Corporate Information

Corporate Data

Members of Board of Directors(As of June 29, 2006)

Company Name: Leopalace21 Corporation
Head Office: 2-54-11 Honcho, Nakano-ku, Tokyo 164-0012
TEL: +81-3-5350-0001 (Main Line)
President and CEO: Tomio Oba
Established: August 17, 1973
Common Stock: ¥55,640.66 million
Number of Shares Outstanding: 159.54 million shares
Operations: Construction, leasing, and sales of apartments, condominiums, and residential
housing; development and operation of resort facilities; hotel business;broadband business; Silver business, etc.
Number of Employees: 6,868(Consolidated basis) 5,708 (Non-consolidated basis)
Building lots and buildings transaction business license:
Minister of Land, Infrastructure and Transport Permit (8) No. 2846
Construction business permit:
Minister of Land, Infrastructure and Transport Permit (Special-15) No. 11502
Registration of Class-1 architect office: Tokyo Governor Registration 36122
Loan business registration: Kanto Finance Bureau Chief Registration (7) No. 00581
Memberships: Japan Association of Home Suppliers
Japan Prefabricated Construction and Manufacturers Association

Corporate Structure

President and CEO
Senior Managing Director
Senior Managing Director
Senior Managing Director
Senior Managing Director
Executive Director ofManagement
Executive Director ofManagement
Executive Director ofManagement
Director
Director
Director
Director
Director
Director
DirectorStanding Auditor
Standing Auditor
Standing Auditor
Auditor(As of June 29, 2006)

Investors Guide 2006

Tomio Oba
Yoshiteru Kitagawa
Eisei Miyama
Kuniaki Sasahara
Akihiko Umeda
Jiro Nishida

For the year ended March 2006

Yoshinori Uehara
Hitoshi Yamaguchi
Keiichiro Shinozaki
Kou Kimura
Yasuhide Sakaguchi
Yoshikazu Miike
Satoshi Abe
Yousuke Kitagawa
Tadahiro Miyama
Yoshitaka Kouda
Masaru Katayama
Katsumi Furuhata
Eiichi Dobashi

Shareholder Composition(As of March 31, 2006)

Leopalace21 Corporation
Apartment Construction Subcontracting Division
Toyo Miyama Kogyo Co., Ltd.
(Manufacturing and Sales of Housing Materials)(As of March 31, 2006)
Securities Companies
693 thousand shares
0.43%( 50.0%)

Leasing Division
SPC Leopalace REIT (Real-Estate Leasing)( 37.5%)SPC Leopalace REIT II (Real-Estate Leasing)( 33.3%)

SPC Leopalace REIT III (Real-Estate Leasing)( 25.0%)Business Corporations andother legal entities
11,849 thousand shares
7.43%

Individuals and Other
42,879 thousand shares
26.88%

Foreign Corporations
59,922 thousand shares
37.56%

Financial Institutions
44,034 thousand shares
27.70%

Major Shareholders (Top 10)(As of March 31, 2006)

Hotel and Resort Related Division
MDI Guam Corporation(Hotel/resort operations in Guam)( 100.0%)

Miyama Travel, Ltd.

( 100.0%)(Travel Agency)

Trianon Palace Hotel De Versailles S.A. (France)(Hotel operations in France)

No. of shares% ofoutstanding
sharesYusuke Miyama

23,399,774

14.66%The Master Trust of Japan ,Ltd.
(Trust Account)

13,452,500

8.43%Japan Trustee Service Bank, Ltd. (for trust)

11,087,300

6.94%

State Street Bank and Trust Company

6,215,636

3.89%

MDI Corporation

5,000,000

3.13%

BBH (Lux) For Fidelity Funds - Japan Fund

3,011,500

1.88%

Toyo Kanetsu K.K.

2,745,900

1.72%

Name of shareholder( 100.0%)

Other Business
DIA KENSETSU Co., LTD.
(Condominium developer/seller)( 36.4%)

Domestic Consolidated Subsidiary
Foreign Consolidated Subsidiary
Equity-method affiliates
Note 1: Numbers within parentheses represent equity stakes held by Leopalace21.
Note 2: Apart from the companies listed above, there are three companies (100% owned
indirectly by Leopalace21) with operational permits

Trust & Custody Services Bank, Ltd.
(Trust Account B)

2,611,100

1.63%

HSBC Fund Services, Sparx AssetManagement Co., Ltd

2,477,200

1.55%

The Chase Manhattan Bank, N. A. London
SECS Lending Omnibus Account

2,265,313

1.41%

Leopalace21 Corporation
2-54-11 Honcho, Nakano-ku, Tokyo 164-0012

TEL: +81-3-5350-0001 (Main Line) FAX: +81-3-5350-0058

Leopalace21 Corporation
Code No. 8848
http://www.leopalace21.co.jp

Message from President

Business Concept

Under our corporate slogan of “United Spirit,” all Leopalace21
employees are united in our attempts to renew management, while
continually working to create new value.

New Slogan
A single dream for a united purpose

Ever since our establishment in 1973 Leopalace21 has cast aside conventional business ideas as aforerunner in the housing industry. We have consistently strived to create new value creation via
development and introduction of innovative products and services. Our 31st anniversary in March
2004 saw the Company listed on the First Section of the Tokyo Stock Exchange, and as of March
2006 we have completed the application of accounting for impaired assets. It is on this firm footingthat will see us standing at a new start line as of March 2007, underpinned with a new financial base.

A United Spirit to meet today’s constant demand for new value andconstant change
A united purpose to fulfill our customers’ dreams

Based on the decision of the Company’s board of directors it has fallen to me, Tomio Oba, to take on

A united purpose for building a comfortable future

the position of president and CEO as of June 1 and act in steering the management of LeoPalace21

A united purpose aiming at a new goal

during this period of transition. My appointment also coincided with the Company moving to a new

A united purpose of both employees and customers at the new LeoPalace21

management system from June of this year based on a three division set-up, which is aimed at fully

to realize a rich and comfortable lifestylestrengthening internal control. Together with starting the Evolution of Corporate Values as a general
President

Tomio Oba

consumer support enterprise we will also strive to maximize enterprise value that fulfills ourinvestors’ expectations.

Medium-term Operating Strategy

The current business environment is currently witnessing unprecedented large-scale change, which
is off-set against a background of changes to employment conditions and population dynamics thathave seen a diversification in peoples’ lifestyles and sense of values. This is in addition to the rapid
technical innovations that continue to take place throughout all industries, together with thedevelopment of social infrastructure such as information technology. Meanwhile, enterprises andsociety have been groping for new ways to coexist that suit the next-generation environment.
Our Company is currently promoting management that can rise to meet these changes to ourbusiness environment, steadily expanding the scale of our core business operations that are
centered on the twin sectors of Construction and Leasing Businesses in our studio apartment
operations. As part of our efforts in creating new value we have started a succession of new
operations up until March 2006, from Residential to Silver and Broadband Businesses, and havebeen moving ahead in drawing up a framework for developing these as strategic businesses.
After firmly consolidating a foothold in these areas, our aim for the current fiscal year ending March
2007 involves utilizing the change to management structure as a base from which to maximize
corporate value by promoting increased completeness of our core business together with a full-scalechange to profitable units in our strategic business in an attempt to pursue increased growth. With
the Company’s corporate slogan for this year of “United Spirit” as our watchword, all of ouremployees are united in developing a management style that focuses on CSR (Corporate Social
Responsibility) as part of a wider social setting our stakeholders at the forefront.
We look forward to your continued support and guidance in the future.

Corporate Vision

We aim to create
new value throughhousing

Basic Policies
1. We view the apartment business as a social undertaking, which realizes the effective useof land and supply of high-quality dwellings.

2. We believe that successful leasing operations are our top priority in the apartment business.
3. We develop and introduce unique products based on a pioneering spirit.
4. We pursue client-first marketing approaches as well as prompt and systematic proactive
operations.

1

1 Increased completeness in our core business
The studio apartment business that makes up our Company’s core business is continuing
to expand with the synergy of the Apartment Construction Subcontracting Businessinvolving apartment construction, and the Leasing Business involving all administrative
work for the leasing aspect of the finished apartments. This Model of Synergies between
Construction and Leasing has provided us with an extremely large competitive edge within
our particular business field, and our Company is currently the market leader in the studioapartment business.
Together with expansion of our business activities, an increasingly important area of ouroperations involves creating a new profit structure that will correspond to our increasingly
large-scale business operations. As of March 2007 we plan to improve the infrastructure ofthese increasingly large-scale business operations, further strengthening our earning capacity,and firmly establishing our current competitive status. Taken together, these planned
initiatives will act in further strengthening our position as the market leader in this field.

2 Full-scale change to profitable units in ourCore Business
Apartment Construction
Subcontracting BusinessLeasing Business

Strategic BusinessResidential Businessstrategic business
The two new businesses that we initiated from the beginning of 2005, Residential andSilver businesses, have certainly left their mark as they make their first steps in the Kanto
region (centered around Tokyo) in the fiscal year leading up to March 2006, with the ordersituation for both businesses developing almost in line with our initial estimates. Our
Internet Broadband Business, which we introduced in October 2002, also continues tosteadily increase in terms of household subscribers as well as increased and enhanced
features. This business can also be regarded as a service sector that provides increased
added value to our Leasing Business.

Silver BusinessBroadband Business

Our Company aims to establish the three divisions of Residential, Silver, and Broadband
Businesses as part of our overall strategic business and promote the full-scale expansionof them in developing profitable operating units. In particular, as both Residential andSilver Businesses have a business structure that is simply an extension of our corebusiness, we think that this business expansion can be carried out both efficiently andrapidly and our policy strives for a rapid business expansion.

2Company History
All events illustrated in the timeline occurred in respective calendar years, while all operational data in charts
represent respective fiscal year figures.

