Tosei : Consolidated Financial Results for the First Nine Months of the Fiscal Year Ending November 30, 2021

This English document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translation and the Japanese original, the Japanese original shall prevail. Tosei Corporation assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Consolidated Financial Results

for the First Nine Months of the Fiscal Year Ending November 30, 2021

					October 5, 2021
Company name: TOSEI CORPORATION		Stock listing:	TSE / SGX
Securities code number: 8923 / S2D
Representative: Seiichiro Yamaguchi, President and CEO	URL:	https://www.toseicorp.co.jp/english/
Contact:	Noboru Hirano, Director and CFO		Phone:	[phone]
Submission of Quarterly Securities Report (Shihanki-Houkokusho):	October 8, 2021 (scheduled)
Commencement of dividend payments:				―
Preparation of supplementary materials for quarterly financial results:	Yes
Holding of quarterly financial results meeting:	No

Note: All amounts are rounded down to the nearest million yen.

1. Consolidated Financial Results for the Nine Months Ended August 31, 2021 (December 1, 2020 - August 31, 2021)

(1) Consolidated Operating Results (cumulative)		(Percentages indicate year-on-year changes)
	Revenue		Operating profit	Profit before tax	Profit for the period
	(¥ million)	(%)	(¥ million)	(%)	(¥ million)	(%)	(¥ million)	(%)
Nine months ended	52,311	(7.1)	10,965	136.1	10,489	152.3	7,079	186.8
August 31, 2021
Nine months ended	56,309	23.1	4,644	(60.0)	4,157	(62.8)	2,468	(67.7)
August 31, 2020
	Profit attributable to	Total comprehensive	Basic earnings	Diluted earnings
	owners of the parent	income for the period	per share	per share
	(¥ million)	(%)	(¥ million)	(%)		(¥)		(¥)
Nine months ended	7,076	186.7	7,795	313.4		150.71	150.50
August 31, 2021
Nine months ended	2,468	(67.7)	1,885	(75.9)		52.05		51.93
August 31, 2020
(2) Consolidated Financial Position
					Equity attributable to	Ratio of equity
	Total assets	Total equity	attributable to owners of
	owners of the parent
					the parent to total assets
	(¥ million)	(¥ million)	(¥ million)		(%)
As of	174,984	65,391	65,391		37.4
August 31, 2021
As of	161,684	58,969	58,969		36.5
November 30, 2020

2.	Dividends
				Annual dividends per share
			1Q-end	2Q-end	3Q-end	Year-end	Total
			(¥)	(¥)	(¥)	(¥)	(¥)
Fiscal year ended November 30, 2020	-	0.00	-	19.00	19.00
Fiscal year ending November 30, 2021	-	0.00	-
Fiscal year ending November 30, 2021			-	38.00	38.00
(Forecast)
Note:	Revision to the most recently released dividend forecasts: No

3. Consolidated Earnings Forecasts for the Fiscal Year Ending November 30, 2021 (December 1, 2020 - November 30, 2021)

(Percentages indicate year-on-year changes)

								Profit attributable to	Basic earnings
	Revenue		Operating profit		Profit before tax	owners of the
			per share
								parent
	(¥ million)	(%)	(¥ million)	(%)		(¥ million)	(%)	(¥ million)	(%)	(¥)
Fiscal year ending	61,657	(3.6)	11,036	71.7		10,376	75.8	6,846	90.1	146.21
November 30, 2021
Note: Revision to the most recently released earnings forecasts: No

• Notes
• 1. Changes in significant subsidiaries during the period
     (changes in specified subsidiaries resulting in changes in the scope of consolidation): No

Newly added: -Excluded: -

(2) Changes in accounting policies and changes in accounting estimates

(a) Changes in accounting policies required by IFRS:

No

1. Changes in accounting policies due to other reasons: No

(c) Changes in accounting estimates:

No

(3) Number of issued shares (ordinary shares)

(a) Number of issued shares at the end of the period (including treasury shares)

As of August 31, 2021	48,683,800 shares
As of November 30, 2020	48,683,800 shares

(b) Number of treasury shares at the end of the period

As of August 31, 2021	1,956,422 shares
As of November 30, 2020	1,508,353 shares

(c) Average number of outstanding shares during the period (cumulative)

Nine months ended August 31, 2021	46,958,245 shares
Nine months ended August 31, 2020	47,432,445 shares

• These consolidated Financial Results are not subject to quarterly review procedures by a certified public accountant or an audit corporation.
• Proper use of earnings forecasts and other notes

The forward-looking statements, including outlook of future performance, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable by the Company. Actual performance and other results may differ substantially from these statements due to various factors. For the assumptions on which the earnings forecasts are based and cautions concerning the use thereof, please refer to "1. Qualitative Information on Quarterly Consolidated Financial Performance (3) Qualitative Information Regarding Consolidated Earnings Forecasts" on page 5 of the attached materials.

