Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

At June 1,September 3, 2007, there were approximately 154,875,000156,747,000 shares of Common Stock, $.01 par value, outstanding.

If one or more of the assumptions underlying our forward-looking statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by the forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking statements. This statement is provided as permitted by the Private Securities Litigation Reform Act of 1995.

When this report uses the words “we,” “us,” and “our,” they refer to Toll Brothers, Inc. and its subsidiaries, unless the context otherwise requires. Reference herein to “fiscal 2007,” “fiscal 2006,” and “fiscal 2005,” refer to our fiscal year ending October 31, 2007, and our fiscal years ended October 31, 2006 and October 31, 2005, respectively.

The accompanying unaudited condensed consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company”), a Delaware corporation, and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that the Company has effective control of the entity, in which case the entity would be consolidated.

In June 2006, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will be effective for the Company’s fiscal year beginning November 1, 2007. The Company is currently reviewing the effect FIN 48 will have on its financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158 requires the Company to (a) recognize in its statement of financial position the overfunded or underfunded status of a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation, (b) recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period, (c) measure defined benefit plan assets and defined benefit plan obligations as of the date of the Company’s statement of financial position, and (d) disclose additional information about certain effects on net periodic benefit costs in the upcoming fiscal year that arise from the delayed recognition of the actuarial gains and losses and the prior service costs and credits. SFAS 158 is effective for the Company’s fiscal year beginning November 1, 2007. The Company does not expect that adoption of SFAS 158 will have a material effect on its financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ request forrequires expanded information about the extent to which a company measures assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 will be effective for the Company’s fiscal year beginning November 1, 2008. The Company is currently reviewing the effect SFAS 157 will have on its financial statements.

The presentation of certain prior yearperiod amounts have been reclassified to conform to the fiscal 2007 presentation.

Inventory consisted of the following (amounts in thousands):

Construction in progress includes the cost of homes under construction, land and land development costs and the carrying costs of lots that have been substantially improved.

The Company capitalizes certain interest costs to inventory during the development and construction period. Capitalized interest is charged to cost of revenues when the related inventory is delivered for homes accounted for under the completed contract method of accounting or when the related inventory is charged to cost of revenues

Interest included in cost of revenues for the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006 was as follows (amounts in thousands):

Inventory write-downs and the expensing of costs that the Company believed not to be recoverable for the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006 were as follows (amounts in thousands):

At April 30, 2007, the fair value of the inventory in the 24 current communities subject to write-downs in the three-month period ended April 30, 2007, net of the $116.2 million of write-downs, was approximately $228.9 million. At JanuaryJuly 31, 2007, the fair value of the inventory in the 1828 current communities and owned land subject to write-downs in the three-month period ended JanuaryJuly 31, 2007, net of the $83.0$139.6 million of write-downs, was approximately $211.8$344.1 million.

The Company evaluated its land purchase contracts to determine if the selling entity is aentities were variable interest entityentities (“VIE”) and, if it is,they were, whether the Company iswas the primary beneficiary of the entity.entities . The Company does not possess legal title to the land, and its risk is generally limited to deposits paid to the seller. The sellers and creditors of the seller generally have no recourse against the Company. At April 30,July 31, 2007, the Company had determined that it was not the primary beneficiary of anyone VIE related to its land purchase contracts.contracts and recorded $16.3 million of inventory and $12.0 million of accrued expenses.

The Company has investments in and advances to several joint ventures with unrelated parties to develop land. Some of these joint ventures develop land for the sole use of the venture partners, including the Company, and others develop land for sale to the venture partners and to unrelated builders. The Company recognizes its share of earnings from the sale of home sites to other builders. The Company does not recognize earnings from home sites it

The Company has investments in and advances to two joint ventures with unrelated parties to develop luxury condominium projects, including for-sale residential units and commercial space. At April 30,July 31, 2007, the Company had investments in and advances to the joint ventures of $20.9$21.6 million, was committed to making up to $114.1$125.7 million of additional investments in and advances to the joint ventures if required by the joint ventures, and guaranteed $13.0$14.9 million of joint venture loans. At July 31, 2007, the joint ventures had an aggregate of $294.3 million of loan commitments, and had approximately $153.9 million borrowed against the commitments.

In fiscal 2005, the Company, together with the Pennsylvania State Employees Retirement System (“PASERS”), formed Toll Brothers Realty Trust Group II (“Trust II”) to be in a position to take advantage of commercial real estate opportunities. Trust II is owned 50% by the Company and 50% by PASERS. At April 30,July 31, 2007, the Company had an investment of $8.9$9.1 million in Trust II. In addition, the Company and PASERS each entered into subscription agreements that expire in September 2007, whereby each agreed to invest additional capital in an amount not to exceed $11.1 million if required by Trust II. Prior to the formation of Trust II, the Company used Toll Brothers Realty Trust Group (the “Trust”) to invest in commercial real estate opportunities.