●Opening of Leopalace Center Taipei●Number of managed properties increased to 300,000●Start of Residential and Silver Businesses●Launch of Monthly Leopalace Flat service●Opening of Leopalace World Nagoya and Leopalace Center Seoul●Beginning broadband business●Launch of Leopalace REIT II and III, a series of real estate securitization products●Capital increases to ¥37.24 billion following public offering of new shares (¥37.56 billion in 2003)●Listed on 1st Section of Tokyo Stock Exchange●Capital increase by public offering, capital increase to ¥55.64 billion●Opening of Leopalace Center Shanghai●Launch of Leopalace REIT, a real estate securitization product●Capital increases to ¥30.52 billion following third-party allotment of new shares●Change company name to “Leopalace 21 Corporation”

Other Divisions●Launch of Monthly Leopalace service

6.0％●Leopalace 21 Villa Colonna Series wins the 1998 Good Design Award

Leasing Division●Launch of Leopalace Fraternity

11.3％●Sales breakdown by division for FY

Construction
Division95

ended March 1991 (non-consolidated)

2.1％

94

Apartment development/sales80.6％●Listed on over-the-counter market( JASDAQ)

88

87

86

th
Grow

89

92

91

90

d
Perio
e
l
b
Bub

ess
Busiondelm itiontrans

93

Post lebubbiod
Per

96

97

01

00

99

04

03

02

06

05

h
rowt
g
s
g
in
earn
o
t
rn
Retu
98

Net worth turns positive on a consolidated basis(in fiscal year ended March 2001)
Other Divisions

Return to profitability at net level

2.7％(in the fiscal year ended March 1997)

Return to profitability at operating level(in the fiscal year ended March 1996)

d
Perio

●Sales breakdown by division for FY

ended March 2006 (non-consolidated)

Establishment of
New Business Model

Net Sales by Division (non-consolidated; ¥ 100 million)

Synergies from Construction and Leasing start to be felt in earnest
Number of Apartment Units under Management(non-consolidated)

5,000
4,692

full-operation

Number of Members of the Leopalace Owners'
Mutual Insurance System (non-consolidated)

4,571

4,166

4,000

54.6％

42.7％

Developer
Construction Subcon tracting
Apartment development/
sales businessLeasing
Division

Construction
Division

350,000

344,045

20,000

3,546
3,000

2,915
2,205

2,000

1,918
1,602

1,445
1,168

1,000

2,004

17,107

1,814

1,334

1,073

1,021
743

572

1,849

18,046304,111300,000

707

629

15,000259,221

14,218250,000

0
87/3

88/3

89/3

90/3

91/3

92/3

93/3

94/3

95/3

96/3

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

497
54
19
3

1,049
54
47
17

1,265
34
109
37

1,632
45
180
61

1,777
46
250
132

536
78
316
143

183
86
354
120

42
137
364
86

18
224
373
92

0
531
428
62

0
760
519
55

12
915
618
57

27
1,040
728
54

44
1,073
841
46

0
637
1,082
96

0
1,544
1,268
102

0
1,902
1,628
16

0
2,250
1,889
27

0
2,480
2,166
46

0
1,952
2,497
122

Real Estate
Construction
Leasing
Other

216,463
11,594200,000
181,484

10,0009,128

136,755

518

500

7,115
117,273

471
404

400

388

100,035

100,000

325

300

5,517

5,000

83,176

4,397

211

200
158
100

152,351

150,000

Recurring profit (non-consolidated; ¥ 100 million)

171

148
79

78

109

135

154

2,991

50,000

154

1,897

44
0

-44

-71

-58

-50
0

0
97/3

-100
87/3

3

88/3

89/3

90/3

91/3

92/3

93/3

94/3

95/3

96/3

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

98/4

98/12 99/12 00/12 01/12 02/12 03/12 04/12

05/12

06/3

06/3

4

Business Mix

Status of Business Expansion

Overall Image of Business Operations (excluding overseas operations)

We consider Construction and Leasing Businesses, relating to apartment management, as our two core businesses and we utilize
management resources, nurtured over the years, to move the strategic business into full effect as well as promoting peripheralbusinesses with the aim of expanding our business operations both quickly and efficiently.

Implement multifaceted business operations for customers of both the Property Owner base and User base by setting acomprehensive target that widely considers the entire “Land Utilization-Related Market”.

Property Owner segment
Enhancing and ExpandingCore Operations

Leopalace21

The fundamental base of our business management is the strong
synergy of our Apartment Construction Subcontracting businessand Leasing business. We are able to maintain steady growththrough the enhancement and expansion of these two core
operations by maintaining a good balance between the demand(tenancy rate) and supply (received orders) in our business
operations.

Enhancing and expanding core business operations
Apartment
Construction
Subcontracting
Business

Synergy

Leasing
BusinessMoving our strategic business into full effect
The three divisions of Residential, Silver, and Broadband
Businesses are extensions of our two core businesses and are
all businesses that are open to an efficient and rapid expansion
based on effective utilization of our existing business
infrastructure. These new businesses got off to a good start in2005 and we were successful in developing a business system
and know-how structure. Following on from this in 2006, weundertook a repositioning of our strategic business for creating
new revenue that can induce future economic growth, which ispart of a full-scale development of our business.

Moving our strategic business into full effectResidential
Business

SilverBusiness

Creating new profitable units
through our change to anationwide-level of operations.

Broadband
Business
Profits deliveredby our added
value service.

Residential
Business

Broadband
Business

Domestic
HotelBusiness

5

Investor segment(For Allotment Sales Business)(For Real Estate Securitization Business)

Customers considering
investments
in securitized real estate

Sales of residences by allotment

Sale of securitized real estate

Leopalace21(For Allotment Sales Business)(For Real Estate Securitization)

Assessment and purchase of land
Customers
considering
sale of land

Residential
buyersResidential BusinessLeasing operations of
securitized properties(For Real Estate Securitization
Business)

Proposal to securitize real estate

Proposal to manage
leased apartments

Apartment
Construction
Subcontracting
Business

Leasing
Business

Customers
considering
effective
use of land

Broadband
Business

Provision ofleasing services
Provision of broadband
ISP services

Tenant segment(individual andcorporation tenants)

Provision of nursing
care services
Silver Business

Promotion of related businesses

Promotion of related businesses

Domestic
HotelBusiness

Overseas
Hotel/Resort
Business

Responding
to local needs.

Overseas developmentof business operations

Taking advantage of our management resources we have also
been active in developing the related industries of Domestic
Hotel Business and Overseas Hotel/Resort Business. The former
operation fills a gap in the needs of our core business’s variedcustomers, as well as capturing a new customer base and acting
in a complementary role for our core business’s nationwide
network. The latter operation, through the development ofoverseas business, mixes our existing customer base with a newcustomer base in addition to creating new demand.

Summary of Operations
Apartment
Construction
Subcontracting
Business

Customers using
the facilities(Landowners)

We provide products with strong overall features offering highperformance functions that are required of leased residential properties,
such as low cost, energy saving and high durability, as well as
sophisticated designs and user-friendly functionality to complement aunique total-support system, which provides powerful support for the
management of residential leasing properties and ultimately their owners.
We will continue to conduct our Residential Housing Allotment Sales
business, Condominium Units Sales business and Leopalace Flatbusiness that deal with urban-type medium to high rise studio units,
as well as Leopalace REIT through our Real Estate Securitization
business.

Leasing
Business

SilverBusiness

We are leasing residential properties based on our Leopalace21
Leasing System which offers features, such as no security deposit andno key money payments, as well as the Monthly Leopalace Flat thatprovides furnished rooms with furniture and consumer appliances ona weekly and monthly basis. We are responding to a wide range ofprospective tenant needs to secure an extremely high rate of tenancy.
We will respond to the full-scale onset of an aging society and provide
community-based Group Homes and Day Services and offer various
nursing care facilities and services, such as planning, developing,administering and managing Private Nursing Homes and Short Stay
Services (specified short-term nursing home care).

Our Broadband ISP service business, Leopalace B.B., includes digitalrental video services, satellite television broadcasting services,internet access services and IP telephone services for the tenants ofleased apartments that we manage throughout the country.

We are operating hotel businesses in major cities around the country,
aiming to manage hotels that are accessible to our customers byproviding new services that are in line with the times and by setting
reasonable prices.

Overseas
Hotel/Resort
Business

We are engaged in major resort business operations at two locations
in Guam, one in the central district and the other in the northwesternsection of the island, through our wholly owned subsidiary, MDI Guam.

Proposal to develop nursing careinsurance applicable facilities

Silver segment(including family
members)

Comprehensive development of Land Utilization-Related Market
Build business models that aim to
maximize the use of customer resources
with the two core operations

Realizing Maximized Business
Opportunities by Implementing Various
Approaches for the Property Owners

Expanding Customer Base throughDiversification of Approaches Implemented
to Users

We are conducting business operations fromvarious perspectives as a go-between for thecustomers who own properties and thecustomers who are using the facilities that are
built and managed by us.

Aside from the Apartment Construction
Subcontracting business, which is one of ourcore operations, we also have strategic business
operations, such as the Residential businessand Silver business that can be included in our
proposals to property owners.

Approaches employed to aid users are conducted byfour business operations, including the Leasing
business, which is a core operation, along with the
Broadband business, Residential business and Silverbusiness.

Apartment Construction Subcontracting andLeasing businesses are the two operations at
the core of such activities. The synergic effects
on peripheral businesses are extremely
powerful resulting from a high degree ofcredibility and recognition secured throughdealing with our customers who are property
owners and our customers who are users. Thishas become our business model with the aim
to maximize the use of customer resources.
Customers on both ends of the business are
not only in a relationship with the entrance andexit of operations, but rather, they should bepositioned as critical business management
resources that bring operating revenue.

The needs of our customers vary from “effective
use of land” to “sale of land” and “investment insecuritized real estate”. We, therefore, offer
our proposals on these three business
operations, suggesting Management of Rental
Apartments, Securitization of Real Estate andDevelopment of Nursing Care Insurance
Applicable Facilities depending on their needs,
while conducting the Assessment and Purchaseof Land for customers who are considering
selling their property and providing services
related to the Sale of Securitized Real Estate,such as Leopalace REIT to those customers
who are interested in investing in securitized
real estate.
We are realizing a maximization of business
opportunities through such various approaches.

Along with properties managed by the Leasing
business, we perform leasing operations forproperties, which have been securitized by the
Residential business and provide leasing services tothe individual and corporate tenant base.
Furthermore, we are increasing the attraction ofleasing properties and connect it to the acquisition ofbusiness revenue by offering both free and for-fee
Broadband ISP services (Leopalace B.B.) to thetenant base. Furthermore, we will sell residences(houses and condominium units) that has beendeveloped by the Residential business to prospective
home buyers, while various nursing care services areprovided to those in need of nursing care (including
families of patients) by the Silver business.
We will be expanding the customer base of users
through the operation of these businesses andpromote diversification of our revenue sources.

