asset Advisors, Inc.
Feb. 2012 Director of Tosei Asset Advisors, Inc. (current position)
Dec. 2012 COO Senior Executive Officer of
Business Division; in charge of Asset Solutions 1 and 2, and Asset Solutions
Business Promotion Department of the
Company (current position)
Director
CFO Senior
Executive Officer of
Administrati
ve Division; and in
charge of
Corporate Planning
Department,
and Administrati
on and HR
Department
Noboru
Hirano Oct. 17, 1959
Apr. 1982 Entered Kokubu & Co., Ltd.
Note 3 1,580
Apr. 1991 Entered Tosei-Shoji Corporation
May 1995 Director of Tosei-Shoji Corporation
Mar. 2001 General Manager of Finance and
Accounting Department of the Company
Oct. 2002 Managing Director of the Company
Jul. 2004 Director and Managing Executive
Officer of the Company
Mar. 2005 Corporate Auditor of Tosei Revival Investment Co., Ltd.
Apr. 2005 Corporate Auditor of Tosei Community
Co., Ltd. (current position)
Sep. 2005 Representative Director of Tosei REIT
Advisors, Inc. (the predecessor of Tosei
Asset Advisors, Inc.)
Feb. 2006 CFO Senior Executive Officer of the Company
Dec. 2007 CFO Senior Executive Officer of
Administrative Division of the Company
Dec. 2007 Representative Director of Tosei
Revival Investment Co., Ltd.
Mar. 2011 CFO Senior Executive Officer of Administrative Division; and in charge
of Corporate Planning Department, and
Administration and HR Department of the Company (current position)
Jan. 2013 Representative Director of Tosei
Revival Investment Co., Ltd. (current
position)
Feb. 2013 Director of Tosei Community Co., Ltd.
(current position)
- 30 -
Title Post Name Date of birth Career summary Term of
office
Number of
shares held
(Share)
Director Goro
Kamino Aug. 29, 1960
Apr. 1983 Entered Mitsui Trust and Banking
Company, Limited (the predecessor of Sumitomo Mitsui Trust Bank, Limited)
Note 3 –
Aug. 1990 Entered Chubu Gas Co., Ltd.
May 1995 Entered Gastec Service, Inc. and
appointed as Corporate Planning Department Chief
Dec. 1995 Director of Toyohashi Cable Network
Inc. (current position)
Aug. 2000 President CEO of Gastec Service, Inc. (current position)
May 2002 President and representative director of
Sala Corporation (current position)
Jun. 2002 Director of System Location Co., Ltd.
Jan. 2004 Director of Sala House Co., Ltd.
(current position)
Mar. 2006 Representative Director of Chubu Gas Co., Ltd. (current position)
Feb. 2007 Chairperson of Sala Cars Japan Co.,
Ltd. (current position)
Feb. 2007 Director of the Company (current position)
Oct. 2009 Director of Japan Post Holdings Co.,
Ltd. (current position)
Mar. 2012
President and Representative Director of Chubu Gas Co., Ltd. (current
position)
Jun. 2012 Director of Musashi Seimitsu Industry
Co., Ltd. (current position)
Director Kenichi
Shotoku Jan. 20, 1971
Oct. 1995 Entered Asahi & Co., Ltd. (the
predecessor of KPMG AZSA LLC)
Note 3 –
Sep. 1999 Transferred to Arthur Andersen & Co.,
Kuala Lumpur Office
Sep. 2002 Entered SCS Global Accounting Co.,
Ltd. (the predecessor of SCS Global
Consulting (S) Pte Ltd)
Nov. 2003 Representative Director of SCS Global
Accounting Co., Ltd. (the predecessor
of SCS Global Consulting (S) Pte Ltd) (current position)
Sep. 2005 Director of O-RID GLOBAL BPO
PTE. LTD. (current position)
Dec. 2010 Statutory Auditor of ROKI TECHNO CO., LTD (current position)
Feb. 2012 Director of the Company (current
position)
Jan. 2013 Corporate Auditor of ROKI GROUP HOLDINGS CO., LTD. (current
position)
Corporate
Auditor (full-time)
Yasuhiro
Honda Jun. 20, 1940
Apr. 1963 Entered TAISEI CORPORATION
Note 4 –
Jun. 1991 General Manager of Machinery & Materials Department of of TAISEI
CORPORATION (in charge of
planning and management)
Jun. 1995 Managing Director of TAISEI TOURIST AGENCY LTD.
Apr. 2003 Full-time Corporate Auditor of the
Company (current position)
- 31 -
Title Post Name Date of birth Career summary Term of
office
Number of
shares held
(Share)
Corporate Auditor
(full-time)
Yutaka
Kitamura Feb. 27, 1950
Apr. 1972 Entered The Yasuda Trust and Banking
Co., Ltd. (the predecessor of Mizuho Trust & Banking Co., Ltd.)
Note 4 –
May 1996 General Manager of Singapore Branch
of The Yasuda Trust & Banking Co., Ltd. (the predecessor of Mizuho Trust
& Banking Co., Ltd.)
Oct. 1998 Joint General Manager of Credit
Division of The Yasuda Trust & Banking Co., Ltd. (the predecessor of
Mizuho Trust & Banking Co., Ltd.)
Oct. 1999 General Manager of Niigata Branch of
The Dai-Ichi Kangyo Fuji Trust &
Banking Co., Ltd. (the predecessor of Mizuho Trust & Banking Co., Ltd.)
Mar. 2005 Full-time Corporate Auditor of Nippon
Carbon Co., Ltd.
May 2010 Full-time Adviser of J-COACH Corporation
Jun. 2010 Full-time Corporate Auditor of
J-COACH Corporation
Feb. 2013 Full-time Corporate Auditor of the Company (current position)
Feb. 2013 Corporate Auditor of Tosei Community
Co., Ltd. (current position)
Corporate Auditor
Tatsuki Nagano
Apr. 16, 1959
Apr. 1983 Entered The Chuo Trust & Banking Co., Ltd. (the predecessor of Sumitomo
Mitsui Trust Bank, Limited)
Note 4 –
Jul. 1995 Financial Planning Chief of Corporate Planning Dept. at headquarters of The
Chuo Trust & Banking Co., Ltd. (the
predecessor of Sumitomo Mitsui Trust Bank, Limited)
Jul. 2000 Management Director of RG Asset
Management PTE. LTD. (current position)
Jul. 2004 Director of Reference Group Holdings
Ltd. (current position)
Aug. 2004 Representative Director of RG Asset Management Services Co., Ltd. (the
predecessor of RG Asset Management
K.K.) (current position)
Feb. 2012 Corporate Auditor of the Company (current position)
Corporate
Auditor Osamu Doi Feb. 23, 1964
Apr. 1987 Entered The Nikko Securities Co., Ltd.
(the predecessor of SMBC Nikko Securities Inc.)
Note 4
Jul. 1993 Transferred to Nikko Europe PLC
Feb. 1998 Returned to The Nikko Securities Co.,
Ltd. (the predecessor of SMBC Nikko
Securities Inc.)
Apr. 2002 Entered FinTech Global Incorporated
Oct. 2005 Senior Vice President of Structured
Finance Division of FinTech Global Incorporated
Oct. 2006 Deputy Head of Investment Banking
Division of FinTech Global Incorporated
Apr. 2007 Head of Investment Department of
FinTech Global Incorporated
Feb. 2013 Corporate Auditor of the Company (current position)
Total 142,435
Notes: 1. Goro Kamino and Kenichi Shotoku are outside directors provided for by Article 2, Item 15 of the Companies Act.
2. Yasuhiro Honda, Yutaka Kitamura, Tatsuki Nagano and Osamu Doi are outside auditors provided for by Article 2,
Item 16 of the Companies Act.
3. Two-year period from the conclusion of the Ordinary General Meeting of Shareholders held February 24, 2012.
4. Four-year period from the conclusion of the Ordinary General Meeting of Shareholders held February 26, 2013
- 32 -
6. Status of corporate governance, etc.
(1) Status of corporate governance
a. Basic thinking on corporate governance
The Group aspires to continue to be a group of companies that make a meaningful contribution to their
shareholders, employees, business partners, and other stakeholders by promptly and accurately
responding to changes in the management environment and continually carrying out business activities
that enable the Group to achieve sound growth. The Group has positioned the enhancement of corporate
governance as the most important means of achieving these aims, with thorough promotion of
consciousness regarding compliance, strengthening of risk management, and implementation of timely
disclosure as the three main initiatives. In addition, the Group works in a unified manner to strengthen
the system further, from the top management down to each employee of Group companies, in order to
construct an internal control system as required by the Companies Act and the Financial Instruments
and Exchange Act and a system as a financial instruments business operator that is credible to investors.
b. Details of internal company bodies and development of internal control system
(a) Basic explanation of internal company bodies
The Company has the Board of Directors and the Board of Auditors in place. In order to execute
business transparently, the Company appoints outside directors, and all of its corporate auditors are
from outside the Company. The Company also employs the executive officer system.
All corporate auditors of the Company are outside corporate auditors and have been since the
Company was listed. The corporate auditors continuously perform audits on the management of the
Company from the point of view of securing and improving the Company’s corporate value and the
common interests of its shareholders. Furthermore, by inviting outside directors to the Board of
Directors, the Company is strengthening its management supervisory function further. On the
management side, by employing the executive officer system, the Company promotes optimal
decision-making capabilities and distribution of duties, as well as the delegation of authority in the
execution of business, thus enhancing corporate governance.
The current system is in place because it is a system that enables the management of the Company
and management oversight to function sufficiently.
i) Operation of Board of Directors
The Board of Directors is composed of five directors, two of whom are outside directors . Based on
the regulations of the Board of Directors, regular meetings of the Board of Directors are held every
month and extraordinary meetings are held as necessary. As the highest management decision-
making body, the Board of Directors makes resolutions on management policy and important
matters, and also supervises the execution of duties by directors.
ii) Auditing by corporate auditors
The Company employs a corporate auditor system with two full-time corporate auditors and two
part-time corporate auditors. All of these four persons are outside corporate auditors as provided for
in Article 2, Item 16 of the Companies Act. Meetings of the Board of Auditors are held once a
month in principle. At these meetings, the four corporate auditors deliberate on necessary items and
work to share information by having the full-time corporate auditors report to the part-time
corporate auditors about their auditing activities.
The corporate auditors also attend meetings of the Board of Directors and management meetings
(composed of all executive officers), which is an advisory body regarding matters to be approved by
the President and CEO.
The auditing activities of corporate auditors are performed in accordance with a yearly audit
plan. Since such activities are carried out in coordination with the accounting auditor and the
Internal Audit Department, an efficient and effective auditing system is in place. Furthermore, the
full-time corporate auditors work to gain an understanding of the status of the execution of business
by holding regular interviews with each director and those in charge of each division.
iii) Executive officer system
The Company employs an executive officer system, under which executive officers appointed by
the Board of Directors execute and exert control over the Company’s business in accordance with
internal regulations, in addition to matters resolved by the Board of Directors.
In addition, the President and CEO holds management meetings twice a month in principle, at
- 33 -
which advance consultation is provided for important decisions to be made by the President and
CEO.
iv) Corporate governance meeting
With the aim of continuous strengthening of corporate governance, the Company holds corporate
governance meetings consisting of full-time directors and full-time corporate auditors once a month
in principle.
At the meeting, directors and corporate auditors check and deliberate over corporate governance
concerns for improving corporate value and items regarding internal control. Where necessary, they
receive advice from outside experts such as corporate attorneys and certified public accountants.
v) Internal auditing
Four members of the Internal Audit Department under the direct supervision of the President and
CEO perform audits of the entire Group in accordance with a yearly plan. If they discover
inadequacies, they demand improvements by providing recommendations for their rectification to
the audited division. Audits are performed effectively, with matters for rectification handled through
enhanced follow-up work including deliberation with the audited division and the provision of
detailed guidance.
vi) Information disclosure
The Company not only prepares documents, etc. specified in laws and regulations such as the
Companies Act and the Financial Instruments and Exchange Act and discloses information in
accordance with the regulations set forth by securities exchanges, but also provides timely and
appropriate corporate information to stakeholders including shareholders and investors by such
means as investor relations activities and its website.
vii) Auditing by accounting auditor
The Company’s accounting auditor is Shinsoh Audit Corporation, with which the Company has
concluded an auditing agreement in accordance with the Companies Act and the Financial
Instruments and Exchange Act. On this basis, Shinsoh Audit Corporation performs audits in
accordance with a yearly audit plan.
- 34 -
(b) The following is an outline of the Company’s corporate governance and internal management system
General Meeting of Shareholders
Management
meeting
Executive
officers
(attendance of
corporate
auditors)
Co
mp
lian
ce C
om
mit
tee
Internal Audit Department
Election/
Dismissal
Info
rmat
ion
Dis
clo
sure
Co
mm
itte
e
Ris
k M
anag
emen
t
Co
mm
itte
e
Report (exchange of opinion)
Election/
Dismissal
Election/
Dismissal
Audit Audit/Report
Advice
Consultation Audit
Audit
Report
Report Instruction
Instruction/
Order
Report/
Consultation
Appointment/
Dismissal of executive
officers of
Group
companies
Report
(exchange of opinion)
Audit
Accounting
auditor
Instruction Report Instruction
President consultation
President and CEO
Executive officers
(execution of
business)
Board of Auditors
4 corporate auditors
(all 4 are outside
corporate auditors)
Instruction
Report
Instruction
Report
Instruction
Report
Each division/Group companies
Corporate
governance meeting
3 full-time directors
2 full-time corporate
auditors
Outside
experts
Board of Directors
5 directors
(of which 2 outside
directors)
- 35 -
(c) Details of internal company bodies and development of internal control system
Regarding systems to ensure that directors’ execution of their duties is in compliance with laws and
regulations and the Articles of Incorporation and other systems necessary to ensure the properness of
a company’s operations (internal control system), the Company passed a resolution at a meeting of its
Board of Directors held on November 28, 2008 that its basic policy on ensuring the properness of a
company’s operations is as follows.
i) Basic policy on compliance with laws and regulations, etc.
• Thoroughly promote consciousness regarding compliance with laws and regulations, etc.
• Strengthen capability of checking for violations of laws and regulations, etc.
• Swiftly address any violations of laws and regulations, etc. and carry out timely and appropriate
information disclosure regarding such violations
• Reject any association with anti-social forces
ii) Basic policy on retaining and managing information
• Thoroughly promote awareness of importance of retaining and managing information
• Strengthen initiatives for the prevention of leakage of important information
• Thoroughly promote knowledge of information for timely disclosure and prevent misstatements and
material omissions
iii) Basic policy on management of risk of loss
• Thoroughly promote awareness, analysis and evaluation of risks that may obstruct the continuation
of corporate activities
• Strengthen monitoring of risk management
• Enhance whistle-blowing system regarding the occurrence of contingencies or signs that they may
occur
• Swiftly address any occurrences of contingencies, accidents, etc. and carry out timely and
appropriate information disclosure regarding such occurrences
iv) Basic policy on efficient execution of duties by directors
• Carry out deliberation and decision making on significant management matters efficiently and in a
timely and appropriate manner
• Eliminate excessive pursuit of efficiencies in management plans and business goals and carry out
decision making in consideration of soundness of the Company
• Develop a system to allow efficient execution of business in accordance with regulations on
operational authority
v) Basic policy on properness of operations of entire Group
• Thoroughly promote penetration of consciousness regarding company principles and compliance
among officers and employees across the entire Group
• Strive to share and resolve the management issues of each Group company
• Strengthen the internal control systems of each Group company through timely and appropriate
information sharing
• Strengthen the system for ensuring the appropriateness of financial reporting relevant to the entire
Group
• Eliminate wrongful acts or irregular transactions carried out through the Group
vi) Basic policy on system to ensure effective auditing by corporate auditors
• Provide employees that are independent from directors to assist in the duties of corporate auditors
• Secure agreement of the Board of Auditors regarding personnel transfers, evaluation, etc. of the
afore-mentioned employees
• Thoroughly promote prompt reporting to the Board of Auditors in the case of an occurrence or risk
of serious loss or discovery by officers or employees of a violation of laws and regulations, etc. or
wrongful act
• Thoroughly promote timely reporting by directors and important employees to corporate auditors
• Make important documents available for inspection in a timely manner
• Promptly report any whistle blowing to corporate auditors
• Directors strive to comprehend and assist audits by corporate auditors and proactively make improvements based on directions from corporate auditors
• In order to enhance corporate auditors’ audits of the entire Group, directors cooperate with
corporate auditors as necessary
- 36 -
The internal control system developed at the Group and the details of new initiatives implemented in
the fiscal year ended November 30, 2012 are as follows.
i) Compliance with laws and regulations, etc.
• For the purpose of supervising directors who execute business, the Company has newly appointed
one more outside director, bringing the number of outside directors to two, and all four of the
corporate auditors are outside corporate auditors. The Company has notified all six of these officers
(two outside directors and four outside corporate auditors) as “independent directors/auditors” in
accordance with the Tokyo Stock Exchange’s “Principles of Corporate Governance for Listed
Companies.”
• A corporate governance meeting attended by full-time directors and full-time corporate auditors is
held every month (held 13 times during the current period). Matters regarding all aspects of
management are deliberated upon and considered at the meetings in order to realize a higher quality
governance system. In addition, education, training, explanation of issues and deliberations
regarding steps and measures, etc. are carried out at the Compliance Committee, which is composed
of heads of divisions and the compliance officers of each Group company (held 12 times during the
current period), and the details are reported at the monthly meetings of the Board of Directors.
• In order to thoroughly promote consciousness regarding violations of laws and regulations and
strengthen the capability to check such violations, a compliance program is set at the beginning of
the fiscal year, and various training sessions and seminars are held, while various regulations are
developed. (Regular training: general compliance training, insider trading and financial instruments
business training).
In the current period, compliance training tailored to different employee levels was carried out.
Additionally, on a monthly basis, compliance slogans are gathered and published, and a booklet
titled “Compliance Mind” is distributed to foster the legal awareness of employees.
• A compliance questionnaire was carried out to check the extent of the penetration of consciousness
regarding compliance.
• A business law forum is held. It is attended by responsible personnel from each department of the
Asset Solutions business and each group company. Participants could share their practical legal
concerns, gather cautionary information regarding client solicitation, and make information widely
known. (The forum was held twelve times in the year under review, once per month.)
