Leopalace21

Integrated Report 2022
For the fiscal year ended March 31, 2022

50th

Leopalace21 Aims To Realize Our Long-Term Vision by Re-Examining
the Purpose, or Our Raison d’Être and by Taking Action Every Day
While Embracing Our Corporate Philosophy

Two Major Challenges
Business

Our
PurposeCreate new value
and provide better
living solutions based on
the theme of housing

1
Provide housing forthe increasing number offoreign nationals

Corporate
Philosophy

Creating New
Value

Editorial Policy
This report is published as an integrated report. The purpose of this report is to enable management to communicate its message to all our stakeholders. We seek to present our management
strategy, priority measures, an overview of business conditions, etc. as well as inform readers about our sustainability initiatives. This report covers the fiscal year from April 1, 2021 throughMarch 31, 2022 (fiscal year 2021). The scope is Leopalace21 Corporation (the “Company”) and its consolidated subsidiaries in Japan and overseas. Our aim is to publish to the extent
possible the latest information available as of the publication date. With the aim of promoting deeper reader comprehension, the report includes macro-economic data relating to ourbusinesses, and the “Data Compilation” section enables readers to understand trends to date. We take care to explain what we present in ways that are readily understandable so that thereport serves as an effective communication tool that reaches our many stakeholders.
In this report, we focus on explaining the strengths in managing approximately 560,000 apartment units nationwide and the social challenges we hope to solve by leveraging thosestrengths. We hope this report helps readers gain a better understanding of the Company.

to be Solved ThroughActivities

2
Environmental initiatives(Toward carbon neutrality)

Long-Term
VisionEnsure competitive advantage
in our business, with theprovision of rental housing
as social infrastructure
at its core, and achievesustainable growth alongwith stakeholders

Reference Guidelines

Forward-Looking Statements• VRF International Integrated Reporting Framework• ISO 26000• GRI Standards

Statements made in this integrated report with respect to Leopalace21 current plans, strategies, and future performance thatare not historical facts are forward-looking statements involving risks and uncertainties. Leopalace21 cautions that a number offactors could cause actual results to differ materially from such statements due to a number of factors including, but not limited to,
general economic conditions in Leopalace21’s markets; demand for, and competitive pricing pressure on, Leopalace21’s products
and services in the marketplace; Leopalace21’s ability to continue to win acceptance for its products and services in these highly
competitive markets; and movements of currency exchange rates.

Leopalace21 Integrated Report 2022

1

To Our Stakeholders

We are celebrating our 50th anniversary from August of this year, and I
would like to take this opportunity to thank all of our stakeholders fortheir support.
Since our founding, our corporate philosophy has been “creating newvalue,” and we have combined various technologies in our studio typeapartments in pursuit of providing comfortable housing so that we canremain a leader in our industry. As a result, we have developed a social
infrastructure consisting of about 560,000 apartment units undermanagement together with over 26,000 property owners, which areused as dormitories and corporate housing by about 80% of the listedcompanies in Japan.
Our business performance deteriorated after the construction defects
problem came to light in 2018, then again in fiscal year 2020 when
President and CEO

the COVID-19 pandemic broke out, and by the end of fiscal year
2020, we fell into excessive liabilities per the Tokyo Stock Exchange
definition. However, by steadily implementing fundamental structuralreforms, we were able to record positive net income for the first timein four fiscal years in fiscal year 2021, and recorded net assets per the
Tokyo Stock Exchange within one year.
Now that our business performance has recovered and we havereached a new stage, we plan to shift our focus to sustainability management in order to enhance our corporate value over the medium- tolong-term, while asking ourselves what we must do to grow into a
company that is needed by society. In addition, I believe it is important
to instill this mindset not only to our management team, but also
among all officers and employees.
To this end, we must engage in dialogue with all of our stakeholders,and I sincerely hope that this integrated report will serve as a conversation starter.
I would like to ask for your continued understanding and support ofour company’s management.

2

Leopalace21 Integrated Report 2022

Contents

Cover 2 Our Purpose, Corporate Philosophy, Long-Term Vision
2 To Our Stakeholders
4 Cover Story
4 Our Journey in Value Creation
6 Value Creation Process
8 Message from the President
13

Message from the Chief of the Corporate
Management Headquarters

17 Sources of Competitive Advantage
18 Apartments
20 Leasing Business Expertise
22 Our People

46 Materiality
47 Materiality Management
48 Leopalece21’s Materiality
50 Offer Rental Housing with Stable Operation
51 Promote Real Estate Tech
52 Work-Style Reform and HR Development
54 Respect for Human Rights
55 Communication with Stakeholders
56 Maintain the Workable Corporate Governance System
57 Strengthen Compliance
58 Environmental Initiatives
62 Data Section

24 Property Owners & Tenants

62 Ten-Year Consolidated Financial Highlights

25 Business Partners

64 Financial Highlights

26 Business Model
27 Business At a Glance
28 Growth Strategy
32 Structural Reforms

67 Non-Financial Highlights
68 Financial Section
132 Data Compilation

138 Corporate Profile

33 Corporate Governance
34 Corporate Governance System
35 Strengthening Our Management Structure
38 Expected roles of outside directors and results
40 Initiatives Aimed at Improving Effectiveness41 Risk Management
42 Compliance
44 Directors and Audit & Supervisory Board Members

Leopalace21 Integrated Report 20223

Cover Story

Our Journey in Value Creation
Leopalace21 has pioneered a variety of industryfirst initiatives to provide new value to societyEver since its establishment in 1973, Leopalace21 has pioneered numerous industry-first initiatives and addressed a variety of housing-related
challenges and needs.

1995

1985

Challenge/needs

Value provided

Securely managed
apartments

Established and launched an industry-firstmaster lease system to pay rents for allunits in apartments for up to 30 years

Challenge/needs(before 1995, it was two to ten years)

Comfortable lifestyles

Tenant recruitment andapartment management

Value provided

Introduced Leopalace21
urban-type apartments

Individual
tenants

Payment for apartmentbuilding*2

Leopalace21

Corporatetenants

Rent payment

Master-lease rents*1

Property
owners• Apartment building*2
Master lease*1 Master-lease rents are reviewed every two years*2 New orders are currently suspended to prioritize theproperty owner follow-up.

(mainly as inheritance tax measures)• Management

Apartments

1999
Challenge/needs

Easy moving/
use as company-leased housing
Value provided

Launched the Monthly Leopalace
short-term rental service, furnishedwith furniture and home appliances
1993
Opened Leopalace Resort Guam

1991
Obtained a patent for“housing with lofts”

Founded
in

1985

1973

1973
Rapid economic
growth period

4Introduced Leopalace21
urban-type apartments

1975

1980
Stable growth period

Leopalace21 Integrated Report 2022

1989

1995
Established and launched anindustry-first master leasesystem to pay rents for all units
in apartments for up to 30 years

Over-the-counter
stock offering

1985

1990
Bubble period

1995
Post-bubble period

2017

Challenge/needs

Challenge/needs

Homes where women can feel safe

Convenient housing

Value provided

Value provided

Began full-fledged introduction of security
system installations for apartments

Promote the introduction of IoT at apartments
Leo Remocon/Leo Lock rolled out in stages

2012

2022

Challenge/needs

Challenge/needs

Challenge/needs

Internet access &video streaming at home

Rooms customized totenants’ preferences

Value provided

Value provided

DX promotion &infection prevention
countermeasures

Launched broadband business

Launched Room Customize(current my DIY)

Sources ofCompetitive Advantage

2002

Cover Story

2011

Value provided

Business Model

Promoting realestate tech2017
Promote the introduction of IoT at apartments
Leo Remocon/Leo Lock rolled out in stages

2018
Construction defects problem discovered

Launched the Monthly
Leopalace furnished with
furniture and home appliances

2000
Company name changed
to Leopalace21

2004
Listed on First Section ofTokyo Stock Exchange

2005
Launched Elderly
Care Business

2020

2008

Launched property 2011owners’ member
Began full-fledged
organization Class L introduction of security
servicesystem installations forapartments

2015
Adoptedelectronic
contractmanagement system

2012
Launched Room
Customize(current my DIY)2002

Net sales

2022(JPY billion)

Began
Launched
installing
Healthcare
Professional smart locks
Support Plan
Beganhousing
Promotingweb-based support forrental
Ukrainianagreements
refugees

800.0
700.0
600.0
500.0

Materiality

Launched broadband
business

Implemented
fundamental
businessstrategies
restructuring

Corporate Governance

1999

400.0
300.0
200.0
100.0
0

2005

2010

2015

Global recession
periodEconomic uptrend period

2020

2022

Data Section

2000

(FY)

Plan

Economic recovery period

2008

2020

Global financial crisis

Coronavirus disease (COVID-19) pandemic

2011

2022

Great East Japan Earthquake

Russia’s aggression against Ukraine
Leopalace21 Integrated Report 20225

Cover Story

Value Creation Process
In the field of rental and other forms of housing, we will strive to solve social challenges by providing
innovative services that meet the needs of the times and create new social value, while simultaneously
achieving sustainable growth (expanding economic value) for Leopalace21.

Sources ofp.17
Competitive Advantage

Apartments
Leasing Business Expertise

Business Model

GrowthStrategySocial demands andchallenges such as

Our People

Sustainable
Development Goals

Purpose

Corporate

Property Owners & Tenants
Business Partners

Structural
Reforms

Corporate

6

Leopalace21 Integrated Report 2022

Cover Story

Materiality p.46

p.26

Long-Term Vision
Sources ofCompetitive Advantage

Offer Rental Housingwith Stable Operation
Promote Real Estate Tech
p.28

ActionGuidelines

advantage in our business,

Respect for Human Rights

with the provision ofCommunication
with Stakeholders

rental housing as social

p.32

infrastructure at its core, andachieve sustainable growthalong with stakeholders

Strengthen ComplianceCorporate Governance

Maintain the
Workable Corporate
Governance System

Business Model

Philosophy

Ensure competitive

Work-Style Reform and
HR Development

Environmental Initiatives
Materiality

Governance

p.33

Data Section

Leopalace21 Integrated Report 2022

7

Cover Story

Message from the President

We will drive forward with“constant structural reforms,”“promoting sustainability,”and “construction defects
management”
Bunya Miyao
President and CEO

Fiscal Year 2021 Earnings
In fiscal year 2021, we recorded net sales of JPY 398.3 billion, operating profit of JPY 1.7 billion, andnet income attributable to shareholders of the parent of JPY 11.8 billion. This marked our first operating profit in three fiscal years, with our net income also turning positive due in part to a reversal ofprovision for losses related to repairs and the recording of deferred tax assets. In addition, an increase
in retained earnings and accumulated other comprehensive income brought the total amount ofownership equity plus stock acquisition rights to JPY 1.4 billion, and we eliminated excessive liabilities
defined by the Tokyo Stock Exchange. We had started fiscal year 2021 with two management issues
in mind: returning to profitability and eliminating excessive liabilities, and we are relieved to haveresolved both issues, albeit for a single fiscal year.
The main contributor to this turnaround was thorough cost reductions, or in other words, structuralreforms. This included a review of our sales office structure, as well as a review of our workforce throughthe implementation of a Company-wide voluntary retirement program, both of which were highly
effective. However, this was more a function of preparations made in previous years that finally bore
fruit, rather than efforts yielding results in a single fiscal year. In addition, from a business standpoint,
we were able to contractually adjust the master-lease rents for property owners and thoroughly review
lease management costs, which played a major role in returning to operating profitability.

Occupancy Rates
Apartment occupancy rates, which underpins our business performance, bottomed out in fiscal year
2020. In fiscal year 2021, our average occupancy rate recovered above 80%, reaching 81.2%.
I believe that this was largely due to the following factors. First, in order to dispel our reputation

8

Leopalace21 Integrated Report 2022

Cover Story

associated with the construction defects problem, we began collecting safety data from fire resistanceverification tests and explaining this data to our corporate clients, which has helped promote a greater
sense of security toward our apartments. Specifically, we began explaining the safety details and theresults of the verification tests to the general affairs personnel in charge and their senior officers of ourcorporate clients in the fall of 2020. Setting aside the issue of whether to repair defective parting walls
or not, we were able to foster a sense of security by carefully explaining a third-party written opinion
indicating that even if the parting wall was defective, fire would not spread if the defect was in acertain area, and therefore there would be no physical danger to the tenants, and I believe this led tomore people moving into our apartments.
The second factor is our collaboration with brokers, which began in earnest around January
2021. Prior to this, brokers had been hesitant to act as intermediaries because Leopalace21 was
known as the company with the construction defects problem. We also provided brokers with proper
explanations on safety, which helped them feel more confident that it was safe to broker Leopalace21
apartments, and this has helped us build a track record.

Sources ofCompetitive Advantage
Business Model

Our Efforts to Address Construction Defects
in Fiscal Year 2021

Corporate GovernanceWith regard to the construction defects problem, our basic policy at the start of fiscal year 2021
was to devote all our efforts to corporate rehabilitation, and we decided to proceed with repairingconstruction defects while prioritizing apartments by safety. The construction defects are a major
management issue, but in light of our business situation, we took a fairly conservative approach infiscal year 2021. Going forward, we will need to accelerate the repair process while monitoring ourcorporate rehabilitation status.
This change in approach is partly a reflection of the fact that we initially had not done the best jobof understanding and organizing the details of the situation when the construction defects came tolight. At the time, we declared that we would rush to fix all the deficiencies without any scientific basis
such as empirical data on safety, which led to a large number of apartments being included in thescope of repairs, and this made it difficult to preferentially carry out repairs on those apartments withhigher priorities. By making use of these reflections, we believe that in fiscal year 2021 we were able
to properly prioritize and carry out repairs steadily and thoroughly.

Materiality

Business Environment Surrounding Rental Housing

Leopalace21 Integrated Report 2022

Data Section

The business environment surrounding rental housing is basically closely related to the demographics
of Japan. In other words, we cannot avoid the impact of the declining birthrate and aging and shrinking population in Japan.
On the other hand, it is also true that people relocating has led to greater housing needs than
before, and many houses are in need of reconstruction considering their life spans. In addition, thenumber of single-person households, our target segment, tends to decline at a slower rate comparedto the number of family households, which is directly affected by the declining birthrate and aging
and shrinking population. Furthermore, we believe that there is no way to avoid taking in foreign
workers in order to maintain various industries such as nursing care, manufacturing, and agriculture9

Cover Story

in Japanese society with a shrinking population going forward. When these factors are combined, we
believe that there will be a certain level of demand for apartments for single persons such as ours overa 10-year period, and that it is unlikely for demand to drop sharply.

Management Policy for Fiscal Year 2022
Having returned to profitability for the first time in three fiscal years, we have reaffirmed that it is necessary to look at things from a medium-term perspective and we have formulated a quantitative planwith numerical targets for the next three years through fiscal year 2024. The plan calls for net sales of
JPY 429.3 billion, operating profit of JPY 25.2 billion, and net income attributable to shareholders of
the parent of JPY 19.4 billion in fiscal year 2024, the final year of the plan. We estimate that we willneed an average occupancy rate of 91.3% (81.2% in fiscal year 2021) to achieve these targets.
For fiscal year 2022, the first year of the plan, we summarized what we must undertake now as ourmanagement policy and came up with the three focal areas of “constant structural reforms,” “promoting sustainability,” and “construction defects management.”
First, with regard to “constant structural reforms,” we plan to complete the transfer of orwithdrawal from unprofitable businesses and concentrate on our Leasing Business as we set forthin our structural reforms announced in June 2020. In fiscal year 2021, we successfully reduced
costs and SG&A expenses by JPY 41.5 billion per year by cutting leasing operation costs, leasing
management costs, and construction and real estate costs, and plan to continue our efforts to
reduce costs even further.
Next, for “promoting sustainability,” we have listed three associated themes of “strengthening
governance,” “offering digital transformation (DX) solutions,” and “promoting greener operations.”
As for “offering DX solutions,” we formulated and announced a “DX Strategy.” With the exceptionof negotiation and communication, which cannot be performed by a system, we will work on digitaltransformation and boldly promote unmanned and systematized operations for tasks that have conventionally been performed by people. In addition, contracts and other tasks that used to require in-person
meetings are now being handled digitally, and we need to accelerate our efforts in these areas.
With regard to “promoting greener operations,” we will work to reduce CO2 emissions from theapartments we manage. In a business like ours, we must not only control the emissions from our own
business activities, but from a broader perspective, we must also consider how we can manage theactivities of our tenants and business partners. We will continue to consider setting specific targets
and other details.
Regarding “construction defects management,” thethird focal area in our management policy, we havealready announced that we will repair approximately
6,000 units in fiscal year 2022, almost double the units
we repaired in fiscal year 2021. As this necessitates
reinforcing our construction capabilities, from the starting point we plan to gradually increase the number ofunits we can repair, and eventually get to a point where
we are repairing at least 700 units per month.

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Leopalace21 Integrated Report 2022

Policy on Future Financial Strategy
Cover Story
Sources ofCompetitive Advantage

With respect to our financials, as of March 31, 2022,
we eliminated excessive liabilities as defined by the
Tokyo Stock Exchange. Our earnings structure is
improving and we expect operating profit to recover, so
we believe it is unlikely that we will fall into insolvency
again. However, in terms of our current financial
situation, we are just seeing the light at the end of thetunnel, and there are many things we need to work on.
One of the things we need to work on is to start
looking into resuming dividend payments to meet the
expectations of our shareholders. We believe that, at least as a publicly listed company, or rather as astock company, it is our duty to pay dividends. However, it is also true that we are in a fragile financial
position, and paying dividends would quickly put us back into excessive liabilities. As such, our nearterm vision for our financial strategy is to pay dividends to shareholders and review our debt, and weplan to build the financial base necessary to fulfill this vision. In the process of building our financialbase, we would like to resume dividend payments as soon as we are able to, rather than in the final
year of the three-year plan.

Business Model

Reaffirming Leopalace21’s Purpose, or Raison d’ÊtreMateriality
Data Section

Leopalace21 Integrated Report 2022

Corporate GovernanceAmid the challenging environment over the past few years, we made various sacrifices to decisively
implement reforms, and the end is finally in sight. And in the course of taking on various initiatives, I’ve
come to reaffirm Leopalace21’s Purpose, or raison d’être.
One part of our Purpose is that we are a rare company that provides uniform rental housing
across Japan. As I mentioned at the press conference when I became President and CEO, ourapartments are located in over 80% of Japanese cities (geographical administrative unit), with a
total of 560,000 units. I believe that the fact that we manage such a large number of apartments
scattered across Japan makes our Company a part of the social infrastructure, and this in itself is ofgreat value and significance.
Another part of our Purpose is that we offer apartments for single-person households, which is also
the foundation of Leopalace21’s business model. International students from abroad, students who
leave their parents’ homes to attend college, and businesspeople relocating alone all need quality
single-person apartments. I believe the fact that we meet these needs is in itself a source of greatsocial value.
I had opportunities to hear some comments that support our Purpose and fulfillment. One staffing
agency that uses our apartments said, “Even if we win a job order, we can’t fulfill the order if we can’t
prepare a place to live for the people we dispatch. This is why we need Leopalace21 in order to growour own business.” We’ve heard similar comments from general contractors and various other customers. Many companies, especially those that operate nationwide, have come to us because they feel thatas they grow their business, they need a nationwide company like ours that can provide consistentquality and volume.

11

Cover Story

Every time we hear these encouraging comments, we are reminded that our very existence is partof the social system, and this is why we must not repeat our past mistakes and work to become evenmore useful to society.

Message for the Future
While we have been in a difficult situation since I became President and CEO, we are finally seeing theresults of our reforms in the form of returning to profitability, but we have not yet reached a safe level.
As we move forward with further reforms, I would like to once again thank all of our stakeholders fortheir support and cooperation.
Firstly, since we are in the process of rebuilding our financial base and working to ensure a stable
growth trajectory, we would like to ask our shareholders for a little more patience before we begin
reinstating shareholder returns, including dividends.
Next, for property owners, we would like to share our mindset that we are working together toenhance not only economic value, but also social value. In our society going forward, being a rental
property owner may not bring in a lot of money, although a certain level of return can be expected. We
would like to encourage property owners to set their eyes on the social value of providing an asset, inthe form of an apartment, that contributes to the local community.
Finally, we are thankful to our employees, as we were able to get the Company on a recovery track
as a result of the difficulties they endured, such as voluntary retirement. I intend to reciprocate this byproviding new challenging opportunities at the Company and creating a fulfilling workplace.
Although our circumstances remain difficult, we are finally beginning to see some positive signs,
such as returning to profitability and eliminating excessive liabilities. I would like to ask all of our
stakeholders for their continued understanding and support of the Company’s management.

Bunya Miyao
President and CEO
September 2022

12

Leopalace21 Integrated Report 2022

Cover Story

Message from the Chief of
the Corporate Management Headquarters
Cover Story

We will strengthen our
profitability and stabilize
our financial base within
the next three years

Sources ofCompetitive Advantage

Shinji Takekura
Director, Executive Officer,
Chief of the Corporate
Management Headquarters

Business Model

Looking Back at Fiscal Year 2021

Materiality
Data Section

Leopalace21 Integrated Report 2022

Corporate GovernanceFor fiscal year 2021, we recorded net sales of JPY 398.3 billion and an operating profit of JPY 1.7
billion. Our net income was JPY 11.8 billion, marking our first return to profitability in four fiscal
years. In addition, ownership equity and stock acquisition rights totaled JPY 1.4 billion, and as
mentioned earlier by President Bunya Miyao, we eliminated excessive liabilities as defined by the
Tokyo Stock Exchange.
Looking back on fiscal year 2021, which was a critical stage in the restructuring process, we made adetailed plan at the beginning of the fiscal year and thoroughly reduced costs while addressing issues
that had remained unresolved.
To reduce SG&A expenses, we established an in-house task force consisting of members chosenfrom various business divisions, plus executive officers, to review operations and eliminate andconsolidate sales offices. In reviewing operations, we streamlined contracting and other tasks that had
been handled by individual sales offices nationwide by consolidating them into our locations in theTokyo metropolitan area and Osaka, and made changes to these tasks so that they could be handledby contract employees. After carrying out the first Company-wide voluntary retirement program to
optimize our workforce, we reduced the number of full-time employees from approximately 7,000 in2018 to roughly half as of the end of June 2022.
On top of that, we implemented measures to contractually adjust the master-lease rents in accordance with the Rental Housing Lease Management Business Law, which came into effect in December
2020. While taking into account the age of the apartments and other actual circumstances, we
proceeded to revise master-lease rents following discussions with the property owners in cases where
there were discrepancies with the surrounding rent market.
As a result of these measures, we were able to reduce SG&A expenses by JPY 24.5 billion in fiscal
year 2021 compared to fiscal year 2018, and our combined SG&A expenses and cost of sales by JPY
41.5 billion during fiscal year 2021, which greatly contributed to our return to profitability.

13

Cover Story

Strategy for the Next Three Years
I will now go over our management policy and financial strategy covering the period from fiscal
year 2022 to fiscal year 2024. Our major policy is to ensure that we thoroughly move forward withsincerity in dealing with our Group’s important issues, such as constant structural reforms, promoting
sustainability, and construction defects management. In particular, we believe that strengthening
our profitability and stabilizing our financial base, which are also the cornerstones of our structuralreforms, are important objectives that we must achieve over the next three years.
The key to restoring our profitability lies in our strategy to improve our occupancy rate, which
dropped sharply in fiscal year 2018. First, we changed our corporate sales strategy in the Leasing
Business Division starting in fiscal year 2021 from focusing on acquiring new corporate clients tomakingproposals to existing corporate clients to expand the number of rooms they use. This approach(%)
40 produced remarkable results, and occupancy rates have begun to recover. In fiscal year 2022, we
has
32.7
will
30 continue to deepen our focus on existing corporate clients and grow our top line.
We also aim to improve our23.0
balance sheet, which is currently severely weakened, as soon as
20
16.0
possible by boosting profits at the individual business level. Specifically, we have set targets to raiseour
10 equity ratio to at least 23% by the end of March 2024 and 30% by the end of March 2025. We
plan to 0.7
achieve these targets by accumulating retained earnings from our business activities, and have0
no plans
to raise newor seek external
FY2021
FY2022capitalFY2023
FY2024 funding. Our lease management business is recurring
Plan
Plan
in nature, generally with little
fluctuationin performance, and we expect to achieve our targets in line
(Reference)(Reference)with our plan.
In addition, we, as a publicly listed company, view our current inability to pay dividends as a major
problem. Accordingly, we will strengthen our capital position and consider resuming dividend payments from fiscal year 2022 to fiscal year 2024.
In November 2020, we received JPY 30 billion in loans with stock acquisition rights from US-based
fund Fortress Investment Group (FIG) to secure funds to address construction defects and other things.
Recently, we have received a variety of ideas on ways to boost our corporate value from FIG. Although
FIG may exercise its stock acquisition rights in the near future, we believe as a general rule that thesefunds should be repaid as soon as possible.

Operating Profit and Operating Profit Margin(JPY billion)

(%)

40.0

10

22.9

20.0

4.3

0

11.7

7.3

1.7

1.5
-36.4

-20.0
-40.0

FY2017FY2018-8.4
FY2019

-29.1

2.8

17.5
4.1

5

5.9

300
0

0.4

-5
-10

FY2021

FY2022Plan

FY2023Plan(Reference)

400

25.2

-7.1
FY2020（名）

FY2024
Plan(Reference)

200

100

0

13
14
40期 41期 4

14Leopalace21 Integrated Report 2022

Financial Strategy for Medium- to Long-Term Growth
Cover Story
Sources ofCompetitive Advantage
Business Model

11.7
1.7

2.8

17.5
4.1

0.4

FY2021

FY2022Plan

Data Section

15

25

5.

