Financial Highlights

SHINWA ART AUCTION CO., LTD. (Years Ended May 31, 2003 through 2005 and Interim 2006)
Millions of yen

FY2003 FY2004 FY2005 2006 Interim

Transaction volume ￥    5,012 ￥   6,421 ￥   7,153 ￥   4,635

Sales 1,222 1,680 1,940 1,281

Total cost of sales 371 577 597 378

Gross profit 850 1,103 1,342 903

Operating income 234 319 440 323

Net income 122 174 235 191

Total assets ￥   2,014 ￥   2,303 ￥   2,619 ￥   2,831

Total shareholder's equity 773 1,080 1,720 1,769

Per share data (yen):

Net income ￥ 25,481.30 ￥ 32,287.60 ￥ 38,029.84 ￥ 10,236.55

Cash dividends applicable to the year 10,000 15,000 18,000 -

Shareholder's equity 178.633.49 201,498.13 270,412.52 94,374.06

Number of employees 28 28 40 45

(Notes) We have done the stock splits of three stocks a stock dated July 20, 2005.

Transaction volume Sales Operating income

Millions of yen Millions of yen Millions of yen

7,153 440
6,421 1,940
1,680 319 323
5,012
4,635
1,222 1,281 234

2003.5 2004.5 2005.5 2006.11 2003.5 2004.5 2005.5 2006.11 2003.5 2004.5 2005.5 2006.11
Interim Interim Interim

Net income Total assets Total shareholder's equity

Millions of yen Millions of yen Millions of yen

235 2,831
2,619 1,720 1,769
191 2,303
174 2,014
1,080
112
773

2003.5 2004.5 2005.5 2006.11 2003.5 2004.5 2005.5 2006.11 2003.5 2004.5 2005.5 2006.11
Interim Interim Interim
-1-
Message from the President

Working to Create & Expand a Fair Auction Market:

An Imperative Part of Distribution Infrastructure

in 21st Century Japan

Although the history of auction markets dates back 300 years in the West, this figure is a mere 15 years for Japan,
and as such, is one market area predicted to grow in the 21st Century. Clearly, the creation of a social platform
centered on the liquidation of high-quality items, especially artworks, has just begun.
Shinwa Art Auction is the first business in Japan to hold consecutive auctions for liquidating artworks in which the
general public can participate freely, and has worked hard to breathe new life into artwork trading, an industry
previously thought to be unpredictable in terms of business practices and price formation. Based on the corporate
philosophy, "Creating and Expanding a Fair and Reliable Auction Market," the Company has carried out reforms
relating to the way in which items pass from seller to buyer, and as a result, currently occupies an overwhelming
share of all successful bids placed within the artwork trading market. In other words, Shinwa Art Auction is leading
the way as the number one open auction corporation in Japan.
The Japanese auction market has experienced much growth and is expected to expand rapidly in the future, and
in order to support this, we must educate consumers so that they are able to determine the value of artworks on their
own, without having prices imposed on them. In preparation for this type of market expansion, Shinwa Art Auction
has not just taken a modern approach to corporate management, but has also thoroughly invested the development
of a fair and reliable auction market from the perspective of its customers. All of the Shinwa Art Auction's staff
understand the importance of retaining a reputation as an auction house that only handles the very best quality and
finest works of art, and the Company has increased its brand status within the industry. By utilizing our know-how
and experience in artworks to enter into new auction areas, such as fancy jewelry, vintage wines and antiques, we
have established a most solid business portfolio.
We have held many serious discussions and debates about the creation of a market for liquidating high-quality
items, a market much needed in Japan, and the establishment of a new distribution infrastructure within that market.
Of course, controversy still surrounds some issues, but in the end, we must arrive at a conclusion and proceed
together as a company. This way of thinking forms the cornerstone for Shinwa Art Auction's operations.
We ask for your continued understanding and support.

Yoichiro Kurata
President and Chief Executive Officer

-２-
Business Domain

The main axis of the business is a continuous project and management of the auction on the artworks.