• Regular training on action against anti-social forces is carried out in order to eliminate any
association with anti-social forces. In addition, a manual on action against anti-social forces has
been formulated, and an employee has been assigned to be in charge of preventing unreasonable
demands.
In the current period, in accordance with the Tokyo Metropolitan Ordinance for Eliminating the
Organized Crime Groups, clauses for the elimination of organized crime groups stated in relevant
agreements were inspected to confirm their compliance.
• A whistle-blowing system has been established providing contact points inside and outside the
Company.
ii) Retaining and managing information
• Administrative offices have been set up in each of the Board of Directors and important meetings
and committees as part of efforts to enable the thorough retaining and management of information.
• The Information Disclosure Committee, which consists of executive officers in charge of each
division (held 18 times during the current period), inspects material including bulletins from the
Tokyo Stock Exchange to gain an understanding of information for timely disclosure. When
information is disclosed, meetings of the Committee are held flexibly, at which deliberations are
held regarding the appropriateness, etc. of information for disclosure and such information is
managed with the use of reports and check sheets regarding disclosure. Details of meetings of the
Information Disclosure Committee are reported at the monthly meetings of the Board of Directors.
• Important information is retained in a manner that makes it easy to find in accordance with the
regulations on the retention of written documents.
In the current period, while continuing the protection of information security, the extent to which
various types of information can be inspected was clarified by such means as implementing the
unified management of a list of details pertaining to the retention of written documents and
confidential information, which was prepared at each division based on inventories of information
assets, at the Administration and HR Department. By these means, the Company worked to develop
- 37 -
its information management framework (including personal information).
• An extraordinary report regarding the voting results at the 62nd Ordinary General Meeting of
Shareholders was submitted to the Director-General of the Kanto Local Finance Bureau and
disclosed through EDINET (Electronic Disclosure for Investors’ NETwork, an electronic disclosure
system to file the corporate disclosure documnets such as Securities Reports required under the
Financial Instruments and Exchange Act).
iii) Management of risk of loss
• At the Risk Management Committee, which is composed of the heads of each section and
department, and the risk management officers of each Group company, risks for the entire Group
are identified, analyzed and evaluated, while information is gathered about individual events and
countermeasures are deliberated upon (held 12 times during the current period). Risk information is
reported regularly by the full-time directors to the full-time corporate auditors at corporate
governance meetings. The details of the deliberations of the Risk Management Committee are
reported at the monthly meetings of the Board of Directors.
• Matters regarding the evaluation of risks associated with financial reporting are reviewed every
quarter.
• In order to enhance the whistle-blowing system regarding the occurrence of contingencies or signs
that they may occur, a risk management program is set at the beginning of the fiscal year and a risk
management cycle is implemented, consisting of risk evaluation and analysis, planning and
implementation of risk countermeasures, reviews of the effectiveness of countermeasures and
checks of functions disseminating information about them.
• In the current period, earthquake countermeasures and human-resources related risks were managed
with risk survey sheets.
• Following a revision of the risk management system, the “Risk and Crisis Management Guidebook”
was revised and distributed to all employees.
• The Business Continuity Plan (BCP) was revised to better reflect the individual circumstances of
each section and department.
• While promoting understanding among the section and department heads of labor management
issues, mental health measures were made more effective by establishing a mental health hotline
that operates independently from the company.
• Disaster practice drills etc., were conducted to boost readiness for unforeseen events.
iv) Efficient execution of duties by directors
• Company principles have been formulated to thoroughly communicate management policy and the
correct direction to take to all officers and employees of the Group, and a medium-term
management plan and business plans for single fiscal years are formulated in accordance with these
principles. In order to achieve the management plan and business goals, progress made in plans for
single fiscal years is checked on a quarterly basis, while those at management level who are middle
management leaders, are required to participate in progress confirmation meetings on a half-yearly
basis to disseminate the management policy.
• In addition to regular meetings of the Board of Directors, which are held on a monthly basis,
extraordinary meetings of the Board of Directors are held as necessary in order to make decisions
swiftly, including extraordinary meetings to approve quarterly financial results (regular meetings
have been held 12 times during the current period, and extraordinary meetings, including those for
quarterly financial results, have been held seven times).
• In order to ensure that deliberations by the Board of Directors are carried out efficiently and fully,
management meetings attended by all executive officers and corporate auditors, at which details of
the matters for deliberation are examined, are held before meetings of the Board of Directors
(regular meetings have been held 24 times during the current period and extraordinary meetings
have been held two times).
• To strengthen corporate governance, the number of directors was increased by one outside director.
v) Properness of operations of entire Group
• All Group companies are required to construct an internal management system to the same level of
that of the Company (the parent), and measures to assist them in this aim are taken where necessary.
In addition, evaluation of their independence by the Internal Audit Department of the Company to
ensure appropriateness in financial reporting has been enhanced.
Employees of Group companies are provided with some of the same training that is carried out at
the Company in order to thoroughly promote the penetration of consciousness regarding compliance.
- 38 -
• Reports are given on the management conditions of all Group companies to the monthly
management meeting. In addition, an understanding of detailed conditions and individual issues for
each month is built up at the meeting of associated companies, which is held by the Corporate
Planning Department. Furthermore, the business support projects for Group companies, which are
carried out at the Company, are implemented, and efforts are being focused on solving management
issues. Timely reporting is required to be made to the chairman of the Risk Management Committee
in the case of an accident or other such event at any Group company.
• Outside experts were invited to act as advisors for group companies, and they provided assistance
and guidance on management and business strategies to construct internal control systems and
improve profitability.
• Responsible personnel from group companies also joined in business law forums established to hear
practical legal concerns, compile cautionary information related to customer solicitation and make
information widely known. (Twelve monthly forums were held.)
• Necessary cooperation is given for the Group company corporate auditor liaison meeting (held on a
half-yearly basis), which is held by the corporate auditors of the Company.
• As a general rule, various training sessions and diagnosis of risks are carried out for all officers and
employees of all Group companies. Meetings of the Compliance Committee and the Risk
Management Committee are attended by those responsible for such matters at each Group company.
• Rules have been established requiring any significant transactions between Group companies to be
reported in advance to the Board of Directors of the Company (in the current period there were no
such transactions).
vi) System to ensure effective auditing by corporate auditors
• The Internal Audit Department has been assigned as the department in charge of assisting the
corporate auditors in their duties. In addition to providing such assistance, this department carries
out administrative duties for the Board of Auditors.
• The duties mentioned above are performed in accordance with direct orders from the corporate
auditors. In addition, evaluations of personnel, rewards and punishments, and transfers of relevant
personnel are carried out after securing the agreement of the Board of Directors.
• In addition to regular and extraordinary meetings of the Board of Directors, corporate auditors
attend the regular management meetings that are held twice a month and also attend extraordinary
meetings as necessary, and directors and executive officers make timely and appropriate reports to
them. Directions received from corporate auditors in business audits and at meetings of the Board of
Directors and management meetings, are implemented as promptly as possible, and progress made
on this is reported at the meeting of the Board of Directors once every three months. Documents the
corporate auditors request to inspect are provided promptly.
• Full-time corporate auditors are provided with reports about various issues regarding all aspects of
management at corporate governance meetings. Representative directors make reports on their areas
of responsibility in interviews once a month, while other directors make such reports once a quarter
and other important employees make reports on a half-yearly basis. Interviews are also held
between presidents and officers of Group companies and the Company’s full-time corporate
auditors (once for each subsidiary). Events that have the potential to develop into matters that pose a
serious risk to the continuation of corporate activities or signs that such events may occur, as well as
individual cases including controversies, accidents and complaints are reported to the corporate
auditors in a timely and appropriate manner.
• The directors receive explanations of the corporate auditors’ yearly audit plans and make efforts to
understand such plans and cooperate in their implementation.
• The corporate auditors attend meetings in which the audit corporation explains its audit findings to
the directors, which are held for each quarterly book closing, and confirm the contents of such
explanation as well as the actions taken by directors in response.
• With the aim of enhancing the threefold auditing structure, there are periodic meetings at which the
accounting auditor reports to the corporate auditors and the Board of Auditors (held six times during
the current period) and periodic meetings at which the corporate auditors and Internal Audit
Department exchange opinions (held six times during the current period).
• With the aim of enhancing audits by corporate auditors across the entire Group, efforts are made to
provide necessary cooperation for holding the Group company corporate auditor liaison meeting on a half-yearly basis.
• A system has been developed in which all whistle blowing is reported promptly to the corporate
auditors, and even when no whistle blowing has occurred, this fact is reported on a monthly basis.
- 39 -
• Discussion meetings were held for outside directors and corporate auditors. (Meetings were held
twice during the period under review.)
• Discussion meetings were held with legal advisors to promote understanding of legal matters
relevant to the Tosei Group. (Meetings were held twice during the period under review.)
(d) Internal auditing and auditing by corporate auditors
i) Coordination between corporate auditors and accounting auditor
In the course of their auditing activities in accordance with the yearly audit plan, the corporate
auditors regularly exchange information and opinions with the accounting auditor. They also
receive reports on the results of audits by the accounting auditor and coordinate closely with them
by such means as observing their audits as appropriate.
ii) Coordination between corporate auditors and Internal Audit Department
The corporate auditors hold a regular exchange of opinions session between the Board of Auditors
and the Internal Audit Department once every two months, and receive timely updates on internal
audit results from the General Manager of the Internal Audit Department. The full-time corporate
auditors attend hearings conducted by the Internal Audit Department with audited divisions, while
members of the Internal Audit Department attend hearings conducted by the corporate auditors with
the accounting auditor, directors and others as assistants to the corporate auditors. Through such
activities, the Company works to enhance the quality of its internal audits and to carry out efficient
business audits.
(e) Accounting audits
i) Names of certified public accountants who executed audit, name of audit corporation they belong to,
and years of continuous auditing
(Name of certified public accountant) (Name of audit corporation) (Years of continuous auditing)
Designated and Engagement Partner
Giichi Yanagisawa Shinsoh Audit Corporation (Note)
Designated and Engagement Partner
Takashi Aikawa Shinsoh Audit Corporation (Note)
(Note) Since the years of continuous auditing are seven years or less, this information is omitted.
ii) Breakdown of assistants in auditing operations
Certified public accountants 3 persons
Other 3 persons
(f) Relationship between outside directors and outside corporate auditors
The Company has two outside directors and four outside corporate auditors.
The Company appoints people who are considered to be fully independent from the business
management and have knowledge, experience and insight that are sufficient to execute the duty of
outside directors and outside corporate auditors, after comprehensive consideration of their career and
qualifications. The Company has not formulated clear standards or policies on independence.
Outside director Goro Kamino has extensive experience and a high level of insight as a
management executive at listed companies, including gas companies of a highly public nature, and the
Company believes that he can adequately supervise other directors and provide advice and
recommendations from his objective standpoint to ensure the adequacy and appropriateness of the
directors’ decision-making.
Outside director Kenichi Shotoku has extensive experience and expertise as a certified public
accountant, including overseas service, and the Company believes that he can provide appropriate
supervision of the Company’s management from his objective standpoint as an accounting expert.
Outside director Kenichi Shotoku is Representative Director of SCS Global Consulting (S) Pte Ltd,
with which the Company has entered into a consignment contract of consulting on overseas business
deployment etc. However, in light of the content and scale of the transactions and other factors, the
Company believes that this will not cause a conflict of interest with general shareholders.
Full-time outside corporate auditor Yasuhiro Honda has abundant managerial and practical
experience, primarily at the administration department of a major construction company, as well as
specialist knowledge. On that basis, the Company believes that he can perform a role in ensuring the
- 40 -
adequacy and appropriateness of the Company’s management.
Full-time outside corporate auditor Yutaka Kitamura has abundant experience including overseas
assignment primarily at a major financial institution as well as specialist knowledge. As such, the
Company believes that he can perform a role in ensuring the adequacy and appropriateness of the
Company’s management, particularly from a financial and global standpoint. Yutaka Kitamura was an
employee of Mizuho Trust & Banking Co., Ltd., with which the Company has transactions, until 2005.
However, in light of the content and scale of the transactions and other factors, the Company believes
that this will not cause a conflict of interest with general shareholders.
Outside corporate auditor Tatsuki Nagano has experience at major financial institutions and
continues to be involved in corporate management as a company representative, and the Company
believes that he can utilize his extensive experience and a high level of expert insight to perform a
role in ensuring the adequacy and appropriateness of the Company’s management.
The Company believes that Osamu Doi can perform a role in ensuring the adequacy and
appropriateness of the Company’s management based on his abundant experience at major securities
companies and at companies that conduct investment banking activities as well as his specialist
knowledge.
c. Development of risk management structure
The Company has established the Compliance Committee with the primary purpose of fostering
consciousness regarding compliance at the Group, and the Risk Management Committee, which
examines the Group’s risk countermeasures. By these means, the Company deliberates on and examines
ways of handling risk management not just from the point of view of compliance with laws and
regulations but also in terms of company ethics and making a social contribution.
d. Remuneration, etc. of officers
(a) Total amount of remuneration, etc. by position, total amount by type of remuneration, etc., and
number of recipients at the Company
Position
Total amount of
remuneration,
etc.
(¥ thousand)
Total amount by type of remuneration, etc.
(¥ thousand) Number of
recipients Basic
remuneration
Stock
options Bonus
Retirement
benefits
Directors
(excluding outside
directors)
114,000 96,000 – – 18,000 3
Corporate auditors
(excluding outside
corporate auditors)
– – – – – –
Outside officers 34,886 32,400 – – 2,486 7
(b) Total amount of consolidated remuneration, etc. by each officer of the Company
Since there is no officer for whom the total amount of remuneration, etc. is ¥100 million or more, this
information is omitted.
(c) Significant items among employee salaries paid to officers concurrently serving as employees
None
(d) Policy on determining amount of remuneration, etc. for officers
Regarding remuneration for officers, the maximum amounts of remuneration, etc. paid to directors
and corporate auditors respectively are determined by resolution of the General Meeting of
Shareholders. Regarding the amounts of remuneration for directors and corporate auditors, those for
directors are determined by resolution of the Board of Directors and those for corporate auditors are
determined by deliberation of the corporate auditors.
- 41 -
e. Status of shareholding
(a) Investment shares held for purposes other than pure investment
Number of issues 1 issue
Total carrying amount ¥1,200 thousand
(b) Investment shares held for purposes other than pure investment and for which the carrying amount in
the current period is over 1% of stated capital
None
(c) Investment shares held for pure investment purposes
None
f. Outline of contracts for limitation of liability
Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company has entered
into contracts with its outside directors and outside corporate auditors that limits their liability for
damages provided for in Article 423, Paragraph 1 of the same Act. The maximum amount of liability
for damages under the contract will be the amount stipulated by laws and regulations.
g. Stipulations of Articles of Incorporation regarding number, etc. of directors
(a) Number of directors
The Company stipulates in its Articles of Incorporation that the number of directors of the Company
shall be six persons or less.
(b) Requirements for resolutions regarding election and dismissals of directors
The Company stipulates in its Articles of Incorporation that resolutions for election of directors shall
be decided by a majority of the voting rights of the shareholders present at a meeting where the
shareholders holding one third or more of the voting rights of the shareholders who are entitled to
exercise their voting rights are present, and shall not be effected by cumulative voting
Regarding resolutions for dismissal of directors, the Company stipulates in its Articles of
Incorporation that they shall be decided by two thirds or more of the voting rights of the shareholders
present at a meeting where the shareholders holding a majority of the voting rights of the shareholders
who are entitled to exercise their voting rights are present.
h. In cases where the Company stipulates that items for resolution at General Meeting of Shareholders
may be resolved by Board of Directors, applicable items and reasons for the stipulation
(a) Acquisition of treasury stock
The Company stipulates in its Articles of Incorporation that the Company can acquire its treasury
stocks by resolution of the Board of Directors as provided for in Article 165, Paragraph 2 of the
Companies Act. The purpose of this is for the Company to acquire its own shares in market
transactions and the like in order to enable the execution of a flexible capital policy in response to
changes in the management environment.
(b) Exemption from liability of directors and corporate auditors
The Company stipulates in its Articles of Incorporation that directors and corporate auditors
(including those who previously held these positions) may be exempted from liability to the extent
provided for in laws and regulations in relation to acts provided for in Article 423, Paragraph 1 of the
Companies Act by resolution of the Board of Directors, as provided for in Article 426, Paragraph 1 of
the same Act. The purpose of this is to create an environment in which directors and corporate
auditors can make use of their abilities sufficiently and fulfill the roles expected of them when
carrying out their duties.
(c) Payment of interim dividend
The Company stipulates in its Articles of Incorporation that an interim dividend may be paid with a
- 42 -
record date of May 31 each year by resolution of the Board of Directors as provided for in Article 454,
Paragraph 5 of the Companies Act, in order to flexibly distribute profits to shareholders.
i. Requirements for special resolutions of General Meeting of Shareholders
The Company stipulates in its Articles of Incorporation that special resolutions of the General Meeting
of Shareholders provided for in Article 309, Paragraph 2 of the Companies Act shall be passed by two
thirds or more of the voting rights of the shareholders present at the meeting where the shareholders
holding one third or more of the voting rights of the shareholders who are entitled to exercise their
voting rights are present.The purpose of this is to operate the General Meeting of Shareholders smoothly
by easing the quorum required for special resolutions at the General Meeting of Shareholders.
(2) Audit fees
a. Audit fees paid to certified public accountants, etc.
Classification
Year ended Nov. 30, 2011 Year ended Nov. 30, 2012
Fees for audit
attestation services
(¥ thousand)
Fees for non-audit
services
(¥ thousand)
Fees for audit
attestation services
(¥ thousand)
Fees for non-audit
services
(¥ thousand)
Filing company 31,000 – 31,000 –
Consolidated
subsidiaries – – 3,000 –
Total 31,000 – 34,000 –
b. Other important fees
(Year ended November 30, 2011)
None
(Year ended November 30, 2012)
None
c. Non-audit services to filing company
(Year ended November 30, 2011)
None
(Year ended November 30, 2012)
None
d. Policy for determining audit fees
Although there are no applicable matters, audit fees are determined appropriately after considering such
factors as the number of auditing days, the size of the company, and the nature of the business activities,
etc.