The Company formed the Trust in 1998 to take advantage of commercial real estate opportunities. The Trust is effectively owned one-third by the Company; one-third by Robert I. Toll, Bruce E. Toll (and members of his family), Zvi Barzilay (and members of his family), Joel H. Rassman and other members of the Company’s current and former senior management; and one-third by PASERS (collectively, the “Shareholders”). At July 31, 2007, the Company had an investment of $6.7 million in the Trust. The Shareholders entered into subscription agreements whereby each group has agreed to invest additional capital in an amount not to exceed $1.9 million if required by the Trust. The subscription agreements expire in August 2008. At April 30, 2007, the Company had an investment of $6.5 million in the Trust. The Company provides development, finance and management services to the Trust and received fees under the terms of various agreements in the amounts of $985,000$1.5 million and $1,241,000$1.9 million in the six-monthnine-month periods ended April 30,July 31, 2007 and 2006, respectively, and $487,000$0.6 million and $594,000$0.7 million in the three-month periods ended April 30,July 31, 2007 and 2006, respectively. The Company believes that the transactions between itself and the Trust were on terms no less favorable than it would have agreed to with unrelated parties.

The Company’s investments in these entities are accounted for using the equity method.

During the three-month period ended January 31, 2007, due to the continued decline of the Detroit market, the Company re-evaluated the carrying value of goodwill that resulted from a 1999 acquisition in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”. The Company estimated the fair value of its assets in this market including goodwill. Fair value was determined based on the discounted future cash flow expected to be generated in this market. Based upon this evaluation and the Company’s expectation that this market will not recover for a number of years, the Company determined that the related goodwill was impaired. The Company

Accrued expenses at April 30,July 31, 2007 and October 31, 2006 consisted of the following (amounts in thousands):

The Company accrues for the expected warranty costs at the time each home is closed and title and possession have been transferred to the home buyer. Costs are accrued based upon historical experience. Changes in the warranty accrual for the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006 were as follows (amounts in thousands):

In October 2004, the Company established a defined benefit retirement plan effective as of September 1, 2004, which2004. The plan covers four current or former senior executives and a director of the Company. Effective as of February 1, 2006, the Company adopted an additional defined benefit retirement plan for nine other executives. The retirement plans are unfunded and vest when the participant has completed 20 years of service with the Company and reaches normal retirement age (age 62). Unrecognized prior service costs are being amortized over the period from the effective date of the plans until the participants are fully vested. The Company used a 5.68% and 5.65% discount rate in its calculation of the present value of its projected benefit obligations for the fiscal 2007 and 2006 periods, respectively, which represented the approximate long-term investment rate at October 31 of the preceding fiscal year for which the present value was calculated.

For the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006, the Company recognized the following costs related to these plans (amounts in thousands):

The fair value of each option award is estimated on the date of grant using a lattice-based option valuation model that uses assumptions noted in the following table. The lattice-based option valuation models incorporate ranges of assumptions for inputs; those ranges are disclosed in the table below. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock and other factors. The expected life of options granted is derived from the historical exercise patterns and anticipated future patterns and represents the period of time that options granted are expected to be outstanding; the ranges given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted-average assumptions and the fair values used for stock option grants for the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006 are as follows:

In the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006, the Company recognized the following costs and tax benefits related to its option plans (amounts in thousands):

The Company expects to recognize approximately $27.1 million of expense and $10.0 million of income tax benefit for the full fiscal 2007 year related to stock option awards. The Company recognized approximately $26.8 million of expense and $9.2 million of income tax benefit for the full fiscal 2006 year related to stock option awards.

The Company’s stock option plans for employees (including officers) and non-employee directors provide for the granting of incentive stock options (solely to employees) and non-qualified options with a term of up to ten years

Pursuant to the provisions of the Company’s stock option plans, participants are permitted to use the value of the Company’s common stock that they own to pay for the exercise of options. The Company received 4,172 shares with an average fair market value per share of $35.43 for the exercise of stock options in the sixnine months ended April 30,July 31, 2006. No shares were received for the exercise of stock options in the three months ended April 30,July 31, 2006 or in the sixnine months and three months ended April 30,July 31, 2007.

Stock option activity for the sixnine months ended April 30,July 31, 2007 and 2006 was as follows:

At April 30,July 31, 2007, the exercise price of approximately 5.6 million outstanding options was higher than the average closing price of the Company’s common stock on the New York Stock Exchange (the “NYSE”) for the three-month period ended April 30,July 31, 2007.

