A N N U A L

R E V I E W

2 0 1 1

Fiscal Year Ended December 31, 2011

Tokyo Tatemono Co., Ltd.

MANAGEMENT REVIEW

Operating Environment
In the fiscal 2011, the Japanese economy was seriously affected by falls in production and exports attributable to the disruption to supply chains associated with the Great East Japan Earthquake. The economy was recovering from the disaster more quickly than anticipated from the middle of the fiscal year, but stalled at the end of the year mainly due to slower growth in overseas economies and the continued appreciation of the yen. In the real estate industry, the operating environment in the rental office market remained challenging. Stronger demand for offices with strong seismic capacity and effective disaster prevention systems due to the effects of the earthquake were tempered by continued downward pressure on rent levels, failing to improve occupancy rates. The residential housing market remained generally firm. Despite temporary falls in the number of houses supplied and the buying motivation of consumers after the earthquake, sales of condominiums with effective disaster prevention systems remained strong, reflecting higher demand and the boosting of low interest rates and policy support. In the real estate investment market, the trading volume was generally weak, influenced by declining investor sentiment due to the earthquake and decelerating growth in overseas economies, although the acquisition of properties by J-REITs increased.

current business environment and the future outlook. A decline in income as a result of the postponement of the expected sale of assets was also attributable to the results as described above. The net loss for the year totaled 71,774 million (US$925,280 thousand), given the recording of extraordinary losses of approximately 65,000 million, mainly reflecting the reviewed assessment of investments in SPCs related to large-scale redevelopment projects in the same manner as described above. Considering this business environment, the Company regrets to report that it has decided to pay no dividends for the fiscal year under review. We offer sincere apologies to our shareholders.

Outlook
The Japanese economy is expected to gradually recover in the future on the strength of demand for reconstruction efforts in the wake of the earthquake. However, the situation is likely to remain uncertain, with little scope for optimism, given risks such as the debt crisis in Europe, a downturn in overseas economies, and the appreciation of the yen, among other factors that could slow economic growth. In the real estate industry, both occupancy rates and rent levels are expected to remain weak, given a deterioration in the supply-demand balance due to an increase in the supply of new buildings. In the residential housing market, demand is likely to remain steady, primarily reflecting the effects of continued low interest rates and policy support. In the real estate investment market, any recovery is likely to be slow, mainly due to a slowdown in overseas economies.

Results
In this business environment, Tokyo Tatemono Co., Ltd. (the Company) and consolidated subsidiaries (collectively the Group) promoted businesses in areas such as office building leasing and condominium sales. As a result, total revenue from operations for the term amounted to 166,943 million (US$2,152,170 thousand), falling 15.8% from the preceding fiscal year. However, the operating loss stood at 678 million (US$8,748 thousand). The recurring loss amounted to 10,875 million (US$140,196 thousand). These results were attributable to the recording of losses in cost of revenue of approximately 14,000 million, mainly reflecting the revaluation of investment in silent partnerships, etc. in special purpose companies (SPCs) related to development sites for condominiums and hotels, the real estate value of which, the Company judged, would fall significantly in light of the

Foundations
Responding to this severe business environment, the Group has developed a new Group medium-term business plan called Restart-Challenging Innovation- for fiscal 2012 to fiscal 2014. Under this plan, the Group will strive to improve its business foundations to achieve further growth in the future by comprehensively bolstering its earnings capabilities and financial strength, recording steady income, establishing earnings foundations, and achieving sound financial conditions. The Group is united in its commitment to achieving a recovery and resuming dividend payments in the 195th term (FY2012).

FINANCIAL REVIEW

Revenue and Income Commercial properties business

In the commercial properties business, the Company focused on tenant services, with the aim of providing a safe and comfortable space in offices, thereby improving occupancy rates and profitability. In the fiscal year under review, both revenue and income declined, largely due to the effects of selling rental buildings, such as Tokyo Tatemono Shinmuromachi Building (Chuo Ward, Tokyo) and Tokyo Tatemono Yokohama Building (Nishi Ward, Yokohama), in the previous fiscal year, and recording a loss on investment in silent partnerships and others from investment in silent partnerships in SPCs, which outweighed the new operation of Tokyo Tatemono Yaesu Building (Chuo Ward, Tokyo). As a result, revenue from operations fell from 79,123 million for the same period of the preceding fiscal year to 43,570 million (US$561,695 thousand), a fall of 44.9%, and operating income declined from 22,480 million to 7,303 million (US$94,148 thousand), down 67.5%.

previous fiscal year, mainly for development sites for condominiums and condominiums for sale. Consequently, revenue from operations decreased from 85,613 million, to 83,904 million (US$1,081,658 thousand), a fall of 2.0%, and operating income dropped from 5,868 million to an operating loss of 1,317 million (US$16,982 thousand).

Brokerage business
In brokerage services for corporate customers, the Company bolstered proposal sales (CRE sales) for the effective use of real estate owned and operated by companies, among others. In brokerage services for individual customers, the Company focused on measures to expand its information and customer bases, for instance by improving its response to the relocation needs of tenants in condominiums managed by the Group. For the fiscal year under review, both revenue and income decreased year on year, affected by a decline in largescale projects in brokerage, appraisal, and consulting services, and also by a fall in real estate sales and a loss on investment in silent partnerships and others for investment in silent partnerships in SPCs. As a result, revenue from operations fell from 13,500 million for the preceding fiscal year to 10,336 million (US$133,248 thousand), down 23.4%, and an operating loss stood at 1,538 million (US$19,837 thousand), compared with an operating income of 2,320 million for the previous fiscal year.

Residential business
In the residential business, to practice the concepts represented by the slogans refined housing and comfortable and peaceful housing after residence, which express the brand identity of Brillia, the Companys condominium brand, the Company sought to acquire carefully selected sites and to plan customer-oriented products. The Company also placed emphasis on quality control, after-sales services, and maintenance. During the fiscal year under review, the Company recorded sales for condominiums including Brillia Ariake Sky Tower (Koto Ward, Tokyo), Brillia WELLITH Bunkyo Sendagi (Bunkyo Ward, Tokyo), Brillia Hamadayama (Suginami Ward, Tokyo), Brillia Musashi Kosugi (Nakahara Ward, Kawasaki), and Brillia Ibaraki Shimochujo (Ibaraki City, Osaka). In the housing leasing business, the Company commenced operations at Apartments Tower Kachidoki (Chuo Ward, Tokyo). In the fiscal year under review, the Company recorded a loss on revaluation of inventories of 6,857 million (US$88,405 thousand), compared with 108 million in the

Other businesses
For the fiscal year ended December 31, 2011, both revenue and income rose from a year ago, despite the effect of the Great East Japan Earthquake, which was most noticeable in the suspended operations of certain golf courses and resort facilities in the leisure business. The improved performance primarily reflected the inclusion of NIHON PARKING CORPORATION in consolidated subsidiaries in metered parking lot business. As a result, revenue from operations rose from 20,037 million for the same period of the preceding fiscal year to 29,132 million (US$375,567 thousand), up 45.4%, and operating income increased from

450 million to 1,349 million (US$17,396 thousand), rising 199.6%.

Analysis of Profitability
Revenue from operations fell 31,330 million year on year, to 166,943 million (US$2,152,170 thousand), and operating loss stood at 678 million (US$8,748 thousand), compared with operating income of 24,055 million for the previous fiscal year. The ordinary loss was 10,875 million (US$140,196 thousand), compared with ordinary income of 13,687 million for the previous fiscal year. These results primarily reflected the absence of sales of rental buildings that were recorded in the previous fiscal year, the recording of a loss on revaluation of inventories for development sites for condominiums and other items, the recording of a loss on investment in silent partnerships and others from investments in silent partnerships, etc. in special purpose companies (SPCs) in which the value of real estate was reduced to expected sales prices, and the postponement of the expected sales of assets. These factors offset the effects of the commencement of the operation of Tokyo Tatemono Yaesu Building (Chuo Ward, Tokyo) and other buildings, and the inclusion of NIHON PARKING CORPORATION in the Companys consolidated subsidiaries. In terms of extraordinary items, the Company recorded gains on the sale of property and equipment and gains on the sale of investment securities as extraordinary income. It also recorded an extraordinary loss from a loss on devaluation of investment securities and a provision for investment loss reserves, mainly reflecting a revised assessment of investments in SPCs related to large-scale redevelopment projects, in addition to the recording of an impairment loss at certain golf courses and condominiums for rent. As a result, the net loss for the fiscal year under review totaled 71,774 million (US$925,280 thousand), compared with a net income of 6,316 million for the previous fiscal year.

the end of the preceding fiscal year, to 898,017 million (US$11,576,866 thousand). The major factors were a decline in investments and other assets, principally reflecting the recording of valuation losses related to investments in SPCs at the Company, offsetting an increase in property and equipment, mainly due to the completion of Apartments Tower Kachidoki and the inclusion of NIHON PARKING CORPORATION in the Companys consolidated subsidiaries. Total liabilities at the end of the term rose 40,588 million from the end of the preceding year, to 705,916 million (US$9,100,376 thousand). This mainly resulted from the issuing of corporate bonds of 25,000 million and an increase in interest-bearing debt as a result of making NIHON PARKING CORPORATION a consolidated subsidiary. The balance of interest-bearing debt (excluding lease obligations) was 513,616 million (US$6,621,325 thousand), rising 52,780 million from the end of the preceding year. Net assets at the end of the term were 192,101 million (US$2,476,490 thousand), a decline of 70,496 million from the end of the preceding fiscal year. This was primarily attributable to a decrease in retained earnings, mainly due to the recording of a net loss.

Financial Position
Total assets at the end of the term fell 29,907 million from

Cash Flow
Consolidated cash and cash equivalents (hereinafter cash) at the end of fiscal 2011 increased 11,982 million from the end of fiscal 2010, to 32,889 million. Cash provided by operating activities was 8,053 million, cash used in investing activities was 37,164 million, and cash provided by financing activities was 41,116 million.

Cash flow from operating activities

Cash provided by operating activities was 8,053 million (US$103,823 thousand), a fall of 51,677 million in cash from the previous fiscal year, mainly reflecting a loss before income taxes and minority interests of 75,889 million and a decrease in cash due to income taxes paid, offsetting an increase in cash attributable to the adjustment of non-cash items such as changes in depreciation and provisions and write-down on marketable securities.

Cash flow from investing activities

Cash used in investing activities was 37,164 million (US$479,115 thousand), a decrease of 35,700 million in cash from the previous year, principally reflecting expenditure of 21,837 million for the purchase of marketable and investment securities, 21,113 million for purchase of noncurrent assets, and a 3,398 million decrease in deposits received under Real Estate Specified Joint Enterprise Law, offsetting an increase in cash attributable to proceeds of 9,320 million from the sale and redemption of marketable and investment securities and proceeds of 7,639 million from the sale of noncurrent assets.