- 43 -
V. Accounting 1. Preparation policy of the consolidated and non-consolidated financial statements
(1) Tosei prepares consolidated financial statements in accordance with the Ordinance on Terminology,
Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the Ministry of
Finance No. 28 of 1976).
(2) Tosei prepares non-consolidated financial statements in accordance with the Ordinance on Terminology,
Forms, and Preparation Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance No.
59 of 1963).
2. Audit attestation
The consolidated financial statements for the fiscal year ended November 30, 2012 (from December 1,
2011 to November 30, 2012) and the non-consolidated financial statements for the fiscal year ended
November 30, 2012 (from December 1, 2011 to November 30, 2012) were audited by Shinsoh Audit
Corporation pursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act.
3. Special efforts made to ensure the properness of consolidated financial statements, etc.
Tosei is carrying out the special efforts in order to ensure the properness of consolidated financial
statements, etc.
Specifically, for the purpose of both ensuring that Tosei has an appropriate grasp of the contents of
Accounting Standards and related regulations, and establishing a system by which it is possible to
accurately respond to changes in Accounting Standards and related regulations, Tosei became a member
of the Financial Accounting Standards Foundation, and participates in seminars and other events hosted
by the foundation.
- 44 -
1. Consolidated financial statements, etc.
(1) Consolidated financial statements
a. Consolidated balance sheets
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Assets
Current assets
Cash and deposits 8,326,305 *2 9,430,622
Notes and accounts receivable-trade 399,856 314,348
Short-term investment securities 10,000 10,000
Real estate for sale *2 27,360,973 *2 31,502,387
Real estate for sale in process *2 6,374,335 *2 5,675,757
Purchased receivables 81,361 2,951
Supplies 3,254 2,426
Deferred tax assets 966,545 990,487
Other 391,300 1,211,089
Allowance for doubtful accounts (5,697) (6,109)
Total current assets 43,908,234 49,133,960
Noncurrent assets
Property, plant and equipment
Buildings and structures *2 5,337,567 *2 5,579,356
Accumulated depreciation (947,482) (1,106,822)
Buildings and structures, net 4,390,084 4,472,533
Tools, furniture and fixtures 120,979 122,220
Accumulated depreciation (88,678) (90,878)
Tools, furniture and fixtures, net 32,301 31,342
Land *2 10,175,285 *2 10,031,990
Other 6,777 21,629
Accumulated depreciation (4,895) (5,187)
Other, net 1,882 16,441
Total property, plant and equipment 14,599,553 14,552,308
Intangible assets
Software 65,816 41,202
Leasehold right – 346,164
Telephone subscription right 1,889 1,889
Total intangible assets 67,705 389,256
Investments and other assets
Investment securities 380,612 *1 403,001
Long-term loans receivable 10,325 3,355
Deferred tax assets 870,404 83,194
Other 145,100 254,175
Allowance for doubtful accounts (14,332) (86,286)
Total investments and other assets 1,392,110 657,440
Total noncurrent assets 16,059,369 15,599,004
Total assets 59,967,603 64,732,965
- 45 -
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Liabilities
Current liabilities
Notes and accounts payable-trade 806,396 1,670,415
Short-term loans payable – *2 384,400
Current portion of long-term loans payable *2, 4 6,170,937 *2, 4 7,356,272
Income taxes payable 79,271 72,921
Advances received 545,967 990,100
Provision for bonuses 150,520 125,659
Other 1,038,122 684,780
Total current liabilities 8,791,215 11,284,548
Noncurrent liabilities
Long-term loans payable *2, 4 23,904,245 *2, 4 24,654,459
Deferred tax liabilities 15,200 –
Provision for retirement benefits 133,154 147,211
Provision for directors' retirement benefits 312,586 328,667
Guarantee deposits 1,810,439 2,130,063
Asset retirement obligations 24,710 24,842
Other – 11,071
Total noncurrent liabilities 26,200,336 27,296,315
Total liabilities 34,991,552 38,580,864
Net assets
Shareholders' equity
Capital stock 5,454,673 5,454,673
Capital surplus 5,538,149 5,538,149
Retained earnings 13,985,597 15,162,573
Total shareholders' equity 24,978,420 26,155,396
Accumulated other comprehensive income
Valuation difference on available-for-sale
securities (2,369) (926)
Deferred gains or losses on hedges – (3,751)
Foreign currency translation adjustment – 1,382
Total accumulated other comprehensive income (2,369) (3,295)
Total net assets 24,976,051 26,152,100
Total liabilities and net assets 59,967,603 64,732,965
- 46 -
b. Consolidated statements of operations and consolidated statements of comprehensive income
Consolidated statements of operations
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net sales 24,759,291 24,539,823
Cost of sales *1 19,290,132 *1 18,291,818
Gross profit 5,469,158 6,248,005
Selling, general and administrative expenses *2 3,080,121 *2 3,217,373
Operating income 2,389,037 3,030,631
Non-operating income
Interest income 2,797 1,679
Dividends income 2,861 2,861
Amortization of negative goodwill 1,490 –
Penalty income 34,035 –
Miscellaneous income 30,724 18,209
Total non-operating income 71,908 22,750
Non-operating expenses
Interest expenses 885,646 775,254
Foreign exchange losses – 1,448
Miscellaneous loss 799 2,310
Total non-operating expenses 886,445 779,013
Ordinary income 1,574,500 2,274,369
Extraordinary loss
Loss on sales of noncurrent assets – *3 18,874
Loss on retirement of noncurrent assets – *4 2,377
Loss on valuation of membership 16,976 4,366
Loss on adjustment for changes of accounting
standard for asset retirement obligations 19,932 –
Special contribution at the time of withdrawal from
employee pension funds – 76,442
Total extraordinary losses 36,909 102,061
Income before income taxes and minority interests 1,537,591 2,172,307
Income taxes-current 65,899 110,535
Income taxes-deferred 719,708 656,376
Total income taxes 785,608 766,911
Income before minority interests 751,982 1,405,395
Net income 751,982 1,405,395
- 47 -
Consolidated statements of comprehensive income
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Income before minority interests 751,982 1,405,395
Other comprehensive income
Valuation difference on available-for-sale securities (3,143) 1,442
Deferred gains or losses on hedges – (3,751)
Foreign currency translation adjustment – 1,382
Total other comprehensive income (3,143) *1 (926)
Comprehensive income 748,839 1,404,469
Comprehensive income attributable to:
Comprehensive income attributable to owners of the
parent 748,839 1,404,469
- 48 -
c. Consolidated statements of changes in net assets
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Shareholders' equity
Capital stock
Balance at the beginning of current period 5,454,673 5,454,673
Balance at the end of current period 5,454,673 5,454,673
Capital surplus
Balance at the beginning of current period 5,538,149 5,538,149
Balance at the end of current period 5,538,149 5,538,149
Retained earnings
Balance at the beginning of current period 13,462,034 13,985,597
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 751,982 1,405,395
Total changes of items during the period 523,562 1,176,975
Balance at the end of current period 13,985,597 15,162,573
Total shareholders' equity
Balance at the beginning of current period 24,454,857 24,978,420
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 751,982 1,405,395
Total changes of items during the period 523,562 1,176,975
Balance at the end of current period 24,978,420 26,155,396
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the beginning of current period 774 (2,369)
Changes of items during the period
Net changes of items other than shareholders'
equity (3,143) 1,442
Total changes of items during the period (3,143) 1,442
Balance at the end of current period (2,369) (926)
Deferred gains or losses on hedges
Balance at the beginning of current period – –
Changes of items during the period
Net changes of items other than shareholders'
equity – (3,751)
Total changes of items during the period – (3,751)
Balance at the end of current period – (3,751)
Foreign currency translation adjustment
Balance at the beginning of current period – –
Changes of items during the period
Net changes of items other than shareholders'
equity – 1,382
Total changes of items during the period – 1,382
Balance at the end of current period – 1,382
Total accumulated other comprehensive income
Balance at the beginning of current period 774 (2,369)
Changes of items during the period
Net changes of items other than shareholders'
equity (3,143) (926)
Total changes of items during the period (3,143) (926)
Balance at the end of current period (2,369) (3,295)
- 49 -
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Total net assets
Balance at the beginning of current period 24,455,632 24,976,051
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 751,982 1,405,395
Net changes of items other than shareholders'
equity (3,143) (926)
Total changes of items during the period 520,419 1,176,049
Balance at the end of current period 24,976,051 26,152,100
- 50 -
d. Consolidated statements of cash flows
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net cash provided by (used in) operating activities
Income before income taxes and minority interests 1,537,591 2,172,307
Depreciation and amortization 336,398 328,464
Amortization of negative goodwill (1,490) –
Increase (decrease) in provision 17,654 77,642
Interest and dividends income (5,658) (4,540)
Interest expenses paid on loans and bonds 885,646 775,254
Loss on retirement of property, plant and equipment – 2,377
Loss (gain) on sales of property, plant and
equipment – 18,874
Loss on adjustment for changes of accounting
standard for asset retirement obligations 19,932 –
Loss on valuation of membership 16,976 4,366
Decrease (increase) in notes and accounts
receivable-trade 64,280 11,241
Decrease(increase) in purchased receivables 5,106 78,409
Decrease (increase) in inventories 3,305,302 (4,129,276)
Decrease (increase) in advance payments (220,082) 147,853
Increase (decrease) in notes and accounts payable-
trade 438,233 864,185
Increase (decrease) in advances received 260,461 444,132
Increase (decrease) in guarantee deposits received (76,084) 319,624
Decrease (increase) in other current assets 67,194 (964,675)
Other, net 265,944 (254,899)
Subtotal 6,917,407 (108,659)
Interest and dividends income received 4,923 4,530
Interest expenses paid (881,503) (778,399)
Income taxes paid (23,098) (122,725)
Net cash provided by (used in) operating activities 6,017,729 (1,005,254)
Net cash provided by (used in) investing activities
Net decrease (increase) in time deposits 286,136 –
Purchase of property, plant and equipment (61,532) (140,303)
Proceeds from sales of property, plant and
equipment – 216,965
Purchase of intangible assets (36,717) (4,560)
Purchase of investment securities (353,350) (22,000)
Proceeds from sales of investment securities 0 –
collection of investment securities 15,347 150
Decrease(increase) in deposits and guarantee money (17,740) (38,927)
Collection of loans receivable 51,705 7,466
Other, net – (1,490)
Net cash provided by (used in) investing activities (116,149) 17,300
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable – 384,400
Proceeds from long-term loans payable 11,474,100 15,777,100
Repayment of long-term loans payable (15,661,377) (13,841,551)
Cash dividends paid (227,718) (227,857)
Other, net (1,567) (1,219)
Net cash provided by (used in) financing activities (4,416,563) 2,090,871
- 51 -
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Effect of exchange rate change on cash and cash
equivalents – 1,399
Net increase (decrease) in cash and cash equivalents 1,485,016 1,104,317
Cash and cash equivalents at beginning of period 6,821,288 8,306,305
Cash and cash equivalents at end of period * 8,306,305 * 9,410,622
- 52 -
[Significant matters in preparing consolidated financial statements]
1. Scope of consolidation
(1) Number of consolidated subsidiaries: 6
Names of consolidated subsidiaries:
Tosei Community Co., Ltd.
Tosei Asset Advisors, Inc.
Tosei Singapore Pte. Ltd.
Tosei Revival Investment Co., Ltd.
Hestia Capital Limited Company
Green House Limited Company
Of the above consolidated subsidiaries, Tosei Singapore Pte. Ltd. was included in the scope of
consolidation since it was newly established during the year under review.
Metis Capital Co., Ltd., which was a consolidated subsidiary of the Company until the previous year,
was excluded from the scope of consolidation from the year under review, since it was merged into
Tosei Revival Investment Co., Ltd. on May 31, 2012.
(2) Name and others of unconsolidated subsidiary
Sannomiya Real Estate Sales LLC
(Reason for exclusion from scope of consolidation)
The unconsolidated subsidiary is small, and total assets, net sales, net income or loss (amount equal to
the equity share), retained earnings (amount equal to the equity share) and others have no significant
impact on the consolidated financial statements.
2. Application of the equity method
Name and others of unconsolidated subsidiary not to be accounted for by the equity method
Sannomiya Real Estate Sales LLC
(Reason for exclusion from scope of application of the equity method)
The company is not accounted for by the equity method, as its impact is not significant on the net
income or loss (amount equal to the equity share), retained earnings (amount equal to the equity share)
and others.
3. Fiscal year-end of consolidated subsidiaries
All consolidated subsidiaries have the same fiscal year-end as the consolidated balance sheet date.
From the year under review, the closing date of Tosei Community Co., Ltd. was changed from
October 31 to the consolidated closing date for the purpose of improvement of efficiency of management
and business operation of the Group. Accordingly, the accounting period of the subsidiary was for 13
months, and the difference was adjusted through the consolidated statements of operations.
4. Accounting policies
(1) Valuation standards and methods for significant assets
1) Securities
Available-for-sale securities
i. With market value
Stated at fair value based on market value and others as of the consolidated closing date (unrealized
gains and losses, net of applicable taxes, are reported in a separate component of net assets, and
costs of securities sold are determined by the moving-average method).
ii. Without market value
Stated at cost determined by the moving-average method.
2) Derivatives
Stated at fair value.
- 53 -
3) Inventories
The cost method (the carrying amounts in the consolidated balance sheets are written down due to a
decline in profitability of assets) is used as the valuation basis.
i. Real estate for sale and real estate for sale in process
Specific identification method
ii. Purchased receivables
Specific identification method
iii. Supplies
Last purchase price method
(2) Depreciation of significant depreciable assets
1) Property, plant and equipment (excluding lease assets)
Property, plant and equipment are depreciated by the declining-balance method.
However, buildings acquired on or after April 1, 1998 (excluding facilities attached to buildings)
are depreciated by the straight-line method.
Useful lives are summarized as follows:
Buildings 3 to 50 years
Structures 10 to 30 years
Machinery and equipment 8 years
Tools, furniture and fixtures 3 to 20 years
2) Intangible assets (excluding lease assets)
Intangible assets are amortized by the straight-line method.
Internal use software is amortized over the estimated useful life (5 years).
3) Lease assets
Lease assets are depreciated by the straight-line method over the lease term with no residual value.
Finance leases that do not transfer ownership and commenced on or before March 31, 2008 are
accounted for in a similar manner with ordinary rental transactions.
(3) Significant allowances
1) Allowance for doubtful accounts
To cover losses from bad debts, allowance for doubtful accounts is provided in the amount expected to
be uncollectible based on historical experience of bad debt for general receivables and individual
collectability for specific receivables such as doubtful receivables.
2) Provision for bonuses
To cover bonus payments to employees, provision for bonuses is provided in the amount for the fiscal
year based on the estimated amount of payment.
3) Provision for retirement benefits
To cover retirement benefits to employees, the amount that would be required to pay if all eligible
employees retired at the fiscal year-end is provided based on the estimated amount of retirement benefit
obligations as of the fiscal year-end.
4) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided in the amount required as of the fiscal year-end
to cover retirement benefit payments to directors and corporate auditors according to the rule for
retirement benefits to directors and corporate auditors.
(4) Translation of significant assets and liabilities denominated in foreign currencies into Japanese currency
Monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at
the spot exchange rate prevailing at the consolidated closing date, and differences arising from such
translation are recognized in the consolidated statements of operations. Assets and liabilities of
consolidated foreign subsidiaries are translated into Japanese yen at the spot exchange rate prevailing at
the consolidated closing date, and revenues and expenses of consolidated foreign subsidiaries are
translated into Japanese yen at the average exchange rate during the period. Differences arising from such
- 54 -
translation are recorded in foreign currency translation adjustment in net assets.
(5) Significant hedge accounting
1) Hedge accounting
Deferral hedge accounting is applied.
2) Hedging instruments and hedged items
Hedging instruments: Interest rate swaps
Hedged items: Loans payable
3) Hedging policy
Hedging is undertaken to the extent of hedged liabilities to reduce interest rate risk.
4) Assessment of hedge effectiveness
The Company and its consolidated subsidiaries assess the hedge effectiveness by comparing the
cumulative changes in fair value of the hedged item with the corresponding changes in fair value of the
hedging instrument to date from the inception of the hedge.
(6) Scope of funds in consolidated statements of cash flows
Cash and cash equivalents consist of cash on hand, readily available deposits, and highly liquid short-term
investments with original maturities of three months or less that are exposed to an insignificant risk of
changes in value.
(7) Other significant matters for preparing consolidated financial statements
1) Accounting for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
However, non-deductible consumption taxes related to noncurrent assets and others are recorded as
long-term prepaid expenses (amortized over five years), and other non-deductible consumption taxes are
recorded as expenses for the term in which they arise.
2) Accounting for investments in silent partnership
For investments in an investment limited partnership and other similar partnerships (considered
securities according to Article 2-2 of Financial Instruments and Exchange Act), an amount equivalent to
the equity interest in the property of the silent partnership is recorded as “Investment securities.”
“Investment securities” is recorded at the time of contribution to a silent partnership. An amount
equivalent to the equity interest in profit and loss earned from operating activities by the silent
partnership is recorded as “Operating income or loss,” and the same amount is added to or deducted
from “Investment securities.” For the repayment of the contribution (including the amount equivalent to
the equity interest in profit and loss earned from operating activities) from a business operator,
“Investment securities” is reduced.
3) Accounting for purchased receivables
When a payment for purchased receivables is collected, the amount collected is deducted from the
acquisition cost of the purchased receivables for each receivable, and the amount collected for each
receivable in excess of the acquisition cost is recorded as revenue on a net basis.
However, as for the amount collected that the division between principal and interest is defined, the
principal portion is deducted from the acquisition cost, and the interest portion is recorded as revenue.
- 55 -
[Change in Accounting Policy]
(Change in Depreciation Method)
From the year under review, following the revision of the Corporation Tax Act, the Company and its domestic
consolidated subsidiaries adopted the depreciation method in accordance with the revised Corporation Tax
Act for property, plant and equipment acquired on or after April 1, 2012.
The impact of this change on profit and loss for the year under review was immaterial.
[Change in Presentation]
(Consolidated Statements of Cash Flows)
“Decrease (increase) in other current assets” included in “Other, net” in “Net cash provided by (used in)
operating activities” for the previous year was reported as a separate line item from the year under review due
to the increased materiality. The consolidated statement of cash flows for the previous year was reclassified to
reflect this change in presentation.