FY20
Pla
(ReferMateriality

Leopalace21 Integrated Report 2022

FY2023Plan(Reference)

Corporate GovernanceAt the beginning of my message, I explained that
Equity ratio
a major factor contributing to our return to net(%)
40
income was the reduction in SG&A expenses and32.7
cost of sales, and that we were able to reduce30
23.0
SG&A expenses by JPY 24.5 billion compared to
20
16.0
fiscal year 2018, before the construction defects
10
problem came to light. And I believe that the
0.7question on the mind of investors now is whether0
we as an organization can maintain the current
FY2021
FY2022
FY2023
FY2024
Plan
Plan
SG&A expenses and cost of sales to net sales(Reference)(Reference)
ratios at a reasonable level with minimal reversal.
This is why we will proceed in a straightforward manner with our various structural reform measures overthe next three years while constantly being mindful of our need to optimize our cost structure. At the sametime, we will also reinstate bonuses for our valued employees and ensure that our in-house task force andother frameworks are functioning properly, while taking into account expenses that we can no further cut
down. Furthermore, from a medium- to long-term perspective, we will maintain a lean corporate structure.
Moreover, from the perspective of strengthening our profitability, I believe we need to create aframework for boosting the value of our apartments under management going forward. As the first stepof this effort, we started installing smart locks in June 2022. Smart locks dramatically improve tenantconvenience by enabling them to unlock the front door using smartphones or other devices, which eliminates the need to visit our office to pick up the key when viewing the apartment or after signing a rental
contract. In addition, the increased security provided by(JPYthe
auto-lock feature will help boost the value
billion)40.0
of existing apartments. This also aligns with societal demands,
such as the need for contactless services
to prevent the spread of infectious diseases. We are proud
to be 22.9
able to help streamline operations by
20.0
eliminating the need for rental brokers to make phone calls or provide
keys, and7.3 by enabling foreign
4.3
0
nationals to arrive from Narita Airport and move directly into their rooms. We aim to install smart locks in
1.5
-29.1
440,000 units, or approximately 80% of our units undermanagement by May 2024. -36.4-20.0
Going forward, we plan to launch initiatives to reduce CO2 emissions linked to electricity, gas, and
-40.0
-7.1
-8.4
other energy sources used in apartments under management through alliances with companies
in other
FY2017FY2018FY2019FY2020industries. The scope of these initiatives will include approximately 560,000 units under management,
and we plan to announce specific CO2 reduction targets. We believe that this endeavor will garnerthe support of the millennial and Generation Z demographic, who are particularly eager to embrace
the SDGs, and will prove effective in rebuilding our corporate brand value. In addition, it will enhancethe value of the apartments for property owners and thus stabilize our rental apartment managementbusiness. Through these measures, we hope to reduce Scope 3 CO2 emissions.
Over the next three years, if we are able to make steady progress on our roadmap for structuralreforms, figuring out how to maintain the scale of our rental apartment units will be a key focus fromfiscal year 2024 onward. In fiscal year 2021 alone, the number of apartments units under management
has fallen by approximately 6,300 units. The contracts for most of these units were terminated at theend of the master lease term, and included many unprofitable apartments that were 25 to 30 years
old with very small private floor areas. Accordingly, the drop in the number of units under management
resulting from reaching the end of the contract term has become one of the factors contributing to theimprovement of our profit structure. From fiscal year 2024 onward, we will also actively invest managerial resources in reconstruction and new apartment development. Furthermore, we believe we need tomaintain the number of apartments of a certain scale in total.

Cover Story

Role of the Chief of
the Corporate Management Headquarters
As the person who primarily oversees the financial aspects of business management, I believe that myhighest priority mission is to ensure that no compliance issues ever emerge again. As an example ofone of the cases we envision for the near future, we launched a program in August 2022 to encourageinternal entrepreneurship by soliciting ideas from within the company. We must prepare a system
to enable our employees to take on as many challenges as they want, while minimizing risks whenstarting new businesses related to our core business or in areas where we have no prior experience,and ensuring compliance and legal backing in the process of nurturing these new businesses. For thesake of the company, and for the sake of the employees who propose business ideas, we must nurturebusinesses under a framework that prevents compliance problems from ever occurring again.
In terms of finance, as mentioned above, we will build a stable financial base by fiscal year 2024
by accumulating internal reserves from profits generated in our core business and resolving theconstruction defects problem. Over the medium- to long-term, we intend for our generation to build
a strong management foundation in all aspects by expanding business scale, improving earnings
power, enhancing various financial indicators, and becoming more useful to society, before passing thecompany onto the next generation.
We pushed forward with major cost reductions in fiscal year 2021, but going forward, we will focus
on creating an environment where employees can enthusiastically work while looking forward to the
future. This is an area where I frequently exchange views with President Bunya Miyao and other directors. The in-house start-up backing program described earlier is also positioned as a means to create
a new work environment. In addition, we plan to develop and begin operating a personnel system
within a few years that will enable younger employees to be appointed as directors and executive
officers of group companies. We expect that employees will be much more satisfied and motivated.

Shinji Takekura
Director, Executive Officer
Chief of the Corporate Management Headquarters
September 2022

16

Leopalace21 Integrated Report 2022

Sources ofCompetitive Advantage[The Sources of Leopalace21’s Competitive Advantage]
Leopalace21 possesses capital with a competitive advantage, such as approximately 560,000 units under management,
around fifty years of leasing business expertise, talented staff members with flexible mindsets, and partnerships withproperty owners and business partners.

Sources ofCompetitive Advantage

Business Model

Materiality

Long-Term Vision

Offer Rental Housing with Stable
Operation

Apartments

Promote Real Estate TechSocial demands
and challenges
such as Sustainable
Development Goals

Leasing Business
Expertise
Our People
Property Owners& Tenants

Growth Strategy
Purpose

Corporate     
Philosophy

ActionGuidelines

Structural Reforms

Business Partners

Work-Style Reform and HR
Development
Respect for Human Rights
Communication with Stakeholders
Maintain the Workable Corporate
Governance System

Ensure competitive
advantage in our business,with the provision ofrental housing as social
infrastructure at its core, andachieve sustainable growthalong with stakeholders

Strengthen Compliance
Environmental Initiatives

Corporate Governance

Leopalace21 Integrated Report 2022

17

Sources of Competitive Advantage

Apartments

Top apartment management units
for single-person households in the industry
1

1

FeaturesFeatures2

3

Strengths

Advantages

Approx.

280,000
units are used bycorporate tenantsSpecialized in studio

Homogeneous

type apartments withfloor plans

560,000 units
nationwide

80

（千世帯）

60,000Approx.
%50,000of listed companies

Equipped with

30,000leased housing

Apartment features

According to the 2018 Housing and Land Survey (Statistics Bureau of Japan), of the 54
million ordinary households throughout Japan, 19 million of them are rented houses, whichmeans that 35% of Japanese people live in rental housing. Of the approximately 19 million
houses for rent throughout Japan, approximately 5.4 million have 29 m2 of floor space orless, which is equivalent to the apartments that account for the Company’s main business.
Based on calculations assuming the above figure, the Company’s units under management
make up an approximately 10% share (560,000 units/5.44 million households = 10.3%) of
our competitive category (houses for rent that have 29 m2 of floor space or less).
There are many companies that provide rental housing, ranging from downtown realestate agents to public housing corporation, and given that we provide approximately
560,000 units, we are the largest scale private landlord in Japan.
We specialize in studio type apartments, which mainly target single-person households.
Although Japanese population is expected to decline due to declining birthrate and aging
population, according to the 2019 Household Projection for Japan (National Instituteof Population and Social Security Research), the number of single-person households is
expected to continue increasing until 2030 and then gradually start to decrease. In addition,
the number of households of the single working age population (age 15 to 64), theCompany’s target segment, is expected to stay about the same for the next twenty years,
hovering around 10 million to 12 million households.
In the studio type apartment market, which accommodates mainly single-personhouseholds, the Company boasts the largest scale in Japan. Unlike Japan’s demographic
trends, this market is expected to grow. We consider this scale and the fact that the market
is growing to be two of our greatest strengths.

Leopalace21 Integrated Report 2022

4,

14

10,758

11

4,535

4,770

5,

14,457

16,785

18,418

19

2005

2010

2015

2

4,112
10,0000Largest scale private landlord in Japan18

54

53,332in principle
10,269

9,637

20,000151,842

furniture,
5,044
5,779
6,212
home
appliances,have usedunits
40,00014,342
14,474as dorms or company- 14,646 and internet
49,063■単独世帯■ひとり親と子■夫婦のみ ■夫婦と子

Number of units undermanagement※国立社会保障・人口問題研究所の2018年推計より

567,314 units(As of the end of March 2022)

Predicted number of single-person households by age(Unit: thousand households)

25,00020,00016,785

18,41819,342 19,960

20,254 20,233 19,944

15,000 14,457
10,0005,000
02005 2010 2015 2020 2025 2030 2035 2040 (FY)
(Expected) (Expected) (Expected) (Expected) (Expected)

Less than 25 years old
25 to 34 years old
65 to 74 years old
75 or older

35 to 64 years old

■その他

2

Apartment strengths

Companies in all kinds of industries, including construction industry,
temporary staffing and outsourcing industry, retail industry, and manufacturing industry, have contracts with us. In addition, approximately
80% of listed companies throughout Japan have used our apartments.
The wide range of industries and low level of reliance on any particular

Cover Story

Have been used by approximately 80% of listed companies in various industries
companies ensures safe and secure environment for the clientcompanies to use our services. On top of that, because the Company
is not affected by the business performance of particular industries orcompanies, we can constantly secure a stable number of contracts.

Sources ofCompetitive Advantage

Why do customers choose us?

2

3

Unified point of contact

Standardized services nationwide

Expense reduction

Because we are capable of providing
apartments throughout Japan, we canoffer a single point of contact for requesting companies, which reduces the burden
faced by our customers.

The apartments we provide are standardized in all regions including grade, floorplan, and major equipment, which helps
to reduce unfairness related to company-leased housing among the employees.

We, as one company, can cover a lot ofdemand, which enables our client companies to reduce brokerage fees and various
other expenses.

3

Business Model

1

Apartment advantages

Restraining CO2 emissions by providing apartments equipped with furniture and home appliances
Corporate Governance

Reduction in CO2 emissions due
to apartments equipped with
furniture and home appliances

65,203 t-CO

2

Materiality
Data Section

The apartments equipped with furniture and home appliances that we provide have anenvironmental advantage. When starting living alone and moving into an unfurnishedapartment, tenants are required to buy a complete set of furniture and appliances necessary
for daily life; when moving into one of our apartments equipped with furniture and home
appliances, tenants are not required to purchase furniture and appliances nor they do
not need to dispose of them. In addition, such apartments make it possible to reduce thenumber of belongings that have to be transported upon moving. When looking into theenvironmental contribution of the above, we learned that we reduced CO2 emissions byapproximately 65,000 t-CO2 during the fiscal year 2021.
We conclude approximately 380,000 rental contracts per year (actual results for fiscal
year 2021). Based on the average number of years that tenants stay in our apartments aswell as the number of years before we have to buy replacement furniture and appliances,
it is assumed that we can take advantage of the reuse of furniture and appliances forabout 99,000 contracts. Considering the CO2 emissions due to the furniture and appliancemanufacturing process and the CO2 emissions due to the disposal process for about 99,000
apartments, and calculating the CO2 emissions reduction due to the decreased number ofthings to transport while moving mainly based on official published values, we found that
CO2 emissions were reduced by 65,000 t-CO2 for the year. This is equivalent to the CO2
emissions of 35,000 people based on a conversion to the annual per capita CO2 emissions fora household person* disclosed by the National Institute for Environmental Studies. Given that
our CO2 emissions (Scope 1 and 2) from business activities for fiscal year 2021 amounted to
15,000 t-CO2, we achieved a net reduction in emissions by providing apartments equippedwith furniture and home appliances, thereby contributing to the environment.
Third-party assurance has been obtained for the approach we used in the calculations
and the calculation results.
*Based on research by the Company (Source: The GHG Emissions Data of Japan (FY1990-FY2020), Final Figures, National Institutefor Environmental Studies)

Leopalace21 Integrated Report 2022

19

Sources of Competitive Advantage

Leasing Business Expertise

Unparalleled and original leasing business expertise
upgraded in accordance with changing times

Expertise1

Innovative products& services

Units equipped with
furniture and home
appliances:approx.

95%

Units equippedwith internet:

approx.

98%

Industry’s largest
number of apartmentswith smart locks:

440,000
rooms planned*To be installed by May 2024

Expertise2

High-quality service
that meets needs

Japanese-language
call center operating
hours:

Number of
foreign languages
supported:

Units with security
systems installed:
approx.

6

315,000

Directly managed
leasing sales offices:

Provision of plans inline with the times

Periodic building
inspections:

109

Examples: Healthcare profes-

100

24

hours

sional support plan, Housing
support to Ukrainian refugees*Including six overseas offices

Expertise3

Tenant matching capaApproximate
bilities utilizing cutting total number of
web-based contracts:
edge technologies

39,000*Total since April 2020

*As of the end of March 2022

20

Leopalace21 Integrated Report 2022

items

*Differs depending on the building
specifications

Percentage ofelectronic contracts
directly with individual customers:

Proportion of corporate
contracts using Leo-sign

70

34

over

*Only rental contracts%(electronic contract
management system):%*Only rental contracts

Leasing business expertise strengths
As an initiative to improve our services in anticipation of the digitaltransformation, we have been promoting the introduction of realestate tech that combines real estate services with IT technology. This
started with our introduction of the Leo-sign, an electronic contract
management system for corporate contracts in 2015, and we have sinceIntroduced Leo-sign, an electronic
contracts for corporate customers
Launched industry’s first use of a tablet
device for customers

2017

introduced cloud-based security cameras, introduced Leo Lock for newly
built apartments, and incorporated real estate tech, including webbased contracts to help handle contract-related work. We will continue
to introduce real estate tech in order to further improve our services
and enhance our leasing business expertise strengths.
2021

2019

Introduced industry’s first eKYC, anauthentication procedure for parking
space contracts
Started optional use of customer devices
for web-based contract signingIntroduced the industry’s
first nationwide webbased rental contract
signing service

2020

S tarted non-face-to-face key delivery
Rolled out web-based customer services in allleasing sales officesFormalized launch of web-based room viewing
via video call2022

 ade it possible toMelectronically handle all
rental contracts
Introduction of smart
locks in steps

Business ModelS tarted installation of Leo Lock,a smart lock system, for newly
built apartments

Sources ofCompetitive Advantage

2015

Cover Story

Ongoing introduction of real estate tech for all kinds of services

We are installing smart locks that enable customers to unlock the front
doors with smartphones or other devices instead of door keys. We havebegun installing the smart locks for apartments in which tenants move
starting from June 2022. Over the two years through May 2024, weplan to install the locks for 440,000 rooms, or approximately 80% of
our rental apartment units under management.

Corporate GovernanceInstalling smart locks in 440,000 rooms in steps to mark the industry’s largest scale
By introducing smart locks, we can eliminate the hassle of customers
having to visit our offices to pick up keys, and we also believe thismeasure will be effective for helping to prevent the spread of infectious
diseases. Since we have been promoting the online handling of contract
procedures for the apartments we manage, we believe the introductionof smart locks will enable us to handle almost all procedures online.

Unlocking is possible by using multiple authentication methods
Use of a smart card

Use of a PIN

Activate a smartphone app,
and tap the screen to unlock
the door.

Put a pre-registered smart cardor a smartphone equipped withmobile FeliCa functionality to
unlock the door.

Enter a pre-determined passcodeby the numeric keypad to unlock
the door.

Materiality

Use of a smartphone

Data Section*FeliCa is a registered trademark or a trademark of Sony Group Corporation or its affiliates.
FeliCa is a contractless IC Card technology developed by Sony Corporation.

Leopalace21 Integrated Report 2022

21

Sources of Competitive Advantage

Our People

Bringing in diverse talents to carve out
a new era with flexible ideas（千世帯）

60,00051,84253,332

54,107

54,11653,48452,315

14,342

14,134

13,693

13,11812,46550,75750,0004,510
3,833to mid-career
Shifting
the49,063
focus of5,779
hiring activities
fromnew 4,123
graduates
recruitment
5,044
3,583
3,350
6,212

40,00014,64630,00010,269

9,637

20,00014,474

4,535
Proportion of
mid-career hires
in the fiscal year
16,785
14,4572019:
4,112

10,000

Proportionof0
mid-career hires
in the fiscal year
2015:

■単独世帯

54.0

2005

68.5%

■ひとり親と子

2010

■夫婦のみ

※国立社会保障・%
人口問題研究所の2018年推計より

11,824Since started providing Leopalace21 urban-type apartments in 1985, we have offered
Proportion of
11,138
10,960before, such
11,203and services
11,101various productsthat did not exist
as short-term stay plans
10,715
mid-career
hires
10,758in the fiscal year
andapartments
equipped
withfurnitureandhomeappliances.
5,074
5,141
5,137
4,924 We believe that the
5,020
4,770
2021:
ideas of our employees contributed greatly to the above achievement, who we hired as
19,96020,233
19,342
19,944
new graduates
to give them20,254
the opportunity
to propose newideas through accumu18,418%
lated experience from scratch.
of changing ourbusiness portfolio
2035
2040 to focus primarily on
2015
2020 In recent years,
2025 as a result2030
予想
予想
予想
予想
the Leasing Business, our hiring activities were more focused on mid-career hires rather■夫婦と子 ■その他
than new graduates. The former accounted for 54.0% of all our hires in the fiscal year
2015 and 68.5% in the fiscal year 2019, became 100% with no new graduate hires in
the fiscal year 2021. In this way, we hope such employees bring about experiences inother industries or other companies to increase the ability to create new innovations byutilizing their ideas, skills, knowledge, and other advantages.

100

Ensuring diversity and meeting customer needs by hiring foreign national employees
Number of foreign national employees(People)

400

300

200

180

100

0
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

22

Leopalace21 Integrated Report 2022

Leopalace21 believes that a workforce of people from a broad array of backgroundswith diverse values helps create new value, and greatly contributes to the growth of
the Company. In addition, multilingual customer support is needed in response to
the increase in the number of foreign national workers and international students inJapan. To secure the diverse talents needed to achieve this, we have been proactively
recruiting foreign national employees. However, due to the transfer or liquidationof subsidiaries related to the International Business, the number of foreign national
employees decreased considerably in the fiscal years 2020 and 2021. Due to the
reduction in the International Business, our business structure has been changed to one
focused on domestic business. We will continue to employ a certain number of foreign
national employees in order to ensure diversity and more effectively respond to thegrowing needs of foreign national customers.

Employee
feedback

I’ve been working at Leopalace Smile forseven years now, and I initially belonged
to the shredder team which is mainly
responsible for shredding documents. I waslater transferred to the printing team. As
part of the team, my main jobs are to print
important documents such as documents
to be distributed to property owners about
their apartments, print addresses on the seasonal distributions andpostcards. I also handle special types of printing including businesscards and ID cards.
The best thing about Leopalace Smile is its cozy atmosphere.
Thanks to the atmosphere here, it’s easy to talk to each other so we
can make recommendations and take other steps to increase work
efficiency. Before I came here, I had never experienced a place quite
like this, so I think it’s a wonderful workplace.
I’m on our printing team right now, but we have various other work
teams, too. In the future, I hope to be rotated to other teams so that
I can do various types of work. I want to be able to do all the work
handled by Leopalace Smile.

I got a job at Leopalace Smile as a resultof my high school counselor introducing
this company to me. My counselor actually
introduced a number of candidate companies, and I decided on Leopalace Smile
because of a lot of young employees and agood workplace atmosphere.
After I joined, I was initially responsiblefor distributing mails. Later on I also started handling printing
job including actual printer operations due to the introduction of
on-demand printers. Right now, as a member of the office support
team, I am directly involved in Leopalace21 work, which includes
computer-based data entry, interacting with the Human Resourcesand General Affairs Department, and handling phone calls.
One good thing about Leopalace Smile is that the bosses here arewilling to talk to employees about various problems, including not
only work-related issues but also private difficulties, and they are very
supportive. I’ve personally talked to my boss about various things,
which has been a big help.
The kinds of work I handle as part of the office support teamincrease on a daily basis. By fulfilling such work, I hope to contribute
to my group, serve as a leader, and help to create an environment thatmakes it easier for everyone to work.

Employee
feedback

Corporate Governance

Kodai Furuya Special subsidiary company Leopalace Smile Co., Ltd.

Business Model

Takashi Inoue Special subsidiary company Leopalace Smile Co., Ltd.

Sources ofCompetitive Advantage

The bosses are helpful in terms of
my professional and personal life.

Cover Story

I want to be able to do all the work handled
by Leopalace Smile.

Supporting foreign national customers ranging
from searching for rooms to their daily life support after moving in.
Liú kǎixīn Manager, International Front Center Shinjuku

Materiality

Liú kǎixīn Manager, IFC Shinjuku

Data Section

I work at the IFC, which stands for International Front Center. The Center specializes in handlingoverseas customers, and we provide support to foreign national customers that includes searching forrooms, delivering keys, and even the daily lives of customers after they move in. We sometimes provide
support even in the cases that are not directly related to our company including cases related to infrastructure necessary for daily life, such as gas opening where no one at the gas company can support in
the foreign language.
Currently, our customers from China and Vietnam are increasing. Before the COVID-19 pandemic,
Vietnamese customers accounted for 50% of all our customers, and customers from China andVietnam currently account for around 40% each, with around 20% of our customers coming fromEnglish-speaking countries. To respond to this situation, we currently have staff skilled in Mandarin andCantonese which is used in Guangzhou, as well as South Korean and Vietnamese employees. Regarding
English, we have staff members who can speak both Vietnamese and English as well as those who canspeak both Chinese and English.
Including my office, the IFC only has a total of seven offices, but I believe we play an important role interms of concluding contracts with foreign national tenants for Leopalace21 apartments.

IFC Shinjuku staff

Leopalace21 Integrated Report 2022

23

Sources of Competitive Advantage

Property Owners & Tenants

Sharing goals withproperty owners
In partnership with 26,500 property
owners throughout Japan

Dialogue with customers throughCustomer’s VoiceOur rental apartment management is an extremely long-term land use
project. To ensure the smooth operation of this project, we believe it isimportant to share goals and build relationships of trust with around
26,500 property owners throughout Japan.
Our construction-related departments are currently focusing theirresources on quickly resolving the problem of construction defects,
and they have suspended accepting orders for new apartments.
However, we run 65 offices throughout Japan and are focusing on
maintaining and building good relationships with property owners
to build new apartments in the future and follow up the problems ofproperty owners.

We distribute Customer’s Voice internally once a month on the intranet.
It is for the purpose of boosting employee engagement and fostering acustomer-oriented culture while also improving the quality of customer
service at leasing sales offices by sharing customers’ feedback throughout the Company. Customer’s Voice announces the winners of the
Outstanding Customer Service Award (individual/leasing sales office),
which is given to those who have been recognized to provide excellent
customer service based on responses from customer surveys conductedwhen customers come to leasing sales offices, as well as the month’s
Spotlight Award. In addition, it contains tips for improvement and realcustomers’ feedback.

Property
owner
feedback

Leopalace21’s staff are highly conscious
about protecting tenants as well as theproperty of owners.

My relationship with Leopalace21 goes back
30 years. I appreciated this relationship themost when there was a family tragedy. There
were issues I didn’t understand, such as problems related to inheritance, and there were somany things to worry about that I was honestlyon the verge of panicking. Leopalace21’s
representative was very kind to me, and I
managed to protect my property thanks to theaccurate advice. I think they are wonderful inprotecting not only apartments but also tenants
as well as the property of owners.

24

Bringing comfort andpeace of mind to tenants

Leopalace21 Integrated Report 2022

Ms. Masami Mitsuki

Tenantfeedback

I don’t have to bring much luggage with me
when moving, and Leopalace21’s rooms are
economical and comfortable to live in.

My job is construction management, so I havebeen on a lot of business trips and often used
Leopalace21’s rooms. The best thing about therooms is that they already have equipment andfurnishings, so all I need to bring is my basic
luggage to start my daily life in them. Plus, when
I leave the rooms, there is no need to dispose offurniture, which offers the major advantage of not
Mr. Nguyen Trung Hieu
having to carry much with me. Before, I stayedat hotels on short-term business trips, but I can
cook for myself in Leopalace’s rooms. Accordingly
I recommend my friends to use Leopalace21’s
rooms because it is more economical. More recently,
Leopalace21 has started handling inquiries inVietnamese after moving in as well, which gives
me a peace of mind. I think it would be even moreconvenient if foreigners could use a social media
community when they search for housing in Japan.

Business Partners

Cover Story
Sources ofCompetitive Advantage

Providing value through collaboration
with our business partners
Working together with business partners to promptly resolve the construction defects
problem and maintain apartment quality

Business Modelapprox.
Business
partner
feedback

400

Number of cleaning
visit partners:

approx.

100

Focusing on “developing global humanresources” and striving for growth based on
the same motivations as Leopalace21

Mr. Satoshi Fujimoto

80

approx.

1,050

Providing peace of mind to property owners
and tenants alongside Leopalace21
Ever since our company was founded, we have
handled indoor maintenance and other maintenance work, mainly in Chiba Prefecture.
Every day, we work hard to ensure that property
owners can trust us with their important assets andto provide comfortable daily lives that are free ofworry to tenants.
During our daily work, we closely collaborate
with Leopalace21 staff. Those highly ambitious
staff give us advice on how to provide better
service to customers, which helps us approach ourwork with confidence.
We look forward to more fully exploiting thiscollaborative system as we do our work, always
keeping Leopalace21’s corporate philosophy of“creating new value” in mind.

Mr. Toyoaki Takazawa
President andRepresentative Director
K.K. Houwa

Leopalace21 Integrated Report 2022

Data Section

Representative Director
K.K. Fujimoto

approx.

Number of property
maintenance partners:

Materiality

Ever since Leopalace21 launched its apartment
business, our company has been doing work thatis mainly focused on cleaning the inside of apartments as well as the areas outside of buildings.
To help ensure that customers continue tochoose Leopalace21’s apartments, employees
engaged in cleaning work do not simply do theirbasic jobs. We also regularly hold workshops in aneffort to help employees accumulate know-how,share good and bad examples of work throughout
the company, and improve our cleaning skills.
Due to inbound demand, we are also promoting
the hiring of foreign national workers, we focus
on human resource development intended to help
us achieve a certain level of performance given
different cultures and diversity, and we collaborate
with Leopalace21 employees to strive for growth
based on the same motivations.