6

Core BusinessCore Business Model

Construction/Leasing Synergies

Our fundamental strength is the “Model of Synergies between Construction and Leasing”

Proposing and contracting
construction of leased
apartments

Property ownersegment(Landowners)

Bulk leasing contract(promising stable
management)

Membership-based leases for long-term
occupancy and Monthly Leopalace Flat
for short-term stays: the Leasing
Division’s two main products

Monthly Leopalace Flat has multiple
functions

In the apartment business, accurately
assessing the changing needs of specificcustomer groups over the next 20-30 years isessential. In this context, we have developed
products primarily targeting single
individuals, who account for the majority ofapartment tenants. Thus, we offer studios ofless than 30 square meters as our main
product in the Construction Division. Indeed,
proposals we submit to owners are for theconstruction of apartment buildings located inareas where we expect large lease demand
based on our detailed marketing analysis.

The Leasing Division offers products designed
for long-term occupancy and short-term stays.
The former responds to the long-term
occupancy through the Leopalace21 Leasing
System that does not require lease deposits
and key money, while the latter is Monthly
Leopalace Flat, which is provided with
furniture and consumer electronics andincludes utility expenses.

In recent years, Monthly Leopalace Flat has
been employed by a diverse group of tenants.
Simply put, long-term occupancy tenantsaccount for some 60% of Monthly Leopalace
Flat tenants and short-term tenants make up
the remaining 40%. Long-term occupancy
functions include ordinary residential use,company and school dormitories, andhousing for job transferees away fromfamilies. Meanwhile, reasons for short-termstays include business trips (mainstay), job
training, entrance examinations and lectures,
temporary housing during moves and homerenovation, and sightseeing. As mentioned
earlier, the success of the Monthly Leopalace
Flat service owes to our accurate response todiverse customer needs.

Our Company
Apartment
Construction
Subcontracting
Business

Leasingbusiness

Leopalace21
Leasing System

Cooperative systems(maintenance andmanagement of buildings)

Studios (less than 30m2): Construction
Division’s Main ProductSimple and convenient
leasing format(available for use startingfrom two weeks )Tenant segment(those moving in)●Individuals

Provision of various services
that support daily life

(general)●Corporations(dormitories
and company
housing)Monthly Leopalace Flats[Construction subcontracting revenue][Management services revenue][Usage fee revenue]

Synergy
The development of the Leasing business that is able to sustain
a high level of tenancy will ensure that apartments are managed
properly after they are built and facilitate the expansion of theApartment Construction Subcontracting business.

To cope with the diversifying needs of tenants
in recent years, we have approached productdevelopment with an eye to convenience andamenity for short-term stays.

The increasing number of property owners who selectour services leads to an increased number of leased
properties (managed properties), thereby promoting
the expansion of the Leasing business.

Breakdown of Monthly Leopalace Flat tenants(for fiscal year ended March 2006)

Building a Unique Business Model with
the Fusion of Construction Businessand Leasing Business Based on theConcept that “Apartment Management
Exists Only Because of Leasing”

Exhibiting an Extremely Strong
Competitiveness in the Industry by
Facilitating Compatibility Between
Benefits for Property Owners andBenefits for Tenants

Expansion of student rental market throughbusiness collaboration; improved occupancy
rates through improved corporate sales

We are building our business based on thebasic policy that states “Apartment
Management Exists Only Because of Leasing”
and with our belief that apartment building
construction and leased property management
are inseparable businesses. From theperspective of property owners, the biggest
concern regarding their decision to build anapartment building is “whether it would bepossible to continue securing an adequate
number of tenants throughout the years”.
Consequently, we provide a “Bulk Leasing
System” to the property owners by conducting theLeasing business on our own and by building
an organization that can sustain a high rate of
tenancy. We resolve the concerns regarding
apartment building management for property
owners and provide them with a mechanismthat makes it possible to commission us withthe construction of an apartment building byrealizing a “Model of Synergies between
Construction and Leasing”.

Our customers are from both the property
owner base, owners of the real property, as
well as tenants, who wish to move into leased
properties. The strength of the “Model of
Synergies between Construction and Leasing” isborne out of various mechanisms that maximize
the benefits for both parties.

By actively developing an expansion of new demand,
we have been successful in further improving
occupancy rates in this particular sector.

By owning such a unique synergy between
Construction and Leasing, we are able torealize extremely high stability in our business
operations.

7

We established a “Total System for Apartment
Operations” that not only offers the members of
the property owner base recruitment andmanagement of tenants, through a bulk
property leasing system and cooperative
system, but also includes maintenance andmanagement of the buildings through theprovision of comprehensive support.
Furthermore, to the members of the tenantbase, we provide not only the development
and provision of leased properties thatfeature superior designs and functionality, butalso units furnished with consumer electronics
by providing leasing formats (such as
Leopalace21 Leasing System and Monthly
Leopalace Flat) to respond to the diverse life
styles of modern times.
Our business model that offers significant
benefits to both parties exhibits an extremely
strong competitiveness.

With the original intention of retaining existing
student tenants, from 2005 we concluded anagreement with companies that have a large
number of students in their correspondence study
businesses. We also established a new payment
option that allows for monthly payments for the useof Monthly Leopalace Flats, providing the possibilityof making payments necessary to move into theleased properties as if they were being paid as rent
on a monthly basis, through a business alliancewith credit card companies. This has expanded
demand and developed a structure that eases theburden on students starting a new life.
We are also focused on expanding our involvement
in corporate trading. As of March 2006 there wereapproximately 14,600 companies involved incorporate trading (an increase of 22.4% on theprevious fiscal year) and this is an area that has
been showing strong growth. Together with the
projected economic recovery, we expect businessdemand to further improve and as of April 2006 welaunched the new “Company-only plan” that allows
for a nationwide change of residence. This has
involved the addition of six further corporate sales
centers to the system of 31 corporate sales outlets(located in Tokyo, Yokohama, and the Kansai and
Chubu regions) for further planned increases to
occupancy rates and expansion of corporate trading.

Temporary use (space lease) 1.5％
/OtherShort-term stay(housing)

42.5％

Long-term
occupancy

56.0％“Leopalace21 Series” exterior view

“Leopalace21 Series” Interior view
Card key

Door at an entrance
equipped with adelivery box

Unit bath comes equipped withconvenient bathroom dryer features

Kitchen with an electricalcooking facility
Microwave ovenTV

Refrigerator

Table and chair (table is collapsible)

Intercom equipped with monitor

Bed

Air-conditioner*Includes currently unfinished properties

8

Characteristics and Competitiveness of Core BusinessCharacteristics and Competitiveness 1

Master sublease system and owners’ mutual insuranceWith our unique supply plan, we promise 30 years of stable management
Based on our belief that successful leasing operations are the key
to the apartment business, we introduced a master subleasesystem which guarantees 30 years of stable apartment
operations, ahead of industry rivals. Under the system, we firstdraft apartment supply plans based on our research on market
potential and tenant needs in each of the 1,051 segmented areas
across the country. Based on these plans, we make proposals toprospective apartment owners, offering comprehensive support for
the apartment business from construction to maintenance andadministration. The master sublease system, which ensures
stable rent income over the maximum 30-year period, andLeopalace owners’ mutual insurance system, which guarantees
apartment building maintenance and administration, represents
our key support systems for apartment owners.

Characteristics and Competitiveness 2

Three unique points that support the master-lease system

Payment ofmaster sublease
rent to owners

OwnersLeopalace21
Corporation

Unique tenant
recruitment
systemTenants

Payment ofsublease rent
Comprehensive
maintenance andadministration

Building

Multiple tenant recruitment channels

Innovative leasing systems

Without successful tenant recruitment, theapartment business would not run smoothly.
Our thorough research in local market’s
potential backed by our nationwide marketing
activities enables independent, nationwide
tenant recruitment. We employ various
recruitment media, including our nationwide
office network, web sites, apartment rental
publications, and TV commercials to ensure
efficient tenant recruitment. Meanwhile,prospective tenants are able to search forhousing units, anytime, anywhere from allover Japan.

Our products cover short-term stay
as well as conventional long-term
housing needs, aided by our
unique systems. Moreover, wehave introduced innovative
business practices not requiring
lease deposits and key money.
Thus, we have successfully
recruited a broad range of tenantgroups unrivaled by competitors,
meeting multiple needs of bothindividuals and corporations.

Reliable proxy maintenance andadministration
On behalf of apartment owners, we carryout operations from building maintenanceto tenant administration. By maintaining
the asset value of buildings at high levels
through consistent maintenance efforts,
we endeavor to secure stable apartment
operations. Furthermore, building
maintenance, which is long-term innature, is guaranteed by the Leopalace
Owners’ Mutual Insurance System, which
protects owner lifestyles fromunforeseeable situations.

Nationwide studio apartment network, supported by online search capabilities

Apartment buildings under master sublease contracts with Leopalace21 are available nationwide
Studios for which we have subcontracted construction and havecarried out maintenance and administration are located all overJapan, totaling some 344 thousand units. These studios werebuilt in areas where we estimated reasonable potential demand
based on thorough market research, in order to meet needs ofprospective tenants. We are the only industry player with thismany studios nationwide.

system ensure smooth maintenance and administration

Number of apartments managed by area
(at end-March 2006)
Koshinetsu area:
Total number ofunits in Japan
344,045

13,789units

Hokuriku area:

Hokkaido area:
7,309units

10,349units

Kinki area:
48,806units

Tohoku area:
21,280units

Chugoku area:
Kyushu/22,138units
Okinawa area:

Domestic network of 237 Leopalace Centers
Visitors to Leopalace Centers at 237 locations nationwide cansearch real-time for studios using our online network. For
example, a person who lives in Tokyo can look for the most up-todate information about studios for lease available in other areas
such as Hokkaido and Kyushu, apply for the apartment, and sign
the contract on the spot. The nationwide sales center network
combined with our online network guarantees our ability to meet avariety of needs among prospective corporate and individual
tenants.

Total number ofoutlets in Japan237*In addition to a further
two overseas outlets.