Cash from financing activities

Cash provided by financing activities was 41,116 million (US$530,053 thousand), an increase of 94,238 million in cash from the previous fiscal year, mainly reflecting funds raised through borrowings and the issuance of bonds.

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Consolidated Balance Sheets
December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) (Note 1) Assets Current assets: Cash and deposits (Notes 13 and 16) Accounts receivable, trade Marketable securities (Notes 16 and 17) Investments in silent partnerships (Notes 16 and 17) Inventories (Notes 3 and 6) Deferred income taxes (Note 20) Other current assets (Note 17) Allowance for doubtful accounts Total current assets Property and equipment, at cost: Land (Notes 6, 7 and 11) Buildings (Notes 6, 7 and 11) Construction in progress Other property and equipment (Note 11) Total property and equipment Less accumulated depreciation Net property and equipment Intangible and other assets (Notes 4 and 7) Investments: Investment securities (Notes 8, 16 and 17) Investments in unconsolidated subsidiaries and affiliates (Notes 8 and 16) Investments in silent partnerships (Notes 8, 16 and 17) Long-term loans Deferred income taxes (Note 20) Guarantee deposits paid (Note 7) Other investments (Notes 7 and 17) Allowance for doubtful accounts Allowance for losses on investments Total investments

32,925 6,603 97 5,339 103,582 3,520 16,318 (582) 167,804

20,941 6,056 2,409 5,339 113,526 2,321 10,819 (176) 161,238

424,466 85,124 1,256 68,840 1,335,345 45,378 210,366 (7,509) 2,163,269

310,712 224,175 3,441 20,469 558,799 (100,088) 458,710 28,218

310,423 198,368 8,591 18,717 536,101 (88,678) 447,422 28,139

4,005,578 2,889,980 44,369 263,877 7,203,806 (1,290,297) 5,913,508 363,785

153,556 34,415 52,128 185 6,218 10,873 5,968 (390) (19,673) 243,283

183,567 33,441 59,075 578 1,298 10,148 4,077 (463) (598) 291,124

1,979,580 443,666 672,020 2,389 80,171 140,181 76,945 (5,032) (253,618) 3,136,304

Total assets

898,017

927,925

$11,576,866

December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) (Note 1) Liabilities and net assets Current liabilities: Short-term borrowings (Notes 5, 6 and 16) Current portion of bonds payable (Notes 5 and 16) Accounts payable, trade (Note 6) Accrued income taxes Provision for warranties for completed construction Provision for bonuses Provision for directors bonuses Deposits received under Real Estate Specified Joint Enterprise Law (Note 7) Other current liabilities (Note 6) Total current liabilities Long-term liabilities: Bonds payable (Notes 5 and 16) Long-term debt (Notes 5, 6 and 16) Deferred income taxes (Note 20) Deferred income taxes on land revaluation Accrued severance indemnities (Note 19) Provision for directors retirement benefits Allowance for loss on disposal of property and equipment Provision for environmental measures Guarantee deposits received (Notes 6 and 16) Deposits received under Real Estate Specified Joint Enterprise Law (Note 7) Other long-term liabilities (Note 6) Total long-term liabilities Total liabilities Commitments and contingent liabilities (Note 9) Net assets: Shareholders equity (Note 12): Common stock, without par value: Authorized: 800,000,000 shares Issued: 433,059,168 shares in 2011 and 2010 Additional paid-in capital Retained earnings Less: Treasury stock, at cost Total shareholders equity Accumulated other comprehensive income: Net unrealized gain on available-for-sale securities Revaluation reserve for land Foreign currency translation adjustments Total accumulated other comprehensive income Minority interests Total net assets Total liabilities and net assets

118,038 10,000 6,460 461 5 273 71 30,090 31,994 197,395 109,750 269,752 7,496 20,911 7,079 1,113 285 40,493 38,508 13,130 508,521 705,916

119,281 9,796 1,798 4 264 220 10,790 32,279 174,436 94,500 240,754 8,633 23,721 6,335 984 582 278 41,238 61,206 12,655 490,890 665,327

$ 1,521,699 128,915 83,282 5,954 67 3,530 915 387,907 412,460 2,544,735 1,414,851 3,477,540 96,646 269,585 91,268 14,348 3,675 522,019 496,435 169,269 6,555,641 9,100,376

92,451 90,696 (22,812) (546) 159,788 11,153 16,446 (2,450) 25,149 7,163 192,101 898,017

92,451 90,696 50,692 (543) 233,297 11,323 13,637 (2,136) 22,823 6,476 262,597 927,925

1,191,845 1,169,215 (294,084) (7,048) 2,059,927 143,784 212,022 (31,593) 324,213 92,348 2,476,490 $11,576,866

See accompanying notes to the consolidated financial statements. 3

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Consolidated Statements of Income
Year ended December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) (Note 1) Revenue from operations Cost of revenue from operations Gross profit Selling, general and administrative expenses (Note 10) Operating income (loss) Other income (expenses): Interest income Dividends income Interest expenses Gain on sales of noncurrent assets Loss on sales of noncurrent assets Loss on retirement of noncurrent assets Loss on building reconstruction Stock issuance cost Bond issuance cost Gain on sales of investment securities Reversal of provision for directors retirement benefits Dividends paid on Real Estate Specified Joint Enterprise Law Write-downs of investment securities Write-downs of subsidiaries and affiliates stocks Loss on adjustment for changes of accounting standard for asset retirement obligations Loss on investments in silent partnership Equity in earnings of affiliated companies Impairment loss (Note 11) Provision for environmental measures Loss on disaster Provision of allowance for losses on investments Other, net Income (loss) before income taxes and minority interests Income taxes (Note 20): Current Deferred Income (loss) before minority interests Minority interests: Net income (loss) 166,943 145,237 21,706 22,384 (678) 37 781 (8,403) 795 (14) (123) (215) (4) (123) 978 (1,668) (43,302) (69) 198 (3,374) (6) (607) (19,075) (1,012) (75,210) (75,889) 867 (5,382) (4,514) (71,374) 399 (71,774) (Yen) Per share of common stock: Net income (loss): Basic Diluted Cash dividends applicable to the year 198,274 151,112 47,161 23,106 24,055 44 632 (8,723) 1,553 (511) (179) (9) (101) 99 17 (1,686) (297) (24) (494) 304 (1,039) (278) (828) (11,524) 12,530 4,422 1,520 5,942 6,588 271 6,316 $2,152,170 1,872,342 279,827 288,576 (8,748) 477 10,069 (108,331) 10,249 (187) (1,588) (2,778) (53) (1,597) 12,618 (21,513) (558,234) (896) 2,557 (43,501) (79) (7,827) (245,906) (13,055) (969,582) (978,331) 11,182 (69,385) (58,203) (920,128) 5,152 $ (925,280) (U.S. dollars)

(166.67)

14.67 8.00

$(2.14)

See accompanying notes to the consolidated financial statements. 4

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Consolidated Statements of Comprehensive Income

Year ended December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) (Note 1) Income (loss) before minority interests Other comprehensive income: Net unrealized gain on available-for-sale securities Revaluation reserve for land Foreign currency translation adjustments Share of other comprehensive income of associates accounted for using the equity method Total other comprehensive income Comprehensive income Comprehensive income attributable to: Comprehensive income attributable to owners of the parent Comprehensive income attributable to minority interests (71,374) 6,588 $(920,128)

(283) 2,809 (75) (136) 2,312 (69,061)

2,561 (2,245) (747) (312) (745) 5,842

(3,660) 36,218 (977) (1,765) 29,815 $(890,312)

(69,448) 387

5,564 278

$(895,303) 4,990

See accompanying notes to the consolidated financial statements.

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Consolidated Statements of Changes in Net Assets

Year ended December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) (Note 1) Common stock Balance at beginning of the year Balance at end of the year Additional paid-in capital Balance at beginning of the year Sales of treasury stock Balance at end of the year Retained earnings Balance at beginning of the year Net income (loss) Cash dividends paid Transfer to revaluation reserve for land Balance at end of the year Treasury stock, at cost Balance at beginning of the year Purchases of treasury stock Sales of treasury stock Balance at end of the year Net unrealized gain on available-for-sale securities Balance at beginning of the year Net change in unrealized gain on available-for-sale securities, net of deferred income taxes Balance at end of the year Revaluation reserve for land Balance at beginning of the year Transfer to revaluation reserve for land Balance at end of the year Foreign currency translation adjustments Balance at beginning of the year Net change in foreign currency translation adjustments Balance at end of the year Minority interests Total net assets 92,451 92,451 92,451 92,451 $ 1,191,845 $ 1,191,845

90,696 (0) 90,696

90,705 (8) 90,696

$ 1,169,226 (11) $ 1,169,215

50,692 (71,774) (1,730) ( 22,812)

46,032 6,316 (3,894) 2,238 50,692

$ 653,509 (925,280) (22,313) $ (294,084)

(543) (5) 1 (546)

(521) (35) 13 (543)

(7,002) (65) 20 (7,048)

11,323 (170) 11,153

8,690

$ 145,980 (2,196) $ 143,784

2,632 11,323

13,637 2,809 16,446

18,121 (4,483) 13,637

$ 175,803 36,218 $ 212,022

(2,136) (313) (2,450) 7,163

(997) (1,139) (2,136) 6,476

$ $ $

(27,548) (4,045) (31,593) 92,348

192,101

262,597

$ 2,476,490

See accompanying notes to the consolidated financial statements.