Consequently, 333,139 thousand yen included in “Other, net” in “Net cash provided by (used in) operating
activities” on the consolidated statement of cash flows for the previous year was reclassified to ¥67,194
thousand of “Decrease (increase) in other current assets” and 265,944 thousand yen of “Other, net.”
[Additional Information]
(Application of Accounting Standard for Accounting Changes and Error Corrections)
The Group adopted the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ
Statement No. 24, December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes
and Error Corrections” (ASBJ Guidance No. 24, December 4, 2009) for the accounting changes and
corrections of prior period errors made after the beginning of the year under review.
(Change in Holding Purpose)
Leasehold property previously held as real estate for sale (Buildings and structures: 194,770 thousand yen,
Leasehold right: 346,164 thousand yen) was transferred to noncurrent assets due to the change in business
policy.
- 56 -
[Notes to consolidated financial statements]
(Notes to consolidated balance sheets)
*1. Investments in the unconsolidated subsidiary are as follows:
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Investment securities – 20,000
*2. Pledged assets and secured debts are as follows:
Pledged assets
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Cash and deposits – 485,750
Real estate for sale 27,209,729 30,967,255
Real estate for sale in process 6,285,709 5,585,460
Buildings and structures 4,187,146 4,238,783
Land 9,983,334 9,692,968
Total 47,665,919 50,970,218
Debts secured by security interests
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Short-term loans payable – 384,400
Current portion of long-term loans payable 6,067,377 7,286,312
Long-term loans payable 23,757,845 24,613,619
Total 29,825,222 32,284,331
3. Contingent liabilities
The Company guarantees borrowings of the following individuals who purchased properties sold by the
Company from Kabushiki Kaisha Aruka. (¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
3 individuals 4,375 4,071
*4. Financial covenants
Year ended November 30, 2011 (as of November 30, 2011)
(1) Of the Group’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 1,039,375 thousand yen) includes financial covenants. If the
Group violates any two items of the following covenants, the Group may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
- 57 -
(2) Of the Group’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 375,000 thousand yen) includes financial covenants. If the
Group violates any two items of the following covenants, the Group may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(3) Of the Group’s loans payable, the syndicated loan contract with The Bank of Tokyo-Mitsubishi UFJ,
Ltd. as the agent (total balance: 1,906,400 thousand yen) includes financial covenants. If the Group
violates either of the following covenants, the Group may repay the amount of the relevant loans to the
lender in a lump sum.
Covenants
• The amount of net assets in the consolidated and non-consolidated balance sheets shall be kept at 75%
or more of the higher of net assets in the consolidated and non-consolidated balance sheets as of the
end of the immediately preceding fiscal year, and net assets in the consolidated and non-consolidated
balance sheets as of November 30, 2009.
• In the consolidated and non-consolidated balance sheets for any fiscal year, loss shall not be posted on
the ordinary level.
(4) Of the Group’s loans payable, the individual contract of cash loan for consumption with Japan Finance
Corporation (total balance: 525,680 thousand yen) includes financial covenants. If the Group violates
either of the following covenants, the Group may repay the amount of the relevant loans to the lender in
a lump sum.
Covenants
• The amount of net assets in the non-consolidated balance sheets shall be higher than 21,014,900
thousand yen.
• Without prior written approval from Japan Finance Corporation, the Group shall not provide loans,
investments or guarantees of more than 6,104,300 thousand yen to any third party.
(5) Of the Group’s loans payable, the individual contract of cash loan for consumption with Japan Finance
Corporation (total balance: 78,000 thousand yen) includes financial covenants. If the Group violates
either of the following covenants, the Group may repay the amount of the relevant loans to the lender in
a lump sum.
Covenants
• The amount of net assets of Tosei Community Co., Ltd. shall be higher than 247,900 thousand yen.
• Without prior written approval from Japan Finance Corporation, Tosei Community Co., Ltd. shall not
provide loans, investments or guarantees of more than 56,100 thousand yen to any third party.
Year ended November 30, 2012 (as of November 30, 2012)
(1) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 656,875 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
- 58 -
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(2) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (Total balance: 120,000 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(3) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 685,850 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• The total net assets in the consolidated and non-consolidated balance sheets shall be kept at 75% or
more of the higher of total net assets in the consolidated and non-consolidated balance sheets as of
November 30, 2011, or total net assets in the consolidated and non-consolidated balance sheets as of
November 30, 2010.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(4) Of the Company’s loans payable, the individual contract of cash loan for consumption with Japan
Finance Corporation (total balance: 322,400 thousand yen) includes financial covenants. If the
Company violates either of the following covenants, the Company may repay the amount of the relevant
loans to the lender in a lump sum.
Covenants
• The amount of net assets in the non-consolidated balance sheets shall be higher than 21,014,900
thousand yen.
• Without prior written approval from Japan Finance Corporation, the Company shall not provide loans,
- 59 -
investments or guarantees of more than 6,104,300 thousand yen to any third party.
(5) Of the Company’s loans payable, the individual contract of cash loan for consumption with Japan
Finance Corporation (total balance: 646,800 thousand yen) includes financial covenants. If the
Company violates either of the following covenants, the Company may repay the amount of the relevant
loans to the lender in a lump sum.
Covenants
• The amount of net assets in the non-consolidated balance sheets shall be higher than 24,382,400
thousand yen.
• Without prior written approval from Japan Finance Corporation, the Company shall not provide loans,
investments or guarantees of more than 2,057,900 thousand yen to any third party.
- 60 -
(Notes to consolidated statements of operations)
*1. The inventory balance at the end of the fiscal year is presented after book values were written down due to
a decline in profitability of assets and the following loss on valuation of inventories are included in cost of
sales.
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Cost of sales 894,137 267,699
*2. Main components of selling, general and administrative expenses are as follows:
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Advertising expenses 47,464 27,992
Directors’ compensations 191,933 220,036
Salaries and allowances 1,333,655 1,414,923
Provision for bonuses 144,521 125,659
Retirement benefit expenses 45,484 47,512
Provision for directors’ retirement benefits 25,837 23,903
Legal welfare expenses 209,120 222,556
Commission fee 184,516 167,587
Taxes and dues 228,145 266,090
Provision of allowance for doubtful accounts 485 78,132
Depreciation and amortization 60,318 63,523
*3. Components of loss on sales of noncurrent assets are as follows: (¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Buildings and Land – 18,874
*4. Components of loss on retirement of noncurrent assets are as follows: (¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Buildings and structures – 1,767
Tools, furniture and fixtures – 610
Total – 2,377
- 61 -
(Notes to consolidated statements of comprehensive income)
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
*1. Reclassification adjustments related to other comprehensive income
(¥ thousand)
Valuation difference on available-for-sale
securities
Amount arising during the period 2,575
Reclassification adjustments – 2,575
Deferred gains or losses on hedges
Amount arising during the period (6,193)
Reclassification adjustments – (6,193)
Foreign currency translation adjustment
Amount arising during the period 1,382
Reclassification adjustments – 1,382
Before tax effect adjustments (2,235)
Tax effect amount 1,308
Total other comprehensive income (926)
*2. Tax effect related to other comprehensive income
(¥ thousand)
Before tax effect
adjustments Tax effect amount
After tax effect
adjustments
Valuation difference on available-for-
sale securities 2,575 (1,133) 1,442
Deferred gains or losses on hedges (6,193) 2,441 (3,751)
Foreign currency translation adjustment 1,382 – 1,382
Total other comprehensive income (2,235) 1,308 (926)
- 62 -
(Notes to consolidated statements of changes in net assets)
Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
1. Issued shares
(Shares)
Class of shares
Number of shares
at the beginning of
the current fiscal year
Increase Decrease
Number of shares
at the end of
the current fiscal year
Common stock 456,840 – – 456,840
2. Dividend
(1) Dividends paid
Resolution Class of shares Total dividends
(¥ thousand)
Dividends per share
(¥) Record date Effective date
Ordinary General
Meeting of
Shareholders held on
Feb. 23, 2011
Common stock 228,420 500 Nov. 30, 2010 Feb. 24, 2011
(2) Dividends whose effective date is after the end of the current fiscal year and record date is included in
the current fiscal year
Resolution Class of
shares
Total dividends
(¥ thousand)
Source of
dividends
Dividends per
share (¥) Record date Effective date
Ordinary General
Meeting of
Shareholders held on
Feb 24, 2012
Common
stock 228,420
Retained
earnings 500 Nov. 30, 2011 Feb. 27, 2012
- 63 -
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
1. Issued shares
(Shares)
Class of shares
Number of shares
at the beginning of
the current fiscal year
Increase Decrease
Number of shares
at the end of
the current fiscal year
Common stock 456,840 – – 456,840
2. Dividend
(1) Dividends paid
Resolution Class of shares Total dividends
(¥ thousand)
Dividends per share
(¥) Record date Effective date
Ordinary General
Meeting of
Shareholders held on
Feb 24, 2012
Common stock 228,420 500 Nov. 30, 2011 Feb. 27, 2012
(2) Dividends whose effective date is after the end of the current fiscal year and record date is included in
the current fiscal year
Resolution Class of
shares
Total dividends
(¥ thousand)
Source of
dividends
Dividends per
share (¥) Record date Effective date
Ordinary General
Meeting of
Shareholders held on
Feb. 26, 2013
Common
stock 274,104
Retained
earnings 600 Nov. 30, 2012 Feb. 27, 2013
- 64 -
(Notes to consolidated statements of cash flows)
* The reconciliation between the ending balance of “Cash and cash equivalents” and “Cash and deposits” in
the consolidated balance sheets are as follows:
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Cash and deposits 8,326,305 9,430,622
Time deposits with maturity over three months (20,000) (20,000)
Cash and cash equivalents 8,306,305 9,410,622
(Lease transactions)
1. Finance lease transactions (Lessee)
Finance lease transactions that do not transfer ownership
1) Details of lease assets
Property, plant and equipment
Multi-purpose machines at the head office (“Tools, furniture and fixtures”)
2) Depreciation method for lease assets
Depreciation method for lease assets is as stated in “4. Accounting policies (2) Depreciation of
significant depreciable assets” under “Significant matters in preparing consolidated financial
statements.”
Finance lease transactions that do not transfer ownership whose start date falls on or before March
31, 2008 are accounted for by a method similar to that applicable to ordinary rental transactions. The
details of these lease assets are as follows.
(i) Acquisition cost equivalent, accumulated depreciation equivalent and ending balance equivalent of
lease properties
(¥ thousand)
As of Nov. 30, 2011
Acquisition cost equivalent Accumulated depreciation
equivalent Ending balance equivalent
Tools, furniture and fixtures 16,462 13,719 2,743
Total 16,462 13,719 2,743
(¥ thousand)
As of Nov. 30, 2012
Acquisition cost equivalent Accumulated depreciation
equivalent Ending balance equivalent
Tools, furniture and fixtures 16,462 16,462 –
Total 16,462 16,462 –
(Note) Acquisition cost equivalent is calculated using the inclusive-of-interest method, as the ending balance of future lease
payments constitutes a small portion of the ending balance of property, plant and equipment, etc.
(ii) Future lease payments, etc.
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Future lease payments
Due within one year 2,743 –
Total 2,743 –
(Note) Acquisition cost equivalent is calculated using the inclusive-of-interest method, as the ending balance of future lease
payments constitutes a small portion of the ending balance of property, plant and equipment, etc.
- 65 -
(iii) Lease payments and depreciation expenses equivalent
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Lease payments 2,743 2,743
Depreciation expenses equivalent 2,743 2,743
(iv) Calculation method of depreciation expenses equivalent
Depreciation expense is calculated by the straight-line method by considering lease period to be
useful life and residual value to be zero.
2. Operating lease transactions (Lessee)
Future lease payments related to irrevocable operating lease transactions (¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Due within one year 1,974 –
Total 1,974 –
3. Operating lease transactions (Lessor)
Future lease payments related to irrevocable operating lease transactions (¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Due within one year 510,138 668,171
Due over one year 1,614,907 1,679,477
Total 2,125,045 2,347,649
- 66 -
(Financial instruments)
1. Status of financial instruments
(1) Policy on handling financial instruments
The Group procures necessary funds for purchasing real properties that are articles for sale mainly in the
Revitalization Business and the Development Business through bank loans. Funds are invested in highly
secure financial assets (such as deposits). The Group hedges interest rate fluctuation risk on some of
borrowings by using interest rate swap transactions. The Group uses derivative transactions not for
speculative purposes, but for hedging risks of fluctuations in interest rates on borrowings.
(2) Description of financial instruments and related risks and risk management system
Notes and accounts receivable–trade, which are operating receivables, are exposed to credit risks of
customers. With respect to these risks, the due dates and outstanding balances are managed for each
business partner. Past due receivables are periodically reported to the management meeting and
individually monitored and responded to.
Securities and investment securities are exposed to market fluctuation risk. For this risk, the market
values are periodically monitored and reported to the management meeting.
With respect to notes and accounts payable–trade, which are operating payables, the majority of
them are due within a year.
Loans payable are to raise funds for purchasing real properties that are articles for sale mainly in the
Revitalization Business and the Development Business. Most of them are with floating interest rates and
are exposed to interest rate fluctuation risk. For this risk, the Group periodically makes a list of interests
on loans for each financial institution and monitors the fluctuations of interests on loans.
For some of loans payable, the Group uses derivative transactions (interest rate swaps) in order to
hedge the interest rate fluctuation risk and fix interest expenses. The effectiveness of hedges is assessed
based on fluctuations in interest rates and others of hedged items and hedging instruments by comparing
cumulative changes in fair value of hedged items and hedging instruments.
Loans payable, which are extended by financial institutions, are exposed to the liquidity risks
stemming from changes in attitudes of such financial institutions toward transactions with the Group.
For these risks, the Group appropriately monitors information on fund demand of the Group and cash
flow situation, strengthens relations with financial institutions with which we do business as needed,
and also makes efforts to diversify financing methods.
(3) Supplementary explanation of fair values of financial instruments
The fair values of financial instruments include, other than values based on market prices, reasonably
measured values when market prices are unavailable. As variable factors are incorporated into the
measurement of such values, the values may vary depending on the assumptions used.
2. Fair values of financial instruments
The carrying amounts in consolidated balance sheet and the fair values, and variances thereof are shown
below. However, items for which it is considered extremely difficult to determine the fair values are not
included in the following table (See note 2).
As of November 30, 2011
(¥ thousand)
Carrying amount in
consolidated balance sheet Fair value Variance
(1) Cash and deposits 8,326,305 8,326,305 –
(2) Notes and accounts receivable–trade 399,856 399,856 –
(3) Investment securities 18,068 18,068 –
Total assets 8,744,230 8,744,230 –
(1) Notes and accounts payable–trade 806,396 806,396 –
(2) Long-term loans payable (including
current portion of long-term loans
payable)
30,075,182 30,100,490 25,307
Total liabilities 30,881,579 30,906,886 25,307
- 67 -
As of November 30, 2012
(¥ thousand)
Carrying amount in
consolidated balance sheet Fair value Variance
(1) Cash and deposits 9,430,622 9,430,622 –
(2) Notes and accounts receivable–trade 314,348 314,348 –
(3) Investment securities 20,643 20,643 –
Total assets 9,765,614 9,765,614 –
(1) Notes and accounts payable–trade 1,670,415 1,670,415 –
(2) Short-term loans payable 384,400 384,400 –
(3) Long-term loans payable (including
current portion of long-term loans
payable)
32,010,731 32,019,976 9,245
Total liabilities 34,065,547 34,074,792 9,245
Derivative transactions (*) (6,193) (6,193) –
(*) The values of assets and liabilities arising from derivative transactions are shown at net value, and with the amount in
parentheses representing net liability position.
(Note 1) Method of measurement of fair values of financial instruments and matters concerning securities
and derivative transactions
Assets
(1) Cash and deposits
The fair values of cash and deposits are based on the relevant book values since these assets are settled in
a short period of time and their fair values are virtually equal to their book values.
(2) Notes and accounts receivable–trade
The fair values of notes and accounts receivable–trade are based on the relevant book values since these
assets are settled in a short period of time and their fair values are virtually equal to their book values.
(3) Investment securities
The fair values of investment securities are based on their prices on the stock exchange if investment
securities are shares. Please refer to Notes on Securities for matters concerning securities by purpose of
holding.
Liabilities
(1) Notes and accounts payable–trade
The fair values of notes and accounts payable–trade are based on the relevant book values since these
liabilities are settled in a short period of time and their fair values are virtually equal to their book values.
(2) Short-term loans payable
The fair values of short-term loans payable are based on the relevant book values since these liabilities are
settled in a short period of time and their fair values are virtually equal to their book values.
(3) Long-term loans payable (including current portion of long-term loans payable)
The fair values of long-term loans payable with floating interest rates are based on the relevant book
values because interest rates reflect market interest rates in short-term intervals and the fair values are
virtually equal to the book values. The fair values of those with fixed interest rates 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.
(Change in presentation)
“Current portion of long-term loans payable” was presented as a separate account for the previous fiscal year,
but it was changed to be included in “long-term loans payable” account for the current fiscal year in order to
present the market value of loans payable more adequately. To reflect this change in presentation,
reclassification of accounts has been made for notes to consolidated financial statements for the previous
fiscal year. As a result, 6,170,937 thousand yen of “current portion of long-term loans payable” has been
reclassified into “long-term loans payable (including current portion of long-term loans payable)” for the
previous fiscal year.
- 68 -
Derivative transactions
Please refer to “Derivative transactions.”
(Note 2) Financial instruments for which it is considered extremely difficult to determine fair values
(¥ thousand)
Classification As of Nov. 30, 2011 As of Nov. 30, 2012
(1) Unlisted stocks 21,388 41,238
(2) Other (investments in silent partnership
and preferred equity securities) 351,155 351,119
(3) Lease and guarantee deposits 115,368 154,296
(4) Guarantee deposits 1,810,439 2,130,063
(1) As unlisted stocks have no market prices and it is considered to be extremely difficult to determine the fair values of
these stocks, they are not subject to the disclosure of fair value.
(2) As investments in silent partnership and preferred equity securities have no market prices and it is considered to be
extremely difficult to determine the fair values of these investments, they are not subject to the disclosure of fair value.
(3) Lease and guarantee deposits offered for leasehold properties have no market prices, and at the same time, it is difficult
to determine the virtual deposit period. Therefore, it is considered to be extremely difficult to estimate the reasonable
cash flows, and they are not subject to the disclosure of fair value.