Koshinetsu area:
10Outlets

Hokuriku area:

131,296units

40Outlets

Tohoku area:
21Outlets

Kanto area:

20Outlets

Tokai area:

7Outlets

Kinki area:

17Outlets
Kyushu/Okinawa area:

Kanto area:

Hokkaido area:

8Outlets

Chugoku area:

27,403units

Shikoku area:

Number of Leopalace Centers by area
(at end-March 2006)

74Outlets

52,868units

Tokai area:

8,807units

Shikoku area:

32Outlets

8Outlets

Characteristics and Competitiveness 3

Real-time web search possible anywhere, anytime

Powerful web research based on nationwide network
Visitors to our web sites can search real-time for the most up-todate information on studios available across the country, and apply
for the apartment and sign a contract on the spot. With some 340
thousand studios managed nationwide, we are the only industry
player that can provide prospective tenants with real-time searchcapabilities of studios available nationwide even using our mobile
Internet site.

9

SearchSelection

Application

Leasing Agreement

Real-time search on our mobile
Internet site
Real-time search of our rental studios canalso be performed on our mobile Internet.
Similar to accessing our main home page,
visitors to the wireless site can gather
information regarding
rental studios, view
floor plans, and makepayments by credit
card.

10

Strategy-1 : Core Business

Basic Strategy for
Our Core Business

Strategy-2 : Strategic Business 1/2

Increased completeness in our core business throughthe restructuring of our basic management system

The greatest feature of our Model of Synergies between Construction and Leasing that makes up our core business is the development of a“stock style” that continues to expand and increase our stock. For our stock to function effectively then a certain level of volume is necessary.
Here at Leopalace, what can be seen as our corporate principle of “Apartment Management Exists Only Because of Leasing” is a key policy inplacing the focus on our stock. During the five-year period from the end of March 2001 to the end of March 2006, the number of apartments
managed by our Company increased approximately 2.3 times from 152,000 units to 344,000 units. Acquiring over 340,000 units during thisperiod meant that our stock correspondingly increased and we witnessed a transition period where we went from a state of deflation to
inflation, resulting in the establishment of an environment that allows for strengthening of the stock business. What we now plan on doing is
maximizing returns on the apartments that we manage as assets on behalf of property owners. In order to carry this out we are developing
the infrastructure of our basic business base to meet this future business environment, and further improving the completeness of ourCompany’s unique Model of Synergies between Construction and Leasing.
More specifically, the accumulated management data from over 20 years of involvement in the apartment leasing business, together withorganic interaction with external market data, has resulted in the development of an infrastructure management system for our corebusiness (ALM system) that provides for the optimum management of investors’ assets. The full-scale introduction and operation of thissystem has meant that we can offer optimum asset management for even the largest of assets. Our Company’s core business also serves asa business model containing similar aspects to the financial enterprises that act as the optimum management for our investors’ assets. The
full-scale operation of the ALM system, running at the same equivalent level as the system that supports the success of the megabanks,
supports the increased strengthening of the stock business in terms of both quantity and quality.

Outline of the core business’s infrastructure management system: ALM system
Improvement of system infrastructure

OwnersLiabilities

Leopalace21

AssetsTenants

Regulation of necessary information for ALM

Establishment of ALM concept●Maximization of total profits in Construction

and Leasing Business●Best balance between leasing income andUpgrading of marketing section●Leasing system maximizing the number ofoccupied units and rent
●Reduction of lifecycle costs of properties

lease rent

Note: ALM system (Asset Liability Management System): General management system for assets and liabilities. At Leopalace we anticipate expanding our large-scale assets (properties
managed by our Company) further, and we are aiming to develop a general system that allows us to control the appropriate management of assets to a similar level to comparable
systems that support financial services companies.

Apartment Construction Subcontracting Business Strategy

Leasing Business Strategy

Nationwide expansion based on
detailed area marketing

Planned increase in occupancy rates throughstrengthening of corporate sales ability

Choice of location is important for initiating synergy in our corebusiness. In other words, site location should be suitable formanaging apartments, and this is one of the necessary
conditions when concluding a contract for construction. This isfurther connected to maintaining profits in the Leasing Businessthat subsequently follows construction of these apartments.

Corporate trading at Leopalace is expanding by our taking overthe management of dormitories and Company-owned housingthat was outsourced following the bout of corporate
restructuring that accompanied the collapse of the bubble
economy. The recent recovery of the Japanese economy, seenin the end of the quantitative easing policy, together with anincrease in corporate employee activity, has resulted inincreased occupancy rates in certain locations.

Here at Leopalace we are involved not only in expanding
operations in our Apartment Construction Subcontracting
Business, but are also focusing on expanding overall profitability
in both Apartment Construction Subcontracting and Leasing
Businesses synergistically, while developing detailed area
marketing. This management style is aimed at driving up ourCompany’s profitability as well as maintaining our high occupancy
rates; this provides apartment owners with the stability theyrequire through such stable management over a long term
period. We hope to continue with this policy in the future, as well
as developing a high level of certainty throughout the domestic
market through the selection of optimal land for leasing.

11

This shift in business use can be anticipated as being further
strengthened by the increasing full-scale recovery of theJapanese economy. As of the end of March 2006 there were atotal of approximately 14,600 companies involved in corporate
trading—an increase of 22.4% on the previous fiscal year andan area displaying high growth. Up to March 2007 we plan the
addition of six further corporate sales centers to the system of
31 corporate sales outlets for further planned increases to
occupancy rates and expansion of corporate trading.

Basic strategy for Residential
and Silver Businesses

Pursuing a sound expansion strategy based on existing
business infrastructure

The Residential and Silver Businesses are extensions of our core business model involving the construction and sale or management ofresidential housing and nursing facilities. As a result both these businesses have been identified as being suitable for pursuing a soundexpansion strategy based on existing business infrastructure (such as leasing operations, contracted outlets, and a pool of both managed
apartments and of apartment owners).
In the future our Company will keep in step with the relevant business expansion in the Residential and Silver Businesses and look at ways todevelop a more efficient and increased business expansion.

Residential Business Strategy

Silver Business Strategy

Efficient business expansion with thesecond baby-boom generation as a target

Expansion in the three principal urban areas
containing over half of Japan’s silver population

In the Residential Business, Leopalace has been developing abusiness strategy that has the second baby-boom generation(taken as those born between 1971 and 1975) as its core target,with this key group seen as having moved on from our corebusiness of leasing studio apartments. Up until March 2006 wehave been operating a system of four sales divisions and eightoutlets in the Tokyo metropolitan area and the three neighboring
prefectures. In the future we plan on moving into the three large
metropolitan areas of the Kanto, Chubu, and Kinki regions andmake progress in this business in each large urban area.

Our Company’s involvement in the Silver Business, anticipatingchanges to population movements as part of Japan’s aging
society, was until March 2006 centered on the running of five
facilities in the Tokyo Metropolitan Area and the three prefectures
surrounding it in the Kanto region. There were complemented byour conclusion of service contracts for a further 20 facilities. Our
plan for strategic expansion in this business is similar to that for
the Residential Business in having a high degree of integration
with our Company’s existing business infrastructure, and iscentered on developing the business in the three principal urban
areas of the Kanto, Chubu, and Kinki regions. The estimatedsilver population (taken as those 65 and over) in these threeareas was approximately 14 million as of 2005, making up 56%of the total number of over 65 year olds in Japan. In the future wehope to ensure the development of both the quality and quantityof our presence in thesethree urban regions (in termsof both quality and productline-up), and further focus ondeveloping an expansion planfor the regions neighboringthese three urban areas.

The estimated number of second generation baby-boomers livingin these three urban areas was approximately 6,300 thousand asof 2005, which made up 64% of the total number of second
generation baby-boomers living throughout Japan. Seen in thislight, our strategy for businessexpansion centered on thesethree urban areas can be
judged as being the mostefficient strategy for expansion
at the present time.

Current state of development of the Residential
Housing Business (as of the end of March 2006)
Number of properties scheduled for sale
Number of properties with completed contract

Current state of development of Silver Business(as of the end of March 2006)
Number of facilities with completed service contracts
Number of facilities that have been opened
10

Tochigi
Prefecture
84

Gunma
Prefecture

127

38

IbarakiPrefecture

Tochigi
Prefecture
Gunma
Prefecture

8

2

7

SaitamaPrefecture
（11）

50

SaitamaPrefecture

16

Tokyo
Metropolitan
Area
7

Kanagawa
Prefecture

（19）

（15）

IbarakiPrefecture
2

1(1)
2

15

Chiba
Prefecture

Tokyo
Metropolitan
Area
1
Kanagawa
Prefecture

2

Chiba
Prefecture（16）*The number in brackets beside eachregion indicates the number of sites

12Strategy-2 : Strategic Business 2/2

Strategy-3 : Related BusinessBroadband Business Strategy

Strategy for Related Businesses: Domestic Hotel Business

Development of a profitable unit through the creation of a huge market

Planned new opening in Hakata in 2007

The broadband service “Leopalace BB” that we provide to each of our managed properties through the set-top box (STB) installed in eachroom (LEO-NET terminal) can be used for not only simply surfing the web, but also for shopping and gaming, and its communication
functions are expanding through using the convenience of its interactive nature to provide such features as a survey system.
Regarding the current state of installation of this service, as of March 2006 approximately 65% of our managed properties (227,000
properties) were equipped with Leopalace BB, and through the annual increase in managed properties a huge market has beendeveloping for this service, drawing in a variety of subscribers.
The possibilities offered by Leopalace BB have been steadily increasing together with both a growing market of users and realization of its
functions and this has led to a widening of business opportunities offered by the service. In addition to improving our corporate-orientatedservice in the future by using this media content, we also plan to utilize our accumulated know-how in our silver facilities as well asrecreational activities to bring about synergy between both business areas. At the same time we are also strengthening our external sales
and marketing aimed at sales of a system specifically at hotels and hospitals. Through these activities we have so far been successful indeveloping our Broadband Business into one of the Company’s profitable units.

Services aimed
at tenantsFree
services

Paid
servicesVideo on demand (VOD): Approximately 3,000 titles
CS Plus (satellite television) service (Four additional channels including WOWOW)

CorporateUnder
development
orientatedservice utilizing
media content

Sale of systems to condominiums, hotels, and hospitals
Classified advertisements using the LEO-NET and related program guide “LEO-NET BOOK”
Programs with commercial tie-ups (Tools for switching to surveys and request forbrochures following commercials)
Interlocking TV and cell-phone program (character entry tool using cell-phone)

In planning stage

Various subscription services (such as regional information and corporate information)

Asahikawa(Opened August 2003)

Sapporo(Opened November 2002)

Niigata(Opened September 2002)

Okayama(Opened
September 2003)

HakataSendai(Planned
opening in 2007)

Using prime locations such as in front of train stations in major cities weplan to open a city hotel in Hakata in 2007 that is superior to our existing
network of hotels. By continuing to respond to regional demands wehope to implement a strong grip on this area of our operations.