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Consolidated Statements of Cash Flows
Year ended December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) (Note 1) Operating activities Income (loss) before income taxes and minority interests Adjustments to reconcile income before income taxes and minority interests to net cash provided by (used in) operating activities: Depreciation and amortization Impairment loss Amortization of goodwill Equity in earnings of affiliated companies Increase (decrease) in allowance for doubtful accounts Increase (decrease) in allowance for losses on investments Increase (decrease) in provision for bonuses Provision for accrued severance indemnities, less payments Interest and dividend income Interest expense Loss on valuation of investment securities Gain on sales of investment securities Loss on building reconstruction Loss on investments in silent partnerships Gain on sales and retirement of noncurrent assets Decrease (increase) in accounts receivable, trade Decrease (increase) in inventories (Note 13) Increase (decrease) in lease and guarantee deposits received Increase (decrease) in accounts payable, trade Decrease (increase) in lease and guarantee deposits Increase in deposits received Other Subtotal Interest and dividends income received Interest expense paid Income taxes paid Net cash provided by operating activities Investing activities Proceeds from sales and redemption of investment securities Purchases of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation (Note 13) Payments for investments in silent partnerships Proceeds from withdrawal of investments in silent partnerships Proceeds from sales of noncurrent assets Purchases of noncurrent assets Payments of loans receivable Collection of loans receivable Increase (decrease) in deposits received under Real Estate Specified Joint Enterprise Law Other Net cash used in investing activities Financing activities Increase (decrease) in short-term borrowings Increase (decrease) in commercial papers Proceeds from long-term loans payable Repayment of long-term loans payable Payments for long-term accounts payable Proceeds from issuance of bonds Proceeds from sales of treasury stock Purchase of treasury stock Purchase of treasury stock of subsidiaries in consolidation Cash dividends paid Cash dividends paid to minority shareholders Proceeds from stock issuance to minority shareholders Other Net cash (used in) provided by financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (Note 13) (75,889) 12,530 $ (978,331)

9,023 3,374 245 (198) 330 19,075 (10) 688 (818) 8,403 43,302 (978) 215

8,198 1,039 190 (304) (63) (15) 9 661 (676) 8,723 297 (99)

494 (862) (1,512) 40,767 (3,463) (157) 392 1,588 205 67,943 798 (8,639) (372) 59,730 6,769 (17,714) (2,985) 1,752 17,796 (12,587) (341) 4,405 6,529 (5,087) (1,464) (13,792) (26,400) 97,300 (126,506) (700) 20,000 5 (35)

116,325 43,501 3,161 (2,557) 4,265 245,906 (131) 8,877 (10,547) 108,331 558,234 (12,618) 2,778

(657) (500) 7,117 (702) (178) 82 (1,149) 9,116 19,891 926 (8,394) (4,369) 8,053 9,320 (21,837) (1,605) (130) 1,573 7,639 (21,113) (79) 183 (3,398) (7,718) (37,164) (800)

(8,472) (6,456) 91,749 (9,054) (2,304) 1,062 (14,814) 117,525 256,432 11,942 (108,216) (56,333) 103,823 120,156 (281,525) (20,692) (1,675) 20,287 98,490 (272,185) (1,026) 2,365 (43,809) (99,499) (479,115) (10,313)

148,072 (127,512) (931) 25,000 0 (5) (200) (1,730) (120) 414 (1,069) 41,116 (22) 11,982 20,906 32,889

1,908,889 (1,643,838) (12,005) 322,289 8 (65) (2,587) (22,311) (1,558) 5,337 (13,790) 530,053 (287) 154,474 269,521 $ 423,995

(3,886) (49) 1,720 (777) (53,122) (315) 4,828 16,078 20,906

See accompanying notes to the consolidated financial statements. 7

Tokyo Tatemono Co., Ltd. and Consolidated Subsidiaries Notes to the Consolidated Financial Statements

1.

Basis of Preparation of Financial Statements

The accompanying consolidated financial statements of Tokyo Tatemono Co., Ltd. (the Company) and consolidated subsidiaries (collectively the Group) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. In addition, the notes to the accompanying consolidated financial statements include financial information which is not required under accounting principles generally accepted in Japan but is presented herein as additional information. Certain reclassifications have been made to present the accompanying consolidated financial statements in a format which is familiar to readers outside Japan. As permitted by the Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted. As a result, the totals in yen in the accompanying consolidated financial statements do not necessarily agree with the sums of the individual amounts. The U.S. dollar amounts presented in the accompanying consolidated financial statements are included solely for the convenience of readers outside Japan. The exchange rate of 77.57 to U.S.$1.00 prevailing on December 31, 2011 has been used in the translation of yen amounts into U.S. dollar amounts in the accompanying consolidated financial statements. It should not be construed that yen amounts have been or could in the future be converted into U.S. dollar amounts at the above or any other rate.

2.

Significant Accounting Policies

(a) Basis of consolidation The accompanying consolidated financial statements include the accounts of the Company and any significant companies which it controls directly or indirectly, as well as the accounts of companies over which the Company exercises significant influence in terms of their operating and financial policies. Numbers of companies included in the scope of consolidation at December 31, 2011 and 2010 were as follows: 2011 Consolidated subsidiaries 37 2010 37

2.

Significant Accounting Policies (continued)

(a) Basis of consolidation (continued) The difference between the cost of an acquisition and the fair value of the net assets of an acquired subsidiary/affiliated company at the date of acquisition is reported in the consolidated balance sheets under other assets or other liabilities and is amortized by the straight-line method over a period of 5 to 20 years. The equity basis of accounting has been applied to 9 and 7 affiliated companies in consideration of their material impact on the accompanying consolidated financial statements for the years ended December 31, 2011 and 2010, respectively. Investments in certain unconsolidated subsidiaries (owned more than 50%) and affiliates (owned 20% to 50%) are carried at cost rather than being accounted for by the equity method because their aggregate net income and retained earnings were not material to the accompanying consolidated financial statements. (b) Cash and cash equivalents The Company and its consolidated subsidiaries substantially consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Reconciliations between cash reflected in the accompanying consolidated balance sheets and cash and cash equivalents reflected in the accompanying consolidated statements of cash flows at December 31, 2011 and 2010 are presented in Note 13. (c) Allowance for doubtful accounts The allowance for doubtful accounts, including a specific allowance, is provided at the amount considered sufficient to cover possible losses on collection. Long-term loans at December 31, 2011 and 2010 were offset against doubtful debts of 2,698 million ($34,786 thousand) and 2,698 million, respectively. These debts consisted of certain loans and the related interest. (d) Allowance for losses on investments The allowance for losses on investments is provided at the amount considered sufficient to cover possible losses on investments in affiliates and others based on their respective financial condition. (e) Marketable and investment securities Securities are classified and accounted for, depending on managements intentions, as follows: i) held-to-maturity debt securities, which are expected to be held to maturity, are reported at amortized cost, and ii) available-for-sale securities, for which market quotations are determinable, are reported at their respective fair value with unrealized gain or loss, net of the applicable taxes, reported as a separate component of net assets. Unrealized gain is not available for distribution in the form of cash dividends.

2. (f)

Significant Accounting Policies (continued) Inventories Inventories are mainly stated at cost, determined by the identified cost method. Net book value of inventories in the consolidated balance sheet is written down when their net realizable values decline.

(g) Property and equipment, and depreciation Property and equipment are carried at cost, less accumulated depreciation. Depreciation of property and equipment is calculated by the straight-line method, except in the case of furniture and fixtures on which the declining-balance method at rates determined based on the estimated useful lives of the respective assets is applied. However, depreciation of property and equipment held by the overseas consolidated subsidiaries is determined by the straight-line method over the estimated useful lives of the respective assets. Under the Land Revaluation Law promulgated and revised on March 31, 1998 and 1999, respectively, the Company elected for a one-time revaluation of land held for its own use to a value based on real estate appraisals at December 31, 2000. The resulting revaluation reserve for land represents an unrealized appreciation in the value of this land and is stated, net of income taxes, as a separate component of net assets. Revaluation reserve for land is not available for distribution in the form of dividends. There was no related effect on the accompanying consolidated statements of income. (h) Intangible assets Intangible assets are amortized by the straight-line method over their respective estimated useful lives. Expenditure relating to computer software developed for internal use is charged to income as incurred, except in cases where it contributes to the generation of income or future cost savings. In these cases, it is capitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years. (i) Leases Leased property is depreciated over the lease term by the straight-line method with no residual value. In addition, those finance lease transactions that do not transfer ownership and commenced on or before December 31, 2008, are accounted for based on standards for ordinary rental transactions. (j) Share and bond issuance costs Costs relating to the issuance of shares and bonds are charged to income when incurred.

10

2.

Significant Accounting Policies (continued)

(k) Derivatives and hedging activities Interest-rate swaps which meet specific matching criteria and qualify for hedge accounting treatment are not remeasured at market value; however, the differentials paid or received under the respective swap agreements are recognized and included as interest expense or income. The Company enters into interest-rate swap contracts to manage its exposure to interest-rate fluctuation with respect to certain of its liabilities. It is the Companys policy to utilize derivatives only for the purpose of reducing market risk. (l) Accrued severance indemnities Accrued severance indemnities are stated at the amount required to cover the liability as of the balance sheet date and is based on the Companys estimates of its liability for retirement benefits and its pension fund assets as of the balance sheet date. The retirement benefit obligation is attributed to each period by the straight-line method over the estimated average remaining years of service of the eligible employees. Actuarial gain or loss is amortized, commencing the year following the year in which the gain or loss is recognized, by the straight-line method over a period of 10 years which is shorter than the estimated average remaining years of service of the eligible employees. (m) Net income per share Computations of basic net income per share are based on the weighted-average number of shares of common stock outstanding during each year. Diluted net income per share is computed based on the weighted-average number of shares of common stock outstanding during each year after giving effect to the dilutive potential of shares to be issued. (n) Income taxes Deferred income taxes are determined based on the differences between the amounts determined for financial reporting purposes and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse. (o) Reclassifications Certain reclassifications of the consolidated financial statements for the year ended December 31, 2010 have been made to conform with the presentation for the year ended December 31, 2011.

11

2.

Significant Accounting Policies (continued)

(p) Accounting changes 1) Recognizing Revenues and Costs of Construction Contracts Until the year ended December 31, 2009, revenues and costs of construction contracts were recognized by the completed-contract method. Effective January 1, 2010, the Company and its consolidated subsidiaries have adopted Accounting Standard for Construction Contracts (Statement No. 15 issued by the Accounting Standards Board of Japan (ASBJ) on December 27, 2007) and Implementation Guidance on Accounting Standard for Construction Contracts (Guidance No. 18 issued by ASBJ on December 27, 2007). Under the new accounting standard and guidance, revenues and costs of construction contracts that commenced on or after January 1, 2010, of which the percentage of completion can be reliably estimated, are recognized by the percentage-of-completion method. The percentage of completion is calculated at the cost incurred as a percentage of the estimated total cost. The completed-contract method continues to be applied for contracts for which the percentage of completion cannot be reliably estimated. This change had no effect on operating income and income before income taxes and minority interests. 2) Partial Amendments to Accounting Standard for Retirement Benefits (Part 3) Effective January 1, 2010, the Company and its consolidated subsidiaries have adopted Partial Amendments to Accounting Standard for Retirement Benefits (Part 3) (Statement No. 19 issued by ASBJ on July 31, 2008). This change had no effect on operating income and income before income taxes and minority interests. 3) Accounting Standard for Equity Method of Accounting for Investments and Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method Effective January 1, 2011, the Company has adopted Accounting Standard for Equity Method of Accounting for Investments (Statement No. 16 issued by ASBJ on March 10, 2008) and Practical Solution on Unification of Accounting policies Applied to Associates Accounted for Using the Equity Method (Practical Issues Task Force No. 24 issued by ASBJ on March 10, 2008). This adoption had no impact on operating loss and loss before income taxes and minority interests.