(4) Guarantee deposits offered by tenants of leasehold properties have no market prices, and at the same time, it is difficult
to determine the virtual deposit period from move-in to leaving of tenants. Therefore, it is considered to be extremely
difficult to estimate the reasonable cash flows, and they are not subject to the disclosure of fair value.
(Note 3) Expected redemption amount of monetary receivables and securities with maturity dates reaching
after the consolidated balance sheet date
As of November 30, 2011
(¥ thousand)
Within 1 year Over 1 year
to 5 years
Over 5 years
to 10 years Over 10 years
Cash and deposits 8,326,305 – – –
Notes and accounts receivable–trade 399,856 – – –
Short-term investment securities and
investment securities
Available-for-sale securities with maturity
(1) Other 10,000 10,000 – –
Total 8,736,162 10,000 – –
As of November 30, 2012
(¥ thousand)
Within 1 year Over 1 year
to 5 years
Over 5 years
to 10 years Over 10 years
Cash and deposits 9,430,622 – – –
Notes and accounts receivable–trade 314,348 – – –
Short-term investment securities and
investment securities
Available-for-sale securities with maturity
(1) Other 10,000 10,000 – –
Total 9,754,970 10,000 – –
(Note 4) Scheduled repayment amounts for long-term loans payable after the consolidated balance sheet date
Please refer to the section of “Detailed statement of loans payable” in the “Supplementary statements–
consolidated.”
- 69 -
(Securities)
Available-for-sale securities
As of November 30, 2011
(¥ thousand)
Description
Carrying amount on the
consolidated balance
sheet
Acquisition cost Variance
Securities whose
carrying amount on the
consolidated balance
sheet exceeds their
acquisition cost
(1) Stocks – – –
(2) Bonds
1) Government and
local bonds – – –
2) Corporate bonds – – –
3) Other – – –
(3) Other 710 625 85
Subtotal 710 625 85
Securities whose
acquisition cost exceeds
their carrying amount on
the consolidated balance
sheet
(1) Stocks – – –
(2) Bonds
1) Government and
local bonds – – –
2) Corporate bonds – – –
3) Other – – –
(3) Other 17,358 21,458 (4,100)
Subtotal 17,358 21,458 (4,100)
Total 18,068 22,083 (4,015)
(Note) With regard to the Company’s shareholdings of unlisted stocks, investments in silent partnership, etc. (372,544 thousand
yen reported on the consolidated balance sheet), as they do not have market prices and it is considered extremely
difficult to determine their fair values, they are not included in “Available-for-sale securities” in the above table.
As of November 30, 2012
(¥ thousand)
Description
Carrying amount on the
consolidated balance
sheet
Acquisition cost Variance
Securities whose
carrying amount on the
consolidated balance
sheet exceeds their
acquisition cost
(1) Stocks – – –
(2) Bonds
1) Government and
local bonds – – –
2) Corporate bonds – – –
3) Other – – –
(3) Other 865 625 240
Subtotal 865 625 240
Securities whose
acquisition cost exceeds
their carrying amount on
the consolidated balance
sheet
(1) Stocks – – –
(2) Bonds
1) Government and
local bonds – – –
2) Corporate bonds – – –
3) Other – – –
(3) Other 19,778 21,458 (1,679)
Subtotal 19,778 21,458 (1,679)
Total 20,643 22,083 (1,439)
(Note) With regard to the Company’s shareholdings of unlisted stocks, investments in silent partnership, etc. (372,358 thousand
yen reported on the consolidated balance sheet), as they do not have market prices and it is considered extremely
difficult to determine their fair values, they are not included in “Available-for-sale securities” in the above table.
- 70 -
(Derivative transactions)
Derivative transactions to which the hedge accounting is adopted
Interest rate derivatives
As of November 30, 2011
None
As of November 30, 2012
(¥ thousand)
Hedge accounting
method
Derivative
transaction type
Principle
hedged item Contract amount
Contract amount due
after one year Fair value
Deferral hedge
treatment of
interest rate swaps
Interest rate swaps
Pay-fixed/
Receive-floating
Loans payable 491,760 466,800 (6,193)
(Note) Measurement of fair values
Fair values are measured using the prices offered by financial institutions with which we do business and others.
- 71 -
(Retirement benefits)
1. Summary of retirement benefit system adopted
The Company and its domestic consolidated subsidiaries have adopted the system of lump sum payment
on retirement based on the internal retirement benefit regulations. In addition, the Company and certain
domestic consolidated subsidiaries have adopted defined-contribution pension plans. Tosei Community
Co., Ltd., a consolidated subsidiary, adopted welfare pension fund plans, but it contracted out of Nihon
Jutaku Kensetsu Sangyo Welfare Pension Fund in September 2012.
2. Retirement benefit obligations
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Retirement benefit obligations (133,154) (147,211)
Provision for retirement benefits (133,154) (147,211)
The Company and its domestic consolidated subsidiaries apply a simplified method in the calculation of
their retirement benefit obligations.
3. Retirement benefit costs
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Retirement benefit costs 39,490 40,316
Premium payment for defined-contribution pension plans 5,994 7,196
Total retirement benefit costs 45,484 47,512
4. Calculation basis of retirement benefit obligations
The Company and its domestic consolidated subsidiaries apply a simplified method, in which an assumed
amount to be required for voluntary base retirement benefits at the year-end is fully deemed as retirement
benefit obligations, in the calculation of their retirement benefit obligations. Therefore, the basic rate, etc.
is omitted.
(Stock options, etc.)
None
- 72 -
(Tax effect accounting)
1. Significant components of deferred tax assets and liabilities
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Deferred tax assets
Current assets
Excess amount over limitation of taxable depreciation
expenses 202,352 216,500
Unrealized gains from payment in substitution 179,702 154,692
Deficit carried forward on tax 534,701 524,783
Other 116,072 145,325
Valuation reserves (66,284) (50,814)
Total 966,545 990,487
Noncurrent assets
Excess amount over limitation of taxable provision
for retirement benefits 54,925 53,041
Excess amount over limitation of taxable provision
for directors’ retirement benefits 125,261 117,518
Impairment loss 68,248 58,447
Loss on valuation of investment securities 12,137 10,550
Deficit carried forward on tax 1,012,408 –
Other 23,909 51,415
Valuation reserves (421,417) (202,476)
Total 875,473 88,496
Total Deferred tax assets 1,842,019 1,078,984
Deferred tax liabilities
Current liabilities
Valuation difference from valuation of subsidiaries’
assets and liabilities at market value (122,053) (29,052)
Total (122,053) (29,052)
Noncurrent liabilities
Valuation difference from valuation of subsidiaries’
assets and liabilities at market value (15,200) –
Other (5,069) (5,302)
Total (20,269) (5,302)
Total Deferred tax liabilities (142,322) (34,355)
Net deferred tax assets 1,699,696 1,044,629
(Note) Net deferred tax assets as of November 30, 2011 and 2012 are included in the following items on the consolidated
balance sheets:
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Current assets–Deferred tax assets 966,545 990,487
Noncurrent assets–Deferred tax assets 870,404 83,194
Current liabilities–Other 122,053 29,052
Noncurrent liabilities–Deferred tax liabilities 15,200 –
- 73 -
2. The reconciliation between the statutory effective tax rate and the effective tax rate after adoption of tax
effect accounting
As of Nov. 30, 2011 As of Nov. 30, 2012
Statutory effective tax rate 41.0% 41.0%
(Adjustments)
Expenses not deductible permanently such as
entertainment expenses 0.8 0.3
Valuation reserves for deferred tax assets 0.9 (10.5)
Difference due to tax-rate changes – 4.3
Consolidation adjustments 8.1 –
Other 0.3 0.2
Effective tax rates after adoption of tax-effect accounting 51.1 35.3
3. Amendments to deferred tax assets and liabilities due to changes in corporate tax rates, etc.
Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the Income Tax Act,
etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social
Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial Resources
Necessary to Implement Measures for Reconstruction Following the Great East Japan Earthquake” (Act
No. 117 of 2011), corporate tax rates was changed for the fiscal years beginning on or after April 1, 2012.
In line with this change, the statutory effective tax rate used to measure deferred tax assets and liabilities
was changed to 38.01% from the fiscal year ending November 30, 2013 to the fiscal year ending
November 30, 2015, and to 35.64% in and after the fiscal years ending November 30, 2016.
Due to this change, deferred tax assets (current assets) and deferred tax assets (non-current assets)
decreased by 82,379 thousand yen and 11,297 thousand yen, respectively, while valuation difference on
available-for-sale securities, deferred gains and losses on hedges and income taxes–deferred increased by
77 thousand yen, 159 thousand yen and 93,440 thousand, respectively.
- 74 -
(Asset retirement obligations)
Asset retirement obligations recorded in the consolidated balance sheets
(1) Summary of relevant asset retirement obligations
Some of property, plant and equipment held by the Company contain asbestos or polychlorinated biphenyl
(PCB), which must be treated in special ways specified by laws and regulations when they are dismantled
or removed. The Group recognizes the disposal costs of them as asset retirement obligations. The laws
and regulations that are grounds for them are as follows: Disposal costs for asbestos Ordinance on Prevention of Health Impairment Due to Asbestos
Disposal costs for equipment
containing PCB
Act on Special Measures Concerning Promotion of Proper Treatment of
Polychlorinated Biphenyl Waste (Act on Special Measures concerning PCB)
(2) Method for calculating the amount of relevant asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the period of use as useful life of
the property and using a discount rate of 2.26% to 2.40%.
(3) Changes in amounts of relevant asset retirement obligations
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Balance at the beginning of the fiscal year (Note) 24,581 24,710
Adjustment due to passage of time 129 131
Balance at the end of the fiscal year 24,710 24,842
(Note) For the fiscal year ended November 30, 2011, the “Accounting Standard for Asset Retirement Obligations” (ASBJ
Statement No. 18, March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations”
(ASBJ Guidance No. 21, March 31, 2008) were applied. Consequently, the beginning balance for the fiscal year ended
November 30, 2011 was calculated in accordance with the Accounting Standard and Guidance.
- 75 -
(Investment and rental properties)
The Company and certain consolidated subsidiaries own rental office and condominium buildings mainly in
Tokyo to earn rental revenue. Net rental revenue from these investment and rental properties during the fiscal
year ended November 30, 2011 amounted to 585,522 thousand yen (rental revenue and rental expense were
recorded as sales and cost of sales, respectively). Net rental revenue from these investment and rental
properties during the fiscal year ended November 30, 2012 totaled 553,332 thousand yen (rental revenue and
rental expense were recorded as sales and cost of sales, respectively).
The carrying amounts in the consolidated balance sheets, increases/decreases thereof and fair values as of
November 30, 2011 and 2012 of these investment and rental properties are as follows: (¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Carrying amount in
consolidated balance
sheet
Balance at the beginning of
the fiscal year 11,949,112 11,826,524
Increase/decrease during
the fiscal year (122,587) 299,803
Balance at the end of the
fiscal year 11,826,524 12,126,327
Fair value at the end of the fiscal year 12,582,805 14,133,184
Notes: 1. The carrying amount in consolidated balance sheet shown above is calculated by deducting the relevant accumulated
depreciation and impairment loss from the property’s acquisition cost.
2. Of increase/decrease during the fiscal year ended November 30, 2011, the increase mainly resulted from the transfer
from property for sale due to change of holding purpose (506,978 thousand yen), while the decrease mainly resulted
from the transfer to properties for sale (235,581 thousand yen) due to change of holding purpose. During the fiscal year
ended November 30, 2012, the increase mostly stemmed from the transfer from properties for sale due to change of
holding purpose (540,934 thousand yen), while the decrease stemmed from sales of properties (235,840 thousand yen).
3. The fair value as of November 30, 2012 was internally calculated in accordance with the Real Estate Appraisal
Standards.
4. With regard to Toranomon Tosei Building, which is partly used as the head office by the Company and consolidated
subsidiaries, only the portion that is not used as the head office is included in the amount shown in the above table.
- 76 -
[Segment information]
(Segment information)
1. Summary of reportable segments
The Group’s reportable segments are components of the Company for which separate financial
information is available that is evaluated regularly by the Board of Directors to determine allocation of
management resources and assess performance. The Group’s head office draws up comprehensive
domestic strategies for each business, and the Group conducts business activities accordingly.
Consequently, the Group is made up of segments based on business, as determined by the head office, and
has six reportable segments: “Revitalization Business,” “Development Business,” “Rental Business,”
“Fund Business,” “Property Management Business” and “Alternative Investment Business.” In the
“Revitalization Business,” the Group increases the value of properties whose asset value has declined and
resells them. In the “Development Business,” the Group sells condominium units and detached houses in
lots to individual customers, and rental apartments and office buildings to investors. In the “Rental
Business,” the Group rents office buildings and condominiums. The “Fund Business” mainly provides
REIT fund asset management services. The “Property Management Business” provides comprehensive
property management services. In the “Alternative Investment Business,” the Group acquires real estate
collateralized loans and sells properties acquired by collecting receivables and accepting substitute
performances.
2. Method for calculating net sales, profit or loss, assets, liabilities and other items by reportable segment
Accounting policies of reported business segments are consistent with those disclosed in “Significant
Matters Forming the Basis of Preparing Consolidated Financial Statements.”
The reported segment profit is calculated on an operating income basis. Intersegment sales or transfers
are based on actual market prices.
- 77 -
3. Information about net sales, profit or loss, assets, liabilities and other items by reportable segment
Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
(¥ thousand)
Reportable segments
Reconciliations
(Note 1)
Amount
recorded on
the consolidated
financial
statements (Note 2)
Revitalization
Business
Development
Business
Rental
Business
Fund
Business
Property
Management Business
Alternative
Investment Business
Total
Net sales
Sales from external customers
12,040,886 5,256,145 2,459,614 1,396,347 3,425,416 180,880 24,759,291 – 24,759,291
Intersegment sales or
transfers – – 48,119 18,017 485,731 – 551,869 (551,869) –
Total 12,040,886 5,256,145 2,507,733 1,414,365 3,911,147 180,880 25,311,160 (551,869) 24,759,291
Segment profit (loss) 1,891,898 (22,238) 1,182,925 652,879 104,845 (190,258) 3,620,051 (1,231,014) 2,389,037
Segment assets 19,048,273 13,562,936 13,258,186 856,286 1,669,912 2,433,173 51,098,768 8,868,835 59,967,603
Others
Depreciation – – 254,418 2,281 24,509 16,657 297,866 38,532 336,398
Increase in property,
plant and equipment
and intangible assets
– – 44,049 3,605 5,376 2,661 55,693 49,204 104,897
Notes: 1. The details of reconciliations are as follows:
(1) Reconciliations of segment profit (loss) of (1,231,014) thousand yen include eliminations of intersegment
transactions of (20,063) thousand yen and corporate expenses that are not allocated to any particular reportable
segment of ¥(1,210,951) thousand . Corporate expenses mainly consist of selling, general and administrative
expenses of the parent company that are not attributable to any particular reportable segment.
(2) Reconciliations of segment assets of 8,868,835 thousand yen include corporate assets that are not allocated to any
particular reportable segment of 9,783,874 thousand yen. Corporate assets mainly consist of surplus funds that are
not attributable to any particular reportable segment (cash and deposits and short-term investment securities) and
assets related to the administrative division of the Company.
(3) Reconciliations of depreciation of 38,532 thousand yen consist of corporate expenses that are not attributable to
any particular reportable segment.
(4) Reconciliations of increase in property, plant and equipment and intangible assets of 49,204 thousand yen consist
of increase in corporate assets that are not attributable to any particular reportable segment.
2. Segment profit (loss) is reconciled to operating income on the consolidated statements of operations.
- 78 -
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
(¥ thousand)
Reportable segments
Reconciliations
(Note 1)
Amount recorded on
the
consolidated financial
statements
(Note 2)
Revitalization
Business
Development
Business
Rental
Business
Fund
Business
Property Management
Business
Alternative Investment
Business
Total
Net sales
Sales from external
customers 5,980,183 10,985,270 2,446,682 776,723 3,512,228 838,736 24,539,823 – 24,539,823
Intersegment sales or transfers
– 274,003 55,044 23,065 343,859 2,269 698,243 (698,243) –
Total 5,980,183 11,259,274 2,501,727 799,788 3,856,087 841,006 25,238,066 (698,243) 24,539,823
Segment profit 390,895 2,318,788 1,192,557 184,135 68,442 59,189 4,214,010 (1,183,378) 3,030,631
Segment assets 23,114,013 14,643,328 13,583,668 942,624 1,349,101 1,905,916 55,538,653 9,194,311 64,732,965
Others
Depreciation – – 240,391 5,424 21,488 15,822 283,125 45,338 328,464
Increase in property, plant and equipment
and intangible assets
– – 114,531 10,079 2,412 714 127,737 17,125 144,863
Notes: 1. The details of reconciliations are as follows:
(1) Reconciliations of segment profit of (1,183,378) thousand yen include eliminations of intersegment transactions of
(12,536) thousand yen and corporate expenses that are not allocated to any particular reportable segment of
(1,170,841) thousand yen. Corporate expenses mainly consist of selling, general and administrative expenses of
the parent company that are not attributable to any particular reportable segment.
(2) Reconciliations of segment assets of 9,194,311 thousand yen include corporate assets that are not allocated to any
particular reportable segment of 10,387,815 thousand yen. Corporate assets mainly consist of surplus funds that
are not attributable to any particular reportable segment (cash and deposits and short-term investment securities)
and assets related to the administrative division of the Company.
(3) Reconciliations of depreciation of 45,338 thousand yen consist of corporate expenses that are not attributable to
any particular reportable segment.
(4) Reconciliations of increase in property, plant and equipment and intangible assets of 17,125 thousand yen consist of
increase in corporate assets that are not attributable to any particular reportable segment.
2. Segment profit is reconciled to operating income on the consolidated statements of operations.
[Related information]
I Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
1. Information by product and service
Information by product and service is omitted since similar information is disclosed in segment
information.
2. Information by geographical area
(1) Net sales
Information about net sales is omitted since sales from external customers in Japan exceeded 90% of
net sales on the consolidated statements of operations.
(2) Property, plant and equipment
Information about property, plant and equipment is omitted since the amount of property, plant and
equipment located in Japan exceeded 90% of property, plant and equipment on the consolidated
balance sheet.