Number of housecleaning partners:

Corporate Governance

Number of business partners
involved in building andfacility construction:

25

Business Model[About Leopalace21’s Business Model]With real estate expertise as its core competency, we have created a unique business model that combines the Leasing
Business, which focuses on apartment leasing and management, and the Elderly Care Business, which mainly operates
fee-based nursing homes.

Sources ofCompetitive Advantage

Business Model

Materiality

Long-Term Vision

Offer Rental Housing with Stable
Operation
Apartments
Leasing Business Expertise

Promote Real Estate Tech

Growth Strategy

Social demands
and challenges
such as Sustainable
Development Goals

Our People
Property Owners

Purpose

Corporate     
Philosophy

ActionGuidelines

Work-Style Reform and HR
Development
Respect for Human Rights
Communication with Stakeholders& Tenants
Business Partners

Structural Reforms

Maintain the Workable Corporate
Governance System
Strengthen Compliance
Environmental Initiatives

Corporate Governance

26

Leopalace21 Integrated Report 2022

Ensure competitive
advantage in our business,with the provision ofrental housing as social
infrastructure at its core, andachieve sustainable growthalong with stakeholders

Business Model

Business

At a Glance

Cover Story

Leasing BusinessNet sales
composition ratio
FY202196.15%
Sources ofCompetitive Advantage

We are mainly engaged in leasing and management of leased apartments and otherproperties through master-lease contracts
as well as maintenance work of apartments
and others, various rental-related services,
broadband services, and construction
subcontracting of mainly apartments. We
offer two types of rental services: a leasing
contract with a contract period of one year
or more and a monthly contract with aperiod of 30 days or more.

Number of units under management

Approximately

560,000(As of the end of the fiscal year 2021)

Net sales

96.15

Net sales
composition ratio
FY2021

3.58%

Corporate GovernanceIn response to Japan’s aging society, we
composition ratio
operate group homes, day-care services,
FY2021
short-stay services, and fee-based nursing
homes that are closely linked to local %communities, and also provide services
such as visiting care and in-home nursing
care support.

Business Model

Elderly Care BusinessNursing care facilities

87 facilities(As of the end of the fiscal year 2021)

Other Businesses

3.58%

Materiality

In Guam, we have Leopalace Resort Guamwhich runs golf courses, a hotel, and otherNet salesfacilities. We plan to sell the property ascomposition ratio
soon as possible pending the impact of
FY2021COVID-19.

Net sales
composition ratio
FY2021

0.27%
Data Section

Leopalace21 Integrated Report 2022

27

Business Model

Growth Strategy: Occupancy Rate Improvement Measures
Measure (1) Area Intensive Strategy
To improve the occupancy rate, we have switched from uniform nationwide sales approach to a
strategy that aims to achieve optimal sales in each area. To do this, we have divided the country
into seven areas and appointed area managers who are responsible for formulating and executing
strategy in each area. They implement a strategy and do sales promotion in line with area-specificcharacteristics. Making decisions on an area-by-area basis allows us to respond quickly, and at thesame time, to raise awareness of the need to improve sales and profit and subsequently raise theoverall earnings, through implementing revenue and cost management by area.
Changes in theoccupancy rate

Departments(compared to the endof March 2021)

East Japan Property Management Department+3.4p

Tokyo Metropolitan 1st Property Management Department+4.6p

Tokyo Metropolitan 2nd Property Management Department+3.2p

Central Japan Property Management Department+4.0p

Kansai Property Management Department+3.6p

Chugoku and Shikoku Property Management Department+1.6p

Kyushu Property Management Department+1.7p(As of the end of March 2022)

Case Example

Taking advantage of demand related to the Akita
offshore wind power generation project

Fumiaki Takeno
Senior Department
Manager
East Japan Property
Management Department

Koji Matsubuchi
Deputy Department
Manager
East Japan Property
Management Department

28

Leopalace21 Integrated Report 2022

As a result of introducing the area-specific sales strategy, we achieved results in Tohoku
area last year. The driving force was capturing demand related to offshore wind power
generation facilities being built off the coast of Akita Prefecture. As a result, we managed to not only improve the occupancy rate but also increase the rent levels.
One of the key factors behind the success in meeting demand was strengthened
sales activities to local real estate agents. While we are good at predicting demandon a macro level such as demographic trends based on its nationwide operation, local
real estate agents have the edge when it comes to understanding the spot demand
specific to different regions. We were able to conclude initial contract and expanded
it thanks to real estate agents in Noshiro, where the power generation facilities arebeing set up.
Further expansion of offshore wind power generation is expected due to the growthof renewable energy, and we hope to get hold of the related demand in other areas
as well as other area-specific demand by strengthening relationships with local realestate agents.

0

FY2017
Manufacturing

FY2018
Temporary staffing and outsourcing

FY2019Hospitality

Cover Story

Measure (2) Establish a Position as the Brains of the Company-Leased
Housing Strategy for Corporate Customers
Occupied units by contract type

Looking at our tenants by attribute, corporate customers account for
approximately 60% of the total tenants. To improve the occupancy rateof our rental apartments which serve as the base of our earnings, wehave been promoting the expansion of business with corporate clients,
especially by cultivating the business with existing customers. Given theenvironment surrounding the Company, we set up specialized units
to handle business with customers in the five industries, temporary
staffing, construction, transportation, food service, and distribution forwhich we believe we can respond to the issues faced by such customers in the fiscal year 2022. We will implement measures specific to theneeds of each company in order to further improve the occupancy rate.

600,000 (Units)534,847

484,718

478,295

468,803482,788

FY2018FY2019FY2020

FY2021400,000

200,000

Sources ofCompetitive Advantage

0

FY2017

Number of units used by companies
Number of units used by students

Number of units used by individuals

Promoting top-level sales and other approaches to establish a position as the “brains of the company-leased
housing strategy” for customers

Business Modelthe methods for approaching corporate clients based on the industry,
region, and other characteristics, and formulate strategies for eachcorporate customer in line with issues and needs that go beyond justcompany-leased housing. By doing this, we are aiming to establish
ourselves as the “brains of the company-leased housing strategy” forcorporate clients.

One of the strengths of our corporate sales is that wide range ofcustomers in no particular industries use our services. We have been
implementing individual strategies for each corporate customer as wellas top-level sales to further cultivate business with existing customers.
Specifically, we increased the number of sales departments mainly in
the Tokyo metropolitan area from five to eight, to carefully analyze
Changes in occupied units by industry
309,062

300,000 (Units)272,566

266,814

FY2018FY2019FY2020280,811

Corporate Governance

280,643

200,000

100,000

0

FY2017
Manufacturing400,000

RetailFood service

Construction

OthersExpanding business through the proposal of plans in line with company characteristics.
Mr. Satoshi NagamatsuManager, General Affairs Section, General Affairs Department, Maruwa Unyu Kikan Co., Ltd.

We have been in business with Leopalace21 since 2004, and the biggest reason for that is speed andresponsiveness of the person in charge. The number of rooms in use was in the single digits, and we
now use over 200. Due to the nature of our company doing transportation business, sudden transfers
are common. In addition, because managers at each sales office handle employee room searches, weused to use non-Leopalace21 apartments as well, but because of Leopalace21’s optimal plan proposal
based on Maruwa’s characteristics, we were able to issue internal instructions to prioritize Leopalace21
apartments when choosing rooms, which simultaneously simplified our work related to company housing
and reduced the costs. They are certainly the brains of our company housing strategy. Because the foreign
national employees we hire can live in Leopalace21 apartments throughout the country without worry,
534,847
we can request Leopalace21 to make such arrangements when necessary. Ideally all arrangements and484,718
478,295 468,803 482,788
management of company housing
should be left to Leopalace21, it would be great if they offer more variation in apartments to respond todiverse needs, such as one-bedroom apartments, other floor plans and variants without furnishings.

Data Section

600,000 (Units)

Hospitality

FY2021

Materiality

Corporateclientfeedback

Temporary staffing and outsourcing

200,000

Leopalace21 Integrated Report 2022

0

FY2017FY2018

Number of units used by companies

FY2019FY2020

FY2021

Number of units used by individualsRe

29

Business Model

Measure (3) Strengthen Ties with Real Estate Agents for Individual Customers

Number of contracts
via real estate agents:

Partnership and collaboration with Fortress’ subsidiary
Partner up and collaborate with Village House, arental housing management company, to strengthen
sales activities targeting real estate agents whooffer rental housing
As part of the occupancy rate improvement measures, we promotepartnership and collaboration with Village House, a rental housing
management company under the umbrella of the Fortress Investment
Group, from which we raised funds. Village House manages low-pricerental housing throughout Japan and has a network of approximately
4,000 stores run by partner real estate agents.
Until now, we have responded to requests for housing throughdirectly operated leasing sales offices as a mainstream as well as
approximately 5,000 partner real estate agents. By offering ourapartments through Village House partner offices, we aimed to expand
the range of our potential customer base and increase the numberof contracts. As a result, during the fiscal year 2021, our real estateagents concluded 35,576 contracts (a YoY increase of 34.2%), and realestate agent contracts made up 38.9% of all individual contracts (a YoY
increase of 6.9 points), both of which were outstanding results.
Our policy is to continue focusing our sales on companies by

30

Leopalace21 Integrated Report 2022

35,576(a YoY increase of 34.2%)

Percentage of individual contracts
via real estate agents:

38.9%(a YoY increase of 6.9 points)*Results for the fiscal year 2021

implementing top-level sales, strengthening our sales structure, andimplementing strategies for each corporate customer. At the sametime, in terms of sales for individuals, our approach is mainly focusedon partnership and collaborating with domestic real estate agents,
strengthening our ability to attract customers on the web, and utilizing
IFC offices that target foreign national customers. Of these, regarding
partnership and collaboration with domestic real estate agents,
we hope to increase the number of partner companies in order tosimultaneously increase the number of contracts and raise the ratio ofcontracts via real estate agents.

Measure (4) Attract More Foreign National Customers
Cover Story
Sources ofCompetitive Advantage
Business Model

Number ofcontracts withforeign nationals(individual contracts)
Full-year plan for the fiscal year 2022

The number of foreign national workers is on the risedue to labor shortages. The number of international
students will also increase in post pandemic era

Number of foreign national workers(Ten thousand people)

200
Manufacturing
150

172.7

Wholesale and retail

Hospitality and food service

Construction

Healthcare and welfare
Others

50

0

2014

2015

2016

2017

2018

2019

2020

2021 (FY)*Status of reporting on the employment of foreign workers (as of October 31, 2021),
Ministry of Health, Labour and Welfare

65%

Efforts to attract foreign national customers (2)Multilingual rental website and expanded rental
contract signing without having to meet face-to-face
As a result of the Japanese government relaxing restrictions on entering thecountry in March 2022, technical interns, international students, and otherforeign nationals have once again started coming into Japan. First, we aretrying to increase the number of used rooms by strengthening our allianceswith registered support organizations for foreign nationals in order to focus
on specified skilled workers. More specifically, we are collaborating with
2000000
registeredsupport organizations to hold seminars for existing corporateclients in the 12 industries subject to the employment of specified skilledworkers1500000
in order to share information on the future hiring of foreign national
employees. It enables us to indirectly support the business development for1000000
our corporateclients while taking steps to address not only obvious needs
but making potential needs apparent. We believe that cultivating business
500000with existingcustomers is more efficient than trying to win new customers.
In addition, through leasing sales offices capable of providing multilingual
support to tenants,
0 we are actively accepting applications from international
students, and are also collaborating with real estate agents and study-abroad
2021
centers to respond to the demand of international students entering Japan.
Leopalace21 Integrated Report 2022

Data Section

100

YoY increase ofMateriality

The number of foreign national workers is on the rise in order to solve
the labor shortages as Japan’s population is declining. In addition,
the number of international students was also on an increasing trend
except for the period of the COVID-19 pandemic during the last
two years. In the post-COVID-19 world, the number of international
students is expected to increase again.

13,000

Corporate GovernanceEfforts to attract foreign national customers (1)31Business Model

Structural Reforms(JPY billion)
450.0

430.0
410.0
390.0

To improve the profit structure, we focus on the Leasing
Business, which is our core business. We have been
Sales
promoting drastic structuralreformscommiaimed
at improving
Advertisingexpense:ssions:the financial strength mainly by reducing costs in the
+0.4
+0.4
Cost of438.1 Business.
Leasingsales: Personnel-35.5 expenses:
-6.0

370.0
350.0

Structural reform (1)Others:-0.7

FY2020results

396.5

FY2021
results

4500
4300
4100
3900
3700
3500

Initiatives in the fiscal year 2021
We have been promoting drastic initiatives aimed at improving ourfinancial strength mainly by reducing costs in order to restore oursluggish business performance. During the fiscal year 2021, we focusedon cutting down SG&A expenses by reducing the number of leasing
sales offices, outsourcing call center work, and taking other steps. We
also contractually adjusted the master-lease rent payment to property
owners and increased efficiency by reviewing our workflow. As a result,
we reduced cost of sales and SG&A expenses by a total of JPY 41.5
billion consisting of approximately JPY 15.9 billion in leasing operation
cost,
approximately JPY 6.5 billion in leasing management cost, and(JPY billion)
450.0
approximately
JPY 10.9 billion in construction and real estate costs.

Structural reform (2)
410.0

390.0

438.1

Cost ofsales: Personnel-35.5 expenses:-6.0(JPY billion)
450.0

4500

410.0
390.0

438.1

370.0
350.0
(JPY billion)
450.0

4500

Cost ofsales: Personnel-35.5 expenses:
-6.0

4100
Others:-0.7

FY2020results

3900
396.5

FY2021
results

434.7

428.9
408.1

410.0

4100

387.8

3900

Others:-0.7

370.0 plan
Eliminating excess liabilities per the TSE criteria
and our future
396.5
370.0

4300

Sales
Advertising commiexpense: ssions:
+0.4
+0.4

430.0

4300

Sales
Advertising commiexpense: ssions:
+0.4
+0.4

430.0

Cost of sales and SG&A expenses reduction results

At the end of the fiscal year 2020, we recorded excessive liabilities
of350.0
JPY 8.1 billion
to
FY2020per the TSE criteria. In response, we continued
FY2021
results
results
implement our
drastic business strategy reconstruction policy, which
we announced in April 2020, focused our managerial resources on
the Leasing Business, which is our core business, and simultaneously

Cost reduction measures in the fiscal year 2022

352.2

3700

348.8

continued pursuing drastic structural reforms aimed at improving the
330.0
3500
financialstrength.
AsFY2018
a result, weachieved
net assetsof JPY 1.4
billion
FY2017FY2019FY2020
FY2021
FY2022planofand eliminated excessive liabilities per the TSE criteria at the end
the fiscal year 2021. We will continue pursuing structural reforms in aneffort to achieve financial stability.

(JPY billion)
450.0

We are still in the middle of the drastic business strategy reconstruction,so we will continue structural reforms in and after the fiscal year
2022. During the fiscal year 2022, although leasing management cost
will increase due to implementation of preventive maintenance forapartments under management, we will continue striving to reduceleasing operation cost by contractually adjusting the master-lease rent

434.7 owners. We expect to further reduce cost of sales by anpaid to property
428.9
additional JPY 3.4 billion in the fiscal year 2022, including almost same
408.1
410.0of construction and real estate costs, where new orders have been
level
387.8
suspended. In addition, in SG&A expenses,
we will pursue initiatives
aimed at reducing costs through increased work efficiency while also
370.0
striving to optimize our cost structure.
352.2
348.8

Cost of sales plan

SG&A
330.0 expenses plan

(JPY billion)
450.0(JPY billion)
80.0

434.7

428.9

73.1

FY2018FY2019FY2020

FY2021

FY2022
plan

68.8
61.9

60.0

408.1

410.0

FY2017

387.8

50.2

44.3

50.3

40.0

370.0

330.0

32

FY2017FY2018FY2019

Leopalace21 Integrated Report 2022

FY2020

352.2

348.8

FY2021

FY2022
plan

20.0

0

FY2017FY2018FY2019FY2020

FY2021

FY2022
plan

3700
3500

Corporate Governance[About Leopalace21’s Corporate Governance]
We have appointed four independent outside directors. The board of directors is working to build a robust management
system by making appropriate and speedy decisions, strengthening the supervisory functions and compliance system,
establishing good relationships with stakeholders, and taking other steps.

Sources ofCompetitive Advantage

Business Model

Materiality

Long-Term Vision

Offer Rental Housing with Stable
Operation
Promote Real Estate Tech

Apartments
Leasing Business Expertise

Growth Strategy

Social demands
and challenges
such as Sustainable
Development Goals

Our People
Property Owners

Purpose

Corporate     
Philosophy

ActionGuidelines

Work-Style Reform and HR
Development
Respect for Human Rights
Communication with Stakeholders& Tenants
Business Partners

Structural Reforms

Maintain the Workable Corporate
Governance System

Ensure competitive
advantage in our business,with the provision ofrental housing as social
infrastructure at its core, andachieve sustainable growthalong with stakeholders

Strengthen Compliance
Environmental Initiatives

Corporate Governance

Leopalace21 Integrated Report 2022

33

Corporate GovernanceCorporate Governance System
Basic approach to Corporate GovernanceWe consider developing and strengthening corporate governance to be a
key management issue. By strengthening corporate governance, we areaiming to realize the corporate philosophy, achieve the management plans,enhance the corporate value over the medium- to long-term, and achievesustainable growth.
In addition, to realize higher corporate value for all stakeholders, weconsider aiming for efficient, fair, and highly transparent management to be
the basic approach underpinning our corporate activities.
Based on this approach, the Board of Directors is working to develop
management structures, organizations, and systems that will allow us
to engage in appropriate and speedy decision making, strengthen the
supervisory functions governing the decisions made, establish compliancesystems, improve and reinforce internal control systems, and build healthy
relationships with stakeholders.
To achieve even faster decision making and smoother business execution,
the Board of Directors has established the Corporate Management Council
and the Board of Executive Officers. The former convenes to discuss important matters related to overall business execution prior to Board of Directors
meetings, while the latter shares information about Company managementwith the aim of strengthening collaboration so that business execution

proceeds smoothly.
The Board of Directors has also established the Nomination andCompensation Committee to handle inquiries and proposals related to thenomination of and compensation for officers, who make up the core of
our governance.
In addition, the Board of Directors has established the Compliance
Committee, which prepares and runs legal compliance systems, the Risk
Management Committee, which handles risks related to business administration, the Personnel Committee, which discusses human resource utilization,
the Sustainability Committee, which pursues initiatives aimed at promoting
sustainability, and the IT Committee, which maintains IT environment. These
committees consider and offer recommendations on management issues tothe Board of Directors so the Board can thoroughly examine them.
Our business operation structure consists of four headquarters: Leasing
Business Headquarters, Corporate Management Headquarters, Compliance
Promotion Headquarters, and Construction Defects Response Headquarters.
Under this system, we will take steps to clarify the scope of responsibilities and authority and make every effort to further strengthen our
corporate governance.

Corporate Governance System

As of June 29, 2022

Nomination andCompensation Committee
Corporate Management Council

Appointment/Removal
Accounting
Audit

Board of Directors
Audit

In-house committees

Accounting Auditor
Audit & Supervisory Board

10 Directors(Including 4 Outside Directors)

Appointment/
Removal/Supervision

4 Members(including 2 Outside Audit &Supervisory Board Members)

Auditing Department
Audit(internal audit)(internal controls)

President and CEO

Compliance Committee
Risk Management Committee
Execution

Personnel Committee
Sustainability Committee
IT Committee
Procurement Management
Committee
Affiliate Directors Advisory
Committee

34

Leopalace21 Integrated Report 2022

Appointment/
RemovalCooperating

Management decision making and supervision

General Shareholders’ Meeting
Appointment/Removal

Board of Executive Officers

Operating Headquarters and Divisions
Leasing Business Headquarters
Corporate Management Headquarters
Compliance Promotion Headquarters
Construction Defects Response Headquarters
Elderly Care Division
Architectural Engineering Division

Subsidiaries and affiliates

Auditing
CouncilStrengthening Our Management Structure
Progress towards strengthening governance
We have strengthened our corporate governance system in order to achieve
the corporate philosophy, attain the management plan, improve themedium- to long-term corporate value, and achieve sustained growth. To
apply external points of view to our management, we have been appointing
outside Audit & Supervisory Board members for over 25 years, and we
appointed outside directors immediately after the global financial crisis,
which had a major effect on the management of the Company.

Cover Story

We subsequently increased the number of outside directors to considerably strengthen the supervisory function of the management. We currently
have four independent outside directors, making up over one third of all
directors. In addition, the Board of Directors has set up various committees
and has pursued timely inquiries in order to examine major management
issues faced by the Company.

Outside Directors (persons)

Sources ofCompetitive Advantage

Major Corporate Governance Initiatives
Outside Audit & Supervisory Board Members (persons)

3
1

1

1

1

1

2

3

5
6

3

5

4

3
3
3
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
3
3
3
2
2
2
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 (FY)
July 2006
1st meeting

Compliance Committee
Sustainability Committee (formerly called the CSR Committee)
Personnel Committee
IT Committee

Business ModelMay 2008
1st meeting
July 2008
1st meeting
April 2009
1st meeting
February 2011
1st meeting

Risk Management Committee

March 2016
1st meeting

Nomination and Compensation Committee

July 2021
1st meeting
March 2022
1st meeting

Affiliate Directors Advisory Committee
Procurement Management Committee

Corporate GovernanceMembers of each established bodyPresident and CEO

Bunya Miyao

Director

Mayumi Hayashima

Director

Naomichi MochidaDirector

Shinji Takekura

Director

Akio Yamashita

Director

Jin Ryu

Outside Director

Akira Watanabe

Outside Director

Yutaka Nakamura

Outside Director

Takumi Shibata

Outside Director
Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberOutside Audit & Supervisory
Board Member
Outside Audit & Supervisory
Board Member
Executive Officers

Kan Ishii

Board ofDirectors

Kenichiro Samejima(Notes 2)

Yoshitaka Murakami(Notes 2)

Jiro Yoshino(Notes 2)

Takao Yuhara(Notes 2)—

Employees—

Affiliated companies—

Outside Experts and others—

Corporate
Management
Council

Board of
Executive
Officers

Risk
Nomination andComplianceManagement
Compensation
Committee
Committee
Committee

Personnel
Committee

10

2

3

6

1

2

1

2

1

11

4

2

2

Sustainability
IT Committee
Committee

Data Section

Name

Materiality

Position

5Notes	1. indicates a chairperson, while indicates a member.
2. All Audit & Supervisory Board members attend meetings of the Board of Directors, and they supervise the execution of business by the directors.

Leopalace21 Integrated Report 2022

35

Corporate GovernanceNomination and Compensation Committee
We have established the Nomination and Compensation Committee as an advisory body to the Board of Directors in order to deliberate on the fairness
and appropriateness of officer appointment/removal, compensation and other issues to ensure the transparency and accountability of our management.
The Nomination and Compensation Committee consists of outside directors, President and CEO, and non-executive directors.

Members

Chairperson: an independent outside director
Committee members: three independent outside directors, President and CEO, and two non-executive directors

Objective

To ensure the appropriateness of decisions related to officer candidates nomination and compensation recommendations

Role

This committee handles the nomination, removal as well as the compensation composition and levels for President and CEO,directors, Audit & Supervisory Board members, and executive officers considering the company business performance and otherfactors for objective deliberation. The committee reports the results of such deliberation to the Board of Directors.

Number of meetings heldin the fiscal year 2021

7

Main deliberation
content

We discussed the appointment of directors and executive officers, and deliberated on personnel, compensation, and evaluation
systems for directors, Audit & Supervisory Board members, and executive officers.
Regarding officer compensation, we specifically reviewed the ratio of performance-linked compensation because it was
low relative to fixed compensation, and it was suggested that the ratio of compensation linked to performance and individual
evaluations should be increased.
In addition, we changed the final determination process for self-reported evaluation items related to directors and executive
officers. The old process based on a self-reporting system was changed to the new process in which the evaluation items are
finalized based on discussion at the Nomination and Compensation Committee. There have been cases where self-reported
evaluation results were changed in accordance with the outcome of discussions. Director and executive officer evaluations are
implemented based on evaluation items finalized through discussion, and will be held twice a year instead of once a year as theyused to be, so as to clarify each officer’s contribution to the Company performance. The Committee has deliberated cases forpromotion and demotion as and when required.

Board members’ compensation
The objective of the Company’s director compensation is to provide an
incentive for the directors to maximize the performance of their duties
in order to achieve the management plan and improve the corporate
value in the medium- to long-term. Director compensation consists offour components: basic remuneration, stock options, annual bonuses,
and medium-term management plan period bonuses. Based on the
deliberation of the Nomination and Compensation Committee, in orderto strengthen the performance-linked incentives going forward, weplan to abolish fixed-amount of basic remuneration and introduce a
performance-based annual compensation that is linked to the level of
performance achievement. In addition, we plan to revise the compensation system to specify the fact that bonuses and stock options will
only be provided when profits are returned to the shareholders throughdividend payments, share buybacks or the like.

36

Leopalace21 Integrated Report 2022

About the reduced officer compensation amount ratio
President and CEO
Other Internal Directors
Full-time Audit & Supervisory Board members
Executive Officers

60%
40–45%
35%
35–40%

Skills of officers
The Board of Directors is aiming to strengthen our governance systemand to flexibly and promptly solve problems. We reviewed the skill set of
the Board of Directors as necessary given the business environment andother factors. Effective June 29, 2022, the Board consists of ten directors in total, of which four appointed as independent outside directors,
so that more than one-third are independent outside directors.
The Company requires its directors to have an extremely broad rangeof expertise, experience, and knowledge, and therefore many of the

Cover Story

appointed directors possess multiple of the required qualities. Particularfocus is given to knowledge of corporate management, corporate
rehabilitation and business restructuring, quality management, legal
affairs, and finance when appointing outside directors. We expectthat directors will be able to leverage these skills to make significant
contribution to the Company’s efforts to implement structural reforms
and strive to recover performance and trust.