12

2.

Significant Accounting Policies (continued)

(p) Accounting changes (continued) 4) Accounting Standard for Asset Retirement Obligations Effective January 1, 2011, the Company has adopted Accounting Standard for Asset Retirement Obligations (Statement No. 18 issued by ASBJ on March 31, 2008) and Implementation Guidance on Accounting Standard for Asset Retirement Obligations (Guidance No. 21 issued by ASBJ on March 31, 2008). The effect of this adoption on operating loss and loss before income taxes and minority interests was immaterial 5) Accounting Standard for Presentation of Comprehensive Income Effective the year ended December 31, 2011, the Company has adopted Accounting Standard for Presentation of Comprehensive Income (Statement No. 25 issued by ASBJ on June 30, 2010). Accordingly, the Company presents Valuation and Translation Adjustments as of December 31, 2011 as Accumulated Other Comprehensive Income in the accompanying consolidated financial statements. 3. Inventories

Inventories consisted of the following: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Real estate for sale Real estate for sale in progress Real estate for development 51,478 35,277 16,826 103,582 35,361 47,371 30,794 113,526 $ 663,643 454,777 216,924 $1,335,345

4.

Intangible and Other Assets

Intangible and other assets as of December 31, 2011 and 2010 consisted of the following: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Leasehold right Goodwill Other 24,424 3,325 468 28,218 24,513 3,212 413 28,139 $314,869 42,874 6,040 $363,785 13

5.

Short-term Borrowings and Long-Term Debt

Short-term borrowings as of December 31, 2011 and 2010 consisted of the following: December 31, 2011 2010 (Millions of Average (Millions of Average yen) interest yen) interest rate (%) rate (%) Loans, principally from banks Current portion of bonds payable Current portion of long-term debt Total 1,807 10,000 116,230 128,038 0.94 1.60 1.64 207 119,074 119,281 2.10 1.64

2011 (Thousands of U.S. dollars)

23,301 128,915

1,498,398 $1,650,615

Long-term debt as of December 31, 2011 and 2010 consisted of the following: December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) 1.60% unsecured straight bonds, due 2012 1.76% unsecured straight bonds, due 2013 1.89% unsecured straight bonds, due 2014 1.92% unsecured straight bonds, due 2015 2.12% unsecured straight bonds, due 2013 1.58% unsecured straight bonds, due 2015 1.80% unsecured straight bonds, due 2016 1.73% unsecured straight bonds, due 2018 1.44% unsecured straight bonds, due 2017 3.65% specific bonds, due 2013 1.23% unsecured straight bonds, due 2014 Loans, principally from banks and insurance companies Less: Current portion of long-term debt 10,000 10,000 20,000 20,000 12,000 10,000 10,000 10,000 15,000 2,500 250 385,983 505,733 (126,230) 379,502 10,000 10,000 20,000 20,000 12,000 10,000 10,000

2,500

128,915 128,915 257,831 257,831 154,698 128,915 128,915 128,915 193,373 32,228 3,222

359,828 454,328 (119,074) 335,254

4,975,938 6,519,705 (1,627,314) $ 4,892,391

The aggregate annual maturities of long-term debt subsequent to December 31, 2011 are summarized as follows: Year ending December 31, 2013 2014 2015 2016 2017 and thereafter Total (Millions of yen) 131,915 96,292 76,263 41,616 33,415 379,502 (Thousands of U.S. dollars) $1,700,604 1,241,358 983,154 536,499 430,774 $4,892,391

14

6.

Pledged Assets

Assets pledged as collateral at December 31, 2011 and 2010 consisted of the following: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Inventories Buildings Land Total 7,041 10,466 35,149 52,658 9,885 9,059 30,174 49,118 $ 90,778 134,934 453,135 $678,848

Secured debt as of December 31, 2011 and 2010 consisted of the following: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Short-term borrowings Accounts payable, trade Other current liabilities Long-term debt Guarantee deposits received Other long-term liabilities 1,346 700 16 21,177 307 4,900 28,448 3,944 700 16 14,134 324 5,600 24,719 $ 17,358 9,024 212 273,016 3,967 63,168 $366,747

7.

Real Estate Held for Specific Partnership Project (under a Silent Partnership Agreement)

Real estate held for a specific partnership project (under a silent partnership agreement) as of December 31, 2011 and 2010 consisted of the following: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Buildings Land Leasehold right Other intangible assets Guarantee deposits paid Other investments 33,086 32,260 4,439 0 774 248 70,809 36,236 29,996 4,439 0 774 280 71,727 $426,541 415,885 57,227 4 9,983 3,198 $912,840

At December 31, 2011, the portion of current liabilities and long-term liabilities corresponding to the above project were recorded as Deposits received under Real Estate Specified Joint Enterprise Law. 15

8.

Investments in Unconsolidated Subsidiaries and Affiliates

Investments in unconsolidated subsidiaries and affiliates as of December 31, 2011 and 2010 consisted of the following: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Investment securities (Stock) Investment securities (Preferred securities) Investments in unconsolidated subsidiaries and affiliates Investments in silent partnerships 4,778 5,711 23,925 400 4,889 9,720 18,831 1,960 $ 61,605 73,623 308,436 5,156

9.

Commitments and Contingent Liabilities

At December 31, 2011, the Company was contingently liable for guarantees on loans to its customers and employees which amounted to approximately 4,558 million ($58,760 thousand). The Company has rights to various types of collateral offered as security against the above guarantees these loans.

10. Selling, General and Administrative Expenses Major components of selling, general and administrative expenses for the years ended December 31, 2011 and 2010 are summarized as follows: Year ended December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Advertisement expenses Salaries Provision of allowance for doubtful accounts Provision for accrued bonuses Provision for accrued bonuses for directors Retirement benefit expenses Provision for accrued directors retirement benefits 2,753 5,875 336 98 71 667 152 2,488 6,013

$35,492 75,749 4,338 1,263 915 8,605 1,971

115 220 636 158

16

11.

Impairment Loss

The Company and certain of its consolidated subsidiaries have recognized impairment losses for the following groups of assets for the year ended December 31, 2011:
(Millions of yen) (Thousands of U.S. dollars)

Company Tojo Golf Club, Inc., Others Tokyo Tatemono Co., Ltd., Others

Major use Golf courses, others Rental condominiums, others

Asset category

Location

Land, buildings and Kato, Hyogo others Prefecture, others Land, buildings and Minato-ku, Tokyo, others others

1,652

$21,304

1,721 3,374

$22,197 $43,501

The aggregate impairment loss of 3,374 million ($43,501 thousand) consisted of 1,422 million ($18,333 thousand) on land and 1,952 million ($25,167 thousand) on buildings and other assets. The recoverable amounts of the asset groups were measured at the net selling value. The net selling value is mainly measured based on the evaluation by real estate appraisers.

12.

Shareholders Equity

The Corporation Law of Japan (the Law) provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met. There is no distribution of dividends for which the record date is in the fiscal year under review and the effective is in the next fiscal year. The following distribution of retained earnings applicable to the year ended December 31, 2010 was duly approved at the annual general meeting of the shareholders held on March 30, 2011: (Millions of yen) Cash dividends of 4 per share 1,730

17

13. Supplemental Cash Flow Information 1. The following table represents reconciliations of cash reflected in the accompanying consolidated balance sheets and cash and cash equivalents reflected in the accompanying consolidated statements of cash flows at December 31, 2011 and 2010: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Cash Time deposits with a maturity of more than three months Cash and cash equivalents 2. 32,925 (36) 32,889 20,941 (34) 20,906 $424,466 (470) $423,995

The decrease (increase) in inventories includes increases and decreases in accounts payable, trade and advances pertaining to inventories. Major components of assets and liabilities of NIHON PARKING CORPORATION and two other companies at the time of consolidation, and relationship between the acquisition value of the shares and the purchase of investments in subsidiaries resulting in a change in scope of consolidation are as follows: (Millions of yen) Current assets Noncurrent assets Goodwill Current liabilities Long-term liabilities Minority interests Acquisition cost of investments in subsidiaries Purchase in the previous fiscal year Cash and cash equivalents of consolidated subsidiaries Payment for funding loan on the premise of acquiring shares in consolidated subsidiaries Purchase of investments in subsidiaries resulting in change in scope of consolidation 2,478 11,080 337 (4,691) (6,079) (189) 2,936 (5) (1,546) 1,385 220 1,605 (Thousands of U.S. dollars) $ 31,955 142,845 4,350 (60,483) (78,369) (2,439) 37,858 (65) (19,937) 17,856 2,836 $ 20,692

3.

18

14.

Business Transactions with Special Purpose Entities

The Company and a consolidated subsidiary, Tokyo Tatemono Real Estate Sales Co., Ltd., invest in special purpose entities (SPEs) to diversify their sources of funding and calculate their profit and loss from individual SPEs more precisely. This note is applicable to 34 and 38 SPEs, in which the Company and Tokyo Tatemono Real Estate Sales Co., Ltd., respectively, own interests of 40% or more. The SPEs utilized consist mainly of tokurei-yugenkaisha, or limited liability companies, and tokutei-mokuteki-kaisha (TMKs), or specific purpose companies, under the Law on Securitization of Assets. In addition to investments by the Company, Tokyo Tatemono Real Estate Sales Co., Ltd. and its associates, SPEs are funded by borrowings from financial institutions, such as non-recourse loans and asset-backed securities for TMKs. The Company and Tokyo Tatemono Real Estate Sales Co., Ltd. plan to collect an appropriate amount for their investments at the exit of the above projects. The Companys and Tokyo Tatemono Real Estate Sales Co., Ltd.s risk exposure is limited to the amount of equity investments in properties for sale. The Company had no investments with voting rights in these SPEs and neither any director nor any employees of the Company were dispatched to them. The following table summarizes transactions with the SPEs for the year ended December 31, 2011: Year ended December 31, 2011 (Millions of yen) Revenue and cost Revenue from operations (*2) Cost of revenue from operations (*3) Revenue from operations (*4) Revenue from operations (*5) Year ended December 31, 2011 (Thousands of U.S. dollars) Revenue and cost Revenue from operations (*2) Cost of revenue from operations (*3) Revenue from operations (*4) Revenue from operations (*5) $24,061 9,343 18,022 466 1,866 724 1,398 36

Balance Investments (*1) Management Brokerage 152,287

Balance Investments (*1) Management Brokerage (*1) $1,963,232

Consists of 39 million ($502 thousand) of marketable securities, 104,373 million ($1,345,535 thousand) of investment securities, 5,000 million ($64,457 thousand) of investments in silent partnerships (current assets), and 42,875 million ($552,736 thousand) of investments in silent partnerships (noncurrent assets), which include investments in silent partnerships and preferred securities issued by TMKs. Consists of dividends on the investments earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd., and comprises 1,628 million ($20,992 thousand) for the commercial properties segment, 233 million ($3,014 thousand) for the residential business segment and 4 million ($54 thousand) for the brokerage business segment. 19

(*2)

14. (*3)

Business Transactions with Special Purpose Entities (continued) Consists of costs and losses incurred by the Company in connection with the investments, and included in the commercial properties segment. Consists of asset management fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. and comprises 832 million ($10,734 thousand) for the commercial properties segment, 115 million ($1,493 thousand) for the residential business segment,22 million ($291 thousand) for the brokerage business segment and 426 million ($5,503 thousand) for the other segment. Consists of brokerage commissions and agency fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. and comprises 35 million ($453 thousand) for the commercial properties segment and 1 million ($12 thousand) for the other segment. Other than the above, 6,143 million ($79,196 thousand) and 45,040 million ($580,636 thousand) in valuation losses (including the provision of allowance for investment loss) were recorded in cost of revenue from operations and other expenses respectively, since the fair value of investments, etc. of the Company declined significantly.