Using the know-how and the marketing skill cultivated

by the auction on the artworks, we will expand the

auction item to the areas such as the jewel, wine, and

antiques. Moreover, we works on the personnel

training, and aims at the establishment of the position

as the overall auction house where a variety of large

amount of money items are handled.

■ AUCTION BUSINESS

Modern Art Auction

This is the main auction featuring works by Japanese and international artists.
Modern Ceramic Auction
The auction features ceramics, lacquerware, and bamboo work by Japanese artist.
Modern Art Partll Auction
Pictures and craft work of more modest prices are included in this auction.
Other Auctions
Special auctions are held several times a year featuring items such as wine,
Japanese tea utensils, jewellery, and watches.

■ OTHER BUSINESS

Private sales
We support an individual negotiation for the customer who hopes for dealings
excluding the auction.

An auction system that benefits sellers & buyers

Although the global artwork trading industry is said to be

unpredictable, Shinwa Art Auction employs two methods

of disclosure intrinsic to the auction market ?

"gprice disclosure" and "gproduct disclosure" with the aim

of establishing a fair and transparent artwork trading

system. While pursuing the highest degree of satisfaction

and trust of both buyers and sellers, we plan to further

infiltrate and expand the auction market in Japan.

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How to Consign
The flow from getting contact to realization is as follows.

PHASE 1: Please Contact Us 1

Please contact us by phone or e-mail. After hearing from

2
you, we will assign an appropriate staff member PHASE 2: Reserve Price
to take care of your matters.
We will consult with you about a reserve price (the
minimum price you are willing to accept and below which
3 a lot will not be sold) in accordance with the estimate
PHASE 3: Contact
committee's assessment.
With the exception of the appraisal fee, no payments are
required until a contract is signed. We ask that you keep
4
the contract documents in a safe place.
PHASE 4: Showing of Article

We will first take the article to prospective buyers who may

5 not be able to attend the preview or attend the auction
PHASE 5: Auction
itself.
Each item is placed up for auction one at a time. The
auctioneer will solicit bids until the hammer price is
decided. 6
PHASE 6: The Buying and Selling Approval

We provide payment of the amount due (hammer price

minus expenses such as consignment fee and storage
● Attention  
charges) after confirming payment by the buyer, who has
 - Please bear the carrying cost to our company 10 days after the auction to convey the funds.
  and the insurance.

- Please inquire about the cost when it becomes

no successful bid.

PAYMENT

■ Consignment sale fee: 10.5% of hammer price (tax included)

EXAMPLE
Hammer price 1,000,000 yen
Consignment sale fee 105,000 yen
Total paid consignor 895,000 yen

OTHER CHARGES

■ Storage fee: 0.7% per year

EXAMPLE
Hammer price 1,000,000 yen
Storage fee (60 days) 1,150 yen
Publishing fee 5,000 yen - 30,000 yen

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How to Buy
The flow from joining our auction to delivery of the property is as follows.

1
PHASE 1:
Subscribe to Auction Catalogues
2
3 weeks before an auction, the catalogue is delivered
PHASE 2: Preview
to all subscribers, allowing them to see the articles Prospective buyers are strongly advised to personally
offered. Those catalogues are valuable resources in examine the property at the preview. All properties are
understanding the current market. exhibited.