Sources ofCompetitive Advantage

Skill set matrix
Attribute

Name

Title

Expertise, Experience, and Knowledge

Age

Gender62

Male

President and CEO
Chairperson of theBoard of Directors

Executive

2

Mayumi Hayashima

Director andManaging Executive
Officer

Executive

49

Female3

Naomichi MochidaDirector andExecutive Officer

Executive

59

Male

4

Shinji Takekura

Director andExecutive Officer

Executive

50

Male

5

Akio Yamashita

Director

Nonexecutive

Member

60

Male

6

Jin Ryu

Director

Nonexecutive

Member

38

Male

7

Akira Watanabe

Director

NonIndependent
executive
outsideMember

75

Male

8

Yutaka Nakamura

Director

NonIndependent
executive
outsideMember

63

Male

9

Takumi Shibata

Director

NonIndependent
executive
outsideMember

69

Male

10

Kan Ishii

Director

NonIndependent
executive
outsideMember68

Male

MemberFinance

Audit

Materiality

Bunya Miyao

Legal

Corporate Governance1

Corporate
Corporate rehabilitation Sales andQuality
management and business marketing management
restructuring

Business Model

Nomination
andExecution of
Independency
Compensation
business
Committee

Data Section

Note: Ages of each director are listed as of June 29, 2022

Leopalace21 Integrated Report 2022

37

Corporate Governance

Expected roles of outside directors and results
In order to obtain objective advice on decision-making and strengthen the supervisory function of the management, we have appointed
four independent outside directors and are increasing the effectiveness of our governance. Below, we describe the roles that we expect
independent outside directors to play, the results they have achieved for us, and the aspirations of newly appointed directors.

Outside director Akira Watanabe
Expectedrole

Achieved
results

Possessed knowledge• Specialized knowledge as a lawyer• Experience as an outside director atother companies

Outside director Yutaka Nakamura
Expectedrole

Achieved
results

Possessed knowledge• Knowledge of quality management andenvironmental management through theexperience in a housing manufacturer• Experience gained through important
positions with multiple organizations in
the housing industry

38

Leopalace21 Integrated Report 2022

Mr. Watanabe is expected to use the keen insight and deep knowledge of company management he has gained through the experience as an outside director
at other companies in order to offer advice on strengthening the operations
and running of the Board of Directors. In addition, we believe he will be able tocontribute in the legal affairs and compliance areas as well based on his keen
insight as a lawyer.
When I was first appointed as an outside director, I found that the Board of
Directors meetings were nothing more than reporting sessions, and lack ofrequired information prevented active discussions for making decisions. I offeredstrict comments from various angles ranging from the way of preparing proposals to format of discussion including necessary information. I am confident thatsuch feedback made significant improvements in the operation of the Board of
Directors meetings and contributed to increased effectiveness of the Board of
Directors. Consequently the operating departments started to consider mattersmore comprehensively, and the Board of Executive Officers has become more
active in discussing the matters.

Mr. Nakamura got his professional start at Panasonic Homes Co., Ltd., where hedeveloped the career in quality management and environmental management,
and he successfully elevated that company to the top level in the industry
in those areas. Therefore, we believe he will contribute to the Company byproviding operational support for resolving the construction defects problem,in maintaining apartments under management, by establishing management
system for improving quality, and by taking steps in addressing climate change.
As the chair of the Compliance Committee, I have been working on strengthening and fleshing out the compliance system. In addition, I took advantageof my long experience in the fields of quality and environmental management
at the housing manufacturer in order to strengthen the systems for preventing
problems in new product development and construction site management, tooffer ideas of proper handling of incidents, and to propose preventive measures
to avoid the recurrence of problem. In terms of work quality, to help attain theplanned goals by overcoming organizational barriers, I proposed that a task
force is established to confirm results and review policies on a monthly basis. The
task force looked into the reduction of cost of sales and SG&A expenses and it
contributed to recording net income for the fiscal year 2021.

Expected
role

Possessed knowledge

Expectedrole

Possessed knowledge

My understanding is that I was appointed for the knowledge I have gained over
the years of corporate rehabilitation in particular. Based on that experience, I
know that good companies have well-functioning systems in place which areclear regarding the way they operate, who is responsible for what, and how the
motivation works in the Company. My role is to provide a boost to ensure thatthese systems work well. In addition, as an outside director at the listed-company, I believe that one particular basic is essential: although major shareholders
are obviously important, minority shareholders are equally important. In the caseof the Company, many of our minority shareholders are the property owners, so I
will particularly stick to the basic principle.

Leopalace21 Integrated Report 2022

Data Section• Keen management insight cultivatedby successively holding important
positions at investment banking andbusiness companies• Deep knowledge and experience incorporate rehabilitation gained byworking as a trustee representative ofJapan Airlines Co., Ltd.

We invited Mr. Ishii because we expect him to utilize his knowledge in supervising the business execution and advising us from a specialized perspective. He
is expected to provide detailed advice in the formulation of the future businessstrategy and financial strategy. We also believe he will utilize his corporate
rehabilitation experience to actively communicate with the aim of helping torebuild our damaged brand caused by bad reputation, and thereby revitalize theCompany.

Materiality

Aspirations
as a newdirector

Corporate GovernanceOutside director Kan Ishii

With my long experience in the capital market, I would like to act always considering the interests of our minority shareholders. Of course, as the Company
recovers, I will also help find ways to ensure that we are accepted by society andcan contribute even more to society than in the past.
I hope to use my experience for the benefit of the Company including my
involvement in the management of a major securities group and a major asset
management company; my relatively extensive overseas experience; my participation in regular workshops involving chairpersons and vice-chairpersons to be
performed by outside directors at UK-based listed companies; and my previous
work as a director at publicly listed companies in Canada and Italy.

Business Model• Keen insight as a part of the management gained during his career inthe securities and asset managementcompanies• Deep knowledge and experience related
to asset management and financeWe expect Mr. Shibata to be involved in and supervise the decision-making
process in the selection of the officer candidates, their compensation froman independent and impartial viewpoint. We invited him to join the Board of
Directors so that he will comprehensively monitor and supervise the corporate
management, and provide advice based on his extensive global experience.

Sources ofCompetitive Advantage

Aspirations
as a newdirector

Cover Story

Outside director Takumi Shibata

39Corporate GovernanceInitiatives Aimed at Improving Effectiveness
The Board of Directors
The Board of Directors focuses on both ensuring agile management
and achieving comprehensive supervisory functions, and it currently
consists of ten directors, including four outside directors. To improve
our corporate value, we believe it is important to appoint suitabledirectors and determine their compensation, and we have incorporated deliberation by the Nomination and Compensation Committee

which is made up of outside directors, into the determination process.
In addition to regular monthly meetings, the Board of Directors
flexibly convenes meetings as necessary to make important management decisions, monitor how business is being executed, andsupervise the execution of duties by directors.

Internal directors(Executive)

Outside directors(Non-executive)

Evaluation of the effectiveness of the Board of Directors
After the end of the fiscal year 2021, we evaluated the function andother duties to be fulfilled by the Board of Directors, mainly to improve
management issues. The evaluation method was an individual evaluation using a questionnaire targeting all the board members. The secretariat of the Board of Directors reported the aggregated and analyzed
results to the Board of Directors, and discussions were held. As a result,for the fiscal year 2021, we confirmed that our Board of Directors andgovernance system generally functioned effectively.
More specifically, based on the evaluation of the Board of Directors
for the previous fiscal year, we steadily implemented structural reforms

to turn the business back on track, boosting the profitability of the
Leasing Business, and strengthening communication between the
management team and employees as initiatives to make improvements
related to management issues identified in the fiscal year 2021.
In the recent evaluation of the Board of Directors, the Board agreed
to implement the business plan as a top priority and to monitor the
progress of below-mentioned initiatives, hold timely discussions andmake decisions including any necessary corrections: formulating a medium-term management strategy, boosting the profitability of the Leasing
Business, and strengthening the risk and crisis management system.

Priority issues during the fiscal year 2021
1. Implement structural reforms to turn the business back on track

1. Formulate a medium-term management strategy

2. Boost the profitability of the Leasing Business2. Boost the profitability of the Leasing Business3. Strengthen communication between the management team and employees

3. Strengthen the risk and crisis management system

Positive points

Points to be improved• Contractual adjustment of the master-lease rent

• Formulation of a new roadmap that includes
the company’s brand strategy• Occupancy rate improvement• Review of costs by an in-house task force• Achievement of positive operating profit andnet income• Branch office visits by the management team40

Priority issues during the fiscal year 2022

Leopalace21 Integrated Report 2022

• Completion of withdrawal from non-core
unprofitable businesses• Further strengthening of crisis management
systemRisk Management
Restructuring of the risk management framework
analyzes risks related to the work it is in charge of, formulates a risk
response plan to manage these risks, and reports the results to the Risk
Management Committee.
The Risk Management Committee regularly meets once a monthand whenever the chair determines that an extraordinary meetingis required. It offers consultation and guidance to ensure that risk isappropriately managed by each department. Furthermore, Chief of
the Compliance Promotion Headquarters reports on the status of risk
management to the Board of Directors on a quarterly basis.

Cover Story
Sources ofCompetitive Advantage

In order to grasp and manage Company-wide risks and strengthen
our risk management framework, the Group has put in place a
Risk Management Committee as an advisory body to the Board of
Directors. President and CEO serves as chair of this Risk Management
Committee, while other members of the Committee comprise Chief of
the Corporate Management Headquarters, Senior Department Managerof the Compliance Promotion Department, and external experts suchas lawyers. The Committee not only monitors risk management status,
but also plans and implements training sessions and works to mitigate
or prevent risks from materializing. Each department identifies andReviewing how we run our Risk Management Committee
to discussion-based operations. The objective behind this decision is
to more actively express opinions in order to devise policies that are
effective on a deeper level. The committee will be used as a forum
for discussing risk measure policies related to high-priority matters,
including risk reduction and prevention measures.

Business Model

During the fiscal year 2021, we reviewed how we run our Risk
Management Committee. More specifically, we assigned an order of priority to the risks we respond to within the committee, and we changed
how the committee is run so that higher priority risks are handled first.
In addition, we switched from report-based committee operations

Responding to disaster risks—to protect the social infrastructure of 560,000 units
downpours and infectious diseases. The policy is set for obtaining
basic information needed for restoration activities and initiatives toprevent the spread of damage and is revised as necessary. The Disaster
Response Policy is also the backbone of our business continuity plan.
In addition, to prevent disaster damage, we are complying with laws
related to customers who move in to Company-managed apartments
by distributing hazard maps when they sign rental contracts andselling disaster prevention goods. As a provider of social infrastructure,
we consider it our responsibility to explain risks related to daily lifethat will affect the customers after they move in, and to respond tosuch risks in advance.

Corporate GovernanceWith the Leasing Business as our core business, we are able to exist
thanks to the use by customers of apartments we construct, manage,and operate. For this reason, it is our social mission to swiftly respondto the building damage and direct damage to customers including
injuries and promptly enact countermeasures.
In 2010, we established a Disaster Response Policy in the aim ofswiftly grasping internal damages such as safety of employees anddamage to company office buildings and facilities and business damages such as damage to apartment buildings managed and operated
as part of businesses in which we engage, and safety of tenants andproperty owners in preparation for earthquakes, typhoons, torrential

Materiality
Data Section

Leopalace21 Integrated Report 2022

41

Corporate GovernanceComplianceTo entrench an enduring compliance-first policy within the organization, we established the Compliance Promotion Headquarters, with the Compliance
Promotion Department at its core, which verifies the legal compliance of Company-wide businesses and products and also builds and operates information management systems, thereby promoting the development of an organizational framework with strong internal controls.

Compliance system
We established the Compliance Promotion Department in response to
the problem of construction defects in order to fundamentally review
and rebuild a solid compliance and risk management framework for
the Group. The Compliance Promotion Department plans and drafts
the construction of new systems, and verifies the legal compliance of
the Group’s new businesses, services, products, etc. The Compliance
Promotion Department also takes the lead in sharing information with

our design, construction, and other departments as well as subsidiaries
and affiliates, reconstructing systems for sharing risk information in
the field throughout the Group, and actively carrying out training andother initiatives aimed at providing knowledge and raising awarenessof compliance. In this way, the department strives to foster an organizational culture defined by our compliance-first policy, thereby setting thestage for successful management.

Compliance consulting service
To handle cases where legal violations or similar acts by officers andemployees are discovered, the Group has established compliancehotline services to deal with the associated consultation and reporting
in-house (the Compliance Promotion Headquarters), outside of thecompany (a law firm), and for Audit & Supervisory Board members(the Audit & Supervisory Board). We have also established a businessBusiness divisions,departments, andsubsidiaries andaffiliates

Whistleblowing system

partners hotline to handle cases involving our business partners. We
also have established a Compliance Mailbox so that we can promptly
respond to any incidents that may occur by receiving a wide variety of
information and consultations from Company officers and employees
and having a system to discover potential risks.

Compliance Committee(Compliance hotline)
Reporting,consultation,etc

Run by: Compliance Promotion
Department(Compliance Committee secretariat)

Chairperson: an outside director
Committee members: in-housecommittee members, legal advisors,and outside committee members

ReportBoard ofDirectors

Compliance Committee
The Compliance Committee has a chairperson who is mutually elected
and appointed from among the outside directors. The committee’s
members include lawyers and other external experts. The committee
plans and drafts measures related to compliance, including fleshing out
and strengthening the training and information management systems,
while also striving to strengthen the monitoring systems, understandproblem areas, and make other improvements. During the fiscal year
2021, the committee deliberated on recurrence-prevention measures,the whistleblowing situation, compliance-related training reporting, andother issues.

取締役会

42

コンプライアンス委員会
報告

Leopalace21 Integrated Report 2022

委員長：社外取締役
委員：社内委員、
顧問弁護士
社外委員

Compliance Committee deliberations content(April 2021–March 2022)

1%

16%

Preventive measures 26 items

29%

13%

Whistleblowing situation andincident reports 23 items
Compliance-related training and reports
13 items
Legal-violation incident reports 12 items

15%

Policy revisions 1 item

26%

Others 14 items* The percentages have been adjusted tocome up to 100% in total.

内部通報制度（コンプライアンスホットライン）
所管：コンプライアンス推進部（コンプライアンス委員会事務局）

通報・
相談など

各事業部・
各部・
各関係会社

Compliance training

1%

Whistleblowing situation andincident reports 23 items

29%

Compliance-related training and reports

13 items
13%
implemented
risk management training.
We have been also striving toincident
reports 12
items
raise the compliance awareness of all Legal-violation
our employees
by takingother
Policyrevisions1
item
steps, such as implementing harassment prevention training.

15%

26%

Others 14 items* The percentages have been adjusted tocome up to 100% in total.

Training related to compliance (16 times)
Details
E-learning aimed at understanding the importance of compliance through a compliance-first mindset

Recurrence Prevention Questionnaire
Harassment prevention training
Harassment prevention training
Harassment field survey
Call for compliance slogans
Risk management training
Information management training

once
once
once
once
once
once
7 times
3 times

Fiscal year
28%
34%
38%
2020
Proportion
Fiscal year of cases of harassment in the whistleblowing system
37%
32%
31%
2021
(cases)(%)
I think it has changed.
160

It is the same as before.

Business Model40

I’m not sure.

40

136
33.8

124

120

30

30

102

29.0

24.5

80

77
14.3

40

20

20

10

10

Corporate Governance

In April of 2020, in an effort to maintain a healthy work environment,
improve trust relationships in the workplace, and thereby achieve a
lively company with a pleasant work atmosphere, the Group formulated
a basic policy on the elimination of harassment and announced thedeclaration to eliminate harassment as a corporate responsibility. In
accordance with this declaration, the Group implemented training
aimed at preventing harassment as part of its compliance-related
training. In addition, we conduct a harassment field survey targeting
all officers and employees. As a result of the above initiatives, thenumber of whistleblowing has been on a decreasing trend since thenumber peaked during the fiscal year 2019, and the number of reported
harassment incidents in particular has decreased, so we believe wehave achieved progress in terms of the measures.

Number of times
As necessary

Sources ofCompetitive Advantage

Targets
Mid-career employees
Elderly Care Business Division area managers,
facility managers, and vice facility managers
All officers and employees
High-level managers
Managers
All officers and employees
All officers and employees
All officers and employees
All officers and employees

Compliance training for the Elderly Care Business Division

Declaration to eliminate harassment

Cover Story

The Group implements compliance training that utilizes E-learningin an effort to boost the compliance awareness of all its employees.
During the fiscal year 2021, we conducted a Recurrence Prevention
Questionnaire targeting all officers and employees, and also

Preventive measures 26 items

16%

0

0
FY2018FY2019Number of cases reported (left axis)

FY2020

FY2021

Proportion of harassment cases (right axis)

Changes in compliance awarenessover 70% of the officers and employees responded that the overall
compliance awareness has improved, so we believe that we havemade steady progress on reforming our corporate culture and raising
this awareness.

Q. Do you think our corporate culture has changed in a good way?

Q. Has there been any change in the awareness of compliance around you
compared to before the discovery of the construction defects problem?

Fiscal year
2020
Fiscal year
2021

Fiscal year
2020
Fiscal year
2021

28%

I think it has changed.

34%

37%
It is the same as before.

38%

32%

31%

I’m not sure.

27%

I think the situation has improved.

61%
71%

16% 11% 1%
There are no signs of something to be done to make improvements.

■ 内部通報受付状況・事案報告 . . . . . . . . . . .

1■ 再発防止策........................ 1
Why don’t you think the corporate culture
has changed?

Data Section• Everyone has been more careful before taking action.
• The culture of making policy decisions without considering compliancerisks has been steadily improving.
• Because we have created an environment that makes it easy to share
information between the members of the sales office.
• I think we have more employees who view things from the customer’s
perspective instead of from the company’s.

10% 2%

It has been the same as before, and there have been no improvements.

We are taking action to try to make improvements.

Why do you think the corporate culture has changed?

Materiality

As we continue to pursue initiatives aimed at reforming our corporate
culture and embedding a compliance-first approach into our business,
we have been also conducting regular awareness surveys targeting all
Group officers and employees. Based on the recent awareness survey,0■ コンプライアンスに関する研修・教育報告.. 1• Not enough opinions of people in the field
have been considered.
法令違反事案報告. . that................. 1• Our corporate culture has been gradually■becoming
more open so
employees can raise issues and requests■
to規定改定superiors. We. . . are. . .however......................
still pushing things forward without making
enoughconsideration■ その他 . . . . . . . . . . . .of. . . . . . . . . . . . . . . . 1
future consequences.
• I don’t think we have actually changed until our customers start sayingthat things have changed for us.
Leopalace21 Integrated Report 2022

43

Corporate GovernanceDirectors and Audit & Supervisory Board Members
Internal Directors (As of June 29, 2022)

Executive

Executive

Representative Director, President and CEO
Chief of the Construction Defects Response
Headquarters

Director and Managing Executive Officer
Chief of the Leasing Business Headquarters

Director and Executive Officer,
Deputy Chief of the Leasing Business
Headquarters, General Manager of the
Corporate Sales Division

Director and Executive Officer,
Chief of the Corporate Management
Headquarters, Senior Department Manager,
Corporate Planning Department
Chief of the Compliance Promotion
Headquarters, Chief Legal Officer (CLO)

Bunya Miyao

Mayumi Hayashima

Naomichi Mochida

Shinji Takekura

Apr. 1983	Joined Nakamichi Leasing Co., Ltd.
Jun. 1990	Joined Leopalace21 Corporation
Sep. 2000	Deputy Manager of the Financial
Department
Jul. 2008	General Manager of the Resort Business
Headquarters
Jul. 2010	General Manager of the Corporate
Planning Department
Jul. 2012	Administrative Officer
Apr. 2013	Executive Officer
Jun. 2016	Director and Executive Officer
May 2017	Representative in charge of the
Corporate Planning Department andPublic Relations Department
Apr. 2018	Director and Managing Executive Officer,
Representative in charge of Corporate
Planning and Investor Relations
May 2019	President and CEO (current)
Jun. 2019	Chief of the Business Operation
Headquarters
May 2022	Chief of the Construction Defects
Response Headquarters (current)

Apr. 1996	Joined Leopalace21 Corporation
Apr. 2009	Deputy Department Manager ofthe Eastern Japan Corporate Sales
Department, Leasing Sales Section 3,
Leasing Business Division
Jul. 2010	Department Manager of the Corporate
Sales Department, Eastern Japan Section 2,
Leasing Business Division
Apr. 2014	Department Manager of the Corporate
Business Promotion Department
Apr. 2015	Administrative Officer
Apr. 2018	Executive Officer
Jun. 2019	Director and Executive Officer,
Chief of the Compliance Management
Headquarters, Chief Legal Officer (CLO)
Jun. 2020	Chief of the Compliance Promotion
Headquarters, Chief Legal Officer (CLO)
Jul. 2020	Chief of the Management Headquarters
May 2021	Deputy Chief of the Corporate
Management Headquarters
May 2022	Director, Managing Executive Officer(current)
Chief of the Leasing Business
Headquarters (current)

Apr. 1985	Joined Mitsui Bank, Limited (nowSumitomo Mitsui Banking Corporation)
Jun. 2007	Joined Leopalace21 Corporation as
Director, General Manager of the
Corporate Planning Department
Apr. 2009	Director and Executive Officer
Department Manager of the 3rd Sales
Department, Leasing Business Division
Department Manager of the Broadband
Business Promotion Department
Apr. 2010	Head of the Related Businesses
Controlling DivisionJun. 2010	Executive Officer
May 2011	Head of the Corporate SalesManagement Division
Apr. 2013	Deputy General Manager of the Leasing
Business Division
Apr. 2014	Managing Executive Officer
Jul. 2015	Deputy General Manager of theConstruction Subcontracting Business
Division
Jun. 2020	Representative Director of Leopalace
Leasing Corporation
May 2021	Administrative Officer and Department
Manager of the Corporate Sales
Planning Department
May 2022	Executive Officer
Deputy Chief of the Leasing Business
Headquarters (current)
General Manager of the Corporate Sales
Division (current)
Jun. 2022	Director and Executive Officer (current)

Apr. 1996	Joined Leopalace21 Corporation
Apr. 2014	Department Manager of the 1st
Construction Subcontracting Business
Department, West Japan Region
May 2018	Department Manager of the 3rdConstruction Subcontracting Business
Department, East Japan Region
Jun. 2020	Department Manager of the 2nd
Wealth Management Department,
East Japan Region, and responsible for
the Emergency Response Project forConstruction Defects Problem
Oct. 2020	Senior Department Manager of the
Corporate Planning Department (current)
Apr. 2021	Executive Officer
May 2022	Chief of the Corporate Management
Headquarters (current)
Chief of the Compliance Promotion
Headquarters, Chief Legal Officer (CLO)(current)
Jun. 2022	Director and Executive Officer (current)

Non-executive

44

Non-executive

Director

Director

Akio Yamashita

Jin RyuApr. 1984	Joined Japan Development Bank
(now Development Bank of Japan Inc.)
Jan. 2006	Joined Morgan Stanley Securities
Co., Ltd. (now Morgan Stanley MUFG
Securities Co., Ltd.)
Jun. 2008	Joined Fortress Investment Group,Managing Director (current)
Mar. 2013	Representative in Japan,
Fortress Investment Group (current)
Jun. 2021	Outside Director, Leopalace21
Corporation
Jan. 2022	Director, PJC Investments (current)
Director, Accordia Next Golf Co., Ltd.
(current)
Director, Accordia Golf Management Co.,
Ltd. (current)
Director, Accordia Golf Co., Ltd. (current)
Director, Green Golf Management Co.,
Ltd. (current)
Director, Next Golf Management
Corporation (current)
Jun. 2022	Director, Leopalace21 Corporation(current)

Apr. 2010	Joined Morgan Stanley MUFG Securities
Co., Ltd.
Apr. 2011	Joined RBS Securities Japan Ltd.
May 2012	Joined Fortress Investment Group
Dec. 2020	Managing Director,
Fortress Investment Group (current)
Jun. 2021	Outside Director, Leopalace21
Corporation
Jan. 2022	Director, PJC Investments (current)
Director, Accordia Next Golf Co., Ltd.
(current)
Director, Accordia Golf Management Co.,
Ltd. (current)
Director, Accordia Golf Co., Ltd. (current)
Director, Green Golf Management Co.,
Ltd. (current)
Director, Next Golf Management
Corporation (current)
Jun. 2022	Director, Leopalace21 Corporation(current)

Leopalace21 Integrated Report 2022

Executive

ExecutiveOutside Directors (As of June 29, 2022)
Cover Story

Non-executive

Non-executive

Non-executive

Non-executive

Outside Director

Outside Director

Akira Watanabe

Yutaka Nakamura

Takumi Shibata

Kan Ishii

Apr. 1973	Registered as an attorney at law
Nov. 2006	External Statutory Auditor,
FAST RETAILING CO., LTD.
Jun. 2007	Outside Director, MAEDA CORPORATION
Outside Audit & Supervisory Board
Member, KADOKAWA GROUPHOLDINGS, INC.
(now KADOKAWA CORPORATION)
Apr. 2010	Outside Director,
MS&AD Insurance Group Holdings, Inc.
Mar. 2013	Outside Director,
DUNLOP SPORTS CO., LTD.
Oct. 2015	Director, ASIA PILE HOLDINGSCORPORATION (current)
Sep. 2018	Partner, Comm & Path Law Office(current)
Jun. 2019	Outside Director, MAEDA ROAD
CONSTRUCTION Co., Ltd. (current)
Jul. 2020	Outside Director,
Leopalace21 Corporation (current)
Jun. 2022	Outside Director,
KADOKAWA CORPORATION (current)

Apr. 1981	Joined National Housing Materials Co.,
Ltd. (now Panasonic Homes Co., Ltd.)
Oct. 2002	Manager, Quality & Environmental
Promotion Department, PanasonicHomes Co., Ltd.
Oct. 2006	Manager, Quality, Environment & IT
Department, Panasonic Homes Co., Ltd.
Apr. 2011	Councilor, Manager of Corporate Quality& Environmental Division, PanasonicHomes Co., Ltd.
Apr. 2012	Senior Councilor, Manager of Corporate
Quality & Environmental Division,
Panasonic Homes Co., Ltd.
Apr. 2018	Senior Principal for Quality & Customer
Satisfaction, Panasonic Homes Co., Ltd.
Mar. 2019	Retired from position at PanasonicHomes Co., Ltd.
Feb. 2020	Outside Director, Leopalace21
Corporation (current)