3. Information by major customer
Information by major customer is omitted since there were no sales from a single external customer
accounting for 10% or more of net sales on the consolidated statements of operations.
- 79 -
II Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
1. Information by product and service
Information by product and service is omitted since similar information is disclosed in segment
information.
2. Information by geographical area
(1) Net sales
Information about net sales is omitted since sales from external customers in Japan exceeded 90% of
net sales on the consolidated statements of operations.
(2) Property, plant and equipment
Information about property, plant and equipment is omitted since the amount of property, plant and
equipment located in Japan exceeded 90% of property, plant and equipment on the consolidated
balance sheet.
3. Information by major customer
Information by major customer is omitted since there were no sales from a single external customer
accounting for 10% or more of net sales on the consolidated statements of operations.
[Information about impairment loss on noncurrent assets by reportable segment]
Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
None
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
None
[Information about amortization of goodwill and balance of unamortized goodwill by reportable
segment]
Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
Information about amortization of goodwill and balance of unamortized goodwill by reportable segment is
omitted since their amounts are immaterial.
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
None
[Information about gain on negative goodwill by reportable segment]
Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
None
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
None
- 80 -
[Information on related parties]
Transactions with related parties
Transactions between the company filing the consolidated financial statements and related parties
Officers and principal individual shareholders of the company filing the consolidated financial statements, etc.
Year ended November 30, 2011 (from December 1, 2010 to November 30, 2011)
None
Year ended November 30, 2012 (from December 1, 2011 to November 30, 2012)
Attribute Name Address
Capital or
investments
in capital
(¥ thousand)
Business or
occupation
Percentage of
voting rights
(%)
Business
relationship Transaction
Trading amount
(¥ thousand) Account title
Ending balance
(¥ thousand)
Officer Seiichiro
Yamaguchi – –
President and
Representative
Director of the
Company
30.39%
owned, directly –
Intermediary
for sale or
purchase of
real estate
15,069 Net sales –
Transaction’s term and policy
Notes: 1. All prices and other transaction terms are determined in consideration of the market prices and actual situation.
2. Trading amounts exclude consumption taxes.
- 81 -
(Per Share Information)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net assets per share ¥54,671.33 ¥57,245.65
Net income per share ¥1,646.05 ¥3,076.34
Notes: 1. Diluted net income per share is not presented since the Company has no potential shares.
2. The basis for calculation of net income per share is as follows:
Item Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net income per share
Net income (¥ thousand) 751,982 1,405,395
Amount not attributable to common shareholders
(¥ thousand) – –
Net income related to common stock (¥ thousand) 751,982 1,405,395
Average number of shares of common stock outstanding
(Shares) 456,840 456,840
3. The basis for calculation of net assets per share is as follows:
Item As of Nov. 30, 2011 As of Nov. 30, 2012
Total net assets (¥ thousand) 24,976,051 26,152,100
Deduction from total net assets (¥ thousand) – –
Net assets related to common stock at fiscal year-end
(¥ thousand) 24,976,051 26,152,100
Number of shares of common stock outstanding at fiscal
year-end used for calculation of net assets per share
(Shares)
456,840 456,840
(Important subsequent events)
(Issuance of shares)
The Company passed a resolution at a meeting of its Board of Directors held on February 22, 2013 to
issue shares as Common stock. The number of shares to be issued will be 29,000, and the method of issue
will be by general public offering in the Singapore region and the overseas market (except for the US and
Canada) with the last payment date on 18 March, 2013.
The determination of the amount to be paid in, the amount of stated capital and capital reserves to be
increased, the issue price (the offer price), and any other matters necessary for the Offering will be
delegated to the Representative Director of the Company.
The funds will be allocated for acquisition of new properties, etc. in the Revitalization Business and the
Development Business and for investments made in Fund Business.
- 82 -
e. Supplementary statements–consolidated
[Detailed statement of bonds payable]
None
[Detailed statement of loans payable]
Category
Balance as of
Dec. 1, 2011
(¥ thousand)
Balance as of
Nov. 30, 2012
(¥ thousand)
Average
interest rate
(%)
Payment due
Short-term loans payable – 384,400 2.00 –
Current portion of long-term loans
payable 6,170,937 7,356,272 2.04 –
Current portion of lease obligations 783 1,771 – –
Long-term loans payable
(excluding current portion) 23,904,245 24,654,459 2.04 2013 - 2032
Lease obligations
(excluding current portion) – 4,878 – 2013 - 2016
Other interest-bearing debts – – – –
Total 30,075,966 32,401,781 – –
Notes: 1. “Average interest rate” shows weighted average interest rate on the ending balance of loans payable.
2. Average interest rates on leasing obligations are omitted because the amount of lease obligations before deducting
interest equivalent included in the total leasing obligations is recorded in the consolidated balance sheets.
3. Repayment of long-term loans payable and lease obligations (excluding current portion) scheduled within five years
after the closing date of accounting period are as follows:
(¥ thousand)
Category Due after 1 year
through 2 years
Due after 2 years
through 3 years
Due after 3 years
through 4 years
Due after 4 years
through 5 years
Long-term loans
payable 8,471,132 3,266,292 3,153,240 3,823,201
Lease obligations 1,771 1,771 1,335 –
[Detailed statement of asset retirement obligations]
As the amount of asset retirement obligations as of December 1, 2011 and November 30, 2012 is not more
than 1% of the total amount of liabilities and net assets as of the same dates, this information is omitted
pursuant to the provisions of Article 92-2 of the Ordinance on Consolidated Financial Statements.
- 83 -
(2) Others
Quarterly data of the year ended November 30, 2012
(Cumulative period)
First quarter
(Three months ended
Feb. 29, 2012)
Second quarter
(Six months ended
May 31, 2012)
Third quarter
(Nine months ended
Aug. 31, 2012)
Year ended
Nov. 30, 2012
Net sales (¥ thousand) 5,023,693 10,151,048 14,767,812 24,539,823
Income before income taxes and
minority interests (¥ thousand) 524,159 535,416 796,801 2,172,307
Net income (¥ thousand) 233,646 286,046 444,307 1,405,395
Net income per share (¥) 511.44 626.14 972.57 3,076.34
(Each quarter)
First quarter
(Dec. 1, 2011 -
Feb. 29, 2012)
Second quarter
(Mar. 1, 2012 -
May 31, 2012)
Third quarter
(Jun. 1, 2012 -
Aug. 31, 2012)
Fourth quarter
(Sep. 1, 2012 -
Nov. 30, 2012)
Net income per share (¥) 511.44 114.70 346.43 2,103.77
- 84 -
2. Non-consolidated financial statements, etc.
(1) Non-consolidated financial statements
a. Non-consolidated balance sheets
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Assets
Current assets
Cash and deposits 7,098,060 *1 8,113,658
Accounts receivable-trade 48,000 17,700
Short-term investment securities 10,000 10,000
Real estate for sale *1 25,912,582 *1 30,333,200
Real estate for sale in process *1 6,374,364 *1 5,444,385
Supplies 1,932 1,228
Advance payments-trade 225,752 77,899
Prepaid expenses 49,260 62,805
Short-term loans receivable from subsidiaries and
affiliates – 379,000
Deferred tax assets 805,085 735,230
Accounts receivable-other 36,524 819,517
Other 48,216 104,755
Allowance for doubtful accounts (4,873) (3,528)
Total current assets 40,604,905 46,095,853
Noncurrent assets
Property, plant and equipment
Buildings *1 4,918,293 *1 4,969,139
Accumulated depreciation (903,432) (1,015,923)
Buildings, net 4,014,860 3,953,216
Structures 22,137 22,137
Accumulated depreciation (13,265) (14,350)
Structures, net 8,871 7,787
Machinery and equipment 880 880
Accumulated depreciation (624) (704)
Machinery and equipment, net 255 175
Vehicles – 12,581
Accumulated depreciation – (2,793)
Vehicles, net – 9,788
Tools, furniture and fixtures 98,146 101,426
Accumulated depreciation (73,641) (79,524)
Tools, furniture and fixtures, net 24,504 21,902
Land *1 9,401,475 *1 9,467,606
Lease assets 4,478 6,748
Accumulated depreciation (3,732) (415)
Lease assets, net 746 6,333
Total property, plant and equipment 13,450,714 13,466,809
Intangible assets
Software 52,215 36,501
Telephone subscription right 1,889 1,889
Total intangible assets 54,104 38,390
- 85 -
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Investments and other assets
Investment securities 380,612 383,001
Stocks of subsidiaries and affiliates 785,372 824,119
Investments in capital 6,000 6,000
Long-term loans receivable 10,325 3,355
Claims provable in bankruptcy, claims
provable in rehabilitation and other 9,497 6,997
Lease and guarantee deposits 110,193 148,995
Deferred tax assets 903,269 44,628
Other 8,380 4,014
Allowance for doubtful accounts (9,412) (5,545)
Total investments and other assets 2,204,240 1,415,567
Total noncurrent assets 15,709,058 14,920,767
Total assets 56,313,964 61,016,621
Liabilities
Current liabilities
Notes payable-trade 325,850 1,119,380
Accounts payable-trade 200,611 387,572
Short-term loans payable – *1 384,400
Current portion of long-term loans payable *1, 3 4,815,837 *1, 3 7,103,187
Lease obligations 783 1,771
Accounts payable-other 226,114 211,599
Accrued expenses 46,680 28,953
Income taxes payable 26,653 25,021
Accrued consumption taxes 188,800 –
Advances received 510,249 965,969
Deposits received 79,210 31,446
Provision for bonuses 96,789 89,826
Total current liabilities 6,517,581 10,349,128
Noncurrent liabilities
Long-term loans payable *1, 3 23,123,045 *1, 3 22,856,149
Guarantee deposits 1,755,235 2,045,612
Lease obligations – 4,878
Provision for retirement benefits 96,726 108,045
Provision for directors' retirement benefits 282,981 302,747
Allowance for Investment loss 131,248 28,596
Asset retirement obligations 24,710 24,842
Total noncurrent liabilities 25,413,947 25,370,872
Total liabilities 31,931,529 35,720,000
- 86 -
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Net assets
Shareholders' equity
Capital stock 5,454,673 5,454,673
Capital surplus
Legal capital surplus 5,538,149 5,538,149
Total capital surpluses 5,538,149 5,538,149
Retained earnings
Legal retained earnings 7,250 7,250
Other retained earnings
General reserve 15,000 15,000
Retained earnings brought forward 13,369,731 14,282,474
Total retained earnings 13,391,981 14,304,724
Total shareholders' equity 24,384,803 25,297,547
Valuation and translation adjustments
Valuation difference on available-for-sale
securities (2,369) (926)
Total valuation and translation adjustments (2,369) (926)
Total net assets 24,382,434 25,296,620
Total liabilities and net assets 56,313,964 61,016,621
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b. Non-consolidated statements of operations
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net sales
Sales on Revitalization business 12,040,886 5,531,217
Sales on development business 5,256,145 11,242,479
Sales on lease business 2,507,733 2,463,150
sales on Fund business 914,679 186,240
Total net sales 20,719,445 19,423,088
Cost of sales
Revitalization business cost 9,905,759 4,909,990
Development business cost 5,123,016 8,712,000
Lease business cost 1,187,719 1,154,349
Fund business cost 78,958 42,968
Total cost of sales 16,295,454 14,819,308
Gross profit 4,423,991 4,603,780
Selling, general and administrative expenses *2 2,078,829 *2 1,937,138
Operating income 2,345,162 2,666,642
Non-operating income
Interest income 2,574 *1 7,847
Dividends income 2,821 2,821
Penalty income 34,035 –
Reversal of allowance for doubtful accounts – 457
Miscellaneous income 24,922 18,959
Total non-operating income 64,353 30,086
Non-operating expenses
Interest expenses 806,769 717,431
Foreign exchange losses – 1,448
Miscellaneous loss 798 2,222
Total non-operating expenses 807,567 721,101
Ordinary income 1,601,947 1,975,626
Extraordinary income
Reversal of allowance for doubtful accounts 1,726 –
Reversal of allowance for investment loss 172,969 102,652
Total extraordinary income 174,695 102,652
Extraordinary loss
Loss on retirement of noncurrent assets – *3 1,585
Loss on valuation of membership 16,976 4,366
Loss on adjustment for changes of accounting
standard for asset retirement obligations 19,932 –
Total extraordinary losses 36,909 5,951
Income before income taxes 1,739,733 2,072,326
Income taxes-current 3,800 3,800
Income taxes-deferred 742,416 927,362
Total income taxes 746,216 931,162
Net income 993,517 1,141,163
- 88 -
Detailed schedule of cost of sales
Schedule of the cost in the Revitalization Business
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Accounts Notes Amounts
(¥ thousand)
Ratio
(%)
Amounts
(¥ thousand)
Ratio
(%)
I. Land 5,511,630 55.6 2,520,736 51.3
II. Acquisition and improvement cost of buildings
3,786,421 38.2 1,828,190 37.2
III. Overhead costs 563,758 5.7 295,928 6.0
IV. Book values written down following a decline in the revenue in the revenue expected to be generated from the inventories
43,948 0.5 265,135 5.5
Total 9,905,759 100.0 4,909,990 100.0
(Note) The cost is calculated based on specific-order cost system.
Schedule of the cost in the Development Business
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Accounts Notes Amounts
(¥ thousand)
Ratio
(%)
Amounts
(¥ thousand)
Ratio
(%)
I. Land costs 2,403,615 46.9 4,535,175 52.1
II. Construction costs 1,776,420 34.7 3,173,143 36.4
III. Overhead costs 342,845 6.7 1,003,680 11.5
IV. Book values written down following a decline in the revenue in the revenue expected to be generated from the inventories
600,135 11.7 – –
Total 5,123,016 100.0 8,712,000 100.0
(Note) The cost is calculated based on specific-order cost system.
Schedule of the cost in the Rental Business
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Accounts Notes Amounts
(¥ thousand)
Ratio
(%)
Amounts
(¥ thousand)
Ratio
(%)
I. Outsourcing costs 228,096 19.2 218,544 18.9
II. Miscellaneous expenses 959,623 80.8 935,805 81.1
[Of which taxes and dues] [259,811] [228,473]
[Of which depreciation and amortization]
[254,418] [238,214]
[Of which water and power] [180,963] [207,684]
Total 1,187,719 100.0 1,154,349 100.0
Schedule of the cost in the Fund Business
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Accounts Notes Amounts
(¥ thousand)
Ratio
(%)
Amounts
(¥ thousand)
Ratio
(%)
Miscellaneous expenses 78,958 100.0 42,968 100.0
Total 78,958 100.0 42,968 100.0
- 89 -
c. Non-consolidated statements of changes in net assets
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Shareholders' equity
Capital stock
Balance at the beginning of current period 5,454,673 5,454,673
Balance at the end of current period 5,454,673 5,454,673
Capital surplus
Legal capital surplus
Balance at the beginning of current period 5,538,149 5,538,149
Balance at the end of current period 5,538,149 5,538,149
Total capital surplus
Balance at the beginning of current period 5,538,149 5,538,149
Balance at the end of current period 5,538,149 5,538,149
Retained earnings
Legal retained earnings
Balance at the beginning of current period 7,250 7,250
Balance at the end of current period 7,250 7,250
Other retained earnings
General reserve
Balance at the beginning of current period 15,000 15,000
Balance at the end of current period 15,000 15,000
Retained earnings brought forward
Balance at the beginning of current period 12,604,633 13,369,731
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 993,517 1,141,163
Total changes of items during the period 765,097 912,743
Balance at the end of current period 13,369,731 14,282,474
Total retained earnings
Balance at the beginning of current period 12,626,883 13,391,981
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 993,517 1,141,163
Total changes of items during the period 765,097 912,743
Balance at the end of current period 13,391,981 14,304,724
Total shareholders' equity
Balance at the beginning of current period 23,619,706 24,384,803
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 993,517 1,141,163
Total changes of items during the period 765,097 912,743
Balance at the end of current period 24,384,803 25,297,547
- 90 -
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the beginning of current period 774 (2,369)
Changes of items during the period
Net changes of items other than shareholders'
equity (3,143) 1,442
Total changes of items during the period (3,143) 1,442
Balance at the end of current period (2,369) (926)
Total valuation and translation adjustments
Balance at the beginning of current period 774 (2,369)
Changes of items during the period
Net changes of items other than shareholders'
equity (3,143) 1,442
Total changes of items during the period (3,143) 1,442
Balance at the end of current period (2,369) (926)
Total net assets
Balance at the beginning of current period 23,620,480 24,382,434
Changes of items during the period
Dividends from surplus (228,420) (228,420)
Net income 993,517 1,141,163
Net changes of items other than shareholders'
equity (3,143) 1,442
Total changes of items during the period 761,954 914,185
Balance at the end of current period 24,382,434 25,296,620
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[Significant accounting policies]
1. Valuation basis and method for securities
(1) Stocks of subsidiaries
Stated at cost determined by the moving-average method
(2) Available-for-sale securities
1) With market value
Stated at fair value based on market value and others as of the balance sheet date (unrealized gains
and losses, net of applicable taxes, are reported in a separate component of net assets, and costs of
securities sold are determined by the moving-average method).
2) Without market value
Stated at cost determined by the moving-average method.
2. Valuation basis and method for inventories
The cost method (the carrying amounts in the consolidated balance sheets are written down due to a
decline in profitability of assets) is used as the valuation basis.
(1) Real estate for sale and real estate for sale in process
Specific identification method
(2) Supplies
Last purchase price method
3. Depreciation methods for noncurrent assets
(1) Property, plant and equipment (excluding lease assets)
Declining-balance method
However, buildings acquired on or after April 1, 1998 (excluding facilities attached to buildings) are
depreciated by the straight-line method.
Useful lives of major items:
Buildings 3 to 50 years
Structures 10 to 30 years
Machinery and equipment 8 years
Tools, furniture and fixtures 3 to 20 years
(2) Intangible assets (excluding lease assets)
Straight-line method
Internal use software is amortized by the straight-line method over the estimated useful life (5 years).
(3) Lease assets
Lease assets are depreciated by the straight-line method over the lease term with no residual value.
Finance leases that do not transfer ownership and commenced on or before March 31, 2008 are
accounted for in a similar manner with ordinary rental transactions.