Contents of Attached Materials
1. Qualitative Information on Quarterly Consolidated Financial Performance.........................................	2
(1)	Qualitative Information Regarding Consolidated Operating Results........................................................	2
(2)	Qualitative Information Regarding Consolidated Financial Positions ......................................................	5
(3)	Qualitative Information Regarding Consolidated Earnings Forecasts ......................................................	5
2. Matters Related to Summary Information (Notes) ...................................................................................	5
(1)	Changes in Significant Subsidiaries during the Period .............................................................................	5
(2)	Changes in Accounting Policies and Changes in Accounting Estimates ..................................................	5
(3)	Additional information..............................................................................................................................	5
3. Condensed Quarterly Consolidated Financial Statements and notes......................................................	7
(1)	Condensed Quarterly Consolidated Statement of Financial Position........................................................	7
(2)	Condensed Quarterly Consolidated Statement of Comprehensive Income ..............................................	8
(3)	Condensed Quarterly Consolidated Statement of Changes in Equity .......................................................	9
(4)	Condensed Quarterly Consolidated Statement of Cash Flows................................................................	10
(5)	Notes on Going Concern Assumption.....................................................................................................	11
(6)	Notes on Condensed Quarterly Consolidated Financial Statements .......................................................	11
(7)	Notes on Significant Subsequent Events.................................................................................................	13

1

1. Qualitative Information on Quarterly Consolidated Financial Performance

1. Qualitative Information Regarding Consolidated Operating Results

1. Recognition, analysis and contents for discussion of business environment and business performance

During the nine months ended August 31, 2021, the Japanese economy continued to face a harsh environment due to the impact of COVID-19. While there are indications of an upturn in the domestic economy, as evidenced by a 1.3% year-on-year increase in the real gross domestic product (GDP) in the period from April to June 2021 on an annualized basis, it remains necessary to monitor factors such as economic downside risks due to the renewed spread of the virus in Japan since July 2021, as well as movements in global financial markets.

In the real estate industry where Tosei Group operates, domestic real estate investments for the six months from January to June 2021 amounted to ¥1.8 trillion, decreasing by 29% year on year. Although demand for investment in real estate by domestic and overseas investors continues to be strong, the decrease in investment opportunities, particularly the lack of large-scale transactions due to the shortage of properties for sale in the market, is regarded as the reason for the slump. Tokyo fell to fourth place in the world ranking by city for the six months from January to June 2021 (ranked first in the same period of the previous fiscal year); however, transactions are expected to recover in the second half of the year, and real estate investments for 2021 are estimated to remain largely unchanged from the previous fiscal year at approximately ¥4.3 trillion (according to a survey by a private research institute).

In the Tokyo metropolitan area condominium market, the number of newly built units from January to July 2021 increased 59.1% year on year to 15,229 units as the result of a rebound after a substantial decline under the state of emergency introduced last year. As a result, the number of supplied units has increased to the level seen in 2019 (15,368 units supplied in the same period in 2019). The average contract rate for the first month has also remained at around the 70% threshold from which market conditions are viewed as favorable, thereby indicating a robust market. In addition, in the Tokyo metropolitan area pre-owned condominium market, the number of units contracted from January to July 2021 increased 23.6% year on year to 24,284 units. However, in the build-for-sale detached house market, housing starts for the seven months from January to July 2021 numbered 32,000 units (down 1.6% year on year), remaining largely unchanged from the same period of the previous fiscal year (according to a survey by a private research institute).

Regarding construction costs for the seven months from January to July 2021, average costs per tsubo for reinforced concrete structure were ¥955 thousand per tsubo (1 tsubo = 3.30 square meters) (an increase of 5.0% year on year), and average costs per tsubo for wooden structure were ¥567 thousand (a decrease of 0.1% year on year). The current increase in the price of steel materials due to the global economic recovery following widespread COVID-19 vaccinations, and the upsurge in timber prices caused by the sharp increase in global demand for timber known as "wood shock" have raised fears of a future hike in construction costs (according to a survey by the Ministry of Land, Infrastructure, Transportation and Tourism).

In the office leasing market of Tokyo's five business wards, the average vacancy rate as of July 2021 was 6.28% (an increase of 3.51 percentage points year on year), against the backdrop of tenants cutting back on office space as a result of a slowdown in expansion of office space and the spread of teleworking lifestyle in certain areas. The average asking rent was ¥21,045 per tsubo (a decrease of ¥1,969 year on year), demonstrating a downturn in the office leasing market in the Tokyo metropolitan area, and it remains necessary to monitor future trends in supply and demand (according to a survey by a private research institute).