Content of Broadband Business’s principal services
Continual internet connection
Basic CS (satellite television) service (Four channels including MTV)
Informational services (news, weather, fortune telling, maps etc.)
Services such as gaming, shopping, and home delivery
Creation of participatory programming for tenants and their transmission

Utilizing our accumulated know-how in the apartment business, we havebegun hotel operations in a number of major cities nationwide (currently
in seven locations). In addition to operating the hotels conventionally
geared towards tourism and business trips, we also offer long-term staysthat are similar to our Monthly Leopalace Flat operations in apartment
leasing, in which we offer stays at reasonable rates. Every room isequipped with an internet connection as well as a range of services suchas free VOD (video on demand). All our hotels include a sales office for
the Apartment Construction Subcontracting Business Division andLeopalace Center for the Leasing Business Division on site. They
therefore serve as branch offices of their respective operational areas toestablish partnerships with apartment owners and studio tenants.

(Opened April 2003)

Nagoya(Opened May 2002)

Yokkaichi(Opened February 2003)

Set Top Box (STB)
Hotel Leopalace Niigata

Hotel Leopalace Sendai

Hotel Leopalace Sapporo

Hotel Leopalace Asahikawa

Strategy for Related Businesses: Overseas Resort Business

Increased revenue through large increases in operating rates of tours and camps
Through our wholly owned subsidiary MDI Guam we are currently operating alarge scale resort business in the tropical island of Guam. In 2003 the basic
infrastructure of the hotel and wedding chapel was completed, which was added
to by the construction of a spa in December 2005. From the fall of 2004 major
travel agencies started offering package tours attracting customers and ourCompany’s own golf and sport camps also saw an increase in consumer interest.
This meant that, as of March 2006 the average availability of Leopalace Resort
improved dramatically to 57.5% (an increase of 16.2 points on the previous
period) and sales stood at 67 million dollars (an increase of 9.5% on theprevious period), which promises increased profitability in the expansion of
stable income in the future.
Out of the 130,000 rooms we operated in fiscal 2005, 11.3% were used by ourapartment owners and 2.3% were used by our shareholders. Through the use ofa great number of our stakeholders we were able to bring about a synergy withour core business and we are also looking to develop long stay silver facilities.

13

Hotel Belvedere

Westin Resort

Leopalace Resort

Track and soccer field

Competition-sized poolClub house14Market Trend-1

Market Trend-2

Demands (Residential Construction Market)

Supply (Residential Leasehold Construction Market)

Number of new residential housing starts (sorted by user relationships)

Number of new residential leaseholds (units under 30m2)

Leased units
Residential house for allotment sales
Condominium units for allotment sales
Homeowner's houses
Company housing and others

Number of new residential leaseholds

Number of new residential leaseholds under 30m2

Number of new residential leaseholds under 30m2

Number of units we supply

Market share of new residential leaseholds under 30m2

Our share

(%)
60.0

(Thousands of units)
600(Thousands of units)
1,800(Thousands of units)
150

(%)
50.0

1,630
1,600

517.7
50.0

500

1,485
1,400

442.3

1,341
616

1,226

1,200

1,173

564

116.2

36.8

1,145

1,173

40.0

400

1,193

122.8
40.0

40.5

111.7

1,249

1,213

1,179

454.5

458.7

121.1

120

467.3

37.1

96.7
90

30.0

31.3
516

1,000

30.1
426

800

518
442

455

459

467

30.0

300

140
200

600

418

444

147

136

118

126

113

198

119
192

211

25.3

166

116

129

198

202

139

138

25.9
23.7

24.6

200

207

476

438
377

0

366

373

367

352

32

31

28

19

15

13

12

12

10

12

10

96/3

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

Note: Excerpted from Residential Housing Construction Work Commencement Statistics for fiscal 2004 of the Ministry of Land, Infrastructure and Transport.

Residential housing supply status has been recovering slowly over the past three years while undergoingchanges in terms of market share makeup.
According to the Residential Housing Construction Work Commencement Statistics of the Ministry of Land, Infrastructure and Transport,
the number of newly built residential housing units peaked in fiscal 1996 (ending March 1997) with 1.63 million units, while the figureschanged to 1.179 million in fiscal 1998 (ending March 1999) and thereafter continued to hover around 1.2 million units. In the past three
years the trend has been showing a slow recovery.
Homeowner’s housing, however, continued to go down during the same period, while leased units and residential housing for allotment
sales increased in number, resulting in a dramatic shift in the market share makeup.

Central roles played by the shifting of the market share makeup for residential housing supplies(commencement of construction for new residential housing), include an increase in the number of leased units
and residential housing for allotment sales and a decrease in the number of homeowner’s residential housing
A look at the trends for commencing new residential housing in recent years in terms of user relationships indicates that leased units andresidential housing for allotment sales are supporting the slow overall recovery trends. Of all the residential housing for allotment sales,
despite a small decrease in sales in fiscal 2005 (ending in March 2006), sales of residential houses are increasing dramatically, showing an
increase of 11.2% over the previous year in fiscal 2003 (ending in March 2004) and 7.8% in fiscal 2004 (ending in March 2005); sales ofcondominium units also increased dramatically in fiscal 2005 (ending in March 2006) with an increase of 11.6% over the previous year.
Furthermore, leased units have recorded a consecutive increase for five years since fiscal 2001 (ending in March 2003), gaining the highest
share of the market by dominating 41.5% in fiscal 2005 (ending in March 2006) for all new units of residential housing construction.

15

10.0

100

438

10.0

231

636
451

30

20.0

218
223

551

20.0

21.9

400

200

60

96.7

111.7

116.2

121.1

122.8

0
03/3

44.9

04/3

05/3

49.7

29.1

0
02/3

42.8
35.0

04/3

05/3

06/3

Note 1: Excerpted from Residential Housing Construction Work Commencement
Statistics for fiscal 2005 of the Ministry of Land, Infrastructure and Transport.
Note 2: All figures are based on fiscal year periods.

0

0
02/3

03/3

06/3

Note: As of March 2006, the total number of units supplied by our company istaken as the actual number of units supplied.

Construction of leased units less than 30m2 are steadily recovering
Leased units under 30m2 comprise our core field and are showing a rapid increase in recent years. The number of construction workcommencing in fiscal 1999 (ending in March 2000), for leased units under 30m2, bottomed at 73,000 units but showed a recovery infiscal 2001 (ending in March 2002) by reaching 97,000 units and 100,000 units by fiscal 2002 (ending in March 2003). In fiscal 2005
(ending in March 2006), this figure increased further to 122,800 units. Furthermore, although the proportion of residential units less than
30m2 among the overall total number of leased units being constructed had increased in fiscal 2004 (ending in March 2005), in fiscal
2005 (ending in March 2006) units over 30m2 showed an increase over units less than 30m2 which displayed a slight decrease. Bothunits had similar shares of almost one quarter of the total figure (23.7%).

Our share of supply for studio apartments is 40.5%
The reason behind this increase in leased units under 30m2, is the increase in the number of young and single households in urban areasthat are seeking a new life style, along with the birth of new demand, such as the outsourcing of corporate dormitories and Company
housing.
Furthermore, the graph shown on the right represents the number of new units supplied by our studio apartment operations (Apartment
Construction Subcontracting Business) for the construction of leased units under 30m2. In fiscal 2005 (ending in March 2006) we wereable to sustain a over 40% share of all supplied units in the market. It is clear that we are in possession of a formidable market share inthis field.

16Market Trend-3

Market Trend-4

Stock and Rebuilding (Residential Leasehold Construction Market)

Demands (Leasing Market)

Number of studio units, number and shares of our units
Studio housing stock
Our stock
Our share

Trend in residential Leaseholds by period

Estimation for future number of general households by family category
SinglesSingle parents with kid(s)Married couples
Married couples with kid(s)Others

2001~2003
1996~2000
1991~1995
1981~1990
1980 and before(1,000 households)
60,000(%)
16.0(Thousands of units)
4,000

3,500

3,447

14.0

(Thousands of units)
18,00016,00015,47016,132

16,076

1,303

1,043

14,000

2,790

2,664
2,664

5 years ago（16.6％）

10.0

2,577

5,371

3,578

4,058

4,400

4,625
4,750
4,794

4,510

8,835

20 years ago（28.1％）

6,000

9,851
10,421

10,58910,50720,000

10,291

4.0

1,000

4,000

500

1.9

6,939
2.0

2.4

242.9

32.0

59.3

110.4

88/10

93/10

98/10

14,919

8,045

3.4

0

17,159( 34.6%)

8,000

6.0

1,500

16,66310 years ago（16.0％）
30,0007.0

15,984

5,100

8.0

1,717

15,169( 30.3%)

12,911

2,451

2,000

14,21840,000( 27.6%)

10,00049,643

46,782

12,0002,500

50,270

2,054

12.0

3,000

50,47649,040（6.5％）

3,215

50,14050,000

Now

0
03/10

5,282

2,000

14,666

10,00014,16913,517

12,776

11,99825 years ago（32.9％）

0

6,539

6,247

5,981

5,761

5,574

5,401

2000/102006(Projected)

2010(Projected)

2015(Projected)

2020(Projected)

2025(Projected)

0
93/10

98/10

03/10

Note: Excerpted from Residential Housing and Land Statistics Survey for fiscal 2003 of the Ministry of Public Management, Home Affairs, Posts and Communications.

Note: Excerpted from the National Census from the Ministry of Public Management, Home Affairs, Posts and Telecommunications for fiscal 2000 and
the Number of Households and Future Estimates of fiscal 2003 from the Institute of Population Problems.

Increasing studio stocks

Large market need exists for studios that will be sustained over a long period

On the other hand, the stocks of studios are in a steadily increasing trend. According to the Residential Housing Construction and Land
Statistics Survey, conducted every five years by the Ministry of Public Management, Home Affairs, Posts and Telecommunications, thenumber of studio units as of October 2003 was 3.447 thousand units. This is an increase of 996 thousand units above figures taken ten
years ago, with a growth rate of 40.6%, showing an outstanding performance in comparison with the growth rate for the residential
housing stock for the same period (17.6%). Furthermore, our market share of stocks has also increased by 7.0%.