3 4
PHASE 3: Apply for Entry Ticket
PHASE 4: Absentee Bid
Entry tickets are provided free of charge. Please note
When you cannot unavoidably come to the auction hall,
that to prevent money laundering, we ask you to
please use an absentee bid form.
provide us with information that will confirm your
identity, such as a passport.
6
PHASE 6: Buyer's Premium
PHASE 5: Successful Biduction 5
The buyer's premium and consumption tax totals 15.75 %
Successful bidders are asked to examine the confirmation on the first 1,000,000 yen of the hammer price plus 10.5
documents carefully and then sign. Successful bidders are % on any remainder above 1,000,000 yen of the hammer
to pay the final bid price plus the buyer's premium, in price.
addition to consumption tax.
EXAMPLE
Hammer price 3,000,000 yen
PHASE 7: Payment 7 Buyer's premium on the first 1,000,000 yen 157,500 yen (15.75%)
Above 1,000,000 yen 2,000,000 yen 210,000 yen (10.50%)
- Buyers must pay within 10 calendar days of the sale.
- Total 3,367,500 yen
- Payment can be made into our bank account, by cash,
or by bank cheque.
8
- After the payment is complete, the property can be PHASE 8: Auction Result
collected one day after the auction at SAA office.
The auction results will be appearing after the auction.
- The receipt handed to buyers at the time of sale must Please visit our website (http://www.shinwa-art.com/).
be shown in order to take possession of the work.
There are also filled in information such as the latest
- Those who wish the item to be delivered can fill out the auction schedule, the exhibition, the participation
request from enclosed with the bill. procedures, and the art academies.

PHASE 9: Delivery 9

Please direct the method of receiving the work in the

delivery request form. The cost of the delivery and packing
are loads of the successful bidder of all. It will reach hand
in about ten days after payment is confirmed.

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Balance Sheets
Millions of Yen

2001 2002 2003 2004 2005

Assets

Current assets 1,438 1,340 1,894 2,070 2,440

Cash and time deposits 652 595 780 1,446 782

Notes and accounts receivable-trade 26 16 78 16 243

Auction deferred payments 251 156 480 126 118

Merchandise 145 37 49 17 197

Prepaid money 336 478 469 416 992

Allowance for doubtful accounts △0 △0 △2 △1 △4

Others 27 55 38 48 112

Fixed assets 174 121 119 232 178

Tangible fixed assets 31 22 17 117 107

Investments and others 143 99 102 115 71

Total assets 1,613 1,462 2,014 2,303 2,619

Liabilities

Current liabilities 893 764 989 1,203 876

Accounts payable 3 - - - -

Auction unpaid money 401 179 693 540 317

Short-term borrowings 369 510 62 285 300

Corporate bond to which repayment

- - - 220 -
date comes within one year

Unpaid consumption tax etc. 55 - 130 52 131

Others 63 73 102 104 127

Fixed liabilities 139 24 251 19 22

Corporate bonds - - 220 - -

Others 139 24 31 19 22

Total liabilities 1,033 788 1,240 1,223 898

Capital

Capital stock 380 435 - - -

Legal reserve 21 24 - - -

Other surplus 178 213 - - -

Total capital 580 674 - - -

Capital stock - - 435 530 760

Capital surplus - - - 95 372

Earned surplus - - 337 454 588

Total shareholder’s equity - - 773 1,080 1,720

Total 1,613 1,462 2,014 2,303 2,619

-６-
Earnings Statements
Millions of Yen

2000/6-2001/5 2001/6-2002/5 2002/6-2003/5 2003/6-2004/5 2004/6-2005/5

Transaction volume 4,928 4,633 5,012 6,421 7,153

Sales 1,105 1,158 1,222 1,680 1,940

Auction business income 1,089 1,013 1,193 1,354 1,527

Other business income 15 144 29 326 413

Cost of sales 371 458 371 577 597

Gross margin 734 699 850 1,103 1,342

Selling,
Selling, general
general and
and administrative
administrative
533 560 616 784 902
expenses

Operating income 200 139 234 319 440

Non-operating income 10 5 5 3 2

Non-operating expenses 9 14 8 10 32

Recurring profit 202 129 231 311 410

Special gains - - - 14 -

Extraordinary loss 129 - - 15 0

Income before income taxes 72 129 231 311 409

Corporation tax, council tax, and

101 12 135 121 185
business tax

Adjustment of corporation tax, etc. △68 47 △27 14 △11

Net income 38 70 122 174 235

Undistributed profit 178 213 310 422 550

Cash Flows
Millions of Yen

2002/6-2003/5 2003/6-2004/5 2004/6-2005/5

Cash flow from operating activities 439 439 △848

Cash flows from investing activities △64 △144 △15

Cash flows from financing activities △249 370 200

Net increase (decrease) in cash and

125 665 △664
cash equivalents

Cash and cash equivalents at

315 440 1,106
beginning of the fiscal year

Cash and cash equivalents at May 31 440 1,106 442

-７-
Corporate Data (As of November 30, 2005)

SHINWA ART AUCTION CO., LTD.