Apr. 1976	Joined Nomura Securities Co., Ltd.
Jul. 1997	Managing Director, Nomura International
plc.
Jul. 1998	Director, Nomura Securities Co., Ltd.
Apr. 2000	Managing Director,
Nomura Europe Holdings plc.
Apr. 2005	President and CEO,
Nomura Asset Management Co., Ltd.
Jul. 2007	Deputy President and COO,
Nomura Holdings, Inc.
Jul. 2013	Executive Chairman,
Nikko Asset Management Co., Ltd.
Jan. 2014	President and COO,
Nikko Asset Management Co., Ltd.
Jun. 2020	Representative Director, Fiducia, Inc.
(current)
Jun. 2022	Outside Director, Leopalace21
Corporation (current)

Apr. 1977	Joined Japan Development Bank
(now Development Bank of Japan Inc.)
Oct. 2008	Managing Executive Officer,
Development Bank of Japan Inc.
Jan. 2010	Trustee Representative,
Japan Airlines Co., Ltd.
Aug.2011	Representative Director President,
FUKUOKA JISHO CO., LTD.
June 2017	Outside Director, NIPPON PISTON RING
CO., LTD.
Apr. 2018	Visiting Professor,
The Graduate School of Project Design
Jun. 2018	Director, The Nishinippon Shimbun
Apr. 2019	Specially Appointed Professor,
The Graduate School of Project Design(current)
June 2021	Advisor, TERRACE MILE, Inc. (current)
June 2022	Outside Director, Leopalace21
Corporation (current)
June 2022	Representative Director, President andCEO, Accordia Golf Co., Ltd.
(current; as of June 30, 2022)

Business Model

Outside Director

Sources ofCompetitive Advantage

Outside Director

Corporate Governance

Audit & Supervisory Board Members (As of June 29, 2022)

Outside Audit & Supervisory Board Member

Audit & Supervisory Board Member

Jiro Yoshino

Kenichiro Samejima

Takao Yuhara

Yoshitaka Murakami

Apr. 1978	Joined The Dai-Tokyo Fire & Marine
Insurance Co., Ltd. (now Aioi Nissay
Dowa Insurance Co., Ltd.)
Apr. 2011	Executive Officer, Aioi Nissay Dowa
Insurance Co., Ltd.
Apr. 2012	Managing Executive Officer,
Aioi Nissay Dowa Insurance Co., Ltd.
Executive Officer, MS&AD InsuranceGroup Holdings, Inc.
Jun. 2013	Full-time Audit & Supervisory Board
Member, MS&AD Insurance Group
Holdings, Inc.
Jun. 2017	Outside Full-time Audit & Supervisory
Board Member, Leopalace21 Corporation(current)

Apr. 1984	Joined Nikkei House Co., Ltd.
Feb. 1986	Joined Leopalace21 Corporation
Apr. 1999	Department Manager of the StoreManagement Department,
Leopalace World Shinjuku,
Leasing Business Division
Oct. 1999	Department Manager of the Planning
Department, Head Office,Leasing Business Division
Apr. 2009	Executive Officer and Department
Manager of the Operations Department,
Leasing BusinessFeb. 2010	Department Manager of the Planningand Operations Department,
Leasing Business Division
Apr. 2012	Department Manager of the Information
Systems Department
Jul. 2012	Administrative Officer
Apr. 2014	Executive Officer
Jul. 2019	Management Headquarters,in charge of Information Systems
Jun. 2020	Administrative Officer and Head of Audit& Supervisory Board Members Office
Jul. 2020	Full-time Audit & Supervisory Board
Member (current)

Apr. 1969	Joined NIPPON CHEMICAL INDUSTRIAL
CO., LTD.
May 1971	Joined Sony Corporation
Jun. 2003	Corporate Senior Vice President andGroup CFO, Corporate Executive Officer,
Sony Corporation
Dec. 2007	Managing Executive Officer, Zensho Co.,
Ltd. (now ZENSHO HOLDINGS CO., LTD.)
Jun. 2008	Audit & Supervisory Board Member,
Ricoh Company, Ltd.
May 2011	Managing Executive Director and CFO,
Zensho Co., Ltd.
Jun. 2013	Audit & Supervisory Board Member,mofiria Corporation
Jun. 2014	Auditor, KAMEDA SEIKA CO., LTD.
Jun. 2015	Outside Audit & Supervisory Board
Member, Leopalace21 Corporation(current)
Dec. 2015	Auditor, T. HASEGAWA CO., LTD.
Dec. 2019	Outside Director, T. HASEGAWA CO., LTD.
(current)

Apr. 1972	Joined Ministry of FinanceJun. 1983	Consul at Consulate-General of Japan inHong Kong
Feb. 1987	Director, Banking Bureau,
Ministry of FinanceJul. 1998	Large Enterprise Examination andCriminal Investigation Deputy
Commissioner, National Tax Agency
Jun. 2000	Taxation Deputy Commissioner,
National Tax Agency
Jun. 2003	First Deputy Commissioner,
National Tax Agency
Oct. 2005	Senior Executive Officer, East Nippon
Expressway Company Limited
Jun. 2011	Full-time Audit & Supervisory Board
Member, Credit Saison Co., Ltd.
Jun. 2019	Outside Director,
Leopalace21 Corporation
Jul. 2020	Audit & Supervisory Board Member,
Leopalace21 Corporation (current)

Leopalace21 Integrated Report 2022

Data Section

Full-time Audit & Supervisory Board Member

Materiality

Full-time Outside Audit & Supervisory Board
Member45

Materiality[About Leopalace21’s Materiality]
Leopalace21 has identified the materiality by organizing them into ESG categories, is promoting efforts to solve theissues therein, and is conducting its business activities with the aim of achieving sustainability management.

Sources ofCompetitive Advantage

Materiality

Business Model

Long-Term Vision

Offer Rental Housing with
Stable Operation
Promote Real Estate Tech
Apartments
Leasing Business Expertise

Growth Strategy

Social demands
and challenges
such as Sustainable
Development Goals

Our People
Property Owners

Purpose

Corporate     
Philosophy

ActionGuidelines& Tenants
Business Partners

Structural Reforms

Work-Style Reform and
HR Development
Respect for Human Rights
Communication with
Stakeholders
Maintain the Workable
Corporate Governance
SystemStrengthen Compliance
Environmental Initiatives

Corporate Governance46

Leopalace21 Integrated Report 2022

Ensure competitive
advantage in our business,with the provision ofrental housing as social
infrastructure at its core, andachieve sustainable growthalong with stakeholders

Materiality

Materiality Management
Driven by the corporate philosophy of creating new value, Leopalace21 seeks to meet the expectations of all stakeholders by conducting activities
aimed at fostering a sustainable society in line with the needs of the times.
Cover Story

Achieving a sustainable society

Sources ofCompetitive Advantage

Leopalace21 conducts business activities to realize sustainability management by linking the Sustainable Development Goals (SDGs) with
our own sustainability activities. We are promoting activities to resolve
materiality while engaged in our main business by identifying materiality for 2030 and setting KPI targets for each fiscal year. By responding
to the needs and demands of society and promoting sustainability
activities, we aim to contribute to solving social challenges and improve
the sustainability of our business.

Business Model

Reviewing the materiality in light of current Company and socio-economic conditions
issues represent opportunity or risk. The materiality are organized into
ESG categories.
Handling construction defects was identified as one of the materiality
unique to the Company. In order to ensure the execution of publicly
announced repair completion plan and prevent similar issues from reoccurring, we designated two KPIs for the materiality under the purview
of governance, and continue to address them as important issues.

Step 2

Step 3

Step 4

Identify social challenges
related to the Company

Determine whether issue
represent opportunity or riskin the fiscal year 2022

Organize the materiality into
ESG category

Receive approval from
Sustainability Committee

Materiality

Step 1

Corporate GovernanceIn the fiscal year 2022, we have revised the materiality while taking into
account current Company and socio-economic conditions. Specifically,
we have identified the promotion of real estate tech, which is a pillar of
our sustainability management, as a new materiality, and determined
the introduction of smart locks as a KPI.
As a framework for identifying the materiality, we first identify social
challenges related to the Company, and then consider whether those

Data Section

Leopalace21 Integrated Report 2022

47

Materiality

Leopalece21’s Materiality
Based on our corporate philosophy of creating new value, Leopalace21 is working to meet the expectations of all its stakeholders and to help build asustainable society tailored to the needs of our time. Following this, we have identified a number of important materiality in consideration of the changing needs of stakeholders, social and environmental challenges, and our required response to ISO26000 and various other guidelines.

*

48

Social challenges

Opportunities and risks relevant to the Company*

Shrinking labor force becauseof falling birthrate andaging population

	Increased demand for housing for single-person households to respond to growing
number of single-person households, foreign national workers, and students	Increasing number of elderly people	Growing demand for nursing care
Excess supply of apartments
Increasing number of abandoned houses
Shortage of nursing care staff

Employment issues

	Creation of jobs to compensate for the declining population of working age
	Multiple ways of working and respect for diversity	Pursuit of comfortable working environment	Growing demand for shared offices
Shortage of workers

Demographic trends	Population concentration in the three major metropolitan areas	Corporate customers’ continuing demand for housing in areas other than the threemajor metropolitan areas
Intense competition in acquiring orders for new apartment buildings

Innovations indigital technology

	Expanding demand due to electronic commerce growth	Enhanced convenience for the benefit of people who live in remote areas andforeign national customers
Systems and services becoming obsolete due to rapid advances in ICT
Reduced relocations due to the popularization of remote working
More university classes held online
Cyberattack threat

Rising demand forconvenient living conditions

	Changes to living environments as a result of COVID-19 impact	Improving daily life through ICT advancement
Dilapidated apartment buildings
Shift in customer needs

Tighter checks on
corporate governance	Increase number/ratio of independent outside directors
	Diversity in the Board of Directors
	Requirement for dialogue with shareholders

Climate change:
realizing recycling andeco-friendly society	Wider spread of energy-saving net-zero energy houses (ZEH)	Growing interest in the use of renewable energy	Realizing carbon neutrality in 2050
Increasing interest in green-minded society
Frequent occurrence of natural disasters

Denotes opportunities

Denotes risks

Leopalace21 Integrated Report 2022

Cover Story

Materiality

Related SDGs

KPIs (Fiscal year 2022)

S• Install smart locks (in 440,000 units by May 2024)

S• Conduct training for foreign national nursing care staff (monthly, 12 times)• Implement 360-degree assessments(target: 642 managers below Senior Department Managers)• Execute systematic human resources development(career development support: 628 persons, future managers training: 114 persons)• Promote the use of paid leave (83% utilization rate)• Promote health and productivity management(reduce number of smokers to 25% by 2024)

S• Employ persons with disabilities (maintain 2.3% employment rate)• Sustain employee retention rate in the special subsidiary (maintain 83%)
• Create jobs for Leopalace Smile (jobs related to security cameras,
replacement of apartment locks and keys, document sending, etc.)(outsource the jobs 100% to Smile)

Work-Style Reform and
HR Development

Respect for Human Rights

S

Strengthen ComplianceG• Ensure to respond to submissions to Suggestion Box for Management(response rate: 100%)• Operate the whistleblowing system (number of cases accepted: 80 cases)• Send in-house notices to improve trust in whistleblowing (6 times)

Environmental Initiatives

E• Reduce Scope1 and 2 CO2 emissions (to 46% of FY2016 level by FY2030)• Promote paperless operations (reduce annual paper usage by 15%)

Maintain the Workable
Corporate Governance System

Leopalace21 Integrated Report 2022

Data SectionG• Maintain dialogue between directors and employees (12 sessions)• Eliminate obvious defects by end of 2024
(number of repaired units by end of March 2023: 6,000)

Communication with
Stakeholders

Materiality

G• Share customer feedback with all employees (12 times a year/once a month)• Hold engagement meetings with institutional investors (100 companies)• Hold engagement meetings with financial institutions (200 times a year)• Hold property owner briefing sessions (90 times a year)• Deliver in-house newsletters (60 times a year)• Implement customer satisfaction surveys (once a year at subsidiaries)

Corporate Governance

Promote Real Estate TechBusiness ModelS• Implement measures to improve occupancy rate
(end of March: 88.44%; annual average: 85.05%)• Increase number of foreign tenants (13,000 individual contracts)• Promote diagnostic building inspections (100 check items, 36,000 buildings)

Sources ofCompetitive Advantage

Offer Rental Housing with
Stable Operation

49

Materiality

S

Offer Rental Housingwith Stable Operation

KPI
Targets for the fiscal year 2022
• Implement measures to improve
occupancy rate (end of March: 88.44%;
annual average: 85.05%)• Increase number of foreign tenants(13,000 individual contracts)• Promote diagnostic building inspections(100 check items, 36,000 buildings)

Leopalace21’s initiatives
Implement measures to improve occupancy rates and increase number of foreign tenants
Improving the occupancy rates is essential to the stable provision ofrental housing, and we are promoting measures to improve occupancy
rates by focusing on specific customer groups: corporates, individuals,
students, and foreign nationals. For the fiscal year 2022, the core ofour business strategy is to acquire foreign workers and international
students as tenants, who are supposed to increasingly enter Japan.
We will not only improve occupancy rates by capturing this demand,
but also actively work to resolve social issues by offering housing that
ensures that foreign nationals can enter into contracts without worry.
To this end, in addition to offering multilingual support, we are working
to build relationships with organizations that support foreign workers.

Promote diagnostic building inspections
In principle, Leopalace21 has been implementing an annual building
inspection to assure peace of mind for property owners and comfort for
tenants. In order to enhance the management services, Leopalace21
increased the check items from 50 to 100 items during inspections from
July 2021.
In the fiscal year 2022, we will be putting effort in preventative
maintenance in addition to inspections to preserve the quality ofapartments under management. We will focus on improving apartment
values so that the tenants can live with comfort in old apartments.

Occupancy Rate Plan
95 (%)
90
85
80
75
Apr

May

Jun

Jul

Aug

Sep

Oct

Average from FY2013 to FY2017 (actual)
FY2021 (actual)
FY2022 (plan)

Nov

Dec

Jan

Feb

Mar

FY2020 (actual)

150 (cases)100
50
0FY 2017

FY 2018

FY 2019

FY 2020

FY 2021100 (%)
75
50
25
0

50

Leopalace21 Integrated Report 2022

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Materiality

S

Promote Real Estate Tech

Cover Story

KPI
Targets for the fiscal year 2022
Sources ofCompetitive Advantage• Install smart locks(in 440,000 units by May 2024)

Leopalace21’s initiatives
Business Model

Install smart locks

100
50
0

Number of web-based contract signing (total)
40,000 (cases)
30,00020,00010,0000
Apr May Jun

Data Section

150 (cases)

Materiality

FY2021 (actual)

Corporate Governance

Smart locks allow tenants to access their homes without keys using asmartphone or other device, and Leopalace21 has begun installing suchlocks on 440,000 units, or roughly 80% of units under management
since June 2022. This system will make it unnecessary to visit offices
to pick up keys when doing room viewings or upon signing rental
agreements, which not only reduces time and effort, but also makes it
possible to lower face-to-face interactions, thereby effectively limiting
the spread of infectious diseases. In addition, auto-locking and otherfunctions offer better security, which will lead to increased rental
property values for the apartments we manage.
Tenants can select their own passcode and leave the house without
hassle, and can easily share the code with roommates or family members
without duplicating keys. For companies using apartments as dormitories, the system will improve company benefits by increasing employee
convenience and is expected to reduce the workload of management
personnel by removing the need for spare keys and other issues.
In addition, foreign customers can go directly to their apartment
95 (%)
immediately after arriving in Japan, reducing travel time drastically on
the unfamiliar transportation network, and helping them start their new
90
lives in Japan with peace of mind and comfort.
85
Recent years have seen increased requirements for contactless handling in the real estate industry as well in response to societal demand80
for advancements in digital transformation and countermeasures
75
against infectious diseases. In combination with web-based contract
Apr May
Jun Jul Aug
Sep toOct
Novproperty
Dec JanFeb Marwill besigning,
all procedures
relatedrentalagreements
Average from FY2013 to FY2017 (actual)
FY2020 (actual)
conducted
online.

Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2021)

FY2022 (plan)

Corporate value improvement 21
Workplace environment improvement 16
System related 9
Corporate culture improvement 4
Newbusiness proposals
2
Leopalace21
Integrated
Report 2022
Business content 1
Customer feedback 0

51

Materiality

S

Work-Style Reform and
HR Development (1)KPI
Targets for the fiscal year 2022
• Conduct training for foreign national
nursing care staff (monthly, 12 times)• Implement 360-degree assessments(target: 642 managers below Senior
Department Managers)

Leopalace21’s initiatives
Conduct training for foreign national nursing care staff
In response to the growing number of foreign national nursing carestaff as a solution to chronic labor shortage problem in the nursing
care industry, we held monthly training sessions for such employees toimprove skills, with a total of 12 sessions held in the fiscal year 2021.
Our goal is to nurture personnel who will be able to work in Japan longterm, so we provide Japanese language course that offers workplacecommunication skills using dedicated teaching materials that simulate
real conversations that occur in nursing care. In addition, we help
these employees learn the kanji characters and honorific language thatwill aid them in acquiring nursing care qualifications and passing theJapanese Language Proficiency Test.

Implement 360-degree assessments
Leopalace21 has introduced a multi-faceted evaluation system with
360-degree assessments as part of our effort to implement a fair andtransparent evaluation system. Preparations began in the fiscal year
2020, and we began 360-degree assessments on all senior department
managers in December 2020. In the fiscal year 2021, the system was
expanded to include lower managers than senior department managers,
and in the fiscal year 2022, it will be further expanded to include
executive officers.

52

Leopalace21 Integrated Report 2022

Evaluated
employee

Juniorstaff

Colleague
Supervisor

Materiality

S

Work-Style Reform and
HR Development (2)Cover Story

KPI
Targets for the fiscal year 2022

95 (%)

40,

90

30,

85

20,

80

10,

75
Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Average from FY2013 to FY2017 (actual)
FY2021 (actual)
FY2022 (plan)

Leopalace21’s initiatives

Employees are required to create their own career plans regularly andmeet with supervisors in order to ensure their own career developmentin the best way possible. In addition, the Human Resources and General
Affairs Department takes a lead role in offering career development

Dec

Jan

Feb

Mar

FY2020 (actual)

150 (cases)

Business Model

Execute systematic human resources development

Sources ofCompetitive Advantage• Execute systematic human resources
development (career development
support: 628 persons, future managers
training: 114 persons)• Promote the use of paid leave(83% utilization rate)• Promote health and productivity
management (reduce number ofsmokers to 25% by 2024)

Junior100

Evaluatedstaff
employeesupport and training
for the next-generation managers to support the50
implementation of their career plans. The goal is to create a workplace
whereeach employee can harness their high ambitions with clear goals
0
that
show
individual FY
purposeachievement
ColleagueFY 20172018 andFY
2019
FYthey2020 aim at.FY 2021
Supervisor

Promote health and productivity management

100 (%)
75
50
25
0
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Health and Productivity Management Cycle:(t-CO2)25,000Good physical and mental health helps the Company grow

20,00020,084(t-C

900

Maintain and promote good health

19,186

18,07615,000¥800

16,796
11,562

10,000
Increase company profit

700

10,516

Concentration on work

Changeperceptions of health
5,000

Data Section

Based on the belief that the mental and physical health of each andevery employee is a driving force of innovation, we support the healthof our employees and actively promote a health and productivity management strategy. Our efforts are focused not only on physical healthbut also mental health, as can be seen in hiring resident public healthnurses and clinical psychologists in 2018, and the formulation andpromotion of mental health plans, which launched in October 2020. In
addition, since the Company has a high percentage of smoking employees, we have begun a non-smoking campaign to reduce the smoking
rate down to 25% by 2024.

Paid leave utilization rate

Materiality

Leopalace21 considers work-life balance promotion an important issue,
and part of this include creating a system and work environment thatmakes it easy for employees to take paid leave. More specifically, we
encourage employees to take a five-day planned leave in summer andwinter, and three-day leave (called “refreshment vacation”) which
can be used anytime throughout the year. We have also a half-day
and hourly paid leave system. In addition, we have implemented acare leave system for employees raising children or who have family
members requiring nursing care. For the fiscal year 2021, the paid leave
utilization rate was 81.7%.

Corporate Governance

Promote the use of paid leave

Boost productivity
Lower employee turnover rate

0
17/3期
Secure outstanding
talents 18/3期

19/3期

20/3期

21/3期

21/3期

600

500

■スコープ1(ガス使用由来) ■スコープ1(車両走行ガソリン由来)
Enhance corporate image■スコープ2(電気使用由来)

15,000 (件)

10,000

Reduce burden of insurance costs

Leopalace21 Integrated Report 2022

120

53

90

60

Materiality

S

Respect for Human Rights

KPI
Targets for the fiscal year 2022
• Employ persons with disabilities(maintain 2.3% employment rate)• Sustain employee retention rate in thespecial subsidiary (maintain 83%)
• Create jobs for Leopalace Smile(jobs related to security cameras,
replacement of apartment locks andkeys, document sending, etc.)(outsource the jobs 100% to Smile)

Leopalace21’s initiatives
Employ persons with disabilities, and sustain employee retention rate in the special subsidiary
We established Leopalace Smile Co., Ltd. in August 2009 with thegoal of expanding the hiring of persons with disabilities, and received
approval for the company to operate as a special subsidiary in
November 2009. The company handles sorting and shipping of various
types of posts for companies in the Leopalace Group, and it handles awide range of other works as well, including the creation of importantcustomer documents. The employment of persons with disabilities is not
only a means of complying with statutory employment rates. We believe
sustaining employee retention rate is also an important indicator tohelp people with disabilities realize independent lives.

Create jobs for Leopalace Smile (jobs related to security cameras, replacement of apartment locks
and keys, document sending, tracing floor plans, etc.)
Leopalace Smile handles a wide range of outsourced operations.
Leopalace Smile employees are now engaged in jobs previously done byemployees in the leasing management departments, including analysis
and processing of security camera footage, resetting of apartment
locks and keys, sending documents for tenants, tracing floor plans, andthe like. In addition to creating jobs that promotes the employment ofpeople with disabilities, outsourcing to Leopalace Smile has significantly
reduced the workload of employees in the leasing management departments and improved productivity across the Group as a whole.

54

Leopalace21 Integrated Report 2022

Materiality

SG

Communication with
Stakeholders
KPI
Cover Story

Targets for the fiscal year 2022

Sources ofCompetitive Advantage• Share customer feedback with all employees(12 times a year/once a month)• Hold engagement meetings with institutional
investors (100 companies)• Hold engagement meetings withfinancial institutions (200 times a year)• Hold property owner briefing sessions(90 times a year)• Deliver in-house newsletters (60 times a year)• Implement customer satisfaction surveys(once a year at subsidiaries)

Leopalace21’s initiatives

Hold engagement meetings withinstitutional investors

Deliver in-house newsletters

With a dedicated IR team acting as the point of contact, we conductengagement meetings with institutional investors and analysts from Japanand overseas throughout the year. In individual meetings, the Chief of the
Corporate Management Headquarters acts as the main speaker. We also strive
to incorporate feedback from markets into our management with by holding
meetings where the President and CEO also participates. Last year, we also
conducted shareholder relations activities and meetings from an ESG perspective in addition to investor relations meetings. In this way, we have increased
communication with investors concerning not only short-term performance,
but also the medium- to long-term improvement of corporate value.

The history of our in-house newsletter Leoleo goes back over 20 years. In
2010, the publication was moved from its previous paper-based format toonline. With improved flexibility, the editorial team increased the frequency
of issue and posted 75 articles a year against the planned 60 in fiscal
year 2021. The Public Relations and Advertising Section of the Corporate
Planning Department is in charge of the publication. Articles are written
based on interviews with various departments and Group companies andare published in a format that enables mutual communication between
employees, with a LeoLike! button and a comment field.

Hold engagement meetings withfinancial institutions

Implement customer satisfaction surveys(once a year at subsidiaries)

In anticipation of the resumption of apartment construction order acceptance in the future, we will actively communicate with financial institutionsin the fiscal year 2022. By carefully explaining our financial condition
and business overview to each institution, we aim to build new business
relationships or restore the transaction.

Sustainability activities are carried out throughout the Group. In addition
to communication with customers, our subsidiaries Plaza Guarantee Co.,
Ltd. and Leopalace Leasing Corporation also conduct an annual customer
satisfaction survey to improve corporate activities and Group-wide services.

Leopalace21 Integrated Report 2022

Data Section

The Company has long been regularly holding property owner briefing
sessions throughout the country as a way for the property owners tointeract with Company employees. We strive to regain the trust of property
owners by explaining corporate policy and building and maintaining a
relationship of mutual trust. In the fiscal year 2021, the sessions could not
be held due to the COVID-19 pandemic, and instead we posted a message
from the President and CEO on the website. In the fiscal year 2022, we will
enhance communication with owners in a safe and secure manner while
monitoring the status of the COVID-19 pandemic.

Materiality

We conduct surveys of customers who visit our leasing sales offices andpublish the results internally once a month. Based on the responses
received, outstanding cases of customer service are recognized with the
Outstanding Customer Service Award (individual/leasing sales office), andparticularly exceptional cases are recognized with the Monthly SpotlightAward. These awards are presented alongside identified areas for improvement and real customer feedback in the aim of improving the quality ofcustomer service provided at leasing sales offices and boosting employee
engagement and fostering a customer-oriented culture by sharing customer
feedback throughout the Company. This initiative was started in the fiscal
year 2020, and we plan to continue it in the fiscal year 2022 and beyond.

