PARK 24 Co., Ltd.: To Our Shareholders

Our basic philosophy:

Parking lots aren't just spaces for parking cars.

They are areas offering superb amenities for cities and city-dwellers!

Real estate price trends in the fiscal year under review seemed to indicate that Japan's economy was contracting at a slower rate. However, as asset values continue to drop, a major deflationary spiral seems increasingly possible. One effect of this has been a slowdown in foreign real estate investment, which had been stimulating the economy. Regular real estate transactions remain in the doldrums.
Throughout this period, however, awareness of the short-term parking facility industry and its ability to solve chronic parking shortages has increased. Park 24 parking facilities have become increasingly visible in the urban landscape as the industry has steadily grown.
In addition the parking equipment sales industry has had steady sales for the past five years despite the low level of private facility and equipment investment. However, the worsening recession has recently caused growth to turn negative. Annual capacity developed, in terms of number of vehicles handled, is down 3%. However, demand has remained steady for automated vertical parking facilities and this sector is in relatively good shape to await economic recovery.
Sales increased 11.4% from the previous fiscal year to \20.892 billion. Recurring profit was \1.51 billion, an increase of 11.5%. Net income rose 6.6% to \724 million.

Management Strategy

Park 24's "Times" coin-operated parking system was well-matched to driver needs and sales grew rapidly. We are pleased that Park 24 has made a significant (if low-profile) contribution to driving conditions in Japan. "Times" system parking continues to be installed as quickly as possible to reach Park 24's goal of 40,000 spaces. As this occurs, operations which are not profitable will be closed down in accordance with our "scrap and build" policy. Park 24 will also continue to expand our parking facility management business. Park 24 has developed model high-yield parking management operations to demonstrate to owners of parking businesses. Achieving this required large-scale facility investment which exceeded cash flow for fiscal years ending in October 1997 and in October 1998. However, future facilities investment will be kept within the cash flow as has been the policy in the past.
Park 24 also plans to use the "Times" brand and the merit of scale to develop high value-added parking operations in which parking is a service business. Beyond being simply a car-parking space, a parking facility has great convenience and utility. Park 24 intends to develop high added value parking facilities with new functions.
To deal with the problem of non-payment at unattended parking facilities Park 24 established the Times Service Co., Ltd. in November 1988. This company will efficiently monitor parking facilities to improve profitability. These strategies will both differentiate the Company from competition and improve return on investment.

Mid Term Outlook

As the economy returns to growth in the future, real estate assets will become increasingly liquid. In this environment development of parking operations which will provide stable, long-term revenues will be an urgent issue. Park 24 is taking several initiatives to meet this challenge.
The first is the Private Finance Initiative (PFI) in which private capital finances community parking facilities. Consultant companies are necessary to attract this capital, and Park 24's extensive facility management and know-how makes us attractive partners to several of the larger general construction companies. Joint agreements to develop these kind of projects will increase long-term stability and will also lower financing costs, which will result in increased stability and profitability. Park 24 is presently studying the possibility of establishing a special purpose company (SPC) and how best to structure the contracts for managing this type of facility.
By operating 40,000 parking spaces and exploiting the opportunities described above, Park 24 hopes to achieve contract cancellation of less than 10% initially and less than 5% over the long term. This will increase recurring profit to over 10% of total sales.

Shareholder Policy

Park 24's forward-looking policies ensure that shareholders earn acceptable returns. We declared a 1:1.3 stock split in October 1997. At the same time a \2 commemorative dividend was added to the usual \10 dividend per share. In the fiscal year ended October 1998, this commemorative dividend was converted into regular dividend and the dividend was increased \1. The total dividend was thus \13, up from \12 a year earlier. The Company intends to increase the dividend per share as profits increase.
We would like to take this opportunity to thank our stockholders for their continued support in developing the business.
Kiyoshi Nishikawa