Head office Gyosei Bldg. 2F, 7-4-12 Ginza, Chuou-ku,

Tokyo JAPAN 104-0061

TEL +81 (0)3 3569-0005

www.shinwa-art.com

Establishment 1989. 6. 15

Capital stock 760 million yen

President & CEO Yoichiro Kurata

Number of employees 45

Business domain Auction business

Private sales
Branch Osaka branch

Investors Information (As of November 30, 2005)

Stock listing Osaka stock exchange Nippon new market-Hercules

Code number 2437

Issued and Outstanding 18,750

Number of Shareholders 1,544

Major Shareholders
Shares Voiting Rights, as % of Total

Shinwa Art Holdings 3,600 19.20

Hyogen 1,215 6.48
MIZUTANI, Dai 966 5.15
Taimei Gallery 780 4.16
YAMAMURA, Masayasu 726 3.87
Osaka Securities Finance Company 597 3.18
LEE, SungYoung 515 2.74
KURATA, Yoichiro 423 2.25
Eizendo 375 2.00
Sho corporation 370 1.97

-８-
Company History
AUG 1987 Launched "Shinwa-kai" art dealers' market.

JUN 1989 Established "Shinwa-kai Co., Ltd."with paid-in capital of 100 million yen.

MAR 1990 Moved the headquarters to 8-5-4 Ginza Chuo-ku

JUL 1990 Acquired antiquary's permission

SEP 1990 Held first "Shinwa Art Auction".

JUN 1991 Changed company named to "Shinwa Art Auction Co., Ltd.".

MAY 1992 Paid-in capital increased to 300 million yen.

SEP 1996 Held first "Modern Ceramic Auction". Paid in capital increased to 360 million yen.

APR 1997 Held first "Japanese tea utensils Auction".

JUN 1999 Held first "Modern Pictures, Lithographs and Craftwork Auction (Now it's called Modern Art PartⅡAuction)".

JUN 2000 Separated "Shinwa-kai" art dealers' market from "Shinwa Art Auction Co., Ltd."

JUL 2000 Moved the headquarters to 4-2-15 Ginza Chuo-ku

AUG 2000 Paid-in capital increased to 380 million yen.

DEC 2000 KISHIDA, Ryusei "Reiko portrait" was made a successful bid for 360 million yen at the 40th Modern Art Auction.

MAR 2001 Held first "Wine Auction".

DEC 2001 Paid-in capital increased to 435 million yen.

MAY 2002 Held first "Jewellery Auction" at "Modern Art PartⅡ Auction".

JUL 2002 Held Charity Auction, 50th "Modern Art Auction".

FEB 2003 Held "Shinwa Art Auction NAKAGAWA, Kazumasa Collection",

and Vincent van Gogh "Farmerette" was made a successful bid for 66 million yen.

MAY 2003 Held "Jewellery&Watch Auction".

JUL 2003 Held "Antique Special Auction".

DEC 2003 Held "Western Antique Auction"

DEC 2003 Moved the headquarters to 7-4-12 Ginza Chuo-ku

JUN 2004 Opened Shinwa Art Museum in the headquarters' building

APR 2004 Concluded business tie-up concerning the private banking business with Resona Bank.

APR 2005 Paid-in capital increased to 735 million yen.

APR 2005 Listed in the Osaka Stock Exchange

SEP 2005 Opened Osaka branch.

DEC 2005 Paid-in capital increased to 760 million yen

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