The Company realized a tax benefit from the exercise of non-qualified stockStock options outstanding and the exercise and disqualifying disposition of incentive stock options of approximately $3.7 million and $11.4 million in the six months ended April 30,exercisable at July 31, 2007 and 2006, respectively.were as follows:

The intrinsic value of options outstanding and exercisable is the difference between the fair market value of the Company’s common stock on the applicable date (“Measurement Value”) and the exercise price of those options that had an exercise price that was less than the Measurement Value. The intrinsic value of options exercised is the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price.

The intrinsic value of options exercised and the fair value of options which became vested in the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006 were as follows (amounts in thousands):

Information pertaining to the calculation of earnings per share for the six-monthnine-month and three-month periods ended April 30,July 31, 2007 and 2006 are as follows (amounts in thousands):

In March 2003, the Company’s Board of Directors authorized the repurchase of up to 20 million shares of its Common Stock, par value $.01, from time to time, in open market transactions or otherwise, for the purpose of providing shares for its various employee benefit plans. At April 30,July 31, 2007, the Company had approximately 12.1 million shares remaining to be purchased under this authorization. The Board of Directors did not fix an expiration date for the repurchase program.

At April 30,July 31, 2007, the aggregate purchase price of land parcels under option and purchase agreements, excluding parcels that the Company does not expect to acquire, was approximately $2.80$2.48 billion (including $1.18$1.21 billion of land to be acquired from joint ventures which the Company has investments in, made advances to or made loan guarantees on behalf of, in the aggregate amount of $287.3$295.7 million), of which it had paid or deposited approximately $156.9$154.8 million. The Company’s option agreements to acquire the home sites do not require the Company to buy the home sites, although the Company may, in some cases, forfeit any deposit balance outstanding

At April 30,July 31, 2007, the Company had outstanding surety bonds amounting to approximately $747.7$699.1 million, related primarily to its obligations to various governmental entities to construct improvements in the Company’s various communities. The Company estimates that approximately $279.8$264.1 million of work remains on these improvements. The Company has an additional $133.0$141.5 million of surety bonds outstanding that guarantee other obligations of the Company. The Company does not believe it is likely that any outstanding bonds will be drawn upon.

At April 30,July 31, 2007, the Company had agreements of sale outstanding to deliver 5,7464,997 homes with an aggregate sales value of approximately $4.22$3.71 billion, of which the Company has recognized $74.1$48.1 million of revenues with regard to a portion of such homes using the percentage of completion accounting method.

At April 30,July 31, 2007, the CompanyCompany’s mortgage subsidiary was committed to providingfund approximately $1.22$1.27 billion of mortgage loans. Approximately $318.2 million of these commitments, as well as $140.1 million of mortgage loans receivable, have “locked in” interest rates. The mortgage subsidiary has commitments from recognized outside mortgage financing institutions (“investors”) to itsacquire these locked-in loans and receivables. Our home buyers and to others. All loans with committed interest rates are covered by take-out commitments from third-party lenders, which minimizehave not “locked in” the Company’s interest rate risk.on the remaining $947.3 million of committments; the Company believes that currently there are adequate available resources in the primary and secondary mortgage markets to fund these commitments.

The Company has a $1.89 billion credit facility consisting of a $1.56 billion unsecured revolving credit facility and a $331.7 million term loan facility (collectively, the “Credit Facility”) with 35 banks, which extends to March 17, 2011. At April 30,July 31, 2007, interest was payable on borrowings under the revolving credit facility at 0.475% (subject to adjustment based upon the Company’s debt rating and leverage ratios) above the Eurodollar rate or at other specified variable rates as selected by the Company from time to time. At April 30,July 31, 2007, the Company had no outstanding borrowings against the revolving credit facility but had letters of credit of approximately $412.2$387.8 million outstanding under it, of which the Company had recorded $93.3$89.7 million as liabilities under land purchase agreements. Under the term loan facility, interest is payable at 0.50% (subject to adjustment based upon the Company’s debt rating and leverage ratios) above the Eurodollar rate or at other specified variable rates as selected by the Company from time to time. At April 30,July 31, 2007, interest was payable on the $331.7 million term loan at 5.84%5.82%. Under the terms of the Credit Facility, the Company is not permitted to allow its maximum leverage ratio (as defined in the agreement) to exceed 2.00 to 1.00 and was required to maintain a minimum tangible net worth (as defined in the agreement) of approximately $2.38$2.41 billion at April 30,July 31, 2007. At April 30,July 31, 2007, the Company’s leverage ratio was approximately 0.530.46 to 1.00 and its tangible net worth was approximately $3.52$3.56 billion. Based upon the minimum tangible net worth requirement, the Company’s ability to pay dividends and repurchase its common stock was limited to an aggregate amount of approximately $1.13$1.15 billion at April 30,July 31, 2007.