With declining birth rates and an aging society, the population problem in Japan is an issue that needs to be considered. In terms of family
categories, singles consisted of 12.91 million in 2000, which comprised 27.6% share of the market. It is anticipated that this will increase
to 15.16 million by 2010 and comprise over 30.3% of the market share. Furthermore, an estimate for 2025 shows the number ofhouseholds will reach approximately 17.15 million and comprise 34.6% of the market share, undergoing a rapid increase in this period. This
indicates that the household makeup in Japan will be moving toward the formation of a gigantic single person household base very rapidly.

Market for rebuilding residential leaseholds has gigantic potential for residential leasehold construction

The market needs for studios provided by us is large and will be sustained over a long period in the future, as indicated by this data on
future estimates.

The graph shown on the right represents the data of trends for the overall residential leaseholds sorted by construction period. Figures
have remained stable for the past five years; while during those five years 2.46 million units of residential leaseholds constructed in 1995
and earlier (ten years ago) were lost, with approximately 2.4 million new units built to replace them. This indicates that this is a market
with a gigantic demand for rebuilding in the future.

17

18Market Trend-5

Market Trend-6

Demand (Residential Construction and Leasing Markets)

Utilization (Residential leaseholds)

Estimates for total number of households in the future by household age groups

Estimates for single person households in the future

65 years and over

65 years and over

35 years to 64 years

35 years to 64 years

Under 35 years

Under 35 years(1,000 households)
60,000Uses of monthly leases■ Breakdown of uses of month-to-month leases(March 2006)

Business trips 36.80％
Temporary stay between moves 1.40％(1,000 households)
18,000Training 2.81％
Study 0.33％

17,159Temporary stay during homerenovation/rebuilding 0.57％
Temporary stay to visit
hospitalized relation 0.24％

16,633
15,98450,00049,04050,13950,47650,27049,643

15,16915,00014,21846,782

Temporary stay to visit relation
on assignment 0.17％
Domestic tourism (individual) 0.18％
Domestic tourism (group) 0.02％
Tourism (foreigners) 0.01％

6,801
12,911
13,37640,000

11,136

15,406

17,616(30.7%)

18,471(23.8%)

18,426

3,861

12,000

4,709

5,664

6,354

(39.6%)

3,032(37.1%)

Temporary use (for space) 1.5％
and other. Office space(23.5%)

30,000. Place for hobby,
creative activities. Common space(for friends and others). Social area
. Conference room
. Other

9,000

4,577
26,13826,43020,00026,818

5,286

5,916

25,88825,436

7,915

6,972

6,363

Temporary use

5,072

Our share

6.0%

0
2006
2010
2015
2020
2025
(Projected) (Projected) (Projected) (Projected) (Projected)

56.0％

326.9

(Thousands of units)
300

277.8
109.7
250

239.8
103.4
200

194.4
89.7
167.6
74.7

150

143.9
57.8

129.4

Residential use

3.5

32.5

113.8

General 36.42％

4,160

3,921

Student dormitories

3,784(22.1%)

3.38％

217.2

100

150.1
50

125.9

111.4

109.8

119.7

2000/3

2001/3

2002/3

2003/3113.8

Job assignment away from home 1.05％
2006
2010
(Projected) (Projected)

2015
2020
(Projected) (Projected)

2025(Projected)

Daily use because of long commute

0.45％
Note: Excerpted from the National Census from Ministry of Public Management, Home
Affairs, Posts and Telecommunications for fiscal 2000 and the Number of Households
and Future Estimates of fiscal 2003 from the Institute of Population Problems.

Anticipated emergence of gigantic silver business market based on estimated figures for future number ofhouseholds by age group
The graph shown on the left is made up of data from page 18, the Estimation for the future number of general households by family
categories, as viewed in terms of age group. The so-called silver population base, comprised of people 65 and over, will exceed the 30%
share of makeup in 2010 and their share of the makeup will reach 37.1% by 2025. This means that a gigantic silver business market,
comprised of one out of three households, will emerge.

In terms of single person households categorized by age group, the silver population base emerges together
with the under 35s as target populations for our core businesses
Furthermore, the graph, shown on the right, represents data prepared by categorizing the extracted information regarding single personhouseholds obtained from the Estimation for the future number of general households by family category, shown on page 18, by age
group. Targets comprised of the under 35 population base of corporate users and silver business market, comprised of those 65 andover, for whom there are increasing needs in terms of hobby and nursing care, are emerging.
Our share in the market of the single person household base for under 35s was 2.7% in 2000, although it reached a level of 6.0% in 2005.

19

Monthly Leopalace Flat
Leopalace21 Leasing System

Company dormitories 14.64％

2.7%
2000/10

350

174.4

5,302
(41.1%)
3,000

6,085

0
2000/10

6,573

42.5％

4,544
9,234

6,388

25,132

10,000

9,509

6,160

6,000

■ Number of tenants by contract type0
1999/3

2004/3

2005/3

2006/3

Note: Based on company data

Pioneering new markets through monthly leasing
We are pioneering into new markets outside the existing leasing markets by implementing Monthly Leopalace, which is available for shortor long-term leasing, along with Leopalace21 Leasing System intended for long-term tenants. The purposes for using the monthly leasing
service can be categorized into “residential use” and “temporary use.” In terms of the residential use, the purposes for using the service
are expanding, such as “dormitory (for employees and students),” “job assignment away from home,” “daily use because of longcommute,” besides the “general use of rooms.” Furthermore, as for “temporary use,” the purposes vary, including “business trips,” whichis the most often cited purpose, as well as accommodation during moving, taking seminars, taking exams and tourism.

Steady increase of a user base for monthly leasing responding to various needs
The trend for number of tenants by contract type indicates that since Monthly Leopalace provides furniture, consumer electronics andutility expenses, launched in March 2000, the number of transactions for monthly leasing increased rapidly, which indicates the service
matched the needs of the market. Furthermore, Monthly Leopalace Flats was launched in March 2002, offering tenancy periods in shorter
segments, responding appropriately to the changing needs of the market. The number of units for this service increased to 109,700 units
by the fiscal term ending in March 2006.

20

Financial Highlights

Consolidated
Net sales

Non-Consolidated

Operating profit

Recurring profit

500,000 (¥ million)

60,000 (¥ million)

60,000 (¥ million)

400,000

50,00050,00040,00040,00030,00030,00020,00020,00010,00010,000Net sales

300,000

Recurring profit

500,000 (¥ million)

60,000 (¥ million)

60,000 (¥ million)

400,000

50,00050,00040,00040,00030,00030,00020,00020,00010,00010,000300,000

200,000
100,000

0

0
'02/3

'03/3

'04/3

'05/3

'03/3

'04/3

'05/3

'06/3

0
'03/3

'04/3

'05/3

'06/3

0
'02/3

Shareholders’ equity

400,000

'03/3

'04/3

'05/3

'06/3

0
'02/3

Net income

'04/3

'05/3

'06/3

'02/3

300,000

90,000400,0000

200,000

60,000-10,000

100,000

30,00010,000
'06/3

0
'02/3

'03/3

'04/3

'05/3

'02/3

'03/3

'04/3

'05/3

-30,000-40,000

0
'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

'06/3

150,000

100,000
200,000
50,000100,000
0

0
'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

(Unit : ¥ million)

Net sales'05/3

300,000-20,0000-20,000

'06/3

'04/3

200,000 (¥ million)

10,00020,000'03/3

Shareholders’ equity

500,000 (¥ million)

20,000120,000'03/3

Total assets

30,000 (¥ million)

150,000 (¥ million)

500,000 (¥ million)

30,000100,000'02/3

Total assets

40,000 (¥ million)

200,000

0
'02/3

'06/3

Net income-10,000

Operating profit

'05/3

'06/3

(Unit : ¥ million)

2002/3

2003/3

2004/3

2005/3

2006/3

2002/3

2003/3

2004/3

2005/3

2006/3

297,584

360,368

422,224476,266

465,386

Net sales

291,463354,647

416,590

469,181457,135

35,41644,892

51,78354,87939,53432,52540,41947,10451,81738,752

Operating profit

34,57444,52551,67054,682

40,775

Operating profit

Recurring profit

34,16736,34541,29953,265

44,151

Recurring profit
Net income

Net income

19,901

20,46420,96033,262- 16,582

16,96825,416

27,84328,750- 33,346

Total assets

374,397

410,340

421,163

453,434

412,803

Total assets

341,626

401,708

432,552

469,467

409,721

Shareholders’ equity

46,07768,30881,419149,798

133,622

Shareholders’ equity

45,40279,447

105,568

168,457

133,106

Common stock

33,27437,50037,50055,64055,640Common stock

33,27437,50037,50055,64055,640Shareholders’ equity per share (¥)

373.69492.06585.82941.06

839.44

Shares outstanding (thousand shares)

123,412

139,543

139,543

159,543

159,543

Net income per share (¥)

164.53160.56150.91220.79- 104.17

Shareholders’ equity per share (¥)

368.21569.87757.391,056.95

835.15

Net income per share (¥)

140.28198.46

199.74

190.47- 209.23

Dividends per share (¥)

0.00

15.00

15.00

15.00

15.00

2002/3

2003/3

2004/3

2005/3

2006/3

Segment information
Sales breakdown (Consolidated)

Operating profit (Consolidated)(Unit : ¥ million)

Hotel Resort
Related Division

Other Division

2003/3

2004/3

2005/3

2006/3

Apartment Construction Subcontracting Division

150,842

190,216

225,011

248,032

195,202

Apartment Construction Subcontracting Division

26,25041,484

54,15357,05139,452

Leasing Division

136,927

162,769

188,866

216,593249,699

Leasing Division

12,949

9,404

7,428

7,243

8,079

-3,569-2,736-3,849-3,928- 2,667371-1,235-3,516-2,640

- 393

2.6%

2.3%

2006/3(Unit : ¥ million)

2002/3

Leasing
Division

Hotel Resort Related Division

7,582

6,688

7,056

9,561

10,869Hotel Resort Related Division

53.4%

Other Division

2,774

1,458

2,590

4,361

12,149Other Division

Eliminations/Unallocated

(542)