4. Translation of assets and liabilities denominated in foreign currencies into Japanese currency
Monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at
the spot exchange rate prevailing at the balance sheet date, and differences arising from such translation
are recognized in the non-consolidated statements of operations.
5. Allowances
(1) Allowance for doubtful accounts
To cover losses from bad debts, allowance for doubtful accounts is provided in the amount expected to
be uncollectible based on historical experience of bad debts for general receivables and individual
collectability for specific receivables such as doubtful receivables.
(2) Provision for bonuses
To cover bonus payments to employees, provision for bonuses is provided in the amount for the fiscal
year based on the estimated amount of payment.
- 92 -
(3) Provision for retirement benefits
To cover retirement benefits to employees, the amount that would be required to pay if all eligible
employees retired at the fiscal year-end is provided based on the estimated amount of retirement benefit
obligations as of the fiscal year-end.
(4) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided in the amount required as of the fiscal year-end
to cover retirement benefit payments to directors and corporate auditors according to the rule for
retirement benefits to directors and corporate auditors as of the fiscal year-end.
(5) Allowance for investment loss
To provide for losses on investments in subsidiaries, necessary funds, which are determined by
individually reviewing the investment, are recorded with actual financial conditions taken into account.
6. Other significant matters for preparing financial statements
(1) Accounting for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
However, non-deductible consumption taxes related to noncurrent assets and others are recorded as
long-term prepaid expenses (amortized over five years), and other non-deductible consumption taxes are
recorded as expenses for the term in which they arise.
(2) Accounting for investments in silent partnership
For investments in an investment limited partnership and other similar partnerships (considered
securities according to Article 2-2 of Financial Instruments and Exchange Act), an amount equivalent to
the equity interest in the property of the silent partnership is recorded as “Investment securities.”
“Investment securities” is recorded at the time of contribution to a silent partnership. An amount
equivalent to the equity interest in profit and loss earned from operating activities by the silent
partnership is recorded as “Operating income or loss,” and the same amount is added to or deducted
from “Investment securities.” For the repayment of the contribution (including the amount equivalent to
the equity interest in profit and loss earned from operating activities) from a business operator,
“Investment securities” is reduced.
[Change in Accounting Policy]
(Change in Depreciation Method)
From the year under review, following the revision of the Corporation Tax Act, the Company adopted the
depreciation method in accordance with the revised Corporation Tax Act for property, plant and equipment
acquired on or after April 1, 2012.
The impact of this change on profit and loss for the year under review was immaterial.
[Change in Presentation]
(Non-consolidated Statements of Cash Flows)
Accounts receivable-other, which were included in “Other” of current assets in the fiscal year ended
November 30, 2011, exceeded one hundredth (1%) of assets, and therefore are separately shown from the
fiscal year ended November 30, 2012. To reflect this change in presentation, items were reclassified for the
fiscal year ended November 30, 2011.
As a result, 84,740 thousand yen included in “Other” of current assets in the balance sheets as of
November 30, 2011 was reclassified to “Accounts receivable-other” (36,524 thousand yen) and “Other”
(48,216 thousand yen).
[Additional Information]
(Application of Accounting Standard for Accounting Changes and Error Corrections)
The Company adopted the “Accounting Standard for Accounting Changes and Error Corrections”
(Accounting Standards Board of Japan Statement No. 24, issued on December 4, 2009) and the “Guidance on
Accounting Standard for Accounting Changes and Error Corrections” (Accounting Standards Board of Japan
Guidance No. 24, issued on December 4, 2009) for the accounting changes and corrections of prior period
errors made after the beginning of the year ended November 30, 2012.
Based on the Practical Guidelines on Accounting Standards for Financial Instruments (JICPA Accounting
- 93 -
System Committee Report No. 14), reversal of allowances for doubtful accounts for the year ended November
30, 2012 is recorded in non-operating income. However, retrospective adjustment was not made for the year
ended November 30, 2011.
[Notes to non-consolidated financial statements]
(Notes to non-consolidated balance sheets)
*1. Pledged assets and secured debts are as follows:
Pledged assets
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Cash and deposits – 485,750
Real estate for sale 25,797,311 30,092,608
Real estate for sale in process 6,285,738 5,354,088
Buildings 3,831,494 3,741,423
Land 9,209,524 9,128,584
Total 45,124,068 48,802,455
Debts secured by security interests
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Short-term loans payable – 384,400
Current portion of long-term loans payable 4,712,277 7,033,227
Long-term loans payable 22,976,645 22,815,309
Total 27,688,922 30,232,936
2. Contingent liabilities
The Company guarantees debts of the following individuals who purchased properties sold by the
Company from Kabushiki Kaisha Aruka. (¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
3 individuals 4,375 4,071
The Company guarantees the borrowings of the following company from financial institutions as follows: (¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Tosei Revival Investment Co., Ltd. 1,838,300 1,863,895
*3. Financial covenants
Year ended November 30, 2011 (as of November 30, 2011)
(1) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 1,039,375 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization)
- 94 -
* However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(2) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 375,000 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(3) Of the Company’s loans payable, the syndicated loan contract with The Bank of Tokyo-Mitsubishi UFJ,
Ltd. as the agent (total balance: 1,906,400 thousand yen) includes financial covenants. If the Company
violates either of the following covenants, the Company may repay the amount of the relevant loans to
the lender in a lump sum.
Covenants
• The amount of net assets in the consolidated and non-consolidated balance sheets as of the end of the
year ended November 30, 2011 shall be kept at 75% or more of the higher of net assets in the
consolidated and non-consolidated balance sheets for the immediately preceding financial year, or net
assets in the consolidated and non-consolidated balance sheets for the year ended November 30, 2009.
• In the consolidated and non-consolidated balance sheets for any financial year, loss shall not be
posted on the ordinary level.
(4) Of the Company’s loans payable, the individual contract of cash loan for consumption with Japan
Finance Corporation (total balance: 525,680 thousand yen) includes financial covenants. If the
Company violates either of the following covenants, the Company may repay the amount of the relevant
loans to the lender in a lump sum.
Covenants
• The amount of net assets of Tosei Community Co., Ltd. shall be higher than 21,014,900 thousand yen.
• Without prior written approval from Japan Finance Corporation, Tosei Community Co., Ltd. shall not
provide loans, investments or guarantees of more than 6,104,300 thousand yen to any third party.
Year ended November 30, 2012(as of November 30, 2012)
(1) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 656,875 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
- 95 -
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(2) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 120,000 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• In the consolidated balance sheets and interim consolidated balance sheets, the amount calculated by
dividing total net assets by total assets shall be not less than 0.15.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(3) Of the Company’s loans payable, the individual contract of cash loan for consumption with The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (total balance: 685,850 thousand yen) includes financial covenants. If the
Company violates any two items of the following covenants, the Company may repay the amount of the
relevant loans to the lender in a lump sum.
Covenants
• In the consolidated statements of operations and interim consolidated statements of operations, loss
shall not be posted on the operating level and on the ordinary level.
• The total amount of net assets in the consolidated and non-consolidated balance sheets shall be kept at
75% or more of the higher of total net assets in the consolidated and non-consolidated balance sheets
as of the end of the year ended November 30, 2011, or total net assets in the consolidated and non-
consolidated balance sheets as of the end of the immediately preceding financial year.
• In the consolidated balance sheets, consolidated statements of operations and consolidated statements
of cash flows as well as the interim consolidated balance sheets, interim consolidated statements of
operations and interim consolidated statements of cash flows, the criterion value, which is calculated
by the formula below, shall be less than 15.
Criterion value = interest-bearing debt ÷ (operating income + depreciation and amortization) * However, for operating income, the above formula uses the amount calculated by adding loss on valuation of
inventories that are included in cost of sales, which are described in notes to the consolidated statements of
operations, to operating income in the consolidated statements of operations.
(4) Of the Company’s loans payable, the individual contract of cash loan for consumption with Japan
Finance Corporation (total balance: 322,400 thousand yen) includes financial covenants. If the
Company violates either of the following covenants, the Company may repay the amount of the relevant
loans to the lender in a lump sum.
Covenants
• The amount of net assets in the non-consolidated balance sheets shall be higher than 21,014,900
thousand yen.
• Without prior written approval from Japan Finance Corporation, the Company shall not provide loans,
investments or guarantees of more than 6,104,300 thousand yen to any third party.
(5) Of the Company’s loans payable, the individual contract of cash loan for consumption with Japan
Finance Corporation (total balance: 646,800 thousand yen) includes financial covenants. If the
Company violates either of the following covenants, the Company may repay the amount of the relevant
loans to the lender in a lump sum.
Covenants
• The amount of net assets in the non-consolidated balance sheets shall be higher than 24,382,400
thousand yen.
- 96 -
• Without prior written approval from Japan Finance Corporation, the Company shall not provide loans,
investments or guarantees of more than 2,057,900 thousand yen to any third party.
(Notes to non-consolidated statements of operations)
*1. The following shows the item that includes transactions with associated companies.
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Interest income – 6,397
Miscellaneous income – 7,120
*2. The approximate ratio to selling expenses is 4.3% in the year ended November 30, 2011 and 2.6% in the
year ended November 30, 2012, while the approximate ratio to general and administrative expenses is
95.7% in the year ended November 30, 2011 and 97.4% in the year ended November 30, 2012.Main
components of selling, general and administrative expenses are as follows:
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Advertising expenses 47,705 26,201
Directors’ compensations 123,995 128,400
Salaries and allowances 764,725 703,096
Provision for bonuses 96,789 89,826
Retirement benefit expenses 27,197 31,872
Provision for directors’ retirement benefits 20,063 20,445
Legal welfare expenses 123,028 113,234
Commission fee 126,114 119,548
Compensations 88,822 180,316
Taxes and dues 223,329 248,085
Provision of allowance for doubtful accounts 168,051 0
Depreciation 40,971 45,453
(Change in presentation)
“Compensations” has been noted for the current fiscal year due to its increased financial materiality. To
reflect this change in presentation, this item and the amount have been presented for the previous fiscal
year.
*3. Losses on disposal of noncurrent assets are as follows:
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Buildings – 1,585
(Notes to non-consolidated statements of changes in net assets)
None
- 97 -
(Lease transactions)
1. Finance lease transactions (Lessee)
Finance lease transactions that do not transfer ownership
1) Details of lease assets
Property, plant and equipment
Multi-purpose machines at the head office (“Tools, furniture and fixtures”)
2) Depreciation method for lease assets
Depreciation method for lease assets was stated in “3. Depreciation methods for noncurrent assets under
Significant accounting policies.
Finance lease transactions that do not transfer ownership whose start date falls on or before March
31, 2008 are accounted for by the same method as that applied to operating leases. The details of these
lease assets are as follows.
(1) Acquisition cost equivalent, accumulated depreciation and ending balance equivalent of lease
properties
(¥ thousand)
As of Nov. 30, 2011
Acquisition cost equivalent Accumulated depreciation Ending balance
equivalent
Tools, furniture and fixtures 16,462 13,719 2,743
Total 16,462 13,719 2,743
(¥ thousand)
As of Nov. 30, 2012
Acquisition cost equivalent Accumulated depreciation Ending balance
equivalent
Tools, furniture and fixtures 16,462 16,462 –
Total 16,462 16,462 –
(Note) Acquisition cost equivalent is calculated using the inclusive-of-interest method, as the ending balance of future lease
payments constitutes a small portion of the ending balance of property, plant and equipment, etc.
(2) Future lease payments, etc.
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Future lease payments
Due within one year 2,743 –
Total 2,743 –
(Note) The ending balance of future lease payments equivalent is calculated using the inclusive-of-interest method, as the
ending balance of future lease payments constitutes a small portion of the ending balance of property, plant and
equipment, etc.
(3) Lease payments and depreciation equivalent
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2012)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Lease payments 2,743 2,743
Depreciation expenses equivalent 2,743 2,743
(4) Calculation method of depreciation expenses equivalent
Depreciation expense is calculated by the straight-line method by considering lease period to be
useful life and residual value to be zero.
- 98 -
2. Operating lease transactions (Lessee)
Future lease payments related to irrevocable operating lease transactions
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Due within one year 1,974 –
Total 1,974 –
3. Operating lease transactions (Lessor)
Future lease payments related to irrevocable operating lease transactions
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Due within one year 478,815 625,984
Due over one year 1,606,164 1,559,992
Total 2,084,980 2,185,977
(Securities)
As of November 30, 2011
As shares in subsidiaries (book value in the balance sheets: 785,372 thousand yen) have no market values
and, at the same time, it is considered extremely difficult to determine the fair values, they are omitted.
As of November 30, 2012
As shares in subsidiaries (book value in the balance sheets: 824,119 thousand yen) have no market
values and, at the same time, it is considered extremely difficult to determine the fair values, they are
omitted.
- 99 -
(Tax effect accounting)
1. Significant components of deferred tax assets and liabilities
(¥ thousand)
As of Nov. 30, 2011 As of Nov. 30, 2012
Deferred tax assets
Current assets
Excess amount over limitation of taxable depreciation
expenses 188,420 213,137
Loss carried forward 534,701 470,659
Other 81,962 61,683
Subtotal 805,085 745,480
Noncurrent assets
Excess amount over limitation of taxable provision
for retirement benefits 39,625 38,507
Excess amount over limitation of taxable provision
for directors’ retirement benefits 116,022 107,899
Loss on valuation of subsidiaries’ stocks 53,811 10,869
Impairment loss 68,248 58,447
Loss on valuation of investment securities 12,137 10,550
Deficit carried forward on tax 813,094 –
Other 18,101 16,370
Subtotal 1,121,040 242,644
Valuation reserves (212,701) (192,714)
Total deferred tax assets 1,713,423 795,411
Deferred tax liabilities
Current liabilities
Other – (10,249)
Subtotal – (10,249)
Noncurrent liabilities
Other (5,069) (5,302)
Subtotal (5,069) (5,302)
Total deferred tax liabilities (5,069) (15,552)
Net deferred tax assets 1,708,354 779,858
2. The reconciliation between the statutory effective tax rate and the effective tax rate after adoption of tax-
effect accounting
As of Nov. 30, 2011 As of Nov. 30, 2012
Statutory effective tax rate 41.0% 41.0%
(Adjustments)
Expenses not deductible permanently such as
entertainment expenses 0.7 0.2
Valuation reserves for deferred tax assets 0.9 0.4
Difference due to tax-rate changes – 3.1
Other 0.3 0.2
Effective tax rates after adoption of tax-effect accounting 42.9 44.9
3. Amendments to deferred tax assets and deferred tax liabilities due to changes in income tax rates, etc.
Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the Income Tax Act,
etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social
Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial Resources
Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act
No. 117 of 2011), corporate tax rates will be changed for the fiscal years beginning on or after April 1,
2012. In line with this change, the statutory effective tax rate used to measure deferred tax assets and
liabilities will be changed to 38.01% for calculating deferred tax assets and deferred tax liabilities from
- 100 -
the fiscal year ending November 30, 2013 to the fiscal year ending November 30, 2015, and to 35.64% in
and after the fiscal years ending November 30, 2016.
Due to this change, deferred tax assets (current assets) and deferred tax assets (non-current assets)
decreased by 57,835 thousand yen and 5,929 thousand yen, respectively, while unrealized holding gains
and losses on securities and income taxes-deferred increased by 77 thousand yen and 63,687thousand yen,
respectively.
(Asset retirement obligations)
Asset retirement obligations recorded in the non-consolidated balance sheets
(1) Summary of relevant asset retirement obligations
Some of property, plant and equipment held by the Company contain asbestos or polychlorinated biphenyl
(PCB), which must be treated in special ways specified by laws when they are dismantled or removed.
The Company recognizes the disposal costs of them as asset retirement obligations. The laws that are
grounds for them are as follows: Disposal costs for asbestos Ordinance on Prevention of Health Impairment due to Asbestos
Disposal costs for equipment
containing PCB
Act on Special Measures Concerning Promotion of Proper Treatment of
Polychlorinated Biphenyl Waste (Act on Special Measures concerning PCB)
(2) Method for calculating the amount of relevant asset retirement obligations
The amount of asset retirement obligations is calculated by estimating the period of use as useful life of
the property and using a discount rate of 2.26% to 2.40%.
(3) Changes in amounts of relevant asset retirement obligations
(¥ thousand)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2012)
Year ended Nov. 30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Balance at the beginning of the fiscal year (Note) 24,581 24,710
Adjustment due to passage of time 129 131
Balance at the end of the fiscal year 24,710 24,842
Note: For the fiscal year ended November 30, 2011, the “Accounting Standard for Asset Retirement Obligations” (ASBJ
Statement No. 18 of March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations”
(ASBJ Guidance No. 21 of March 31, 2008) were applied. Consequently, the balance is that of the beginning of the
fiscal year.
- 101 -
(Per Share Information)
Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov.30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net assets per share ¥53,371.94 ¥55,373.04
Net income per share ¥2,174.76 ¥2,497.95
Notes: 1. Diluted net income per share is not presented since the Company has no potential shares.
2. The basis for calculation of net income per share is as follows:
Item Year ended Nov. 30, 2011
(Dec. 1, 2010 - Nov. 30, 2011)
Year ended Nov.30, 2012
(Dec. 1, 2011 - Nov. 30, 2012)
Net income per share
Net income (¥ thousand) 993,517 1,141,163
Amount not attributable to common shareholders
(¥ thousand) – –
Net income related to common stock (¥ thousand) 993,517 1,141,163
Average number of shares of common stock outstanding
(Shares) 456,840 456,840
3. The basis for calculation of net assets per share is as follows:
Item As of Nov. 30, 2011 As of Nov. 30, 2012
Total net assets (¥ thousand) 24,382,434 25,296,620
Deduction from total net assets (¥ thousand) – –
Net assets related to common stock at fiscal year-end
(¥ thousand) 24,382,434 25,296,620
Number of shares of common stock outstanding at fiscal
year-end used for calculation of net assets per share
(Shares)
456,840 456,840
(Important subsequent events)
(Issuance of shares)
The Company passed a resolution at a meeting of its Board of Directors held on February 22, 2013 to
issue shares as Common stock. The number of shares to be issued will be 29,000, and the method of issue
will be by general public offering in the Singapore region and the overseas market (except for the US and
Canada) with the last payment date on 18 March, 2013.
The determination of the amount to be paid in, the amount of stated capital and capital reserves to be
increased, the issue price (the offer price), and any other matters necessary for the Offering will be
delegated to the Representative Director of the Company.