Corporate Governance

Hold property owner briefing sessions

Business Model

Share customer feedback with all employees

55Materiality

G

Maintain the Workable Corporate
Governance System

KPI
Targets for the fiscal year 2022
• Maintain dialogue between directors andemployees (12 sessions)• Eliminate obvious defects by end of 2024
(number of repaired units by end of
March 2023: 6,000)

Leopalace21’s initiatives
Dialogue between directors and employees
As part of measures to ensure the effectiveness of governance andprevent recurrence of problems, we provide opportunities for dialogue
between directors and employees. In the fiscal year 2021, President andCEO and other directors visited remote branches from the head officein person to get a chance to exchange views with employees, and a
total of 26 Town Meetings were held in each region via web connection
from the visited sites. The details of these meetings are published in
the company newsletter in an effort to share information and ensuretransparency. In the fiscal year 2022, we will continue to hold Town
Meetings in the same manner, not only to gather information on issues
related to business activities, but also to improve work styles and makethe Company a rewarding place to work.

Eliminate obvious defects by the end of 2024
The Company is proceeding with repair works at the same time as itis proceeding with good-faith discussions with property owners andrelevant government agencies, while providing detailed explanations
to tenants and obtaining their understanding. The repair works areproceeding with priority given to vacant units where new tenant recruitment is pending in buildings found to be defective. As of the end ofJune 2022, we have completed repair works on approximately 51,000
units. The plan for July 2022 and beyond is, first and foremost, to carryout repair works on approximately 6,000 units by March 2023 with thegoal of eliminating obvious defects in the construction defects problem
by the end of 2024.

56

Leopalace21 Integrated Report 2022

(as of end of June 2022)
Total numberof units in
obviously
Repairs, etc.
defective
requiredbuildings

SeriesTotal numberof buildings

Number ofobviously
defective
buildings

Nail/
6 series

15,283

7,754

121,825

88,37645,386

Other
series23,802

4,616

71,83054,639

5,946

Total

39,085

12,370

193,655

143,015

51,332

RepaircompletedMateriality

G

Strengthen Compliance

Cover Story

KPI
Targets for the fiscal year 2022

95 (%)
90

Sources ofCompetitive Advantage• Ensure to respond to submissions to
Suggestion Box for Management(response rate: 100%)• Operate the whistleblowing system(number of cases accepted: 80 cases)• Send in-house notices to improve trustin whistleblowing (6 times)

40,000 (cases)
30,00085

20,00080

10,000

Leopalace21’s initiatives

75

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Average from FY2013 to FY2017 (actual)
FY2020 (actual)
Ensureto respondto submissions
to
FY2021 (actual)
FY2022 (plan)
Suggestion Box for Management0
Apr May Jun

Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2021)

Number of submissions to our Suggestion Box for Management(fiscal year 2021)

150 (cases)
This system has been in operation since 2019 as a mechanism to deliver100

040,000 (cases)

90

30,000Operate the whistleblowing system

100 (%)85

50
25
0

Number of whistleblower submissions received

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

150 (cases)
100

25,00050

The Company operates a whistleblowing system called the Compliance0Hotline. Three contact points have been set up depending on what the
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2021)
whistleblower wishes to report: Internal Hotline, External Hotline, andAudit & Supervisory Board Member Hotline.
The Company’s whistleblower regulations have been revised inaccordance with the enactment of the Revised
Whistleblower
Protection
Corporate
value improvement
21
Act in June 2022. To ensure the system isrunningenvironment
reliably, we
haveWorkplace
improvement
16
posted the key revisions, such as stronger
protection
Systemrelated 9of informants
Corporatepage
culture4
in-house,
and we have established a dedicatedonimprovement
the company(t-CO2)Newsystem
businessand
proposals
2 its use.
intranet for whistleblowing to publicize thepromote
900,000
873,167

20,000 0 20,084
FY 2017

15,00019,186

18,076

FY 2018

16,796FY2019

FY 2020

11,562

10,000864,448

800,000

786,510

FY 2021

10,516700,000

Data Section(t-CO2)

Send20,000
in-house notices to improve trust inwhistleblowing
10,000Materiality

80 order to measure whether the whistleblowing system is operatingIn
properly,
we multiply the number of employees by a certain percentage
75
and set the result as the target for the number of whistleblower reports
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
we expect to Average
receive.from
ForFY2013
the fiscal
year 2022 thetarget is 80 submisto FY2017 (actual)
FY2020 (actual)sions received.FY2021 (actual) FY2022 (plan)75

Corporate value improvement 21
Workplace environment improvement 16
System related 9
Corporate culture improvement 4
New business proposals 2
Business content 1
Customer feedback 0
Others 15

employee suggestions directly to the management team. Submissions ofsuggestions for improvement are divided into several categories, including improvements of corporate value, corporate culture, and workplaceenvironment. In the fiscal year 2021, like the preceding fiscal year,
submissions on Corporate Value Improvement was the largest category.
Management
notonly listens
to what is FYsubmitted,butalso responds
FY 2017
FY 2018
FY 2019
2020
FY 2021
100% of the time, thereby ensuring two-way communication between
95 (%)
employees
and management.

Corporate Governance50

Business Model

Apr

Business content 1
Customer feedback 0
Others 15
748,745

692,463

693,388

600,000

5,000
0
100 (%)17/3期

500,000
18/3期■スコープ1(ガス使用由来)

75

19/3期

20/3期

21/3期

21/3期

■スコープ1(車両走行ガソリン由来)

17/3期

18/3期

Leopalace21 Integrated Report 2022
19/3期
20/3期
21/3期
21/3期

57

Materiality

E

Environmental Initiatives

TCFD
recommendations

Governance

The Group has established a Sustainability Committee under the Boardof Directors that meets every three months to promote initiatives
related to sustainability management on which the Board of Directors
instructs the whole company as part of the Group’s business. The Boardof Directors, through deliberation and consultation, exercises oversightover climate-related issues, which are positioned as important issues

in sustainability management, and in the fiscal year 2021, the Board
approved the setting of targets for reducing CO2 emissions.
The Sustainability Committee is chaired by the Sustainability Officer
and is composed of persons in charge of sustainability from each department. The Committee discusses and examines measures to promote
environmental initiatives, which the Company identifies as a materiality.

Board of Directors
Sustainability Committee
Chairperson:	Chief of the Corporate Management Headquarters(Sustainability Officer)
Members:	President and CEO, Deputy Chief of the Corporate Management
Headquarters, persons in charge of sustainability fromeach department and Group companies, etc.

Leasing Business
Headquarters

ArchitecturalEngineering Division

Elderly Care
Business DivisionCorporate
Management
Headquarters

Compliance
Promotion
Headquarters

Auditing
Department

Group companies(not all)

Roles in the management system
Board of Directors
The Board of Directors is the body that decides basic management
strategies and plans. With respect to addressing climate change, theBoard determines policy based on deliberations at the Sustainability
Committee and the Risk Management Committee, receives reports on
the activities of these committees, and exercises oversight over them.

Sustainability Officer
When the Board of Directors makes decisions on environment-related
policies, including climate-related issues, the Sustainability Officer
leads the discussion and plays a central role in consulting the
Sustainability Committee.
58

Leopalace21 Integrated Report 2022

Sustainability Committee
The Sustainability Committee shares the status of sustainability progress
throughout the Group by reporting on the status of activities for eachmateriality related to the areas of environment, society, and governance that the committee members, who represent relevant internal
departments and Group companies, are working on as part of theirbusiness activities. In addition, the Committee sets numerical targets forenvironmental activities, including climate change, manages the statusof their achievement, reports on important matters to the Board of
Directors, and, together with the Risk Management Committee, reports
to the Board of Directors on the risks posed by climate change.

Materiality

TCFD recommendations

Strategy

We have conducted scenario analysis as indicated below for the
purpose of evaluating the financial impact and business impact under
different scenarios (see table below), examining the resilience of ourstrategy and response to climate change risks and opportunities, andconnecting them to future business strategies.
Since the Leasing Business accounts for more than 90% of our sales,

Cover Story

the scope of the scenario analysis is the Leasing Business segment(construction, leasing, and management of apartments). In addition,
since we have identified and disclosed materiality up to 2030 in linewith the SDGs, the time frame for the scenario analysis was also
assumed to be 2030.

Category

Scenario overview

1.5°C

Scenario in which policies and regulations are implemented to achieve a decarbonized society and the global temperature increase from pre-industrial times islimited to less than 1.5°C. The transition risk is high, but the physical risk is low
compared to the 4°C scenario.

• IEA World Energy Outlook 2021 Net Zero Emissions by 2050 Scenario• IPCC RCP2.6

4°C

No new policies or regulations will be introduced, and global CO2 emissions willcontinue to increase. The transition risk is low, but the physical risk is high.

• IEA World Energy Outlook 2021 Stated Policies Scenario• IPCC RCP8.5

Sources ofCompetitive Advantage

Reference scenario
Main reference scenarios*For parameters not specified in the 1.5°C scenario, the 2°C scenario is applied.

Business Model

Scenario analysis steps
Step1
Identify important climate-relatedrisks and opportunities and set
parameters

Step3

Identify and define range of
scenarios

Evaluate business impacts undereach scenario• Identify relevant scenarios that areclosely related to the existing scenarios
based on Step 1 information and others.
• Establish the likely scenario based onprospective social conditions.

• Quantitatively and qualitatively evaluate
the financial impact of each of the
scenarios considered as important
climate-related risks and opportunities
identified in Step 2

Step4
Consider strategies and further
responses to climate-related risks
and opportunities• Formulate the Company strategies forclimate-related risks and opportunities• Consider further measures

Corporate Governance• Identify climate-related risks andopportunities• Assess risks and opportunities of highimportance• Set parameters related to highly
important risks and opportunities

Step2

Identified risks/opportunities and their business/financial impacts
The scenario analysis we conducted identified the risks and opportunities indicated below. We have already begun efforts to address theincreased costs associated with carbon taxes, including setting Scope 1
Category

Increase in operating costs due to tighter regulations such as carbon taxes

MediumMediumTransition
risks

Technology

Increased construction costs for new properties

Large

Large

MarketLow evaluation by investors as a company with inadequate response to climate change

Large

Large

Reputation

Corporate customers refusing to do business with us due to delay in environmental response

MediumMediumPhysical
risks

Acute

Decline in sales due to weather disasters

Small

Small

Chronic

Increased costs due to longer construction periods resulting from longer heat waves

MediumMediumIncreased sales due to increased demand for environmentally friendly apartments (construction)

Small

Small

Increased sales by providing environmentally friendly apartments (leasing)

Small

Small

Increased sales due to the new production lines by corporate customers which are engaged inenvironmental business (leasing)

Small

Small

Restoration demand for repairs after flood damage (construction)

MediumMediumOpportunities

Products andservices

Resilience

Data Section

Policy and legal

Risks

Impact levels

Business/financial impact
1.5°C
4°C

OutlineMateriality

Categoryand 2 reduction targets. In the future, we will discuss further measuresfor each risk and opportunity, such as starting full-scale development of
ZEH apartments, and take appropriate measures.

Large: Impact on sales of JPY 5 billion or more/significant impact on operations
Medium: Impact on sales of JPY 500 million or more but less than JPY 5 billion/mid-level impact on operations
Small:
Impact on sales of less than JPY 500 million/minor impact on operations

Leopalace21 Integrated Report 2022

59

Materiality

TCFD recommendations

Risk
management
The Group has established a Risk Management Committee under the
Board of Directors to comprehensively identify and manage companywide risks. Risks are being evaluated and addressed according to six
broad classifications. Risks related to climate change are positioned asexternal factors in the risk classification. Climate change-related risks
identified or periodically reviewed by the Sustainability Committee arecommunicated to the Risk Management Committee as appropriate andshared as Company-wide risks. The Sustainability Committee and the

Risk Management Committee take the lead in coordinating with relevant departments to study, formulate, and implement countermeasuresagainst climate change-related risks. Monitoring, including verificationof effectiveness, is conducted as appropriate by the relevant departments, and the results are reported to the Sustainability Committee
and the Risk Management Committee, which then share them with theBoard of Directors.

Risk classification table
External factors

1. Risks of changes in the external environment
2. Country risks
3. Disaster risks

Strategy andgovernance

FinanceCompliance

1. Legal violations and lawsuit risks
2. Compliance risks

1. Strategy risks
2. Management risks
3. Contractor/subsidiary management risks

Operations

1. Operational risks
2. Information management risks
3. Personnel risks
4. System risks

1. Market risks
2. Liquidity risks
3. Default risks

Reputation

Risk of incurring losses caused by media reports, reputation,
rumors, and hearsay

Risk management framework
Board of Directors
Risk Management Committee

Sustainability Committee

Chairperson: President and CEO
Members:	Directors, Audit & Supervisory Board members, andrelevant departments within the Company, as well as
committee members, counsel, directors, auditors, etc.
from outside the Company

Chairperson:	C hief of the Corporate Management Headquarters
Members:	President and CEO, Deputy Chief of the Corporate
Management Headquarters, relevant departments
within the Company, etc.

Departments and Group Companies

Roles in the management system
Board of Directors
The Board receives reports from the Sustainability Committee and the Risk Management Committee on the status and response to climate change risk
management and exercises oversight over them.

Risk Management Committee
While tracking and managing Company-wide risks, the Risk Management Committee shares climate change-related risks reported by each department
with the Sustainability Committee as appropriate. It also assesses climate change-related risks communicated to it by the Sustainability Committee.

Sustainability Committee
The Sustainability Committee controls and manages climate change-related risks and reevaluates them as appropriate. Its work is shared with the Risk
Management Committee as appropriate and reported to the Board of Directors on a regular basis.
60

Leopalace21 Integrated Report 2022

Materiality

TCFD recommendations

Metrics andtargets
We have been compiling and disclosing our total CO2 emissions frombusiness activities since fiscal year 2016, and the total results for eachfiscal year are shown on our website and in the integrated reports.
By the end of fiscal year 2021 we had already achieved the target
we set in 2020 to reduce the Scope 1 and 2 CO2 emissions—emissions
from the use of electricity and gas, and vehicle gasoline—of our facilities by 26% by fiscal year 2030 compared to fiscal year 2016.
One of the major factors that led to a significant reduction in CO2emissions was our reorganization and streamlining of businesses,
which resulted in a reduction of leasing sales offices through structuralreforms of the main business and the transfer or withdrawal from
non-core and unprofitable businesses. For Scope 1 and 2 emissions, weCover Story

revised the reduction target values starting in fiscal year 2022 and will
work to further reduce them in the future.
In the future, we will work to identify and reduce Scope 3—CO2
emissions indirectly generated upstream and downstream of ourbusiness activities—in order to further contribute to environmental
protection. Since most of our Scope 3 emissions come from the use ofelectricity and gas by tenants, we are currently taking measures suchas changing the lighting fixtures of managed properties to LEDs. Since
our Scope 3 CO2 emissions are expected to increase in the future as theoccupancy rate rises, we will work to further reduce Scope 3 throughthe development and sale of ZEH apartments and the use of renewableenergy in managed apartments.

Sources ofCompetitive Advantage

Scope 1 and 2 reduction targets
Business Model

46% reduction by FY 2030 compared to FY 2016
*Target value changed starting in FY 2022

Scope 1, 2, 3 results
Item

FY2016FY2017FY2018FY2019

5,467

5,518

5,218

3,473

3,284

Scope 2

14,692

13,71912,558

11,578

8,089

7,232

Scope 3

873,167

864,448786,510

692,463

693,388748,745

Corporate Governance

5,392

Scope 1, 2

Scope 3(t-CO2) (t-CO2)

25,000 25,000

900,000900,000

873,167
873,167
864,448
864,448

18,07618,076
16,79616,796

800,000800,000

5,000 5,0000

700,000700,000

693,388693,388692,463
692,463

600,000600,000

500,000500,000

FY2016FY2016
FY2017FY2017
FY2018FY2018
FY2019FY2019
FY2020FY2020
FY2021FY2021

Data Section

FY2016FY2016
FY2017FY2017
FY2018FY2018
FY2019FY2019
FY2020FY2020
FY2021FY2021

786,510786,510
748,745748,745

15,000 15,000

11,56211,562
10,51610,516

Materiality

20,000 20,00020,08420,084
19,18619,186

0FY2021

Scope 1(t-CO2) (t-CO2)

10,000 10,000

FY2020

Scope 1Scope(emissions
1 (emissions
from thefrom
use theof gas)use of gas)
Scope 1Scope(emissions
1 (emissions
from vehicle
from gasoline)
vehicle gasoline)
Scope 2Scope(emissions
2 (emissions
from thefrom
use theof electricity)use of electricity)

Leopalace21 Integrated Report 2022

61

Data Section

Ten-Year Consolidated Financial Highlights
For the years ended March 31:

FY2012FY2013

FY2014FY2015Net sales
Leasing Business
Development Business
Elderly Care Business
Hotel, Resort & Other Businesses
Cost of sales
Selling, general and administrative expenses
Operating profit (loss)
Leasing Business
Development Business
Elderly Care Business
Hotel, Resort & Other Businesses
Adjustments
EBITDA (Operating profit + depreciation)
Recurring profit (loss)
Net income (loss)

454,285
383,637
53,3699,482
7,795
396,508
50,299
7,477
8,750
2,748
(742)
(970)
(2,308)
13,161
11,154
13,398

470,883
388,562
63,135
10,171
9,013
401,51055,906
13,467
15,364
2,951
(610)
(981)
(3,256)
19,46011,36815,730483,247
399,375
61,312
10,608
11,950407,433
60,992
14,822
20,590211(606)(1,257)(4,116)22,55813,483
15,175

511,513
410,641
74,16010,79815,913422,604
67,82321,08522,8483,340(1,354)(360)(3,388)30,70019,90919,631

261,649
56,14549,026
56,681

288,165
103,354
37,22774,767

308,882
124,928
44,48775,221

327,609
144,865
50,82488,043

Cash flows: (JPY million)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Free cash flows (FCF)

6,069
(6)
9,148
6,063

15,584(6,929)
8,848
8,654

15,715(17,550)
1,747(1,834)

22,104(11,087)
1,374
11,017

Amounts per share: (JPY)Net assets
Net income (loss)
Cash dividend

265.3274.85—

393.0569.38—

475.1757.73—

550.9474.68
10.00

Index:
Units under management
Average annual occupancy rate (%)
Construction subcontracting orders received (JPY million)
Equity ratio (%)
Return on equity (ROE) (%)
Return on assets (ROA) (%)
Dividend payout ratio (%)
Debt/equity ratio (%)
Number of employees

546,204
82.94
73,006
21.5
30.5
4.2
—
0.9
6,277

548,912
84.58
81,139
35.9
19.7
4.1
—
0.4
6,758

554,948
86.57
87,395
40.4
13.3
4.5
—
0.4
7,339

561,961
87.95
86,439
44.2
14.6
6.3
13.4
0.4
7,846

At fiscal year-end: (JPY million)
Total assets
Net assets
Interest-bearing debt
Cash and deposits balance*W ith changes in accounting policies at subsidiaries in the Leasing Business, consolidated accounts reported in the past have been retroactively revised, and historical data for past fiscal years shown here reflects
these retroactive revisions(Notes) 1. Return on equity (ROE) = Net income/average ownership equity during the fiscal year x 100
2. Return on assets (ROA) = Recurring profit/average total assets during the fiscal year x 100
3. Debt/equity ratio = Interest-bearing debt/(net assets – non-controlling interests)
4. In this report, net income attributable to shareholders of the parent is stated as net income.

Changes in Business Portfolio
Until Fiscal Year 2016 (Year ended March 2017)
Leasing Business• Corporate housing management& rental housing brokerage• Rent payment guarantees• International business

Construction Subcontracting Business • Custom-built homes

62

Elderly Care Business• Elderly care business

Hotels & Resort Business• Hotels and resort business• Travel agency services

Others• Small-amount, short-term insurance• Solar power generation• Clerical services agency• Real estate development

Leopalace21 Integrated Report 2022

Fiscal Year 2017 (Year ended March 2018)—Fiscal Year 2019 (Year ended March 2020)• Corporate housing management& rental housing brokerage• Rent payment guarantees• International business• Small-amount, short-term insurance• Solar power generation

Leasing Business• Custom-built homes• Real estate development

Development Business• Elderly care business

Elderly Care Business• Hotels and resort business• Travel agency services• Clerical agency services

Hotels, Resort and Other Businesses

(JPY million)(USD thousand)

FY2020520,488416,594
74,566
11,536
17,791
427,820
69,76922,89822,4595,051(1,650)664(3,626)32,23522,355
20,401

530,840
435,537
76,587
12,807
5,908
434,762
73,14722,93026,062
3,663(1,596)(846)(4,353)34,65622,354
14,819505,223
426,388
58,992
13,922
5,919
428,988
68,844
7,390
14,987(995)(846)(1,346)(4,407)
20,336
7,063(68,662)

433,553
388,939
23,806
14,6206,186
408,11261,915(36,473)(20,828)(5,181)(559)(1,000)(8,903)(24,316)(36,341)(80,224)

337,828
158,870
49,918104,432

337,257
159,438
53,829106,543

291,790
81,33848,04784,53627,504(8,653)(14,048)
18,85027,338(2,336)(18,354)
25,001603.76
77.61
22.00
568,739
88.53
87,139
47.0
13.4
6.7
28.3
0.3
7,695

408,959
391,964—
14,5242,469
387,872
50,269(29,182)(19,385)—(720)(1,551)(7,524)(18,766)(34,170)(23,680)

FY2021
398,366
383,043—
14,2581,064
352,289
44,302
1,774
7,719
—
(789)
(1,668)(3,486)
11,127(2,151)
11,854FY2021
3,254,893
3,129,699—
116,498
8,695
2,878,416
361,976
14,50063,073—(6,453)(13,631)(28,487)
90,916(17,582)
96,858

196,953
1,589
36,13760,501

161,708
3,277
35,40954,863

145,430
11,03433,04545,523

1,188,255
90,158270,002371,953(7,212)
7,379(15,181)167(51,639)
39,533(12,048)(12,106)(40,816)
11,82923,571(28,986)(4,460)886(5,886)(3,574)(36,447)
7,241(48,096)(29,205)630.8458.02
22.00

331.87(278.58)—5.34(328.77)—(25.83)(84.88)
—

3.25
36.04
—

0.03
0.29
—

570,672
90.59
75,905
47.2
9.3
6.6
37.9
0.3
7,690

574,798
88.34
64,495
27.7(57.2)
2.2
—
0.6
7,600

575,798
80.78
7,814
0.7
(195.1)(14.9)
—
23.0
7,043

573,673
78.89
5,927
(5.3)
—
(19.1)
—
(4.4)
5,082

567,314
81.22
2,792
0.7
—
(1.4)
—
23.2
4,356

567,31481.22
22,812
0.7
—
(1.4)
—
23.2
4,356

Corporate Governance

FY2019Business ModelFY2018Sources ofCompetitive Advantage

FY2017

Cover Story

FY2016*

From Fiscal Year 2020 (Year ended March 2021)

Materiality

5. Regarding the Hotels, Resort & Other Businesses, we added the results of the Hotels & Resort Business to the results of Others for the period from the fiscal year 2010 to the fiscal year 2015, and thenwe changed the segments in the fiscal year 2017, so we retroactively changed the figures for the fiscal year 2017 to the new segment (Hotels, Resort & Other Businesses).
6. Development Business was integrated to Leasing Business from the fiscal year 2020.

Reference: Fiscal Year 2021 (JPY million)
Net sales

Operating profit (loss)

Leasing Business
Development Business (Leasing Segment)

383,043

7,719

Strategic Business

Elderly Care Business

14,258(789)

Non-core Businesses

Other Businesses

1,064(1,668)

Leopalace21 Integrated Report 2022

Data Section

Core Business

63

Data Section

Financial Highlights
Net sales
JPY

Operating profit (loss)

398.3 billion

JPY

Down 2.6 % y/yOperating profit margin

1.7 billion

0.4%

JPY -29.1 billion in
fiscal year 2020

-7.1% in fiscal year 2020

(JPY billion)(JPY billion)

600.0

40.0

10

20.0

5

0

0

-20.0

-5

(%)

400.0

200.0

0

-40.0

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

-10

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

Operating profit (loss) (left axis)

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

Operating profit margin (right axis)

Net sales have been on an upward trend since the fiscal year 2009,
reaching a peak in the fiscal year 2017, as the Company thoroughly
strengthened the profitability of the Leasing Business. However, problem
of construction defects resulted in a halt to taking applications fortenants and thereby a decrease in occupancy rates, which combined withthe effect of the COVID-19 pandemic has led to a decrease in earnings
for the past four fiscal years.

Profits in the Leasing Business continued to increase from fiscal year
2011 when efforts to improve profitability began to bear fruit, but theconstruction defects problem in fiscal year 2019 and the COVID-19 pandemic that started in fiscal year 2020 resulted in an operating loss for two
consecutive fiscal years. We were able to return to profitability in the fiscal
year 2021 for the first time in three years with thorough cost reductions.

Net income (loss) attributable to shareholders of the parent

EBITDA (Operating profit + depreciation)

JPY

11.8 billion

JPY

JPY -23.6 billion in fiscal year 2020

11.1 billion

JPY -18.7 billion in fiscal year 2020

(JPY billion)(JPY billion)

30.0

60.0

20.0
30.0
10.0
0
0

-90.0

-30.0

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

As seen in the operating profits, net income had been increasing since
the fiscal year 2011, when efforts to improve profitability of the Leasing
Business began to bear fruit. In fiscal year 2018, sale of apartments
owned by the Company resulted in an impairment loss. We then posted
a net loss for three years starting in fiscal year 2018 due to provision forlosses related to repairs and decreased business earnings. The fiscal year
2021 marked the first time in four years that we posted a net income
due to reversal of provision for losses related to repairs and recording
deferred tax assets.

64

Leopalace21 Integrated Report 2022

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

EBITDA, the sum of operating profit and depreciation, has been on an
increasing trend between fiscal year 2011 and fiscal year 2017, due toincreased operating profit from earnings recovery and an increase indepreciation from active capital investment in new businesses. EBITDA
in fiscal years 2019 and 2020 was negative mainly due to a decreasein operating profit in fiscal year 2018. In the fiscal year 2021, EBITDA
turned to positive because of recording operating profit for the first timein three years.