(*4)

(*5)

(*6)

Combined assets, liabilities and net assets of the SPEs based on the most recent year end date of each SPE are summarized as follows: December 31, 2011 (Millions of yen) Assets Real estate property Other Total 708,149 48,762 756,912 Liabilities and net assets Borrowings (*7) Capital (*8) Other Total 513,011 252,865 (8,965) 756,912

Assets Real estate property Other Total (*7) (*8)

December 31, 2011 (Thousands of U.S. dollars) Liabilities and net assets $9,129,172 628,624 $9,757,796 Borrowings (*7) Capital (*8) Other Total $6,613,533 3,259,837 (115,573) $9,757,796

Consists of non-recourse loans and asset-backed securities for TMKs. Consists of capital deposits in silent partnerships and preferred securities issued by TMKs.

20

14.

Business Transactions with Special Purpose Entities (continued)

The following table summarizes transactions with the SPEs for the year ended December 31, 2010: Year ended December 31, 2010 (Millions of yen) Revenue and cost Revenue from operations (*2) Cost of revenue from operations (*3) Revenue from operations (*4) Revenue from operations (*5) 5,194 0 2,832 222

Balance Investments (*1) Management Brokerage (*1) 175,239

(*2)

(*3)

Consists of 2,349 million of marketable securities, 120,525 million of investment securities, 5,000 million of investments in silent partnerships (current assets), and 47,364 million of investments in silent partnerships (noncurrent assets), which include investments in silent partnerships and preferred securities issued by TMKs. Consists of dividends on the investments earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd., and comprises 1,900 million for the leasing segment and 3,293 million for the other segment. Consists of costs and losses incurred by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. in connection with the investments, and included in the other segment. Consists of asset management fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. and comprises 1,348 million for the leasing segment and 1,483 million for the other segment. Consists of brokerage commissions and agency fees earned by the Company and Tokyo Tatemono Real Estate Sales Co., Ltd. included in the other segment.

(*4)

(*5)

Combined assets, liabilities and net assets of the SPEs based on the most recent year end date of each SPE are summarized as follows (*6): December 31, 2010 (Millions of yen) Assets Real estate property Other Total (*6) 743,326 53,529 796,856 Liabilities and net assets Borrowings (*7) Capital (*8) Other Total 541,964 247,559 7,332 796,856

The assets, liabilities and net assets of one SPE were excluded from the above disclosure because the SPE had already sold all of its real estate before December 31, 2010, and its significance was immaterial for the above disclosure. Consists of non-recourse loans and asset-backed securities for TMKs. Consists of capital deposits in silent partnerships and preferred securities issued by TMKs.

(*7) (*8)

21

15. Lease Transactions (1) Finance leases (Lessee) The following pro forma amounts represent the acquisition costs, accumulated amortization/depreciation and net book value of the leased property as of December 31, 2011 and 2010, which would have been reflected in the accompanying consolidated balance sheets if the finance leases currently accounted for as operating leases had been capitalized: December 31, 2011 2010 2011 (Millions of yen) (Thousands of U.S. dollars) Acquisition costs: Buildings Machinery and equipment Vehicles Furniture and equipment Intangible assets (software) Accumulated amortization/depreciation: Buildings Machinery and equipment Vehicles Furniture and equipment Intangible assets (software) Accumulated impairment loss Furniture and equipment Net book value: Buildings Machinery and equipment Vehicles Furniture and equipment Intangible assets (software) Future minimum lease payments: Within one year Over one year Balance in impairment loss account on leased assets Lease payments (assumed amortization/depreciation) Reversal of impairment loss account on leased assets Impairment loss on leased assets 25 866 177 1,069 22 338 136 497 417 2 110 41 154 153 102 256 102 210 60 2 11 12 90 230 228 573 10 11 73 180 147 423 $ 324 11,170 2,292 $13,787 291 4,362 1,760 $ 6,414 $ 5,385 $ 32 1,422 531 $ 1,986

1 0 16 50 81 150

84 65 150 151

$ 1,979 1,323 $ 3,302 $ 1,315 $ 2,712 $ $ 779 29

Amortization/depreciation was calculated by the straight-line method over the respective lease periods assuming a nil residual value. 22

15. Lease Transactions (continued) (2) Operating leases (Lessee) December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Future minimum lease payments: Within one year Over one year 4,977 86,042 91,020 2,766 76,885 79,651 $ 64,165 1,109,229 $1,173,395

Operating leases (Lessor) December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Future minimum lease payments: Within one year Over one year 4,369 14,518 18,887 4,517 14,778 19,295 $ 56,331 187,161 $243,492

16. Financial Instruments Effective the fiscal year ended December 31, 2010, a new accounting standard for financial instruments and related implementation guidance have been adopted. Financial Instruments at December 31, 2011 are summarized as follows: Overview (1) Policy for financial instruments The Company and its consolidated subsidiaries have the policy to limit fund management to short-term deposits and raises funds mainly through loans from banks and the issuance of corporate bonds. Derivative instruments are used to mitigate risks referred to below, and the Company and its consolidated subsidiaries do not enter into derivative transactions for speculation. (2) Types of financial instruments and related risk Primary marketable securities and investment securities are preferred capital contribution certificates of special purpose companies under the Asset Liquidation Act and shares in companies with which the Group has business relationships. The Group is exposed to credit risks of issuers, interest rate risks, and market price fluctuation risks.

23

16. Financial Instruments (continued) Overview (continued) Investments in silent partnership are investments in special purpose companies and are exposed to the credit risks of issuers and interest rate risks. Short-term borrowings are mainly used for funding working capital. Long-term debt and bonds payable are mainly used for capital expenditures. Debts with floating interest rates are subject to interest-rate risk, however, the Company and its consolidated subsidiaries utilize derivatives (interest rate swaps) as hedging instruments for some long-term debt with floating interest rates to fix the cash flows of interest payments. (3) Risk management for financial instruments (a) Monitoring of credit risk (the risk that customers or counterparties may default) Each operating department monitors the status of major counterparties and manages the due dates and balances of receivables. The Group seeks to identify, at an early stage, any collectability issues due to the worsening financial conditions of counterparties to mitigate credit risk. (b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates, interest rates and others) To minimize the risks arising from fluctuations in interest rates on loans payable, the Group uses interest rate swaps. In relation to marketable securities and investment securities, the Group regularly monitors the fair values and financial situation of the issuers (counterparties). The Group reviews the status of its holdings of financial instruments considering market trends and relationships with counterparties. (c) Monitoring of liquidity risk (the risk that the Group may not be able to meet its obligations on scheduled due dates) Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidity risk. (4) Supplementary explanation of the estimated fair value of financial instruments The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value is reasonably estimated. Since various assumptions and factors are used in estimating the fair value, different assumptions and factors could result in different fair value.

24

16. Financial Instruments (continued) Estimated Fair Value of Financial Instruments The carrying value of financial instruments in the consolidated balance sheet, their fair value, and the differences between them as of December 31, 2011 are as follows. (Financial instruments whose fair value is extremely difficult to estimate are not included; please see Note 2 below.) Carrying value Estimated fair value Difference (Millions of yen) 32,925

(1) Cash and deposits (2) Marketable securities and investment securities Other securities Total assets (1) Short-term borrowings (2) Long-term debt (including due within one year) (3) Bonds payable(including due within one year) Total liabilities Derivatives

32,925

33,712 66,637 1,807 385,983 119,750 507,541

33,712 66,637 1,807 389,798 121,722 513,328

3,815 1,972 5,787

Carrying Estimated value fair value Difference (Thousands of U.S. dollars) (1) Cash and deposits (2) Marketable securities and investment securities Other securities Total assets (1) Short-term borrowings (2) Long-term debt (including due within one year) (3) Bonds payable(including due within one year) Total liabilities Derivatives Notes: 1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions Assets Cash and deposits Since these items are settled in a short period of time, their carrying value approximates fair value. 25 $ 424,466 $ 424,466 $

434,602 859,068 23,301 4,975,938 1,543,766 6,543,007

434,602 859,068 23,301 5,025,122 1,569,193 6,617,617

49,184 25,426 74,610

16. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) Marketable securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is mainly based on prices provided by the financial institutions making markets in these securities.

Liabilities Short-term borrowings Since these items are settled in a short period of time, their carrying value approximates fair value. Long-term debt (including due within one year) Since variable interest rates of certain long-term debt are determined based on current interest rates in a short period of time, their carrying value approximates fair value. The fair value of long-term debt with fixed interest rates is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new debt were entered into. Bonds payable(including due within one year) The fair value of bonds is based on the quoted market price. Derivatives The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term debt since amounts in such derivative contracts accounted for short-cut method are handled together with long-term debt as hedged items. 2. Financial instruments for which it is extremely difficult to determine the fair value (Millions of yen) (1) (2) (3) (4) Unlisted stocks (*1) Preferred securities (*1) Investments in silent partnerships (*2) Guarantee deposits received (*3) 8,772 121,658 57,468 40,493 (Thousands of U.S. dollars) $ 113,093 1,568,370 740,860 522,019

(*1) These items are not included in Assets (2) Marketable securities and investment securities since their market price is unavailable and the assessment of their fair value is deemed extremely difficult. (*2) The fair value of investments in silent partnerships is not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult. (*3) Since market price for lease and guarantee deposit payables is unavailable and calculation of the actual period of duration from lease initiation to termination is difficult, it is extremely difficult to estimate fair value reasonably and therefore the fair value of lease and guarantee deposit payables is not disclosed.

