Financial Highlights

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

FY2003 Transaction volume Sales Total cost of sales Gross profit Operating income Net income Total assets Total shareholder's equity •••@ •@ 5,012 1,222 371 850 234 122 •••@ •@2,014 773

FY2004 •••@ •@6,421 1,680 577 1,103 319 174 •••@ •@2,303 1,080

FY2005 •••@ •@7,153 1,940 597 1,342 440 235 •••@ •@2,619 1,720

2006 Interim •••@ •@4,635 1,281 378 903 323 191 •••@ •@2,831 1,769

Per share data (yen):
Net income Cash dividends applicable to the year Shareholder's equity Number of employees •• 25,481.30 10,000 178.633.49 28 •• 32,287.60 15,000 201,498.13 28 •• 38,029.84 18,000 270,412.52 40 •• 10,236.55 94,374.06 45

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

Transaction volume
Millions of yen 7,153

Sales
Millions of yen

Operating income
Millions of yen 440 1,680 1,940 319 1,281 234 323

6,421 5,012

4,635

1,222

2003.5

2004.5

2005.5

2006.11 Interim

2003.5

2004.5

2005.5

2006.11 Interim

2003.5

2004.5

2005.5

2006.11 Interim

Net income
Millions of yen 235 174 112 191

Total assets
Millions of yen 2,619 2,303 2,014 2,831

Total shareholder's equity
Millions of yen 1,720 1,769

1,080 773

2003.5

2004.5

2005.5 2006.11 Interim

2003.5

2004.5
-1-

2005.5 2006.11 Interim

2003.5

2004.5

2005.5 2006.11 Interim

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

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.

How to Consign
The flow from getting contact to realization is as follows. PHASE 1: Please Contact Us
you, we will assign an appropriate staff member to take care of your matters.

1 2

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

PHASE 2: Reserve Price

We will consult with you about a reserve price (the

PHASE 3: Contact

3

minimum price you are willing to accept and below which a lot will not be sold) in accordance with the estimate committee's assessment.

With the exception of the appraisal fee, no payments are required until a contract is signed. We ask that you keep the contract documents in a safe place.

4

PHASE 4: Showing of Article

PHASE 5: Auction
Each item is placed up for auction one at a time. The auctioneer will solicit bids until the hammer price is decided.

5

We will first take the article to prospective buyers who may not be able to attend the preview or attend the auction itself.

6

PHASE 6: The Buying and Selling Approval

We provide payment of the amount due (hammer price

•œ Attention •@
•@- Please bear the carrying cost to our company •@ and the insurance. - Please inquire about the cost when it becomes no successful bid.

minus expenses such as consignment fee and storage charges) after confirming payment by the buyer, who has 10 days after the auction to convey the funds.

PAYMENT
•¡ Consignment sale fee: 10.5% of hammer price (tax included)
EXAMPLE Hammer price Consignment sale fee Total paid consignor 1,000,000 yen 105,000 yen 895,000 yen

OTHER CHARGES
•¡ Storage fee: 0.7% per year
EXAMPLE Hammer price Storage fee (60 days) Publishing fee 1,000,000 yen 1,150 yen 5,000 yen - 30,000 yen

How to Buy
The flow from joining our auction to delivery of the property is as follows. 1 2

PHASE 1: Subscribe to Auction Catalogues
3 weeks before an auction, the catalogue is delivered to all subscribers, allowing them to see the articles offered. Those catalogues are valuable resources in understanding the current market.

PHASE 2: Preview

Prospective buyers are strongly advised to personally examine the property at the preview. All properties are exhibited.

PHASE 3: Apply for Entry Ticket
Entry tickets are provided free of charge. Please note that to prevent money laundering, we ask you to provide us with information that will confirm your identity, such as a passport.

3

4

PHASE 4: Absentee Bid

When you cannot unavoidably come to the auction hall, please use an absentee bid form.

6 5

PHASE 6: Buyer's Premium

PHASE 5: Successful Biduction

The buyer's premium and consumption tax totals 15.75 % on the first 1,000,000 yen of the hammer price plus 10.5 % on any remainder above 1,000,000 yen of the hammer price. EXAMPLE

Successful bidders are asked to examine the confirmation documents carefully and then sign. Successful bidders are to pay the final bid price plus the buyer's premium, in addition to consumption tax.

PHASE 7: Payment

7

Hammer price Buyer's premium on the first Above 1,000,000 yen

3,000,000 yen 1,000,000 yen 2,000,000 yen 157,500 yen (15.75%) 210,000 yen (10.50%)

- Buyers must pay within 10 calendar days of the sale. - Payment can be made into our bank account, by cash, or by bank cheque. - After the payment is complete, the property can be collected one day after the auction at SAA office. - The receipt handed to buyers at the time of sale must be shown in order to take possession of the work. - Those who wish the item to be delivered can fill out the request from enclosed with the bill.

- Total 3,367,500 yen

8

PHASE 8: Auction Result

The auction results will be appearing after the auction. Please visit our website (http://www.shinwa-art.com/). There are also filled in information such as the latest auction schedule, the exhibition, the participation procedures, and the art academies.

PHASE 9: Delivery
Please direct the method of receiving the work in the

9

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.