The funds will be allocated for acquisition of new properties, etc. in the Revitalization Business and the
Development Business and for investments made in Fund Business.
- 102 -
d. Supplementary statements
[Detailed schedule of securities]
[Shares]
Issue Number of shares
(Shares)
Book value on the non-
consolidated balance
sheet
(¥ thousand)
Investment securities Available-for-sale
securities
Jyutaku Sangyo Shinyou
Hoshou Kabushiki
Kaisha
120 1,200
Total 120 1,200
[Bonds]
Issue
Aggregate nominal
amount
(¥ thousand)
Book value on the non-
consolidated balance
sheet
(¥ thousand)
Short-term investment
securities
Available-for-sale
securities
Shoko Chukin Bank
Warisho 10,000 10,000
Investment securities Available-for-sale
securities
Shoko Chukin Bank
Rissho 10,000 10,000
Total 20,000 20,000
[Other]
Type and issue
Number of
investment units
(Units)
Book value on the non-
consolidated balance
sheet
(¥ thousand)
Investment
securities
Available-for-sale
securities
(Investment trust beneficiary
certificate)
Nippon Building Fund Inc. 1 865
Daiwa J-REIT Open 34,925,957 19,778
Jei Hudosan Shoken Toshi Houjin 1 38
(Preferred securities etc.)
Godo Kaisha Mariken Park – 200,000
Godo Kaisha Himawari – 17,769
Japan Opportunity 1 Tokutei
Mokuteki Kaisha 2,667 133,350
Clover Shiba Koen Tokutei Mokuteki
Kaisha 23,000 0
Gin Roku Tokutei Mokuteki Kaisha 35,615 0
Total 34,987,241 371,801
- 103 -
[Detailed schedule of property, plant and equipment and others]
(¥ thousand)
Type of assets Balance as of Dec. 1, 2011
Increase in the
year ended
Nov. 30, 2012
Decrease in the
year ended
Nov. 30, 2012
Balance as of Nov. 30, 2012
Accumulated depreciation or
amortization
as of Nov. 30, 2012
Depreciation
during the year ended
Nov. 30, 2012
Carrying value
as of
Nov. 30, 2012
Property, plant and equipment
Buildings 4,918,293 54,776 3,929 4,969,139 1,015,923 114,834 3,953,216
Structures 22,137 – – 22,137 14,350 1,084 7,787
Machinery and equipment 880 – – 880 704 79 175
Vehicles – 12,581 – 12,581 2,793 2,793 9,788
Tools, furniture and fixtures 98,146 4,753 1,473 101,426 79,524 7,355 21,902
Land 9,401,475 66,130 – 9,467,606 – – 9,467,606
Lease assets 4,478 6,748 4,478 6,748 415 1,161 6,333
Total property, plant and equipment
14,445,411 144,990 9,881 14,580,520 1,113,710 127,309 13,466,809
Intangible assets
Software 98,551 4,150 3,014 99,686 63,185 19,864 36,501
Telephone subscription right 1,889 – – 1,889 – – 1,889
Total intangible assets 100,440 4,150 3,014 101,575 63,185 19,864 38,390
[Detailed schedule of allowances]
(¥ thousand)
Category Balance as of
Dec. 1, 2011
Increase in the year ended
Nov. 30, 2012
Decrease in
the year ended
Nov. 30, 2012 (specific purposes)
Decrease in the year ended
Nov. 30, 2012 (other)
Balance as of
Nov. 30, 2012
Allowance for doubtful
accounts 14,286 9,074 4,753 9,532 9,074
Provision for bonuses 96,789 89,826 96,789 – 89,826
Provision for directors’ retirement benefits
282,981 20,445 679 – 302,747
Allowance for investment loss 131,248 – – 102,652 28,596
Notes: 1. The amount shown in the decrease (other) in allowance for doubtful accounts in the year ended November 30, 2012
represents the reversal of the allowance after revaluation.
2. The amount shown in the decrease (other) in allowance for investment loss in the year ended November 30, 2012
represents the reversal of the allowance due to recovery of the financial status of subsidiaries.
- 104 -
(2) Principal assets and liabilities
1) Current assets
i. Cash and deposits
(¥ thousand)
Category Amount
Cash 548
Deposits
Current deposits 1,123,102
Ordinary deposits 6,354,257
Time deposits 635,750
Subtotal 8,113,109
Total 8,113,658
ii. Accounts receivable-trade
Breakdown by customer
(¥ thousand)
Customers Amount
ORIX Corporation 5,157
Helios Capital Yugen Kaisha 3,838
Tosei Asset Advisors, Inc. 2,100
MEAL SYSTEM CO.,LTD. 1,314
Other 5,290
Total 17,700
Accrual, collection and retention of accounts receivable-trade
Balance as of
Dec. 1, 2011 (¥ thousand)
Accrual in the year
ended Nov. 30, 2012 (¥ thousand)
Collection in the year
ended Nov. 30, 2012 (¥ thousand)
Balance as of
Nov. 30, 2012 (¥ thousand)
Collection rate
(%)
Retention period
(Day)
(A) (B) (C) (D)
(C) ———————
(A) + (B)
× 100
(A) + (D) ———————
2 ———————————
(B) ———————
366
48,000 579,240 609,540 17,700 97.2 20.8
- 105 -
iii. Real estate for sale
(¥ thousand)
Regions Land area (m2) Amount
Yokohama-shi, Kanagawa 26,169.32 5,740,969
Ota-ku, Tokyo 1,617.13 5,240,289
Shinjuku-ku, Tokyo 7,817.63 2,792,296
Chiyoda-ku, Tokyo 873.38 2,730,447
Other 27,240.18 13,829,197
Total 63,717.64 30,333,200
iv. Real estate for sale in process
(¥ thousand)
Regions Land area (m2) Amount
Shibuya-ku, Tokyo 1,024.34 1,230,925
Kita-ku, Tokyo 1,193.24 858,794
Chuo-ku, Tokyo 300.11 588,829
Bunkyo-ku, Tokyo 1,254.00 531,155
Other 273,041.82 2,234,679
Total 276,813.51 5,444,385
v. Supplies
(¥ thousand)
Item Amount
Postage stamps 102
Revenue stamps 138
Envelopes 106
Other 882
Total 1,228
2) Current liabilities
i. Notes payable-trade
Breakdown by customer
(¥ thousand)
Customers Amount
Tokyu Construction Co., Ltd. 738,650
Dai Nippon Construction 380,730
Total 1,119,380
Breakdown by maturity date
(¥ thousand)
Maturity date Amount
December 2012 380,730
January 2013 738,650
Total 1,119,380
ii. Accounts payable-trade
(¥ thousand)
Customers Amount
NIHON KEIZAI ADVERTISING CO.,LTD. 145,214
Kabushiki Kaisha Kouwa 34,215
TAKIGUCHI KOUGYOU 33,250
COSMOS MORE CO., LTD. 23,100
Other 151,792
Total 387,572
- 106 -
iii. Current portion of long-term loans payable
(¥ thousand)
Customers Amount
The Bank of Yokohama, Ltd. 1,128,300
Sumitomo Mitsui Trust Bank, Limited 986,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd . 810,835
Aozora Bank, Ltd. 751,000
Other 3,427,052
Total 7,103,187
iv. Long-term loans payable
(¥ thousand)
Customers Amount
The Shoko Chukin Bank, Ltd. 4,074,108
Kansai Urban Banking Corporation 2,850,200
The Tokyo Star Bank, Limited 1,903,000
Mizuho Bank, Ltd. 1,843,408
Other 12,185,433
Total 22,856,149
(3) Others
None
- 107 -
VI. Outline of filing company’s business concerning shares
Business year From December 1 to November 30
Ordinary General Meeting of
Shareholders February
Record date November 30
Record dates for dividends
from surplus
May 31
November 30
Share trade unit –
Purchase of shares less than
one unit:
Office for handling business None
Shareholder registry
administrator None
Forwarding office None
Handling charge for
purchase None
Method of public notice
Electronic public notice will be made.
URL for public notice:
http://www.toseicorp.co.jp/ir/publicly/index.html
However, if it is impossible to publish public notices electronically
because of an accident or other unavoidable circumstances, the public
notices shall be made by publication in the Nihon Keizai Shimbun.
Special benefits for
shareholders None
- 108 -
VII. Reference information on filing company
1. Information on filing company’s parent company
Tosei does not have a parent company as described by the provisions of Article 24-7, Paragraph 1 of the
Financial Instruments and Exchange Act.
2. Other reference information
From the beginning of this fiscal year until the filing date of this Annual Securities Report, Tosei has filed
the following documents.
(1) Annual Securities Report and Appendices, and Written Confirmation
62nd term; from December 1, 2010 to November 30, 2011, filed to Director-General of Kanto Local
Finance Bureau on February 28, 2012.
(2) Internal Control Report and Appendices
Filed to Director-General of Kanto Local Finance Bureau on February 28, 2012.
(3) Quarterly Securities Reports and Written Confirmations
First quarter of the 63rd term; from December 1, 2011 to February 29, 2012, filed to Director-General
of Kanto Local Finance Bureau on April 9, 2012.
Second quarter of the 63rd term; from March 1, 2012 to May 31, 2012, filed to Director-General of
Kanto Local Finance Bureau on July 10, 2012.
Third quarter of the 63rd term; from June 1, 2012 to August 31, 2012, filed to Director-General of
Kanto Local Finance Bureau on October 10, 2012.
(4) Extraordinary Reports
Filed to Director-General of Kanto Local Finance Bureau on February 22, 2013.
Extraordinary Report based on Article 24-5, Paragraph 4 of the Financial Instruments and Exchange
Act, Article 19, Paragraph 1 of the Cabinet Office Ordinance on Disclosure of Corporate Information,
etc. and Article 19, Paragraph 2, Item 1 of the same Ordinance.
Filed to Director-General of Kanto Local Finance Bureau on February 27, 2013.
Extraordinary Report based on Article 19, Paragraph 2, Item 9-2 (Results of Exercise of Voting
Rights) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.
- 109 -
B. Information on Guarantee Companies, etc. of Filing Company No items to report
- 110 -
Independent Auditors’ Audit Report and Internal Control Audit Report
February 25, 2013
To the Board of Directors of
Tosei Corporation
Shinsoh Audit Corporation
Designated and Engagement Partner,
Certified Public Accountant:
Giichi Yanagisawa (Seal)
Designated and Engagement Partner,
Certified Public Accountant:
Takashi Aikawa (Seal)
[Audit of Financial Statements]
Pursuant to the first paragraph of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act,
we have audited the consolidated financial statements included in the Accounting Section, namely, the
consolidated balance sheets, and the related consolidated statements of operations, comprehensive income,
changes in net assets and cash flows, the significant accounting policies, the other related notes and
consolidated supplementary schedules of Tosei Corporation and consolidated subsidiaries for the fiscal year
from December 1, 2011 to November 30, 2012.
Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for designing and
operating such internal control as management determines is necessary to enable the preparation and fair
presentation of the consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. The purpose of an audit of the consolidated financial statements is not to express an opinion on the
effectiveness of the entity’s internal control, but in making these risk assessments the auditor considers
internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Tosei Corporation and consolidated subsidiaries as of November 30, 2012, and the
consolidated results of their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in Japan.
Matter for Emphasis As stated in “important subsequent events,” Tosei Corporation passed a resolution at a meeting of its Board of
Directors held on February 22, 2013 to issue shares as Common stock.
This matter did not have a material effect on our opinion.
[Audit of Internal Control over Financial Reporting]
Pursuant to the second paragraph of Article 193-2, Paragraph 2of the Financial Instruments and Exchange Act,
we have audited management’s report on internal control over financial reporting of Tosei Corporation as of
November 30, 2012.
Management’s Responsibility for the Management’s Report Management is responsible for designing and operating internal control over financial reporting, and for the
preparation and fair presentation of the Management’s Report in accordance with standards for assessment of
internal control over financial reporting generally accepted in Japan.
Internal control over financial reporting may not prevent or detect misstatements.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Management’s Report based on our internal control audit.
We conducted our internal control audit in accordance with auditing standards for internal control over
financial reporting generally accepted in Japan. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Management’s Report is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the result of
management’s assessment on internal control over financial reporting in the Management’s Report. The
procedures selected depend on the auditor’s judgment, including the materiality of effect on the reliability of
financial reporting. An internal control audit also includes evaluating the overall presentation of the
Management’s Report, including disclosures on scope, procedures and conclusions of management’s
assessment of internal control over financial reporting.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion In our opinion, the Management’s Report referred to above, which represents that the internal control over
financial reporting as at November 30, 2012 of Tosei Corporation is effective, present fairly, in all material
respects, the result of management’s assessment on internal control over financial reporting in conformity
with standards for assessment of internal control over financial reporting generally accepted in Japan.
Conflicts of Interest We have no interest in the Company which should be disclosed in compliance with the Certified Public
Accountants Act.
*1. The above is a digitization of the text contained in the original copy of the Audit Report, which is in the custody of the
Company as attachments to the financial statements.
2. The section of financial statements of this report does not contain their XBRL data.
※The English version of the financial statements consists of an English translation of the audited Japanese
financial statements. The actual text of the English translation of the financial statements was not covered by
our audit. Consequently, for the auditor’s report of the English financial statements, the Japanese original is
the official text, and the English version is a translation of that text.
Independent Auditors’ Audit Report
February 25, 2013
To the Board of Directors of
Tosei Corporation
Shinsoh Audit Corporation
Designated and Engagement Partner,
Certified Public Accountant:
Giichi Yanagisawa (Seal)
Designated and Engagement Partner,
Certified Public Accountant:
Takashi Aikawa (Seal)
Pursuant to the first paragraph of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act,
we have audited the financial statements included in the Accounting Section, namely, the balance sheets and
the related statements of operations and changes in net assets, the significant accounting policies, the other
related notes and supplementary schedules of Tosei Corporation for the 63rd fiscal year from December 1,
2011 to November 30, 2012.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in Japan, and for designing and operating such
internal control as management determines is necessary to enable the preparation and fair presentation of
the non-consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. The purpose of an
audit of the financial statements is not to express an opinion on the effectiveness of the entity’s internal
control, but in making these risk assessments, the auditor considers internal controls relevant to the entity’s
preparation and fair presentation of the non-consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Tosei Corporation as of November 30, 2012, and its financial performance for the year then ended
in conformity with accounting principles generally accepted in Japan.
Matter for Emphasis
As stated in “important subsequent events,” Tosei Corporation passed a resolution at a meeting of its Board of
Directors held on February 22, 2013 to issue shares as Common stock.
This matter did not have a material effect on our opinion.
Conflicts of Interest We have no interest in the Company which should be disclosed in compliance with the Certified Public
Accountants Act.
*1. The above is a digitization of the text contained in the original copy of the Audit Report, which is in the custody of the
Company as attachments to the financial statements.
2. The section of financial statements of this report does not contain their XBRL data.
※The English version of the financial statements consists of an English translation of the audited Japanese
financial statements. The actual text of the English translation of the financial statements was not covered by
our audit. Consequently, for the auditor’s report of the English financial statements, the Japanese original is
the official text, and the English version is a translation of that text.
[Cover]
Document to be filed: Management’s Report on Internal Control
Provisions to base upon: Article 24-4-4, paragraph (1) of the Financial Instruments and
Exchange Act
Filing to: Director-General of the Kanto Local Finance Bureau
Date of filing: February 28, 2013
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
Title and name of Chief Financial
Officer
Noboru Hirano, Director and CFO
Location of head office: 4-2-3, Toranomon, Minato-ku, Tokyo, Japan
Places where the document to be filed is
available for public inspection:
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi-kabutocho, Chuo-ku, Tokyo)
1. Basic Framework of Internal Control Over Financial Reporting
Seiichiro Yamaguchi, President and CEO of TOSEI CORPORATION (the “Company”) and Noboru Hirano,
CFO Senior Executive Officer of the Company, having the responsibility to design and operate internal
control over financial reporting of the Company, designs and operates such internal control of the Company in
accordance with the basic framework set forth in “On the Setting of the Standards and Practice Standards for
Management Assessment and Audit concerning Internal Control Over Financial Reporting (Council
Opinions)” published by the Business Accounting Council.
Note that internal control aims at achieving its objectives to a reasonable extent given that all individual
components of internal control are integrated, and function as a whole. Thus, internal control over financial
reporting may not be able to completely prevent or detect misstatement in financial reporting.
2. Scope of Assessment, Assessment Date and Assessment Procedure
Assessment of internal control over financial reporting was performed as of November 30, 2012 (i.e., the last
day of this fiscal year) in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.
In this assessment, the management first assessed company-level control which would have a material
impact on the reliability of overall financial reporting on a consolidated basis, and based on such result, the
management then selected the business processes to be assessed. In the process-level control assessment, the
management assessed the effectiveness of internal control by analyzing the business processes in scope,
identifying key controls that would have a material impact on the reliability of the financial reporting, and
assessing the design and operation of such key controls.
Management determined the scope of assessment of internal control over financial reporting, by selecting
the Company, consolidated subsidiaries and companies accounted for by the equity method based on their
materiality of impacts on the reliability of financial reporting. The materiality of the impacts on the reliability
of financial reporting was determined in consideration of both quantitative and qualitative aspects, and the
management reasonably determined the scope of assessment of process-level control based on the result of the
company-level control assessment, which included the Company and its 3 significant consolidated
subsidiaries.
For the purpose of determining the scope of process-level control assessment, 1 business location was
selected as “Significant Business Locations”, which comprises the Company and its consolidated subsidiaries
selected in descending order based on their fiscal year’s consolidated net sales (after elimination) and
contributed approximately two-thirds of the Company’s consolidated net sales in the aggregate. Note that the
management confirmed that the scope of internal control assessment was sufficient based on this fiscal year’s
consolidated net sales. In such Significant Business Locations, all business processes related to the accounts
that are closely associated with the Company’s business objectives, such as sales, accounts receivable, and
inventory were included in the scope of assessment. Furthermore, regardless of the Significant Business
Locations, certain business processes related to significant accounts involving estimates and management’s
judgment were added to the scope of assessment as “business processes with material impacts on financial
reporting.”
3. Assessment Result
Based on the above mentioned assessment results, the management concluded that the internal control over
financial reporting at the end of this fiscal year was effective.
4. Supplementary Information
None
5. Special Affairs
None