26

16. Financial Instruments (continued) 3. Redemption schedule for receivables and marketable securities with maturities at December 31, 2011
Due after Due after one year five years through through five years ten years (Millions of yen)

Due in one year or less

Due after ten years

Cash and deposits Marketable securities and investment securities Held-to-maturity securities Corporate bonds Other securities with maturities Government bonds Total

32,557

20 58 32,635

15 15

Due after Due after one year five years through through ten Due in one years year or less five years (Thousands of U.S. dollars) Cash and deposits Marketable securities and investment securities Held-to-maturity securities Corporate bonds Other securities with maturities Government bonds Total $419,716 $ $

Due after ten years

257 747 $420,722

193 $193

4.

The redemption schedule for bonds and long-term debt

Due after one year through two years Due after Due after two years three years through through three years four years (Millions of yen) 20,250 76,042 96,292 30,000 46,263 76,263 Due after four years through five years

Due in one year or less

Due after five years

Bonds payable Long-term debt Total

10,000 116,230 126,230

24,500 107,415 131,915 Due after one year through two years

10,000 31,616 41,616 Due after four years through five years

25,000 8,415 33,415

Due in one year or less

Due after Due after two years three years through through three years four years (Thousands of U.S. dollars) $ 261,054 980,304 $1,241,358 $386,747 596,406 $983,154

Due after five years

Bonds payable Long-term debt Total

$ 128,915 1,498,398 $1,627,314

$ 315,843 1,384,760 $1,700,604

$128,915 407,583 $536,499

$322,289 108,485 $430,774

27

16. Financial Instruments (continued) Financial Instruments at December 31, 2010 are summarized as follows: Estimated Fair Value of Financial Instruments The carrying value of financial instruments in the consolidated balance sheet, their fair value, and the differences between them as of December 31, 2010 are as follows. (Financial instruments whose fair value is extremely difficult to estimate are not included; please see Note 2 below.) Carrying value Estimated fair value Difference (Millions of yen) 20,941

(1) Cash and deposits (2) Marketable securities and investment securities Other securities Total assets (1) Short-term borrowings (2) Long-term debt (including due within one year) (3) Bonds payable Total liabilities Derivatives Notes: 1.

20,941

35,319 56,260 207 359,828 94,500 454,535

35,319 56,260 207 362,420 97,009 459,637

2,592 2,509 5,101

Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions Assets Cash and deposits Since these items are settled in a short period of time, their carrying value approximates fair value. Marketable securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is mainly based on prices provided by the financial institutions making markets in these securities.

28

16. Financial Instruments (continued) Estimated Fair Value of Financial Instruments (continued) Liabilities Short-term borrowings Since these items are settled in a short period of time, their carrying value approximates fair value. Long-term debt (including due within one year) Since variable interest rates of certain long-term debt are determined based on current interest rates in a short period of time, their carrying value approximates fair value. The fair value of long-term debt with fixed interest rates is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new debt were entered into. Bonds payable The fair value of bonds is based on the quoted market price. Derivatives The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term debt since amounts in such derivative contracts accounted for short-cut method are handled together with long-term debt as hedged items. 2. Financial instruments for which it is extremely difficult to determine the fair value (Millions of yen) (1) (2) (3) (4) Unlisted stocks (*1) Preferred securities (*1) Investments in silent partnerships (*2) Guarantee deposits received (*3) 9,576 155,691 64,415 41,238

(*1) These items are not included in Assets (2) Marketable securities and investment securities since their market price is unavailable and the assessment of their fair value is deemed extremely difficult. (*2) The fair value of investments in silent partnerships is not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult. (*3) Since market price for lease and guarantee deposit payables is unavailable and calculation of the actual period of duration from lease initiation to termination is difficult, it is extremely difficult to estimate fair value reasonably and therefore the fair value of lease and guarantee deposit payables is not disclosed.

29

16. Financial Instruments (continued) 3. Redemption schedule for receivables and marketable securities with maturities at December 31, 2010
Due after Due after one year five years through through five years ten years (Millions of yen)

Due in one year or less

Due after ten years

Cash and deposits Marketable securities and investment securities Held-to-maturity securities Corporate bonds Other securities with maturities Government bonds Total

20,825

20,825

20 73 93

4.

The redemption schedule for bonds and long-term debt

Due after one year through two years Due after Due after two years three years through through three years four years (Millions of yen) 24,500 75,779 100,279 20,000 42,490 62,490 Due after four years through five years

Due in one year or less

Due after five years

Bonds payable Long-term debt Total

119,074 119,074

10,000 101,830 111,830

30,000 15,922 45,922

10,000 4,731 14,731

30

17. Marketable Securities and Investment Securities Information regarding marketable securities classified as other securities for the years ended December 31, 2011 and 2010 is summarized as follows: (1) Marketable other securities
December 31, 2011 Carrying Acquisition Unrealized Carrying Acquisition Unrealized cost gain (loss) value cost gain (loss) value (Millions of yen) (Thousands of U.S. dollars) Securities whose carrying value exceeds their acquisition cost: Stock Government bonds Securities whose carrying value does not exceed their acquisition cost: Stock Other Total

23,365 73 23,438

5,045 72 5,118

18,319 0 18,320

$301,216 947 302,164

$ 65,043 939 65,983

$236,173 8 236,181

4,474 5,798 10,273 33,712

5,725 6,411 12,136 17,254

(1,250) (612) (1,863) 16,457

57,683 74,754 132,437 $434,602

73,810 82,649 156,459 $222,442

(16,127) (7,894) (24,021) $212,159

December 31, 2010 Carrying Acquisition Unrealized cost gain (loss) value (Millions of yen) Securities whose carrying value exceeds their acquisition cost: Stock Government bonds Other Securities whose carrying value does not exceed their acquisition cost: Stock Total

25,165 74 7,509 32,748

7,773 72 6,008 13,854

17,391 1 1,501 18,893

2,570 2,570 35,319

3,293 3,293 17,148

(722) (722) 18,170

The Company recognized losses on other securities considered temporary amounting to 209 million ($2,702 thousand) in 2011 and 261 million in 2010, and other-than-temporary impairment amounting to 50,662 million ($653,114 thousand) in 2011 and 2,479 million in 2010.

31

17. Marketable Securities and Investment Securities (continued) (2) Sales of securities classified as other securities and the related aggregate gains and losses are summarized as follows: December 31, 2011 (Millions of yen) (Thousands of U.S. dollars) Sales proceeds Aggregate gains 1,104 978 $14,234 12,618

(3) Investments in special purpose companies (SPCs) are summarized as follows: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Marketable securities Investments in silent partnerships (included in current assets) Other current assets Subtotal Investment securities Investments in silent partnerships (included in investments) Other investments Subtotal Total 39 5,339 5,378 121,619 52,128 230 173,977 179,356 2,409 5,339 15 7,765 153,281 59,062 232 212,575 220,341 $ 502 68,840 69,343 1,567,867 672,015 2,967 2,242,851 $2,312,194

32

18. Derivatives and Hedging Activities Hedge accounting was applied to all derivative transactions for the year ended December 31, 2011. The summary of these transactions is as follows: Interest-related transactions
Notional amount Due after one year (Millions of yen) Fair value

Class of Transactions

Hedged items

Interest rate swap contracts accounted for by the short-cut method pay/fixed and receive/floating

Debt and bonds payable

153,414

109,678

(*)

Class of Transactions

Hedged items

Notional amount

Due after one year

Fair value

(Thousands of U.S. dollars)

Interest rate swap contracts accounted for by the short-cut method pay/fixed and receive/floating Debt and bonds payable

$1,977,755

$1,413,933

(*)

(*) The estimated fair value of interest rate swap contracts is included in the estimated fair value of the debt and bonds payable since amounts of such derivative contracts accounted for by the short-cut method are handled together with debt and bonds payable as hedged items. Hedge accounting was applied to all derivative transactions for the year ended December 31, 2010. The summary of these transactions is as follows: Interest-related transactions
Notional amount Due after one year (Millions of yen) Fair value

Class of Transactions

Hedged items

Interest rate swap contracts accounted for by the short-cut method pay/fixed and receive/floating

Debt and bonds payable

138,012

97,750

(*)

(*) The estimated fair value of interest rate swap contracts is included in the estimated fair value of the debt and bonds payable since amounts of such derivative contracts accounted for by the short-cut method are handled together with debt and bonds payable as hedged items.

33

19.

Accrued Severance Indemnities

Employees whose services with the Company are terminated are, under most circumstances, entitled to lump-sum severance payments determined by reference to their basic rate of pay, length of service at that time and the conditions under which termination occurs. The minimum payment is an amount based on voluntary retirement. Accrued severance indemnities, net periodic pension cost and assumptions used in such calculations for the years ended December 31, 2011 and 2010 are summarized as follows: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Accrued severance indemnities: Projected benefit obligation Fair value of plan assets Unrecognized prior service cost Unrecognized actuarial gain Accrued severance indemnities (14,189) 5,152 (9,037) (76) 2,034 (7,079) (13,528) 5,447 (8,080) 25 1,719 (6,335) $(182,930) 66,427 (116,502) (989) 26,223 $ (91,268)

Year ended December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Net periodic pension cost: Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized actuarial loss Net periodic pension cost Assumptions: Discount rate Anticipated rate of return on plan assets Amortization period of unrecognized prior service cost Amortization period of actuarial gain or loss 839 263 (81) (7) 325 1,338 1.5~2.0% 1.5% 10 years 10 years 707 251 (77) 3 315 1,200 1.5~2.0% 1.5% 10 years 10 years $10,820 3,392 (1,053) (94) 4,195 $17,260

34

20.

Income Taxes

Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants taxes and enterprise tax, which, in the aggregate, resulted in a statutory tax rate of approximately 40.7% for the years ended December 31, 2011 and 2010. Income taxes of the overseas consolidated subsidiaries are based generally on the tax rates applicable in their respective countries of incorporation. The effective tax rate reflected in the accompanying consolidated statements of income for the year ended December 31, 2010 differed from the statutory tax rate for the following reasons: Year ended December 31, 2010 Statutory tax rate Increase (decrease) in income taxes resulting from: Reversal of valuation allowance for deferred tax assets Non-deductible expenses Non-taxable income Inhabitants per capita taxes Other Effective tax rate 40.7%

5.8 1.2 (1.1) 0.4 0.4 47.4%

Due to the recording of a loss before income taxes and minority interests, a reconciliation of the differences between the statutory tax rate and the effective tax rate for the year ended December 31, 2011 has been omitted.

35

20.

