The Daiwa House group occupies a significant position within the Japanese housing industry, with a 3.6% share of the total market for new housing construction starts — the number two position in both single-family houses and apartment buildings. Each year, the group supplies approximately 40,000 housing units to the market, including single-family houses, rental apartments, and condominiums. Since the Company's establishment, it has built an aggregate of 1,070,000 housing units. Housing operations account for approximately 66.6% of the group's total net sales.

As is well-known, Japan now has enough houses and condominiums to meet demand. In comparison with other advanced industrialized countries, however, the situation is still unsatisfactory in terms of housing floorspace per person and the average useful life of single-family houses.

Looking at prospects for the near future, although the number of children as a percentage of the total population is decreasing, while the ratio of elderly people is rising, the children of the baby boomers are now starting to buy their own homes. There is thus an urgent need for home construction that precisely meets the requirements of both the new housing market and the demand for renovation and rebuilding of existing homes, and we are responding proactively to this situation.

In response to demand for new housing, we are offering high-quality, long-lasting housing that can be passed on to the next generation, featuring the fruits of our proprietary technologies such as earthquake dampening systems and efficient insulation for outer walls. To further strengthen the Company's marketing system, which is designed to cater to the differing needs of local regions, we are planning to increase the number of offices from 86 at present to 100 by the end of fiscal 2005. In addition, we will make efforts to more effectively support the growth of our seven sales subsidiaries.

With regard to the rental apartment business, where demand on the rise, the Company is introducing new types of apartment building that offer even higher asset value to landowners. At the same time, we are collaborating with our affiliate Daiwaliving, which manages apartment buildings. We are aggressively marketing innovative land utilization plans for landowners under such systems as fixed-term land-lease contracts and land-lease contracts with building purchase riders, as these methods reduce investment risk. In these ways, we are broadening our field of business operation.

With respect to the stock of existing housing, we are in the process of setting up home renovation centers at all the Company's branches nationwide to tap the large potential market represented by the one million customers on our books, and thereby cultivate a fruitful new market. Over the long haul, we have good hopes of growing this business into a major earnings source.

In the field of commercial building construction, we are more actively marketing services focused on individually tailored customer solutions. In particular, our LOC (Land Owner Company) system, an asset management system that ties together the needs of landowners and companies wishing to open wholesale or retail outlets, has already proven its strong competitiveness with a track record to date of over 21,000 contracts. The system addresses equally the need by landowners for earnings from land assets and the need for profit expansion by retailing industry companies through the opening of new stores. Thanks to the high-level expertise of our staff and our extensive network of contacts, this service has gained an excellent reputation, and business is projected to continue improving for the foreseeable future.

Through the measures described above, the Daiwa House group is injecting new, added value into the Japanese housing industry and other related industrial sectors. Our short-term goals are to gain a 10% share of the new housing market and become the leading corporate group in the supply of comprehensive housing-related services.