(764)

(1,300)(2,282)(2,532)Eliminations/Unallocated(1,427)(2,391)(2,545)(3,043)(3,695)297,584

360,368

422,224476,266

465,386

Total

34,57444,52551,67054,682

40,775

Apartment Construction
Subcontracting Division

Total

41.7%

21

22

Financial Indicators

Consolidated

Non-Consolidated

Profitability
Gross profit / Net sales

Operating profit / Net sales

Net income / Net sales

Gross profit / Net sales

Operating profit / Net sales

30（％）

30（％）

20（％）

30（％）

15（％）

20

20

10

20

10

Net income / Net sales
10（％）
5
0

10

10

0

0

0
'02/3

'03/3

'04/3

'05/3

'06/3

10

-10
'02/3

'03/3

'04/3

'05/3

5

0

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

-5
-10

0
'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

2002/3

2003/3

2004/3

2005/3

2006/3

2002/3

2003/3

2004/3

2005/3

2006/3Gross profit / Net sales (%)

25.80

25.39

25.84

24.92

23.94

Gross profit / Net sales (%)

25.80
26.24

25.39
25.54

25.84
25.89

24.92
25.64

24.46

Operating profit / Net sales (%)

11.61

12.35

12.23

11.48

8.76

Operating profit / Net sales (%)

11.61
12.15

12.35
12.65

12.23
12.43

11.48
11.69

8.64

Net income / Net sales (%)

6.68

5.67

4.96

6.98

- 3.56

Net income / Net sales (%)

6.68
5.82

5.67
7.16

4.96
6.68

6.98
6.12

- 7.29Stability
Equity/Assets ratio

Current ratio

Fixed assets/Equity ratio

60（％）

150（％）

600（％）

40

100

400

Equity/Assets ratio

Current ratio

40（％）

Fixed assets/Equity ratio

120（％）

600（％）

80

400

40

200

30
20
20

50

200
10

0

0
'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

0

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'06/3

'05/3

'02/3

'03/3

'04/3

'05/3

'06/3

2002/3

2003/3

2004/3

2005/3

2006/3

13.28

19.77

24.40

35.88

32.48

2002/3

2003/3

2004/3

2005/3

2006/3Equity/Assets ratio (%)

12.30

16.64

19.33

33.03

32.36

Equity/Assets ratio (%)

Current ratio (%)

102.96

88.08

80.09

80.25

79.50

Current ratio (%)

82.44

88.47

79.79

79.04

78.30

Fixed assets/Equity ratio (%)

508.50407.66348.97

197.84186.44

Fixed assets/Equity ratio (%)

512.03343.28283.19187.75188.05

Efficiency
Total assets turnover

Fixed assets turnover

1.5 (Times)

Tangible fixed assets turnover

2.0 (Times)

Total assets turnover

Fixed assets turnover

Tangible fixed assets turnover

3.0 (Times)

1.5 (Times)

3 (Times)

4.5 (Times)

2.0

1.0

2

3.0

1.0

0.5

1

1.5

1.5
1.0
1.0
0.5
0.5
0

0
'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

2002/3

2003/3

2004/3

2005/3

2006/3

2002/3

2003/3

2004/3

2005/3

2006/3

Total assets turnover (times)

0.82

0.91

1.01

1.08

1.07

Total assets turnover (times)

0.88

0.95

0.99

1.04

1.03

Fixed assets turnover (times)

1.27

1.40

1.50

1.64

1.70

Fixed assets turnover (times)

1.25

1.40

1.45

1.52

1.61

Tangible fixed assets turnover (times)

1.47

1.60

1.75

1.97

2.11

Tangible fixed assets turnover (times)

2.27

2.60

2.86

3.13

3.13

Note: Total assets, fixed assets, and tangible fixed assets are expressed as an average of the relevant numbers at the beginning and end of each fiscal year, respectively.

23

Note: Total assets, fixed assets, and tangible fixed assets are expressed as an average of the relevant numbers at the beginning and end of each fiscal year, respectively.

24

Financial Indicators

Consolidated

Non-Consolidated

Productivity
Net sales per employee

Operating profit per employee

120 (¥ million)

12 (¥ million)

90

9

60

6

30

3

No. of employees at end-FY

0

0
'02/3

'03/3

'04/3

'05/3

Net sales per employee

'02/3

'03/3

'04/3

'05/3

No. of employees at end-FY

9,000 (persons)120 (¥ million)

15 (¥ million)

6,000 (persons)

6,000

80

10

4,000

3,000

40

5

2,000

0

0

'06/3

Operating profit per employee

'06/3

'02/3

'03/3

'04/3

'05/3

0
'02/3

'06/3

'03/3

'04/3

'05/3

0

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

2002/3

2003/3

2004/3

2005/3

2006/3

2002/3

2003/3

2004/3

2005/3

2006/3

75.13

83.68

83.71

78.33

69.85

Net sales per employee (¥ million)

89.36

98.77

101.20

94.65

82.74

Operating profit per employee (¥ million)

8.72

10.33

10.24

8.99

6.12

Operating profit per employee (¥ million)

10.85

12.50

12.57

11.07

7.15

No. of employees at end-FY (persons)

4,228

4,385

5,702

6,457

6,868

No. of employees at end-FY (persons)

3,520

3,661

4,572

5,341

5,708

Net sales per employee (¥ million)

Note: Net sales per employee and operating income per employee are calculated using the average number of employees during the year.

Note: Net sales per employee and operating income per employee are calculated using the average number of employees during the year.

Investment Indices
ROE

ROA

90（％）

ROE

15（％）

ROA

60（％）

12（％）

40

60
10

8

20

30
0

5
0

4

-20

-30

0
'02/3

'03/3

'04/3

'05/3

0

-40

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

2002/3

2003/3

2004/3

2005/3

2006/3

ROE (%)

62.53

35.78

27.99

28.77

- 11.70

ROA (%)

9.52

9.26

9.93

12.18

10.19

Note: Total assets, fixed assets, and tangible fixed assets are expressed as an average of the relevant numbers at the beginning and end of each fiscal year, respectively.

'03/3

'04/3

'05/3

'06/3

'02/3

'05/3

'06/3

2003/3

2004/3

2005/3

2006/3

ROE (%)

48.42

40.71

30.09

20.98

- 22.11

ROA (%)

9.87

10.87

11.29

11.48

8.81

Note: Total assets, fixed assets, and tangible fixed assets are expressed as an average of the relevant numbers at the beginning and end of each fiscal year, respectively.

Consolidated

Free cash flows

Depreciation expense
6,000 (¥ million)

30,000 (¥ million)

40,0004,000

20,00020,0002,000

10,000

0

0
'04/3

'05/3

'06/3

Per Share Data

Capital investment

60,000 (¥ million)

'03/3

'04/3

2002/3

Cash Flows

'02/3

'03/3

Shareholders’ equity per share

Shares outstanding at the end of fiscal year

900 (¥)

300 (¥)

180,000 (thousand shares)

600

150

120,000

300

060,000

0
'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3
-150

0
'02/3

2002/3

2003/3

2004/3

2005/3

'03/3

'04/3

'05/3

'06/3

0
'02/3

'03/3

'04/3

'05/3

'06/3

'02/3

'03/3

'04/3

'05/3

'06/3

2006/3

Cash flows from operating activities

34,25923,34731,49240,34856,971

Cash flows from investing activities- 16,326- 21,011- 12,532- 8,978- 11,266

Cash flows from financing activities- 2,809- 1,010- 30,129- 20,959- 47,946

Depreciation expense (¥ million)

4,555

4,707

5,251

5,855

4,565

Capital investment (¥ million)

10,02019,023

12,715

8,919

13,193

Cash flows (¥ million)

Net income per share

Shareholders’ equity per share (¥)

2002/3

2003/3

2004/3

2005/3373.69492.06585.82941.06

2006/3
839.44

Net income per share (¥)

164.53160.56150.91220.79- 104 .17

Shares outstanding at the end of fiscal year (thousand shares)

123,303138,821

138,984

159,180

159,180

Note: Free cash flows = cash flows from operating activities +cash flows from investing activities

25

26

Balance Sheets

Consolidated

Non-Consolidated

Consolidated

Non-Consolidated(Unit : ¥ million)

2004/3

2005/3

2006/3

2004/3

2005/3

2006/3

136,602

156,847

163,518

133,195

152,984

159,258

2005/3

2006/3

2004/3

2005/3

2006/3

170,555

195,427

205,674

166,917

193,548

203,376

Liabilities

AssetsCurrent assets(Unit : ¥ million)

2004/3Current liabilities

Cash and cash equivalents

36,59646,852

44,612

34,02944,086

41,769Accounts payable including payables for completed projects

72,921

91,046

81,23172,73290,80580,846

Trade receivables and accounts receivable for completed projects

31,69941,588

8,114

31,03840,654

7,223

Short-term borrowings

24,20330,09820,3488,459

14,857

2,042

Operating loans

Long-term borrowings due within one year

16,737

13,142

10,426

16,737

13,142

10,426

Marketable securities

164

151

155

124

151

13

Real estate for sale/property inventories

133

477

7,524

133

477

Payment for construction in progress

-

-

-

14,815

14,941

18,005

Bonds due within one year

1,435

1,435

1,435

1,435

1,435

1,435

7,523

Unpaid expenses

10,987

10,517

9,503

8,972

9,709

8,508

Accrued expenses

3,747

3,248

35,249

3,747

3,248

35,249Supplies

-

-

-

552

261

350

Prepaid expenses

-

-

-

13,51816,032

18,984

Other inventories

746

455

638

-

-

-

Deferred tax assets

9,821

2,796

10,827

9,821

2,796

10,827

-

-

-

74

90

47

Other accounts receivable

24,02029,41522,56424,01929,412

22,561

Other

14,55819,89424,893

1,010

3,793

5,762

Accrued income

Allowance for doubtful accounts
Fixed assets
Tangible fixed assets

48

23

41

40

17

20,667

16,367

4,423

20,661

16,363

4,419

Advances received

21,69928,27437,626

21,65728,21537,510

Customer advances for projects in progress

10,418

8,732

42,061

10,418

8,732

42,061

Deposits payable
Allowance for employees’ bonuses
Other
Long-term liabilities

-

-

-

3,782

4,390

5,457

1,689

2,224

2,487

1,689

2,224

2,487

6,481

6,683

6,534

2,249

1,831

585

151,505

90,55555,855160,066

107,461

73,238-1,623-1,175-1,487-1,612-1,163-1,481

Bonds

14,197

12,762

11,327

14,197

12,762

11,327284,130

296,366

249,128

298,964

316,286

250,316

Directors’ long-term borrowings

122,82964,48931,402

109,493

59,46426,752

238,655

243,010

196,512

147,492

151,427

140,663

Long-term borrowings

-

-

-

22,154

22,12622,126

1,958

2,556

3,246

1,944

2,541

3,229

12,276

10,566

9,801

12,276

10,566

9,801

Buildings and structures

114,790

117,004

83,66641,31442,971

39,613Retirement benefit reservesLand

106,458

109,740

107,216

102,710

105,927

97,862

Lease/guarantee deposits received

201

-

-

-

-

-

42

179

76

-

-

-

322,061

285,982

261,530

326,984

301,010276,615

17,683

17,653

17,651---

Construction in progress

14,053

12,697

1,964

1,707

719

1,555

Long-term unpaid expenses

Other

3,353

3,568

3,665

1,759

1,808

1,629

Other

Intangible fixed assets
Investments and other assets
Investment securities
Shares of subsidiaries and affiliates
Corporate bonds issued by subsidiaries and affiliates
Long-term loans receivable