Income Taxes (continued)

The significant components of deferred tax assets and liabilities as of December 31, 2011 and 2010 were as follows: December 31, 2010 2011 2011 (Millions of yen) (Thousands of U.S. dollars) Deferred tax assets: Write-downs of investment securities Loss on impairment of noncurrent assets Net operating loss carry forwards Allowance for losses on investments Unrealized dividends on investments in silent partnerships Accrued severance indemnities in excess of tax-deductible portion Write-downs of stocks of subsidiaries and affiliated companies Loss on appraisal of real estate held for sale Loss on appraisal of noncurrent assets Other Gross deferred tax assets Valuation allowance Total deferred tax assets Deferred tax liabilities: Reversal of deferred tax liabilities based on revaluation of assets of subsidiaries Net unrealized gain on available-for-sale securities Reversal of reserve for deferred capital gain on land Gain on change in interest in a consolidated subsidiary Other Total deferred tax liabilities Net deferred tax assets (liabilities) 18,057 11,278 10,848 7,003 2,873 2,606 1,455 992 394 3,550 59,060 (40,927) 18,132 4,933 11,520 4,781 243 3,343 2,567 1,552 1,504 429 3,885 34,761 (21,410) 13,351 $ 232,786 145,398 139,856 90,288 37,037 33,605 18,758 12,797 5,081 45,770 761,380 (527,622) 233,757

(6,269) (5,818) (2,740) (762) (300) (15,890) 2,242

(7,100) (7,252) (3,124) (870) (15) (18,364) (5,013)

(80,819) (75,009) (9,831) (35,323) (3,869) (204,853) $ 28,904

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), Japanese corporation tax rates will be reduced and a special reconstruction corporation tax, a surtax for reconstruction funding after the Great East Japan Earthquake, will be imposed for the fiscal years beginning on or after April 1, 2012.

36

20. Income Taxes (continued) The effect of this change was to decrease deferred tax assets by 1,157 million ($14,917 thousand), increase investment securities by 40 million ($528 thousand), increase net unrealized gain on available-for-sale securities by 872 million ($11,252 thousand), decrease deferred income taxes by 325 million ($4,192 thousand), increase revaluation reserve for land by 3,363 million ($43,362 thousand) and decrease deferred tax liability on land revaluation by 3,363 million ($43,362 thousand) in the accompanying consolidated financial statements as of and for the year ended December 31, 2011. 21. Business Combinations (Business combination through share acquisition) (1) Outline of the business combination (i) Name and business of the acquired company Name of the acquired company: Business of the acquired company: (ii) Reason for the business combination The Company judged that it would be able to strengthen the earnings capabilities of the Tokyo Tatemono Group by integrating the real estate owned and managed by the Group and the parking management expertise owned by NIHON PARKING CORPORATION, and the customer networks possessed by the Group and NIHON PARKING CORPORATION. (iii) Date of the business combination February 8, 2011 (Date of the announcement of the result of the tender offer) (iv) Legal form of the business combination Share acquisition by tender offer, etc. (v) Name of the acquired company after the business combination NIHON PARKING CORPORATION (vi) Percentage of voting rights acquired Percentage of voting rights held immediately before the business combination: Percentage of voting rights additionally acquired on the business combination date: Percentage of voting rights held after the acquisition: 0.00% 93.69% 93.69% NIHON PARKING CORPORATION Operation of metered parking lot business

(*) The percentage of the voting rights acquired as described above included voting rights acquired through the acquisition of all shares owned by persons in special relationships. (vii) Details on the business combination The Company paid cash to acquire 93.69% of voting rights of NIHON PARKING CORPORATION.

37

21. Business Combinations (continued) (2) Financial period of the results of the acquired company, included in the consolidated financial statements From March 1, 2011 to December 31, 2011 (3) Acquisition costs of the acquired company and their breakdown (Millions of yen) Acquisition price Expenses directly incurred in the acquisition Acquisition cost 2,831 105 2,936 (Thousands of U.S. dollars) $36,501 1,357 $37,858

(*) The acquisition price as described above included 389 million ($5,022 thousand) spent to acquire shares owned by persons in special relationships. (4) Goodwill (i) Amount of goodwill arising from the transaction 337 million ($4,350 thousand) (ii) Reasons for goodwill Additional earnings potential expected through the future development of the business (iii) Amortization method and period Straight-line method over a period of 5 years (5) Assets acquired and liabilities assumed on the business combination date (Millions of yen) Current assets Noncurrent assets Total assets Current liabilities Long-term liabilities Total liabilities 2,478 11,417 13,896 4,691 6,079 10,770 (Thousands of U.S. dollars) $ 31,955 147,195 $179,151 $ 60,483 78,369 $138,852

(6) Estimated amount and calculation method of the impact of the business combination on the consolidate statement of income for the fiscal year ended December 31, 2011, on the assumption that the business combination was completed at the beginning of the fiscal year. This information has been omitted because the impact of the estimated amount on the consolidated statement of income for the fiscal year was immaterial. The estimated amounts of the impact have not been audited by the Companys independent auditors.

38

21. Business Combinations (continued) (Transactions under common control, etc.) I. Inclusion of NIHON PARKING CORPORATION as a wholly owned subsidiary 1. Outline of the transaction (1) Name and business of the company subject to the business combination Name of the company subject to the business combination: NIHON PARKING CORPORATION Business of the company subject to the business combination: Operation of metered parking lot business (2) Date of the business combination June 28, 2011 (3) Legal form of the business combination Share acquisition (Additional acquisition) (4) Name of the acquired company after the business combination NIHON PARKING CORPORATION (5) Matters relating to the transactions In accordance with the resolutions made at the 14th annual general meeting of shareholders and the class meeting of ordinary shareholders held on May 25, 2011, NIHON PARKING CORPORATION, the Companys consolidated subsidiary, acquired all its common shares subject to wholly call, and issued class shares at the ratio of 1/3,333 to one common share subject to wholly call as consideration for the acquisition. For shareholders, other than the Group companies, receiving fractional class shares of less than one share, the total cash equivalent to the proceeds from the sales of fractional shares was paid in accordance with relevant laws and regulations. As a result, the Tokyo Tatemono Group acquired all the class shares of NIHON PARKING CORPORATION, making it a wholly owned subsidiary. 2. Accounting treatment This transaction was applicable to transactions with minority shareholders, and was recorded as a transaction under common control in accordance with Accounting Standard for Business Combinations (Statement No. 21 issued by ASBJ on December 26, 2008) and Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (Guidance No. 10 issued by ASBJ on December 26, 2008). 3. Additional acquisition costs and their breakdown (Millions of yen) Acquisition price Expenses directly incurred in the acquisition Acquisition costs 204 5 209 (Thousands of U.S. dollars) $2,639 64 $2,703 39

21. Business Combinations (continued) I. Inclusion of NIHON PARKING CORPORATION as a wholly owned subsidiary (continued) 4. Goodwill (1) Amount of goodwill arising from the transaction 21 million ($274 thousand) (2) Reasons for goodwill Extra earning potential expected through the future development of the business (3) Amortization method and period Straight-line method over a period of 5 years II. Merger between the Company and a consolidated subsidiary 1. Outline of the transaction (1) Names and businesses of companies subject to the business combination (i) Acquiring company Name: Businesses: Tokyo Tatemono Co., Ltd. (the Company) Sales and purchases, leasing, brokerage, management and appraisal of real estate, and other businesses

(ii) Acquired company Name: Businesses: Shinjuku Square Tower Management Co., Ltd. (the Companys wholly owned subsidiary) Management of land, buildings on the subject land, and their attached facilities and equipment, and other businesses

(2) Date of the business combination December 1, 2011 (3) Legal form of the business combination Absorption-type merger with the Company as the surviving company and Shinjuku Square Tower Management Co., Ltd. as the dissolved company (4) Name of the company after the business combination: Tokyo Tatemono Co., Ltd. (5) Matters relating to the transactions The Company decided to implement an absorption-type merger with Shinjuku Square Tower Management Co., Ltd., which was engaged in sub-leasing operations and the union management of Shinjuku Square Tower, to further improve the quality of its services and streamline its operations. 2. Accounting treatment This transaction was recorded as a transaction under common control in accordance with Accounting Standard for Business Combinations (Statement No. 21 issued by ASBJ on December 26, 2008) and Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (Guidance No. 10 issued by ASBJ on December 26, 2008). 40

22.

Investment and Rental Properties

Effective the fiscal year ended December 31, 2010, a new accounting standard for disclosures regarding fair value of investment and rental real estate properties and related implementation guidance have been adopted. The Company and some of its subsidiaries own office buildings for lease, apartment houses for lease, commercial facilities for lease and other properties in Tokyo and other areas. Some office buildings for lease are regarded as real estate including space used as rental properties since they are used by the Company and some of its consolidated subsidiaries. The carrying values of these properties in the consolidated balance sheet, their changes during the current fiscal year and their fair value at December 31, 2011 are as follows:
Carrying value December 31, 2010 Fair value December 31, December 31, 2011 2011 Changes (Millions of Yen) 14,183 (532) 344,499 107,095 371,225 136,925

Rental properties Real estate including space used as rental properties

330,316 107,628

Fair Value Carrying amount December 31, December 31, December 31, 2010 2011 2011 Changes (Thousands of U.S. dollars) Rental properties Real estate including space used as rental properties $4,258,303 1,387,495 $182,842 (6,858) $4,441,145 1,380,636 $4,785,681 1,765,190

Notes: * The carrying values in the consolidated balance sheet are the amounts determined by deducting accumulated depreciation from the acquisition costs. * The major increase in the carrying value is due to the acquisition of real estate amounting to 19,869 million ($9,508 thousand) and the acquisition of real estate due to the increase of subsidiaries amounting to 9,805 million ($126,909 thousand). The major decrease in the carrying value is due to depreciation amounting to 7,554 million ($97,394 thousand) and the sales of real estate amounting to 6,616 million ($85,297 thousand). * The fair value is appraised principally by real estate appraisers, and the fair value of other is estimated in accordance with appraisal standards for valuing real estate.

41

22.

