Japanese

Top message Minoru Souda President and Chairman Token Corporation

Looking back on the 40th fiscal term:We recorded our highest-ever net sales and income as a result of major management reforms aimed at a leaner management structure, and also increased efficiency.

The 40th fiscal term (the fiscal year ended April 30, 2016)revealed the results of our major management reformsto construct a leaner management structure, begun after the Lehman Brothers collapse of 2008. Our construction business yielded increased revenues and profits through means including strengthened order management, increased productivity, and centralized purchasing. In the real estate leasing business, too, we achieved increased revenues and profits from the promotion of tenant brokerage, by increasing our managed properties and expanding the functions of our Facilities Search Home Mate Research. Moreover, our occupancy rate as of the end of April 2016 recorded a new high of 98.4%.

In consolidated business performance for the 40th fiscal term, net sales were ¥283,731 million (a 6.9% increase from the previous term), for the third consecutive term of record highs. Operating income was ¥13,181 million (a 39.5% increase from the previous term), ordinary income was ¥13,607 million (a 32.5% increase from the previous term), and profit attributable to owners of parent was ¥8,634 million (a 38.9% increase from the previous term), all setting a new record high for the first time in 9 fiscal terms. In addition, the fact that the growth rate of income greatly exceeded that of net sales reveals an increase in efficiency.

Drastically restructuring our internal organization to become a fighting group and raise the speed of growth in the 41st fiscalterm,

However, we are not satisfied with our current status. Our major reforms following the Lehman Brothers collapse have steadily yielded increased revenues and profits over the past few years, but the pace of this growth is modest compared to the outstanding pace that we experienced between our listing on the market in 2002 and the Lehman Brothers collapse.

Although we have pursued offensive management since our founding, we took the Lehman Brothers collapse as an opportunity to rebuild our earnings structure with a focus on defensive management. While it is natural that this has resulted in our current growth, if we maintain this speed of growth then 10 years from now we will have become a company with little presence and no growth. Embracing this sense of urgency, we will increase our speed of growth in the 41st fiscal term.

The centerpiece of this speed boost is the major restructuring of our internal organizations. Over these past two or three years, we have worked to transition to offensive management. However, to engage allout in offensive management, we must reform the awareness and actions of employees. Accordingly, from the start of the term we have been executing a major restructuring of organizations, through means such as drastic reassignment of personnel. While this constitutes fairly radical surgery, through it we will create a fighting group.

Growing our market share by improving the precision of branch opening strategies and developing new forms of branches

Along with major restructuring of our organizations,Token Corporation will execute offensive strategies. The foundation for this is our branch opening strategies,which are of two types. The first is the improvement of precision in branch opening planning. When opening a new branch, we envision future population movement based on detailed data, then assess demand, and consider whether to open the branch, along with relocation, integration, and closure of branches.
We will also develop new forms of branches. In the past, we mainly opened branches equipped with three functions: sales functions and construction functions for our construction business, and brokerage functions for our real estate leasing business.
However, what we will introduce now are forms of branches separated by location, specialized in either the construction

Promoting tenant brokerage by strengthening IT strategy, and establishing an advertising and information business

Equaling branch opening strategies in importance are IT strategies, especially web strategies. In particular, the tenant brokerage-only Home Mate and Facilities Search Home Mate Research, which allows searching for information on community facilities used in daily life and for rental properties around such facilities, bear important roles in promoting tenant brokerage. Home Mate Research contains 125 kinds of diverse information on facilities. We will strengthen the profitability of the website itself by growing advertising revenue, and to establish our advertising and information businesses.

Facilities Search Home Mate Research
▲Facilities Search Home Mate Research

Aiming to improve our position in urban areas by developing distinctive new businesses

Achieving further growth for our company requires the establishment of a firm position in urban areas. While we have had a degree of success in suburbs, we recognize that competing in metropolises, including the 23 wards of Tokyo and ordinance-designated major cities, calls for distinctive products and a dedicated organization.

In response, we have begun new businesses, primarily rental condominiums with attached owner's residences for the commercial districts of urban areas where high floor-area ratios are set, and also upscale rental condominiums, and women-only condominiums.

One business that is already showing results is rental condominiums with attached owner's residences, for which we have gradually begun to compile a track record of orders. In our upscale rental condominium business, we have Chikusa Tower Hills (Chikusa Ward, Nagoya; completed in 2007) as a property directly managed by our company, and plan to start construction soon on the 28-floor Sakae Tower Hills property (Naka Ward, Nagoya).

We want to place particular focus on our condominium sales business. However, we hope to develop this to a degree that does not create a great risk as a business peripheral to our core business of renting. We will stably operate new businesses aimed at urban areas with dedicated organization, leading to improvement of our position in urban areas.

Aiming for consolidated net sales of ¥300 billion in the 41st fiscal term

Sakae Tower Hills

Through major organizational restructuring and the above-mentioned offensive strategies, we aim to achieve consolidated net sales of ¥300 billion in the 41st fiscal term. Having set this as a medium- to long-term goal for several years already, we will finally realize it during the term.

Sakae Tower Hills
You can see the construction progress status of "Sakae Tower Hills" from the above official page.

Organizational restructuring, with an eye to future overseas expansion as well, is the key to sustainable growth

Looking ahead, we are also placing overseas expansion in our sights. In particular, the high birth rates in Southeast Asia offer potential, the reverse of Japan with its increasingly aging society and low birth rate. At present, we are surveying destinations where we can leverage the know-how we have gained in Japan.

If we are able to achieve consolidated net sales of ¥300 billion in the 41st fiscal term, we will then aim for ¥400 billion and even ¥500 billion as subsequent medium- to long-term targets. The various new businesses we have mentioned will be continued even after we achieve net sales of ¥300 billion.

What holds the key to sustainable growth is the major organizational restructuring that we are carrying out now. Our company has strength in highly earthquake-resistant technologies; even during the Great Hanshin Awaji Earthquake of 1995 and the Great East Japan Earthquake of 2011, our buildings did not topple. This contributes to the building of relationships of trust with facility owners and with tenants. However, we cannot grow further if we become satisfied with the status quo. Under the major organizational restructuring that we are carrying out in the construction division, sales division, and across the company, we are strengthening our technological and sales capabilities to achieve sustainable growth.
Through a variety of strategies, we expect to pay an annual dividend of ¥130 per share in the 41st fiscal term (¥35 more than in the 40th fiscal term). We ask all of our shareholders for their continued understanding.and support for these management policies.

June,2016