Total assets

145.4 billion

Net assets-1.4%

Down 10.1% y/y

JPY-19.1% in fiscal year 2020

ROE

11.0 billion—(— in fiscal year 2020)

3.4 times compared tofiscal year 2020(%)

(JPY billion)

(%)

400.0

60

200.0

40

150.0

30

200.0

30
100.0

20

50.0

10

0

0

Sources ofCompetitive Advantage(JPY billion)0

Cover Story

JPY

ROA

0

-300

-30

FY
2012

FY
2013

FY
2014

Total assets (left axis)

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

FY
2012

ROA (right axis)

FY
2013

FY
2014

Net assets (left axis)

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

ROE (right axis)

ROE hovered around 10% from fiscal year 2014, as a result of steadily
expanding earnings primarily in the Leasing Business. ROE is currently ina slump due to decreased profits.

Equity ratio

Interest-bearing debt—incl. lease obligations
JPY

Down 6.7% y/y(JPY billion)

50

60.0

Corporate Governance33.0 billion

0.7%-5.3% in fiscal year 2020(%)

Business Model

ROA recovered rapidly after returning to profitability in fiscal year 2011,reaching 6.6% in fiscal year 2017. Profits then fell sharply from fiscal
year 2018, bottoming out at negative 19.1% in fiscal year 2020. In
the fiscal year 2021, as a result of cost reductions leading to earnings
recovery, the index has risen to negative 1.4%.

40
40.0

30
20

Materiality

20.0

10
0

0

-10

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

In the last 10 years, we have focused on reducing and curtailing the debt
ratio in consideration of our repayment capacity. As a result, our interest-bearing debt was JPY 33.0 billion at the end of the fiscal year 2021.

Leopalace21 Integrated Report 2022

Data Section

In the past decade, equity ratio was increased to 47.2% by the end of
fiscal year 2017 resulting from our efforts to secure financial security as
we recovered earnings. However, it began dropping in fiscal year 2018
due to declining business earnings, and stood at negative 5.3% at the endof fiscal year 2021. While retained earnings decreased due to a retroactive
application of revenue recognition accounting standard, net income
attributable to shareholders of the parent of JPY 11.854 billion and anincrease in foreign currency translation adjustments returned the equity
ratio to positive in the fiscal year 2021 for the first time in two years.

FY
2012

65

Data Section

Free cash flows
JPY

Cash and deposits balance-3.5 billion

JPY

JPY -28.9 billion in fiscal year 2020
(JPY billion)(JPY billion)

30.0

120.0

15.0

90.0

0

60.0

-15.0

30.0

-30.0

0

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

After the global financial crisis, there was a continued increase in free
cash flows due to increases in operating cash flows and restraints on
investment cash flows. However, operating cash flows turned negative in
fiscal year 2018 due to declining profits. Free cash flows have remained
negative for three years, but we were able to significantly reduce thenegative margin by earnings recovery in the fiscal year 2021.

The balance of cash and deposits continued to increase until the end of
fiscal year 2017 due to increases in operating cash flows, restraints on
cash flows for investments in capital and other areas, and the sale of held
assets. The balance of cash and deposits has been trending downwards
since fiscal year 2018 mainly due to negative operating cash flows.

Units under management

Average annual occupancy rate

567,314 units

81.2%

Down 6,359 units y/y

Up 2.3 points y/y(Thousand units)

(%)

600

90

450

80

300

70

150

60

50

0

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

Expanding the number of units under management leads to a stronger
earnings base, so we worked to raise that number by increasing
apartment supply mainly in the three major metropolitan areas where
we can expect strong occupancy demand. We are now focusing on
improving occupancy rates in apartments we currently manage rather
than increasing the number of apartments. The number of units undermanagement at the end of the fiscal year 2021 stood at 567,314, a
decrease of approximately 6,000 units compared to the end of theprevious fiscal year.

66

45.5 billion

Down 17.0% y/y

Leopalace21 Integrated Report 2022

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

Occupancy rates of the apartment units under management have a cycleof reaching the peak in March, drop in the following April, and thengradually rise. In order to offset the cyclical decreases in occupancy rates,
we implemented measures to promote long-term occupancy, and theannual average occupancy rates gradually went up. Mainly due to theeffect of construction defects problem, the occupancy rate fell over the
past three years starting in fiscal year 2018. Fiscal year 2021 saw anincrease for the first time in four years due to a recovery in occupancy
demand which was previously suppressed mainly by corporate customers,
and due to successful result of various measures including strengthening
relationships with real estate agents.

Non-Financial Highlights
No. of employees on childcare leave

Rate of paid leave usage

81.7%
Down 8.8 points y/y
(%)

5.0

100

4.0

80

3.0

60

2.0

40

1.0

20

0

Sources ofCompetitive Advantage(%)

Cover Story

2.8%
Down 2.0 points y/y

0

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

Rate of workforce turnoverRate of employees with disabilities

13.1%

2.73%

Down 18.3 points y/y

Up 0.4 points y/y

(%)

(%)

40

3.0

Corporate Governance

We have achieved a rate of 70% of employees taking paid leave throughthe acceptance of work-style reforms promoted by the Company, andthrough allowing five days of planned leave in summer/winter, threedays of undefined leave (called “refresh vacation”), and through the
improvement of other systems. In the fiscal year 2020, the number of
employees taking leave before leaving the Company increased due to theimplementation of the voluntary retirement system, which resulted in a
temporary increase in the rate of employees taking paid leave, but in thefiscal year 2021, the rate settled back down to the level it was before thefiscal year 2020.

Business Model

We have been working to improve our working environment by giving
due consideration to achieving work-life balance by reducing overtime
work, increasing the percentage of people taking paid leave, and bycreating a framework that makes it easier to take childcare leave. We
calculate the number of employees taking childcare leave divided by the
number of all employees as the childcare leave acquisition rate. The rate
dropped 2.8% in the fiscal year 2021 because more women take thisleave than men at the Company and the percentage of women who left
the Company was high last fiscal year.

30
2.0

Materiality

20
1.0
10

0

0

FY
2012

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

The Company believes that providing an environment for a broad
range of personnel from diverse backgrounds and with different values
contributes to the creation of new value, and greatly helps the Company
grow. We established a special subsidiary called Leopalace Smile which
employs people with disabilities in August 2009. We want to provide arewarding place to work for all people, and since achieving the statutory
employment rate, the rate has continued to increase year by year.

Leopalace21 Integrated Report 2022

Data Section

The Company considers our human resources to be very important, andas such we have established an employee training system and othermeasures that allow all employees to demonstrate their own diverse
individuality and abilities. In addition, we are promoting to build amore comfortable work environment that is easy to work in in order totackle the issue of long working hours, an issue that is particular to thisindustry. The turnover rate temporarily increased in the fiscal year 2020
due to the introduction of the voluntary retirement system, but the rate
for the fiscal year 2021 dropped back to the level where it was before
the fiscal year 2020.

FY
2012

67

Financial Section

Management’s Discussion and Analysis
1. Operating Environment
The corporate earnings showed a recovery trend in the domestic
economy during the fiscal year 2021 as a result of implementing
infection prevention measures and boosting economic activities
in parallel in the prolonged effect from COVID-19 pandemic. The
outlook however remained uncertain because of outbreak of theOmicron variant and Russian invasion into Ukraine.
The new housing starts of leased units increased for the firsttime in five years (up 9.2% year on year). In the rental housing
market, the number of vacant houses continues to increase, andin order to secure a stable occupancy rates amid difficulty inrecovering nationwide demand, the Company believes it is important to implement strategy package comprising: focus on supplying
apartments in the three metropolitan areas where high occupancy
rates are expected in the future; keep and enhance the property
value through carrying out appropriate maintenance; implement
area intensive strategy to cater for the respective business
requirements and customer characteristics; and promote DX solutions for attracting customers by providing convenient services
such as web-based contract signing, and other tenant services.
Under these circumstances, Leopalace21 Group (the “Group”)
took selective concentration approach with prioritized allocationof the management resources into the Leasing Business, a corebusiness, and continued structural reforms to fundamentally
improve the business structure in accordance with announcement on structural reforms dated June 5, 2020. The Company
strives to stabilize the business and financial position and continuously improve the profitability through cost-cutting efforts
across the board.
Concerning COVID-19 impact, the Company believes thatthe business environment ameliorates following the Japanese
government decision of stepwise easing the border controls andsupposedly increasing foreign national workers and international
students entry into Japan.
2. Analysis of Business Results(1) Net Sales
Net sales for the consolidated fiscal year 2021 amounted to JPY
398,366 million (down 2.6% year on year). The decrease wasmainly caused by the lowered unit rent resulting from the impact
of COVID-19 pandemic and the reduction of construction subcontracting business.

68

Leopalace21 Integrated Report 2022

Net Sales by Segment(JPY million)

FY 2020

FY 2021

ChangeLeasing Business

391,964

383,043(8,921)

Elderly Care Business

14,524

14,258(266)

Other Businesses

2,469

1,064

(1,405)408,959

398,366(10,592)

Total(2) Earnings
Operating profit was JPY 1,774 million, compared with operating
loss of JPY 29,182 million during the fiscal year 2020, due to the
reduction of cost of sales and SG&A expenses amounting to JPY
41,550 million against the previous fiscal year. The recording ofinterest expenses of JPY 4,474 million made recurring loss of JPY
2,151 million, a reduction of JPY 32,018 million in recurring loss
against the previous fiscal year.
The Company managed to record net income attributable toshareholders of the parent of JPY 11,854 million, a profit since
the fiscal year ended March 31, 2018, which compared with net
loss attributable to shareholders of the parent of JPY 23,680
million for the previous fiscal year. The improvement was mainly
contributed by the reversal of provision for losses related to
repairs of JPY 11,959 million because of lowered unit repair costby insourcing repairs and tightened control on supplier selection
combined with reduced number of buildings to be repaired due
to updated deficiency judgment and increase of demolition, andincome taxes – deferred of JPY 4,401 million.
Operating Profit by Segment(JPY million)

FY 2020

FY 2021

ChangeLeasing Business(19,385)

7,719

27,105Elderly Care Business

(720)

(789)

(68)

Other Businesses(1,551)(1,668)(116)

Adjustments(7,524)(3,486)

4,038

Total

(29,182)

1,774

30,957

Change in Operating Profit
20,00010,0000

4,038

27,105-68-116-20,000-30,000-29,182-40,000
FY2020

LeasingElderlyCare

Otherbusinesses

Adjustments

FY2021

Elderly Care Business
The Company has been cutting the operational cost by continuous efficiency improvement for the Elderly Care Business. Net
sales during the fiscal year 2021 were JPY 14,258 million (down
1.8% year on year), and operating loss was JPY 789 million (adeterioration of JPY 68 million year on year) due to a decrease in
the number of users for elderly care services as a result of being
concerned about the infection risk of COVID-19. The number offacilities was 87 as of the end of the fiscal year 2021.

Business Model

Other Businesses
Net sales of the Other Businesses including resort facilities in
Guam were JPY 1,064 million (down 56.9% year on year) andoperating loss was JPY 1,668 million (a deterioration of JPY 116
million year on year) mainly due to a significant decline in occupancy rates in Guam because of COVID-19 pandemic.

Corporate Governance

3. Analysis of Consolidated Financial Position(1) Position of Assets, Liabilities, and Net assets
Total assets at the end of March 2022 decreased by JPY 16,278
million from the end of the previous fiscal year to JPY 145,430
million. This was mainly attributable to the decrease of thefollowing items: JPY 9,340 million in cash and deposits, JPY
1,088 million in other accounts receivable, JPY 1,055 million inmachinery, equipment, and vehicles (net), JPY 1,529 million inleased assets (net), JPY 2,272 million in others (net) – non-current
assets, and JPY 1,030 million in others (net) – intangible fixed
assets, whereas recorded the increase of JPY 4,402 million indeferred tax assets and JPY 2,336 million in allowance for doubtful accounts.
Total liabilities decreased by JPY 24,035 million from the end of
the previous fiscal year to JPY 134,396 million. This was mainly
attributed to the decrease of the following items: JPY 2,116
million in in lease obligations, JPY 15,422 million in provision forlosses related to repairs, and JPY 6,629 million in provision forapartment vacancy loss.

Data Section

Leopalace21 Integrated Report 2022

Materiality(3) Segment Information
Leasing BusinessIn Leasing Business, the Company provides abundant value-added
services such as my DIY which allows the tenants to customize
a selected single wall of the room, promotion of the transition tosmart apartments which enables electrical appliances and door
locks, to be operated by smartphone, and support for remote services such as web-based customer services, apartment viewing
and rental contract signing. In order to achieve stable occupancy
rates, the Company has been strengthening tie with real estateagents as well as implementing area intensive approach which
deals with area specific requirements.
The occupancy rate at the end of March 2022 was 85.10%(up 3.38 points from the end of the previous fiscal year) withaverage occupancy rate of 81.22% (up 2.33 points year on year).
The demand for apartment rooms was recovering due to the slowdown impact of COVID-19 pandemic, restored demand by corporate customers which had been subdued, and successful measureof strengthened tie with real estate agents. The number of units
under management was 567 thousand (a decrease of 6,300 fromthe end of the previous fiscal year).
The number of direct leasing sales offices at the end of March2022 was 109 (a reduction of 30 from the end of the previous
fiscal year). That reflected efforts to increase the operational efficiency and productivity.
The orders received was JPY 2,792 million (down 52.9% year
on year) and the backlog of orders was JPY 6,133 million (down
36.5% from the end of the previous fiscal year) due the suspension of new orders for apartment buildings and others against the
backdrop of construction defects problem for parting walls.
As a result, despite the increasing occupancy rate, net sales

Sources ofCompetitive Advantage-10,000

1,774

Cover Story(JPY million)

came to JPY 383,043 million (down 2.3% year on year) due tothe lowered unit rent resulting from the impact of COVID-19 pandemic and the reduction of construction subcontracting business.
Operating profit was JPY 7,719 million due to the reduction ofmanagement cost and SG&A expenses, contractual adjustment ofmaster-lease rent as a result of agreement with the property owners and reversal of provision for apartment vacancy loss based on
aggregated impact of improving profitability of our management
units (operating loss of JPY 19,385 million was recorded in thefiscal year 2020).

69

Total net assets increased by JPY 7,757 million from the endof the previous fiscal year to JPY 11,034 million. This was mainly
due to an increase of JPY 2,623 million in foreign currency transaction adjustments and the recording of JPY 11,854 million in net
income attributable to shareholders of the parent, on the other
hand, non-controlling interests decreased by JPY 1,774 million
as a result of dividend payment to a non-controlling shareholder
by a consolidated subsidiary and its payment for purchased
treasury stock, and retained earnings decreased by JPY 4,963
million resulting from retrospective application of the AccountingStandard for Revenue Recognition as of the beginning of the
fiscal year ended March 2022. The equity ratio improved by 6.0
points from the end of the previous fiscal year to 0.7%.
(2) Cash Flow Position
Cash flows from operating activities was a net outflow of JPY
4,460 million, a reduction of JPY 36,355 million in net outflow
year on year. This was mainly due to a recording of JPY 9,693
million in income before income taxes, JPY 9,352 million in depreciation and amortization, and JPY 2,355 million in increase inallowance for doubtful accounts, whereas JPY 11,959 million inreversal of provision for losses related to repairs, JPY 6,629 million for the decrease in provision for apartment vacancy loss, JPY
2,188 million for the decrease in advances received, JPY 4,455
million in interest paid, and JPY 2,172 million in payment related
to repairs paid were recorded.
Cash flows from investing activities was a net inflow of JPY
886 million, a reduction of JPY 10,943 million in net inflow year
on year. This was mainly due to JPY 1,180 million of proceedsfrom sale of investment securities.
Cash flows from financing activities was a net outflow of JPY
5,886 million, which is compared with a net inflow of JPY 23,571
million in the previous fiscal year. This was mainly due to JPY
3,239 million of expenditure in repayment of finance lease obligations, JPY 1,400 million of expenditure in payment for purchaseof treasury stock by a consolidated subsidiary, and JPY 1,171
million of expenditure in payment of dividends to non-controllingshareholders.
As a result, cash and cash equivalents at the end of the fiscal
year ended March 2022 became JPY 44,023 million, decreased by
JPY 9,322 million from the end of the previous fiscal year.
4. Management Policies, Key Issues to Address,
and Business Environment
Forward-looking statements in the discussion below are basedon judgments by the Company as of the time of preparing thisintegrated report.

70

Leopalace21 Integrated Report 2022

(1) Management Policies
The Group sets the management policies for the fiscal year 2022
consisting of the three components: Constant structural reforms,
Promoting sustainability, and Construction defects management.
Cost structural reforms
We aim to continue cost structure controls and achieve increased
occupancy rate.
(i) Controlling cost structure
In addition to reducing costs through continuation of contractualadjustment of master-lease rent carried out since last fiscal year
and business streamlining efforts (outsourcing of call center
operation, and centralization of rental contracts to metropolitan
areas), we are working to generate profits and strengthen ownership equity by optimizing the cost structure through certain
cost-focused initiatives and selective concentration in operations
to provide for maintenance to maintain and improve property
values for the future, for recording provision for bonuses, and forvarious sales measures and others necessary to improve earnings.
(ii) Increasing occupancy rate
We aim to achieve our targets by implementing strategies forincreasing occupancy rate for each of the following defined customer categories:
Corporate customers:
	Deploy top sales representation, boost sales structure, andimplement strategies tailored to the individual company toincrease market share and increase the room usage balance.
Individual customers:
	Liaise and partner with real estate agencies and strengthen
web-based customer attraction.
Foreign national customers:	Increase usage by specified skilled workers through strengthening liaisons with companies that support foreign national
human resources and organizations that can offer specificsupport to ensure a safe and comfortable living and working
environment.
Capture demand from foreign national students by proactively meeting customer needs with shops that can provide
multilingual service and by liaising with real estate agencies
and international study centers.
Promoting sustainability
We aim to achieve sustainable growth and improve corporate
value over the medium to long term by increasing operationalsustainability through promoting business activities conducive

Business Model(3) Business Environment
Regarding population trends, a factor affecting the businessenvironment as a mid to long-term point of view, the total numberof households in Japan is expected to decline after the peak of2025 but single-person households is expected to increase up to2030 and keep the level of about 20 million households till 2040.
Net domestic migration to the three major metro regions (inflows
exceed outflows) will continue. Furthermore, the population aged
65 or over will mark 30% of the total population in 2025 andcontinue to rise for the following years. The decreasing trend in
productive population (aged 15 – 64) will continue and a planned
increase in foreign workers will partly compensate for the lacking
workforce in the aging society.
Although the new housing starts of leased units increased forthe first time in five years (up 9.2% year on year), the number ofvacant houses continues to increase in the rental housing market.
Under these circumstances, we need to turnaround the business by acquiring the additional corporate demand for providing
their employees with company-provided housing or dormitories.
We will keep realizing our purpose as a provider of social infrastructure for housing amounting to 560,000 managed units.

Materiality
Data Section

Leopalace21 Integrated Report 2022

Corporate Governance(2) Key Issues to Address
We announced in the Annual Securities Report dated June 29,
2021 (from April 1, 2020 to March 31, 2021, available in Japanese
language only) that the Company recorded excessive liabilities of
JPY 8,105 million for the financial results ended March 2021. We
entered into the grace period for delisting dated June 29, 2021
caused by the Company’s state of excessive liabilities reported
in the fiscal year 2020, in accordance with the Tokyo Stock
Exchange’s Securities Listing Regulations.
We have been engaged in during the fiscal year 2021 continued
drastic structural reforms such as transferring or withdrawing
from non-core and unprofitable businesses, and cost-cutting
efforts, in combination with improving occupancy rates by implementing measures such as longer reach of customers through thestrengthened tie with real estate agents network, and initiativeof web-based customer services, apartment viewing and rental
contract signing.

Sources ofCompetitive Advantage

Construction defects management
In response to the problem of construction defects that haveoccurred in the Company’s constructed apartments, we will makesteady progress in repairing the construction defects while working to restore the financial foundation with the aim of completely
eliminating obvious defects by 2024. We have completed therepairs for about 51,000 units by the end of June 2022 and continue another 6,000 units by the end of March 2023 to eliminate
all obvious defects by the end of 2024.
Moreover, keeping recurrence prevention at the top of management’s priorities, we are continuing initiatives to avoid similar
incidents taking place by concentrating on the following policies:
Fundamental Reform of the Corporate Culture, Restructuring of
the System for Compliance and Risk Management, and Revisionof the Construction Business Framework. In addition to providing
progress status reports on repair work, we present the information on the Company’s website.
https://www.leopalace21.co.jp/info/en/

As a result, the Company recorded the net sales of JPY 398,366
million, operating profit of JPY 1,774 million, recurring loss of
JPY 2,151 million, net income attributable to shareholders of theparent of JPY 11,854 million, and net assets of JPY 1,425 million
as shown in the “Financial Statements (Japanese AccountingStandard) for the fiscal year 2022” dated May 13, 2021. The
excessive liabilities were therefore eliminated at the end of the
fiscal year.
We expect increased sales and profit for the fiscal year 2022
year on year due to planned increased occupancy rate and cost
reduction effect as a result of structural reforms. We prepared theplans for the fiscal year 2023 and the fiscal year 2024 which indicate continuous growth in sales and operating profit. Additional
structural reform measures and sales efforts enables us to realize
operating profit of JPY 17,500 million and JPY 25,200 million
for the two fiscal years. In addition to strengthening capital byrecording net income, we start to consider from fiscal year 2022
to fiscal year 2024 implementing shareholders return such as payment of dividends and share buybacks.
We remain committed to make further efforts in improving efficiency, strengthening management structure and implementing
sales initiatives in order to further enhance the corporate value.

Cover Story

to environmental, social and economic sustainability, while
offering products and services that meet contemporary needs bypromoting digital transformation (DX) focused on Real Estate Tech
including the use of web-based customer attraction and contract
signing, and use of accumulated data.
As one of our initiatives for the Sustainable Development Goals(SDGs), we aim to reduce the Scope 1 and 2 CO2 emissions fromfacilities related to the Company (emissions from the use of electricity and gas, and vehicle gasoline), by 46% by FY2030 whencompared with FY2016.

71

Financial Section

Consolidated Balance Sheet
Leopalace21 Corporation and consolidated subsidiaries
March 31, 2022 and 2021

JPY million

2022

2021

2022

45,523
8,618
443
200
693
—
213
405
1,634
730
3,954
(2,255)60,161

54,863
7,930
524
100
180
349
238
497
2,076
1,819
4,199
(182)
72,598371,953
70,415
3,620
1,636
5,668
—
1,741
3,316
13,355
5,968
32,307(18,430)
491,555

56,173(37,321)18,852
20,794(13,260)
7,534
31,26926,461(24,485)
1,976
92
18,483(13,557)
4,926
64,652

53,778(34,220)
19,557
20,601(12,011)
8,589
31,11828,924(25,418)
3,506
82
18,358(11,160)
7,198
70,052458,973(304,935)
154,038
169,903(108,342)
61,561
255,486
216,208(200,057)
16,151
759
151,021(110,770)
40,250528,247

3, 10, 27
13, 18

6
3,130
3,136

12
4,161
4,173

51
25,57625,627

7, 8, 137
7, 11
33, 4, 12

5,180
1,126
267
577
6,596
4,647
(914)
17,48085,269145,430

5,431
1,096
249
1,121
2,194
5,443
(651)
14,883
89,109161,708

42,331
9,201
2,183
4,715
53,89737,971(7,475)
142,825
696,700
1,188,255

Notes

ASSETS
Current assets:
Cash and deposits
Trade receivables
Accounts receivable for completed projects
Securities
Real estate for sale
Real estate for sale in process
Payment for construction in progress
Raw materials and supplies
Prepaid expenses
Other accounts receivable
OthersAllowance for doubtful accounts
Total current assets
Non-current assets:
Property, plant and equipment:
Buildings and structures
Accumulated depreciation
Net
Machinery, equipment, and vehicles
Accumulated depreciation
Net
Land
Leased assets
Accumulated depreciation
Net
Construction in progress
Others
Accumulated depreciationNet
Total property, plant and equipment
Intangible fixed assets:
Goodwill
OthersTotal intangible fixed assets
Investments and other assets:
Investment securities
Long-term loans
Bad debts
Long-term prepaid expenses
Deferred tax assets
OthersAllowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
The accompanying notes are an integral part of these statements.

72

Leopalace21 Integrated Report 2022

USD thousand (Note 1)

3, 6, 7, 13
7
7
3, 7, 8, 13
3, 12, 13
3
33, 7, 123, 10, 12, 16, 17, 18, 27
3, 13, 16, 17, 18

3, 10, 13, 16, 17, 18

10, 13, 16, 17
3, 18, 25

10
10, 13, 16, 17, 18

3, 7, 12

JPY million

3,172
514
114
3,133
9,593
696
28,239
541
67
2,783
3,777
9,301
3,861
65,79820,8583,491
438
16,28274,542
10,657259,279
2,191
63
17,87015,85934,46430,495
486,494

30,429
569
7,151
7,382
16,145
11
1,414
9,525
2,222
74,854
134,396

30,615
1,544
7,869
6,423
29,732
9
2,960
9,650
3,826
92,633
158,431248,626
4,655
58,43460,319131,920
96
11,55977,82918,160611,603
1,098,097

100
136,345(135,749)

81,282
55,174(142,586)

817
1,114,022(1,109,157)

24

(302)
392

(344)
(6,474)(2,475)
3,206

12
3
14

(39)
746
(31)
675
357
9,608
11,034145,430(0)(1,877)(142)(2,019)388
11,383
3,277
161,708

(318)
6,096
(256)
5,521
2,919
78,51090,158
1,188,255

3, 12
3, 12
3, 12
3, 12
3, 12

7, 13
7, 13
3

12
3, 12
3, 14

Corporate Governance

2,552
427
53
1,992
9,123
1,304
31,733
268
7
2,187
1,941
4,218
3,732
59,542

7
7
7, 13
7, 13
7, 12

Business Model

2022

Sources ofCompetitive Advantage

2021

Cover Story

2022

Notes

24, 3232

Materiality
Data Section

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable
Accounts payable for completed projects
Current portion of long-term debt
Lease obligations
Accounts payable – otherAccrued income taxes
Advances received
Customer advances for projects in progress
Provision for warranty obligations on completed projects
Provision for fulfillment of guarantees
Provision for losses related to repairs (short-term)
Provision for apartment vacancy loss (short-term)
OthersTotal current liabilities
Non-current liabilities:
Long-term debt
Lease obligations
Long-term advances received
Lease/guarantee deposits received
Provision for losses related to repairs
Deferred tax liabilities
Provision for apartment vacancy loss
Liability for retirement benefit
OthersTotal non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock:
Authorized: 500,000,000 shares in 2022 and 2021
Issued: 329,389,515 shares in 2022 and 2021
Capital surplus
Retained earnings
Treasury stock: 493,610 shares in 2022 and561,610 shares in 2021
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains (losses) on other securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Share subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

USD thousand (Note 1)

The accompanying notes are an integral part of these statements.