In the Tokyo metropolitan area's logistics facility leasing market, leasable stock in July 2021 amounted to 6.86 million tsubo (an increase of 11.7% year on year). The vacancy rate was 1.3%. Although this was an increase from the level of 0.5% observed in April 2021, rising to the 1% level, supply and demand remain tight. Leasing demand is expected to remain firm for the time being, despite an easing in the extraordinary demand stemming from COVID-19 pandemic (according to a survey by a private research institute).

In the real estate fund market, the market scale continues to expand. J-REIT assets under management in July 2021 totaled ¥20.9 trillion (an increase of ¥1.1 trillion year on year) and assets under management in private placement funds totaled ¥22.5 trillion (as of December 2020, an increase of ¥2.3 trillion year on year). Combining the two, the real estate securitization market scale grew to ¥43.4 trillion (according to a survey by a private research institute).

In the Tokyo business hotel market, the average guest room occupancy rate in the five months from

2

January to May 2021 was 34.5% (84.2% in the same period of the fiscal year ended November 30, 2019), due to the continuing impact of COVID-19. The total number of hotel guests in Tokyo encompassing all types of accommodation in the five months from January to May 2021 amounted to 12.05 million overnight stays (31.74 million overnight stays in the same period of the fiscal year ended November 30, 2019). The environment is forecasted to remain harsh for the hotel market, despite the daily progress of vaccinations in Japan (according to a survey by the Japan Tourism Agency).

Amid this operating environment, in the Revitalization Business, the Group made steady progress in selling assets such as income-generating office buildings and apartments, while in the Development Business, the Group pushed ahead with sales of detached houses and logistics facilities. In addition, the Group also proceeded with the acquisition of income-generating properties and various types of land for development as future sources of income.

As a result, consolidated revenue for the nine months ended August 31, 2021 totaled ¥52,311 million (down 7.1% year on year), operating profit was ¥10,965 million (up 136.1%), profit before tax was ¥10,489 million (up 152.3%), and profit attributable to owners of the parent was ¥7,076 million (up 186.7%).

Performance by business segment is shown below.

Revitalization Business

During the nine months ended August 31, 2021, the segment sold 41 properties which had been renovated, including Kannai Tosei Building Ⅲ (Yokohama-shi, Kanagawa), T's garden Kiyose (Kiyose- shi, Tokyo), Ichikawashimamura Building (Ichikawa-shi, Chiba). In addition, the segment sold three unit in the Restyling Business from Isarakoplace Residence (Minato-ku, Tokyo), Rune Kamakura Ueki Residence (Kamakura-shi, Kanagawa).

It also acquired a total of 25 properties including, income-generating office buildings, apartments and a logistic facility for renovation and sales purposes and two land lots.

In addition, the Group reviewed the valuation of its income-generating properties, recording a reversal of inventories valuation loss of ¥563 million.

As a result, revenue in this segment was ¥30,060 million (down 0.9% year on year) and the segment profit was ¥7,239 million (up 25.4%).

Development Business

During the nine months ended August 31, 2021, the segment sold a new logistic facility, T's Logi Hasuda (Hasuda-shi, Saitama) and a new commercial facility, THE Palms Sagamihara Park Brighter (Store section) (Sagamihara-shi, Kanagawa). In addition, the segment focused on the sale of detached houses, for which there was firm demand. The segment sold 66 detached houses at such properties as THE Palms Court Kamakura Shiromeguri (Kamakura-shi, Kanagawa) and THE Palms Court Hibarigaoka (Nishitokyo- shi, Tokyo).

During the nine months ended August 31, 2021, it also acquired two land lots for logistic facility projects, one land lot for apartment project, one land lot for commercial facility project, three land lots for income- generating office buildings and land lots for 58 detached houses.

In addition, the Group reviewed the valuation of its income-generating properties, recording a reversal of inventories valuation loss of ¥268 million.

As a result, revenue in this segment was ¥10,487 million (down 26.6% year on year) and the segment profit was ¥1,280 million (in comparison with segment loss of ¥3,855 million in the same period of the previous fiscal year).

Rental Business

During the nine months ended August 31, 2021, while the segment sold 22 buildings of its inventory assets held for leasing purposes, it newly acquired 17 properties including income-generating office buildings and apartments. In addition, the segment made efforts to lease vacancies out following acquisitions and also focused on leasing activities for its holding non-current assets and inventory assets.

As a result, revenue in this segment was ¥3,992 million (down 6.0% year on year) and the segment profit was ¥2,016 million (up 20.2%).

3