Investment and Rental Properties (continued)

The income or loss from rental properties and real estate including space used as rental properties for the year ended December 31, 2011 are as follows:
December 31, 2011 Rental income, net Rental cost (Millions of yen) 25,302 4,346 10,235 1,560

Rental income

Other, net

Rental properties Real estate including space used as rental properties

35,537 5,906

(1,284) (229)

Rental income

December 31, 2011 Rental income, net Rental cost (Thousands of U.S. dollars) $326,190 56,033 $131,948 20,114

Other, net

Rental properties Real estate including space used as rental properties

$458,139 76,148

$(16,558) (2,956)

Notes: * Rental income excludes the one from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for providing leasing services and operations management. * Impairment loss is a major component of Other, net for rental properties. Gain on sales of property is a major component of Other, net for real estate including space used as rental properties. The carrying values of these properties in the consolidated balance sheet, their changes during the current fiscal year and their fair value at December 31, 2010 are as follows:
Carrying value December 31, 2009 Fair value December 31, December 31, 2010 2010 Changes (Millions of Yen) 330,316 107,628 359,978 139,413

Rental properties Real estate including space used as rental properties

338,295 118,119

(7,979) (10,491)

Notes: * The carrying values in the consolidated balance sheet are the amounts determined by deducting accumulated depreciation from the acquisition costs. * The major decrease in the carrying value is due to the sales of real estate amounting to 16,823 million. * The fair value is appraised principally by real estate appraisers, and the fair value of other is estimated in accordance with appraisal standards for valuing real estate. 42

22. Investment and Rental Properties (continued) The income or loss from rental properties and real estate including space used as rental properties for the year ended December 31, 2010 are as follows:
December 31, 2010 Rental income, net Rental cost (Millions of yen) 15,640 4,769 8,962 1,764

Rental income

Other, net

Rental properties Real estate including space used as rental properties

24,603 6,533

(987) 941

Notes: * Rental income excludes the one from real estate including space used as rental properties that was used by the Company and some of its consolidated subsidiaries for providing leasing services and operations management. * Impairment loss is a major component of Other, net for rental properties. Gain on sales of property is a major component of Other, net for real estate including space used as rental properties. 23. Segment Information Business Segments Effective from the year ended December 31, 2011, the Company and its consolidated subsidiaries adopted Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (Statement No. 17 issued by ASBJ on March 27, 2009) and the Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (Guidance No. 20 issued by ASBJ on March 21, 2008). 1. Overview of Reportable Segments The reportable segments of the Company are the constituent units for which separate financial information is available and for which the Board of Directors conducts regular reviews to determine the allocation of management resources and assess business performance. The Company conducts business activities by establishing divisions corresponding to their line of business at the head office with the divisions formulating comprehensive strategies for the businesses that they operate. Therefore, the Companys comprises business segments are classified based on division and comprise four businesses, which include commercial properties, residential, brokerage, and other as the reportable segments. In the commercial properties business, the Company leases out and manages office buildings and commercial facilities. In the residential business, the Company sells condominiums and detached houses and leases out and manages condominiums. In the brokerage business, the Company sells and buys real estate and provides brokerage, real estate appraisal and consulting services. In other businesses, the Company operates the leisure business and the renovation business among others. 43

23. Segment Information (continued) 2. Calculation Methods for the Amounts of Revenue from Operations, Profit and Loss, Assets and Other Items by Reportable Segment The accounting methods for the reportable business segments are the same as those stated in the Significant Accounting Policies. Profits in the reportable segments are based on operating income. Intersegment revenue from operations or transfers is based on the current market value. 3. Information on Revenue from Operations, Profit and Loss, Assets, and Other Items by Reportable Segments
Year ended December 31, 2011 Commercial properties Residential Brokerage Other (Millions of yen) Total Adjustments (Notes a and b) Consolidated

Revenue from operations: Customers Intersegment Subtotal Costs and operating expenses Operating income Assets Other items: Depreciation Impairment losses on fixed assets Increase in property and equipment and intangible assets Amortization of goodwill Balance of goodwill

43,570 503 44,074 36,771 7,303

83,904 401 84,305 85,623 (1,317) 181,030 2,156 1,428

10,336 52 10,388 11,927 (1,538) 33,751 53 1

29,132 1,843 30,975 29,626 (1,349) 106,030 2,181 1,812

166,943 2,801 169,745 163,948 5,796

(2,801) (2,801)

166,943 166,943 167,622 (678)

3,673 (6,475) 65,240 94

511,963 4,509 132

832,777 8,901 3,374

898,017 8,995 3,374

8,069 30 518

10,117 (2) (8)

1,296 35 105

1,511 182 2,710

20,995 245 3,325

94

21,089 245 3,325

Year ended December 31, 2011 Commercial properties Residential Brokerage Other Total (Thousands of U.S. dollars) Adjustments (Notes a and b) Consolidated

Revenue from operations: Customers Intersegment Subtotal Costs and operating expenses Operating income Assets Other items: Depreciation Impairment losses on fixed assets Increase in property and equipment and intangible assets Amortization of goodwill Balance of goodwill

$ 561,695 6,496 568,191 474,043 94,148

$1,081,658 5,177 1,086,835 1,103,818 (16,982)

$133,248 679 133,927 153,765 $ (19,837) $435,115 $ 694 16

$ 375,567 23,761 399,328 381,932 17,396

$ 2,152,170 36,114 2,188,284 2,113,559 74,724

(36,114) (36,114)

$ 2,152,170 2,152,170 2,160,918 (8,748)

47,358 $ (83,473) $841,050 $ 1,213

$6,600,021 $ 58,137 1,704

$2,333,773 $ 27,795 18,416

$1,366,905 $ 28,125 23,363

$10,735,816 $ 114,753 43,501

$11,576,866 $ 115,966 43,501

104,023 388 6,769

130,433 (36) (108)

16,710 453 1,361

19,490 2,355 34,942

270,658 3,161 42,874

1,216

271,875 3,161 42,874

44

23. Segment Information (continued) Business Segments (continued)

Year ended December 31, 2010 Commercial properties Revenue from operations: Customers Intersegment Subtotal Costs and operating expenses Operating income Assets Other items: Depreciation Increase in property and equipment and intangible assets Residential Brokerage Other (Millions of yen) Total Adjustments Consolidated

79,123 705 79,828 57,347 22,480 565,451 4,632

85,613 289 85,902 80,033 5,868

13,500 371 13,871 11,551 2,320 28,052 12

20,037 2,020 22,057 21,607 450

198,274 3,386 201,660 170,539 31,121 874,688 8,111

(3,386) (3,386)

198,274 198,274 174,218 24,055 927,925 8,198

3,679 (7,065) 53,236 86

192,500 1,825

88,683 1,641

6,597

3,245

48

542

10,435

114

10,550

Note a:

Adjustments to segment operating income of (6,475) million ($(83,473) thousand) and (7,065) million consists of 295 million ($3,807 thousand) and (2) million of inter-segment eliminations and (6,770) million ($(87,280) thousand) and (7,063) million of corporate expenses for the years ended December 31, 2011 and 2010, respectively, which mainly represent the Companys general and administrative expenses that are not allocable to any of the reportable segments. Adjustments to segment assets of 65,240 million ($ 841,050 thousand) and 53,236 million consists of (38,516) million ($(496,535) thousand) and (39,098) million of inter-segment eliminations, 103,756 million ($1,337,585 thousand) and 92,335 million of corporate assets for the years ended December 31, 2011 and 2010, respectively.

Note b:

24. Subsequent Events The annual general meeting of shareholders on March 29, 2012 duly approved a resolution for a reduction in legal reserve and an appropriation of surplus, which had been approved at the meeting of the Board of Directors on February 14, 2012. The objectives of reducing the legal reserve and the appropriation of surplus are to eliminate retained earnings deficit. The reduction in legal reserve, based on Article 448-1 of the Corporate Law of Japan, involves a partial reversal of legal reserve and its transfer to other capital surplus. Accordingly, the amount of legal reserve was reduced by 13,901 million ($179,213 thousand). The appropriation of surplus, based on Article 452 of the Corporate Law of Japan, resulted in a reduction of the total amount of other capital surplus after the above transfer of 27,178 million ($350,367 thousand), increasing of retained earnings brought forward by 27,178 million ($350,367 thousand) in order to eliminate the same amount of retained earnings deficit. The schedule for the reduction in legal reserve and appropriation of other capital surplus is as follows: (1) Date of resolution of the Board of Directors: February 14, 2012 (2) Date of resolution of the annual general meeting of shareholders: March 29, 2012 (3) Effective date: March 29, 2012 45

Tokyo Tatemono Co., Ltd.

REPORT OF INDEPENDENT AUDITORS

Tokyo Tatemono Co., Ltd.

BOARD OF DIRECTORS

Chairman & Director Makoto Hatanaka President & Representative Director Hajime Sakuma Senior Managing Directors and Representative Directors Akisato Saruta Kazumasa Kato

Managing Directors Hisao Shibayama Tatsuo Usui Shuichiro Koshimizu Hitoshi Nomura Satoshi Fujimoto Directors Takeo Inui Shinji Yoshida Yoshiki Yanai Ichiro Kouno Tsutomu Hanada Kengo Fukui

Standing Corporate Auditors Masami Kubota Junichiro Ookawa Corporate Auditors Tetsuya Kawagishi Yutaka Shigemori
(as at May 31, 2012)

Tokyo Tatemono Co., Ltd.

CORPORATE DATA

Tokyo Tatemono Co., Ltd. Date of Establishment October 1, 1896 Capital 92,451 million Number of Employees 471 Number of Shareholders 18,996 (as at December 31, 2011) Head Office 9-9, Yaesu 1-chome, Chuo-ku, Tokyo 103-8285 Japan Tel. +81-3-3274-0111 Fax. +81-3-3274-0256 Branches Kansai Branch 7-12, Kitahama 3-chome, Chuo-ku, Osaka-shi, Osaka 541-0041 Japan Tel. +81-6-6202-0111 Fax. +81-6-6202-0298 Sapporo Branch 2-6, Kitananajyonishi 1-chome, Kita-ku, Sapporo-shi, Hokkaido 060-0807 Japan Tel. +81-11-717-0111 Fax. +81-11-717-5330 Kyushu Branch 8-49, Tenjin 2-chome, Chuo-ku, Fukuoka-shi, Fukuoka 810-0001 Japan Tel. +81-92-761-0110 Fax. +81-92-736-6586 Nagoya Branch 20-8, Nishiki 2-chome, Naka-ku, Nagoya-shi, Aichi 460-0003 Japan Tel. +81-52-202-0301 Fax. +81-52-202-0302 Principal Subsidiaries Tokyo Tatemono Real Estate Sales Co., Ltd. 25-1, Nishishinjyuku 1-chome, Shinjyuku-ku, Tokyo 163-0647 Japan Tel. +81-3-3342-6277 Fax. +81-3-3349-0822 Tokyo Tatemono Techno-Build Co., Ltd. 1-3, Taihei 4-chome, Sumida-ku, Tokyo 130-0012 Japan Tel. +81-3-5608-7654 Fax. +81-3-5608-7536 Tokyo Tatemono Amenity Support Co., Ltd. 1-3, Taihei 4-chome, Sumida-ku, Tokyo 130-0012 Japan Tel. +81-3-3621-3232 Fax. +81-3-3621-7262 Tokyo Tatemono Resort Co., Ltd. 9-9, Yaesu 1-chome, Chuo-ku, Tokyo 103-8285 Japan Tel. +81-3-3274-0865 Fax. +81-3-3275-1440 Nihon Parking Corporation 10-5, Nibancho, Chiyoda-ku, Tokyo 102-0084 Japan Tel. +81-3-3222-0015 Fax. +81-3-3222-0029

http://www.tatemono.com

Printed in Japan