Balance Sheets
Millions of Yen 2001 Assets Current assets Cash and time deposits Notes and accounts receivable-trade Auction deferred payments Merchandise Prepaid money Allowance for doubtful accounts Others Fixed assets Tangible fixed assets Investments and others Total assets Liabilities Current liabilities Accounts payable Auction unpaid money Short-term borrowings Corporate bond to which repayment date comes within one year Unpaid consumption tax etc. Others Fixed liabilities Corporate bonds Others Total liabilities Capital Capital stock Legal reserve Other surplus Total capital Capital stock Capital surplus Earned surplus Total shareholder’s equity Total 380 21 178 580 1,613 435 24 213 674 1,462 435 337 773 2,014 530 95 454 1,080 2,303 760 372 588 1,720 2,619 893 3 401 369 55 63 139 139 1,033 764 179 510 73 24 24 788 989 693 62 130 102 251 220 31 1,240 1,203 540 285 220 52 104 19 19 1,223 876 317 300 131 127 22 22 898 1,438 652 26 251 145 336 •¢ 0 27 174 31 143 1,613 1,340 595 16 156 37 478 •¢ 0 55 121 22 99 1,462 1,894 780 78 480 49 469 •¢ 2 38 119 17 102 2,014 2,070 1,446 16 126 17 416 •¢ 1 48 232 117 115 2,303 2,440 782 243 118 197 992 •¢ 4 112 178 107 71 2,619 2002 2003 2004 2005

Earnings Statements
Millions of Yen 2000/6-2001/5 Transaction volume Sales Auction business income Other business income Cost of sales Gross margin Selling, general and administrative Selling, general and administrative expenses Operating income Non-operating income Non-operating expenses Recurring profit Special gains Extraordinary loss Income before income taxes Corporation tax, council tax, and business tax Adjustment of corporation tax, etc. Net income Undistributed profit 4,928 1,105 1,089 15 371 734 533 200 10 9 202 129 72 101 •¢ 68 38 178 2001/6-2002/5 4,633 1,158 1,013 144 458 699 560 139 5 14 129 129 12 47 70 213 2002/6-2003/5 5,012 1,222 1,193 29 371 850 616 234 5 8 231 231 135 •¢ 27 122 310 2003/6-2004/5 6,421 1,680 1,354 326 577 1,103 784 319 3 10 311 14 15 311 121 14 174 422 2004/6-2005/5 7,153 1,940 1,527 413 597 1,342 902 440 2 32 410 0 409 185 •¢ 11 235 550

Cash Flows
Millions of Yen 2002/6-2003/5 Cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the fiscal year Cash and cash equivalents at May 31 439 •¢ 64 •¢ 249 125 2003/6-2004/5 439 •¢ 144 370 665 2004/6-2005/5 •¢ 848 •¢ 15 200 •¢ 664

315 440

440 1,106

1,106 442

Corporate Data
Head office

(As of November 30, 2005)

SHINWA ART AUCTION CO., LTD.
Gyosei Bldg. 2F, 7-4-12 Ginza, Chuou-ku, Tokyo JAPAN 104-0061 TEL +81 (0)3 3569-0005 www.shinwa-art.com Establishment Capital stock President & CEO Number of employees Business domain 1989. 6. 15 760 million yen Yoichiro Kurata 45 Auction business Private sales Branch Osaka branch

Investors Information
Stock listing Code number Issued and Outstanding Number of Shareholders 2437 18,750 1,544

(As of November 30, 2005)

Osaka stock exchange Nippon new market-Hercules

Major Shareholders
Shares Shinwa Art Holdings Hyogen MIZUTANI, Dai Taimei Gallery YAMAMURA, Masayasu Osaka Securities Finance Company LEE, SungYoung KURATA, Yoichiro Eizendo Sho corporation 3,600 1,215 966 780 726 597 515 423 375 370 Voiting Rights, as % of Total 19.20 6.48 5.15 4.16 3.87 3.18 2.74 2.25 2.00 1.97

Company History
AUG JUN MAR JUL SEP JUN MAY SEP APR JUN JUN JUL AUG DEC MAR DEC MAY JUL FEB 1987 1989 1990 1990 1990 1991 1992 1996 1997 1999 2000 2000 2000 2000 2001 2001 2002 2002 2003 Launched "Shinwa-kai" art dealers' market. Established "Shinwa-kai Co., Ltd."with paid-in capital of 100 million yen. Moved the headquarters to 8-5-4 Ginza Chuo-ku Acquired antiquary's permission Held first "Shinwa Art Auction". Changed company named to "Shinwa Art Auction Co., Ltd.". Paid-in capital increased to 300 million yen. Held first "Modern Ceramic Auction". Paid in capital increased to 360 million yen. Held first "Japanese tea utensils Auction". Held first "Modern Pictures, Lithographs and Craftwork Auction (Now it's called Modern Art Part‡UAuction)". Separated "Shinwa-kai" art dealers' market from "Shinwa Art Auction Co., Ltd." Moved the headquarters to 4-2-15 Ginza Chuo-ku Paid-in capital increased to 380 million yen. KISHIDA, Ryusei "Reiko portrait" was made a successful bid for 360 million yen at the 40th Modern Art Auction. Held first "Wine Auction". Paid-in capital increased to 435 million yen. Held first "Jewellery Auction" at "Modern Art Part‡U Auction". Held Charity Auction, 50th "Modern Art Auction". Held "Shinwa Art Auction NAKAGAWA, Kazumasa Collection", and Vincent van Gogh "Farmerette" was made a successful bid for 66 million yen. MAY JUL DEC DEC JUN APR APR APR SEP DEC 2003 2003 2003 2003 2004 2004 2005 2005 2005 2005 Held "Jewellery&Watch Auction". Held "Antique Special Auction". Held "Western Antique Auction" Moved the headquarters to 7-4-12 Ginza Chuo-ku Opened Shinwa Art Museum in the headquarters' building Concluded business tie-up concerning the private banking business with Resona Bank. Paid-in capital increased to 735 million yen. Listed in the Osaka Stock Exchange Opened Osaka branch. Paid-in capital increased to 760 million yen

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