570

579

579

563

564

565

44,903

52,77652,035150,908

164,294

109,087

7,697

9,815

11,046

4,591

5,401

6,185

-

-

-

70,06164,293

5,755

-

-

-

1,200

1,200

1,200

5,291

4,315

2,930

1,882

938

1,877

Total liabilities

Minority interests
Minority interests

Shareholders’ equity

Long-term loans to employees

-

-

-

4

1

0

Share capital

37,50055,64055,64037,50055,64055,640Long-term loans to executives

-

-

-

1,700

1,700

-

Capital surplus

15,49533,75933,75915,37533,49533,495Long-term loans to subsidiaries and affiliates

-

-

-

45,88656,67356,242Retained earnings

41,38972,09653,12352,487

79,14643,409Long-term trade receivables

15,821

10,9792,835

15,821

10,9792,835

Net unrealized gains on ‘other securities’

Long-term prepaid expenses

26,11932,82633,03522,531

29,062

33,618Translation adjustments

Deferred tax assets

1,330

2,174

1,901

1,330

2,174

1,893

Treasury stock

- 293

- 195

- 197

- 85

- 91

- 93

Other

3,560

3,341

3,349

3,508

3,354

3,349

Total shareholders’ equity

81,419149,798

133,622

105,568

168,457

133,106-14,918-10,676-3,064-17,612-11,485-3,871

431

220

156

392

196

146

Total liability, minority interest and shareholders’ equity

421,163

453,434

412,803432,552

469,467

409,721

Allowance for doubtful accounts
Deferred assets
Organization costs

39

24

9

-

-

-

Bond issuance costs

392

196

146

392

196

146

421,163

453,434

412,803432,552

469,467

409,721

Total assets

27

52

Accrued income taxes

291

258

714

291

266

654

- 12,964- 11,761- 9,418

-

-

-

28

Statements of Income

Statements of Cash Flows

Consolidated

Non-Consolidated

Consolidated(Unit : ¥ million)

2004/3
Ordinary income and loss
Net sales
Sales from Contracting Division
Sales from Leasing Division
Sales from Other Division
Cost of sales
Cost of Contracting Division
Cost of Leasing Division
Cost of Other Division
Gross profit
Selling, general and administrative expenses
Advertising expense
Selling fees
Provisions for allowance for doubtful accounts
Director compensation
Salaries and bonuses
Provisions for allowance for employees’ bonuses
Provisions for retirement benefit reserves
Welfare expenses
Fees paid
Rents paid
Depreciation expense
Taxes and public charges
Other
Operating profit
Non-operating profit and loss
Non-operating profit
Interest income
Dividend income
Gain on securities sales
Equity method income
Income from cancellation of resort memberships
Income from cancellation of construction contracts
Foreign currency translation gain
Unrealized gains on interest rate swaps
Other
Non-operating expenses
Interest expense
Bond interest expense
Amortization of bond issuance costs
Foreign exchange loss
Other
Recurring profit
Extraordinary income and losses
Extraordinary income
Gain on sales of fixed assets
Gain on sale of investment securities
Gain on sale of affiliates’ stocks
Reversal of allowance for doubtful accounts
Gain from forgiveness of debt
Extraordinary losses
Loss on sales of fixed assets
Write-offs of fixed assets
Markdown on investment securities
Loss on devaluation of affiliates’ stocks
Impairment losses
Provision for allowance for doubtful accounts
Amortization of transition obligation
Directors’ retirement benefit
Other
Net income before taxes and adjustments (loss)
Corporate, residential, and enterprise taxes
Income tax rehabilitation
Income tax adjustments
Minority interest
Net income (loss)
Retained earnings brought forward
Unappropriated retained earnings (loss)

29

2005/3

2006/3

2004/3

2005/3(Unit : ¥ million)

2006/3422,224
225,011
188,8638,349
313,084
147,266
154,080
11,737
109,139
57,468
8,004
1,555
118
358
19,485
1,105
487
3,031
2,407
1,996
18,91851,670476,266
248,032
216,590
11,643
357,546
163,176
177,671
16,698
118,72064,038
7,889
2,401
387
364
23,161
1,518
590
3,928
1,585
2,135
20,07554,682

465,386
195,202249,695
20,488353,928
129,397
203,664
20,866
111,458
70,683
8,265
2,909
1,653
425
25,714
1,752
861
4,101
1,293
2,391
21,314
40,775416,590
225,011
188,874
2,704
308,734
147,266
156,0365,430
107,856
56,072
7,999
3,492
118
347
18,595
1,105
485
3,474
4,171
3,061
1,501
1,766
9,952
51,873

469,181
248,032
216,599
4,550
348,882
163,176
179,507
6,198
120,299
65,419
7,867
5,124
387
353
22,711
1,518
589
4,616
4,194
3,947
1,584
1,735
10,78754,879457,135
195,202249,702
12,230345,319
129,397
205,480
10,441
111,816
72,281
8,245
5,565
1,653
414
25,249
1,752
859
5,982
3,763
4,112
1,292
1,909
11,47939,534

1,561
93
299
321
26
121
268
431
11,932
5,113
6,405
413
41,299

3,308
62
100
1,481
28
293
915
52
374
4,725
3,902
822
53,265

6,493
53
125
512
11
174
4,780
233
601
3,116
2,300
815
44,151

1,347
94
336
299
26
121
268
200
6,026
4,454
82
196
1,084
208
47,104

1,239
64
261
100
28
293
192
52
245
4,301
3,352
155
196
598
51,817

2,156
55
429
125
11
174
903
233
222
2,938
2,051
96
269
521
38,752

1,479
22
1,439
17
2,733
17
762
30
1,393
157
300
72
40,04523,055- 4,843873
20,960
-

1,011
7
4
1,000
1,662
6
373
1,109
157
15
52,615
12,282
6,197
873
33,262
-

68
13
31
24
66,96310453
65,480831
187-22,743261
729- 8,023871-16,582
-

1,461
22
1,439
2,532
16
761
30
1,193
157
300
72
46,03323,032- 4,843
27,84324,64352,487

1,678
6
671
1,000
6,279
6
335
5,768
157
11
47,217
12,2696,197
28,75050,396
79,14639
7
31
79,17310452
59,342
18,348831
187-40,381251729- 8,016-33,346
76,75643,409Cash flows from operating activities
Net income before taxes and adjustments (Decrease)
Depreciation expense
Increase (Decrease) in allowance for doubtful accounts
Interest and dividends income
Interest expense
Gain from forgiveness of debt
Foreign exchange loss (gain)
Equity method income
Loss on sale of tangible fixed assets
Write-offs of tangible fixed assets
Impairment losses
Gain on sale of affiliates’ stocks
Gain on sale of investment securities
Markdown on investment securities
Loss on sale of securities
Decrease (Increase) in accounts receivable
Decrease (Increase) in inventories
Increase (Decrease) in long-term prepaid expenses
Increase (Decrease) in accounts payable
Increase (Decrease) or decrease in amount received for uncompleted works
Increase (Decrease) in advances received
Increase (Decrease) in guarantee deposits received
Increase (Decrease) in accrued consumption tax
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payment for purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Commissions paid on sale and disposal of tangible fixed assets
Payment for purchase of shares of affiliates
Payment for purchase of bonds of affiliates
Payment for purchase of investment securities
Proceeds from sale of investment securities
Payment for loans madeProceeds from collection of loans
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term debt
Repayment of short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Payment for accounts payable for long-term projects
Proceeds from shares issued
Proceeds from issuance of privately placed bonds
Payment for retirement of privately placed bonds
Payment for redemptions of privately placed bonds
Dividends paid to minority shareholders
Payment for purchase of treasury stock
Dividend paid for shareholders
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents (Decrease)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

2004/3

2005/3

2006/340,045
5,251
1,252
-109

52,615
5,855
1,454
-99

-22,743

5,579
6,405
-321

4,268
-1,000-915-1,481

2,518-4,780-512

17762-1,4396373-100-12,84110453
65,480-3130-299-3,684-449-14,358
13,514
6,383-3,348452-8,794
19,949-1,685
6,558-1,855
-705
-893

4,565
1,737
-256

-125
42,237-39,212-7,345-10,208
33,3289,294-1,761-1,166324
2,991
58,54780-5,530-18,064

61,16081-3,992-16,900

699
72,181228-2,356-13,081

35,03240,34856,971-12,715-8,919-13,193

56-52-1,800-1,200-1,099

45
-16

914
-34

-1,743-2,827

4,949-2,999952-1,0202,835-1,381

2,155
-658

2,414
-690

- 13,363- 8,978

2,843-422-11,266

28,754-36,357

39,405-46,434

17,750-28,564

18,908-47,325-6,325

10,000-54,346-1,436

10,680-42,703

15,761
-717
-706
-29
-2,091

36,260-1,435-875-6-2,090- 30,129- 20,959

686- 7,773- 154
10,25636,59646,85244,36936,596

13,259-13,667-1,435-873-1-2,390-47,946
0-2,24046,852
44,61230