Leopalace21 Integrated Report 2022

73

Financial Section

Consolidated Statement of Income
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2022 and 2021

JPY million

2022

Notes

Net sales
Sales from Leasing Business
Sales from Other Businesses
Cost of sales
Cost of sales from Leasing Business
Cost of sales from Other Businesses
Gross profit
Selling, general and administrative expenses
Advertising expenses
Sales commission expense
Transfer to allowance for bad debt
Directors’ bonuses
Salary and bonuses
Retirement benefit cost
Rent expense
Depreciation and amortization
Taxes and public charges
OthersOperating profit (loss)
Non-operating income
Interest income
Dividend income
Gains on valuation of investment securities
Foreign exchange gain
Employment adjustment subsidy
OthersNon-operating expenses
Interest expenses
Funding costs
Share of loss of entities accounted for using equity method
OthersRecurring profit (loss)
Extraordinary income
Gain on sale of property, plant and equipment
Gain on sale of investment securities
Gain on sale of shares in the subsidiary
Reversal of provision for losses related to repairs
Extraordinary losses
Loss on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Impairment loss
Loss related to repairs
Loss on sale of investment securities
Special severance allowance
Retirement benefit cost
Loss on liquidation of subsidiaries and associated companies
Loss on valuation of investment securities
Loss on closure of offices
Income (loss) before income taxes
Income taxes
Current
Deferred
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to shareholders of the parent
The accompanying notes are an integral part of these statements.

74

Leopalace21 Integrated Report 2022

27, 32

27

14

3

29

398,366
383,043
15,322352,289
336,339
15,95046,07744,302
2,718
2,328
2,202
302
14,960
1,263
2,517
2,079
4,530
11,399
1,774
827
34
65
129
1
242
354
4,754
4,474
—
162
117
(2,151)
12,080120
0—11,959
234
—
45
118
—
—
—
—
—
—
69
9,693
(2,956)
1,444(4,401)
12,650795
11,854

USD thousand (Note 1)

2021
408,959
391,964
16,994
387,872
370,872
17,00021,08650,269
2,302
1,852
107
351
19,218
1,883
2,944
2,202
5,695
13,708(29,182)
1,084
66
84
141
110
243
438
6,072
2,171
2,904
44
951
(34,170)
19,664225
4,065
015,374
8,419
18
114
4,041
982
114
2,479
427
151
90
—
(22,925)
280
710
(429)
(23,205)475(23,680)2022

3,254,893
3,129,699
125,194
2,878,416
2,748,093
130,322
376,477
361,976
22,21019,021
17,9942,469
122,236
10,326
20,571
16,99237,013
93,14014,500
6,762
285
536
1,054
11
1,979
2,895
38,84536,560—1,325
959(17,582)
98,705981
4—97,718
1,918
—
375
971
—
—
—
—
—
—
570
79,204(24,156)
11,806(35,962)
103,306
6,502
96,858Financial Section

Consolidated Statement of Comprehensive Income
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2022 and 2021

JPY million

12
3
14

2021

2022

(23,205)

103,360

(38)
2,623
111

(1,047)(1,597)403(317)
21,436908

12,697
15,3480(2,240)(25,445)15
22,043
125,404

14,550(25,920)

118,882

798

474

6,521

Sources ofCompetitive Advantage

2022

12,650Cover Story

Notes

Net income (loss)
Other comprehensive income (loss)
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted forusing equity method
Total
Comprehensive income (loss)
Comprehensive income (loss) attributable toshareholders of the parent
Comprehensive income (loss) attributable tonon-controlling interests

USD thousand (Note 1)

The accompanying notes are an integral part of these statements.

Notes

USD thousand (Note 1)

2022

2021

2022

(38)
—
(38)
0
(38)

2,555
(4,065)(1,509)462(1,047)

(316)
—
(316)
—
(317)

2,623
—
2,623
—
2,623

(1,591)(6)(1,597)—(1,597)

21,436—
21,436—
21,436

57
53
111
—
111

(75)
478
403
—
403

469
439
908
—
908

1
2,697

0
(2,240)15
22,043

Corporate Governance3

Materiality

Net unrealized gains (losses) on other securities
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted forusing equity method
Amount accrued in the fiscal year
Total

Business Model

JPY million

Data Section

Leopalace21 Integrated Report 2022

75

Financial Section

Consolidated Statement of Changes in Equity
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2022 and 2021

JPY million
Shareholders’ equity

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityBalance as of March 31, 2020
75,282
Cumulative effect due to changein accounting policy
Balance at the previous yearend reflecting the change in
75,282
accounting policy
Issuance of new shares
5,999
Capital reduction
Net income (loss) attributable
to shareholders of the parent
Disposal of treasury stock
Change in the scope of
consolidation
Change in share of parent
from transactions with
non-controlling interests
Net change of items otherthan shareholders’ equity
Total change during period
5,999
Balance as of March 31, 2021
81,282
Cumulative effect due to changein accounting policy
Balance at the previous yearend reflecting the change in
81,282
accounting policy
Issuance of new shares
Capital reduction(81,182)
Net income (loss) attributable
to shareholders of the parent
Disposal of treasury stock
Change in the scope of
consolidation
Change in share of parent
from transactions with
non-controlling interests
Net change of items otherthan shareholders’ equity
Total change during period(81,182)
Balance as of March 31, 2022
100

45,148(118,874)

(473)

1,083

Total
Share
Net unrealized
Foreign
Remeasurements accumulated Subscription
gains (losses)
currency
otherof definedrightson othertranslation
benefit plans comprehensive
securities
adjustments
income

1,047

(280)

(546)

220

269

Noncontrollinginterests

Total net
assets

16

1,589

—
45,1485,999(118,874)(473)(23,680)
(32)

128

4,026
10,02655,174(23,712)(142,586)

128
(344)

(4,963)55,174

1,047

(280)

(546)

220

269

16

(147,550)(344)

11,854
(10)

41
(53)

(1)
11,800(135,749)

41
(302)

1,589
11,999—(23,680)
96(23,680)
96

—

—

4,026

4,026

(7,557)(6,474)(1,047)(1,047)(0)(1,596)(1,596)(1,877)

403
403
(142)

(2,240)(2,240)(2,019)

119
119
388

11,366
11,366
11,383(4,963)

81,182

81,170136,345

1,083
11,999——(11,438)
—
—

9,245
1,687
3,277
(4,963)(0)(1,877)(142)(2,019)388

11,383(1,686)——

11,85430

11,854
30

(53)

(53)

(1)

(1)

11,830
392

(38)
(38)
(39)

2,623
2,623
746

111
111
(31)

2,695
2,695
675

(30)
(30)
357

(1,774)(1,774)
9,608

890
12,721
11,034Total
Share
Net unrealized
Foreign
Remeasurements accumulated Subscription
gains (losses)
currency
otherof definedrightson othertranslation
benefit plans comprehensive
securities
adjustments
incomeNoncontrollinginterests

Total net
assets93,007

26,776

USD thousand (Note 1)
Shareholders’ equity
Commonstock

CapitalsurplusRetainedearnings

Balance as of March 31, 2021
664,125450,812 (1,165,020)
Cumulative effect due to change(40,557)
in accounting policy
Balance at the previous yearend reflecting the change in
664,125450,812 (1,205,578)
accounting policy
Issuance of new shares
Capital reduction(663,308)
663,308
Net income (loss) attributable
96,858to shareholders of the parent
Disposal of treasury stock(88)
Change in the scope of(438)
consolidation
Change in share of parent
from transactions with
(10)
non-controlling interests
Net change of items otherthan shareholders’ equity
Total change during period(663,308)
663,209
96,420
Balance as of March 31, 2022
817 1,114,022 (1,109,157)
The accompanying notes are an integral part of these statements.

76

Leopalace21 Integrated Report 2022

Accumulated other comprehensive income

Treasury
stock

Total
shareholders’equity(2,816)(52,898)(1)(15,336)(1,165)(16,503)

3,171(40,557)(2,816)341

341(2,475)(93,456)——(40,557)(1)(15,336)(1,165)(16,503)

3,171

93,007(13,780)——

96,858252

96,858
252

(438)

(438)

(10)

(10)

96,662
3,206

(317)
(317)
(318)

21,433
21,433
6,096

908
908
(256)

22,02422,024
5,521

(251)
(251)
2,919

(14,496)(14,496)
78,5107,276
103,938
90,158Financial Section

Consolidated Statement of Cash Flows
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2022 and 2021

JPY million

USD thousand (Note 1)

2021

2022

Income (loss) before income taxes

9,693(22,925)

79,204

Depreciation and amortization

9,352

10,41676,415

Cover Story

2022

Notes

Cash flows from operating activities:

Impairment loss
Reversal of provision for losses related to repairs

10, 27

118

4,041

971

20

(11,959)(15,374)(97,718)

19

—

982

—

21

—

2,479

—

7

6

58

Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts

3

2,355

340

19,242

Increase (decrease) in liability for retirement benefits

3

(14)

1,360

(122)

Increase (decrease) in provision for apartment vacancy loss

3

(6,629)(3,644)(54,165)

Losses on liquidation of subsidiaries and associated companies

—

151

—

Interest and dividend income

(100)

(150)

(821)

Interest expense

2,171

36,560

3

—

2,904

—

Foreign exchange loss (gain)

3

(1)

(110)

(11)

162

44

1,325

(120)

(206)

(981)

45

114

375

(129)

(50)

(1,054)Equity in losses (earnings) of affiliated companies using
equity method
Loss (gain) on sale of property, plant and equipment
Loss on retirement of property, plant and equipment

18

Loss (gain) on valuation of investment securities(0)(3,951)

(4)

—

(0)

—

Decrease (increase) in accounts receivable

(523)

(579)

(4,275)Decrease (increase) in real estate for sale in process

2

3,432

23

Decrease (increase) in payment for construction in progress

25

486

205

Decrease (increase) in long-term prepaid expenses

3

744

4,378

(1,029)(5,861)(8,409)

Increase (decrease) in customer advances for projects in progress(272)(1,241)(2,230)

Increase (decrease) in advances received(2,188)(5,327)(17,879)

701

603

5,727

Increase (decrease) in guarantee deposits received
Increase (decrease) in accrued consumption taxes

121

(421)

992

Others(2,023)

1,804(16,534)

Subtotal

2,603(27,759)

21,272

Interest and dividends received

154

861

(1,500)(36,406)(2,172)(8,313)(17,753)—(2,479)—

Income taxes paid

(541)

(918)

(4,421)

Net cash provided by operating activities(4,460)(40,816)(36,447)

Payment related to repairs paid
Payment of special severance allowance

21

Data Section

105(4,455)Interest paid

Materiality

535

Increase (decrease) in accounts payable

Corporate Governance

Loss (gain) on sale of investment securities
Investment loss (returns) from anonymous associations

Business Model

4,474

Funding costs

Sources ofCompetitive Advantage

Loss related to repairs
Special severance allowance for severance

The accompanying notes are an integral part of these statements.

Leopalace21 Integrated Report 2022

77

JPY million

USD thousand (Note 1)

2022

2021

2022

Payment for purchase of property, plant and equipment(705)(2,328)(5,763)

Proceeds from sale of property, plant and equipment

1,458

4,167

11,913

Payment for purchase of intangible assets

(781)

(509)

(6,387)

Proceeds from redemption of securities

—

5,600

—

Notes

Cash flows from investing activities:

Payment for purchase of investment securities

(313)

(363)

(2,565)

Proceeds from sale of investment securities

1,180

4,341

9,647

Proceeds from liquidation of subsidiaries

—

18

—

Payments for sale of shares in subsidiaries resulting in change inscope of consolidation

—

(92)

—

Proceeds from sale of shares in subsidiaries resulting in change inscope of consolidation

—

7

—

Payment for loans

(31)

(36)

(254)

Proceeds from collection of loans

73

57

601

Payments for deposit of time deposits

—

(4)

—

Proceeds from withdrawal of time deposits

17

67

139

Others

(10)

904

(89)

Net cash provided by (used in) investing activities

886

11,829

7,241

Repayment of short-term debt

—

(847)

—

Proceeds from long-term debt—

30,234—

Cash flows from financing activities:

Repayment of long-term debt

(75)

(17,790)(615)(3,239)(4,181)(26,470)

Proceeds from issuance of shares—

11,999—Proceeds from issuance of stock acquisition rights

—

215

—

Payment of funding costs—(2,868)——(8,103)—(1,400)—(11,438)

Repayment of finance lease obligations

Payment for redemption of bonds
Payment for purchase of treasury stock by a consolidated subsidiary
Payment for acquisition of shares in subsidiaries not resulting
in change in scope of consolidation

(0)

—

(2)

Proceeds from share issuance to non-controlling shareholders—

15,000—(1,171)(87)(9,570)000(5,886)23,571(48,096)

Payment of dividends to non-controlling shareholders
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

220

(154)

1,805

Net increase (decrease) in cash and cash equivalents(9,240)(5,570)(75,497)

Cash and cash equivalents at beginning of year

53,346

58,916435,872

Decrease in cash and cash equivalents on exclusionfrom consolidation

(82)

—

(676)

44,02353,346359,698

Cash and cash equivalents at end of year
The accompanying notes are an integral part of these statements.

78

Leopalace21 Integrated Report 2022

6

Financial Section

Notes to Consolidated Financial Statements
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2022 and 2021

Business Model
Corporate Governance(2) Cash and deposits or cash equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments with insignificant risk of change
in value and maturities of generally three months or less as cash
and deposits. These include cash on hand, demand deposits atbanks and highly liquid short-term investments with negligible riskof fluctuation in value and maturities of less than three months.
Cash equivalents, on the other hand, is defined as those including
maturities of greater than three months.

Materiality
Data Section

3. Summary of Significant Accounting Policies(1) Consolidation
Names of significant subsidiaries (18 in total)
Leopalace Leasing Corporation
Plaza Guarantee Co., Ltd.
Leopalace Power Corporation
Leopalace Energy Corporation
ASUKA SSI
Leopalace21 Business Consulting (Shanghai) Co., Ltd.
Leopalace21 (Thailand) CO., LTD.
Leopalace21 (Cambodia) Co., Ltd.
LEOPALACE21 PHILIPPINES INC.
Leopalace21 Singapore Pte. Ltd.
Morizou Co., Ltd.
Azu Life Care Co., Ltd.
Leopalace Guam Corporation
Leopalace Smile Co., Ltd.

Sources ofCompetitive Advantage

2. Going Concern Assumption
There are no issues applicable to the going concern assumption.

PT. Leopalace Duasatu Realty and another subsidiary havebeen excluded from the scope of consolidation in the consolidated
fiscal year ended March 2022 because the importance of thesecompanies has declined.
The accompanying consolidated financial statements as ofMarch 31, 2022 include the accounts of the Company and its
18 (20 as of March 31, 2021) subsidiaries and four associatedcompanies Woori & Leo PMC Co., Ltd, Ancora Residential Fund
LP, PT TEGUH BINA KARYA, and Learn JP Corp. in equity method(together, “the Companies”). The fiscal year closing dates ofthese four companies are different from the consolidated balance sheet date. The respective financial statements of theCompanies were used for consolidation.
The Company holds the shares in TRUMAN HOLDINGSLIMITED and two other companies but did not include them in thecompanies where the Company applies the equity method for consolidation. The total assets, sales, net income (loss) and retained
earnings both on an equity method basis and other items do notmake material impact on the consolidated financial statements.
The balance sheet dates of Leopalace Guam Corporation andother 9 subsidiaries are all the same, being December 31. For the
consolidated entities whose fiscal year ends different from that of
the Company but within 3 months, their financial results are usedin the preparation of consolidated financial statements. Whensignificant transactions occur to those subsidiaries between theirfiscal year ends and the Company’s fiscal year end, those transactions are necessarily adjusted to consolidate.

Cover Story

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Leopalace21
Corporation (“the Company”) have been prepared in accordancewith the provisions of Financial Instruments and Exchange Act ofJapan, its related accounting regulations and in conformity withaccounting principles generally accepted in Japan, which are different in certain respects, as to application and disclosure requirementsfrom International Financial Reporting Standards.
The accompanying consolidated financial statements have beenreformatted and translated into English (with certain expanded disclosure) from the consolidated financial statements of the Company
prepared in accordance with accounting principles generally
accepted in Japan and filed with the Financial Services Agency as
required by the Financial Instruments and Exchange Act of Japan.
The translation of the Japanese yen amounts into U.S. dollars
is prepared solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2022, which was
JPY 122.39 to USD 1.00. Such translation should not be construed
as a representation that the Japanese yen amounts have been,
could have been, or could in the future be, converted into U.S.
dollars at this or any other rate of exchange. Certain amounts inthe previous year’s financial statements have been reclassified toconform to the current fiscal year’s presentation.
Figures are rounded down to the nearest JPY 1,000,000 or
USD 1,000.

Leopalace21 Integrated Report 202279

(3) Inventories
Real estate for sale and real estate for sale in process are primarily stated at cost (presented in net book value less write-down
when profitability declines) determined by the specific identification method.
Costs on construction contracts in progress are primarily statedat cost determined by the specific identification method.
Raw materials and supplies are primarily stated at cost(presented in net book value less write-down when profitability
declines) determined by the last purchase price method.
Cost of sales for the Leasing Business includes the reduced
book value which is caused by the declined contribution of inventories to profitability.
JPY million

Item
Loss from inventory revaluation

USD thousand

2022

2021

2022

—

41

—

(4) Securities
Held-to-maturity debt securities are stated at amortized cost(straight-line method).
Other securities with available fair values are stated at fairvalue at the end of the fiscal year of each consolidated company.
Other securities without available fair values are stated at cost by
the moving-average method.
Unrealized gains or losses on these securities are reported, netof income taxes, as a separate component of net assets. Cost of
securities sold is computed using the moving-average method.
Investments in silent partnership are reported in the equity
method, based on the latest financial statements available as at theclosing dates stipulated by the respective partnership contracts.
(5) Derivative financial instruments and hedge accounting
Accounting principles are fair value method. But there is no derivative transaction with/without hedge accounting during the fiscal
year ended March 2022 and 2021.
(6) Property, plant and equipment (except for leased assets)
Property, plant and equipment for rent of the Company and domestic consolidated subsidiaries are stated at cost. Depreciation iscomputed generally on the straight-line basis. The useful lives are
principally from 22 to 47 years for buildings and structures for rent.
Property, plant and equipment other than above of theCompany and domestic consolidated subsidiaries are stated atcost. Depreciation is computed generally by the declining-balancemethod. However, buildings (excluding facilities attached to buildings) obtained on or after April 1, 1998, and facilities attached tobuildings and structures obtained on or after April 1, 2016, aredepreciated by the straight-line method. The useful lives are principally from 15 to 50 years for buildings and structures, 17 years

80

Leopalace21 Integrated Report 2022

for machinery, equipment and vehicles, and 5 to 10 years for tools,
furniture and fixtures.
Property, plant and equipment of the consolidated overseas
subsidiaries are depreciated by the straight-line method based on
the local GAAP. The useful lives are principally from 20 to 40 years
for buildings and structures and from 3 to 5 years for tools, furniture and fixtures.
(7) Intangible fixed asset
Software for internal use is amortized on a straight-line basis overthe estimated useful life of 5 years.
(8) Long-term prepaid expenses
Long-term prepaid expenses are amortized evenly over a period
mainly from 5 to 7 years for master lease rent and 5 years fornon-deductible consumption taxes on non-current assets.
(9) Stock issue expenses
Stock issue expenses are charged to funding costs when incurred.
(10) Allowance for doubtful accounts
The Companies maintain an allowance for doubtful accounts toreserve for potentially uncollectible receivables. A provision forgeneral doubtful receivables is provided by applying a certain
reserve percentage of the receivables based on experience frompast transactions. A specific allowance is recorded for the estimated amount to be uncollectible based on the customers’ financial condition or other pertinent factors.
(11) Liability for retirement benefit
In conjunction with the calculation of retirement benefit obligations,the method for attributing projected retirement benefits for theperiod up to the current fiscal end is based on a straight-line basis.
Actuarial gains/losses, which are prorated according to thestraight-line method over a specified period (5 years) within the
average remaining service years of employees at the time ofaccrual, are amortized starting from the next fiscal year of therespective accruals. Unrecognized actuarial gains/losses areposted after tax effects, as the cumulative amount of adjustments
attributed to accumulated other comprehensive income in the net
assets. Certain consolidated subsidiaries have adopted a simplified method of calculation with liability for retirement benefits andretirement benefits expense. Under this simplified method, retirement benefit obligation is deemed to be equal to the amount which
would be required to pay if all eligible employees voluntarily retireat the end of the fiscal year.
(12) Provision for losses related to repairs
In order to reserve for the losses related to repairs, an estimatedamount of provision is recorded based on the defect rate, etc.

(i) The amount stated in the fiscal year ended March 2022 and 2021

Provision for losses related
repairs (current liabilities)
Provision for losses related
repairs (non-current liabilities)
Total

USD thousand

2022

2021

2022

1,941

3,777

15,85916,14529,732

131,920

18,08633,509147,779(13) Provision for apartment vacancy loss
Provision for vacancy loss on apartment units managed undermaster lease agreements is calculated according to the projected
loss that could incur during a reasonably estimable period to prepare for the risk of increasing vacancies. It is based on estimatedlosses resulting from current rental income and expected futureoccupancy rates for each rental property managed by the Leasing
Business Division of the Company and included in the cost of saleof the Leasing Business Division.

Business Model(i) The amount stated in the fiscal year ended March 2022 and 2021
JPY million

Provision for apartment
vacancy loss
(current liabilities)
Provision for apartment
vacancy loss
(non-current liabilities)
Total

USD thousand

2022

2021

2022

4,218

9,301

34,464

1,414

2,960

11,5595,632

12,262

46,024

Corporate Governance(ii) Accounting estimates per item
The Company employed below specific method for estimation.
The Company compares the sum of revenue from the tenant
for the rent and associated services considering the occupancy
rate projection for individual apartments with sum of expenses
which consist of master lease rent and management expenses.
In case the sum of expenses exceeds the sum of revenue fora certain apartment, the provision is calculated by multiplying
the monthly deficit by the remaining number of months for fixed
rent period of master lease agreements.
The Company made occupancy rate projection considering
the apartment’s surrounding conditions and room demand as
step one; adjusted the step one result by taking account of theresults of suspended tenant recruitment which may be required
because of repair works as step two.
In case of changes in conditions and assumptions basedon which the estimate was prepared, provision for apartment
vacancy loss may be changed in the consolidated financial
statements for the fiscal year ending March 2023.

Data Section

Leopalace21 Integrated Report 2022

Materiality

The Company employed the following methods.
a. Repair expenses
Sort out the repairs by the types of defects and repair
method and calculate the number of defective rooms basedon the defective rate as a result of the all-building investigations, which is then multiplied by the actual unit cost or
estimated unit cost.
b. Leasing expenses
Estimate the number of months for leasing the apartmentbuildings which other companies manage but not theCompany, which is then multiplied by the actual monthly rent.
c. Relocation expenses
Calculate the number of rooms which other companies
mainly manage, which is then multiplied by the actual unit
cost for relocation.

Sources ofCompetitive Advantage(ii) Accounting estimates per item
The Company established the Emergency Headquarters forConstruction Defects and carried out all-building investigations
related to the announcement of parting wall defects in theattics in April 2018 and other defects in May 2018, in February
and May 2019. The Company has been repairing the defects
which were identified at the investigations to make them tocomply with the related laws and regulations.
The Company provided the provision for losses related to
repairs based on the assumed amount in accordance withthe actual defects rate to be prepared for possible repair
expenses and associated expenses for the apartment buildings
constructed by the Company. In the fiscal year ended March
2022, a reversal of provision for loss on repairs of JPY 11,959
million (USD 97,718 thousand) was recorded due to a reductionin the unit repair cost as a result of batched ordering efforts,
allocating in-house manpower resources for repairs, and agreements with property owners to change repair methods; and adecrease in the number of buildings requiring repairs as a resultof revised judgement related to construction defects as well asbuilding demolition agreed upon with the owners.
The Company has built the provision provided for repairing
all the significant defects that the Company has recognized andthere would not be any further expenses which may incur in the
future.

Cover Story

JPY million

The Company has been striving to calculate more reasonable
and highly accurate provision regarding repair costs and incidental
costs per unit considering some of the estimates presented byexternal contractors and resulting from some of the outsourced
work into in-house repairs; and the change in the estimated unit
price due to updated deficiency judgment.
In case of changes in conditions and assumptions based on
which the estimate was prepared, provision for losses related to
repairs may be changed in the consolidated financial statements
for the fiscal year ending March 2023.

81

(14) Provision for warranty obligations on completed projects
Provision for warranty obligations on completed projects is accrued
to reserve for execution of warranty obligations under defect liabilities in the future. It is calculated using the percentage of the past
execution of warranty obligations on the completed projects.

for the development period capitalized it into acquisition cost of
property, plant and equipment.
Capitalized interests included in carrying value of property,
plant and equipment were JPY 341 million (USD 2,788 thousand)as of March 31, 2022.

(15) Provision for fulfillment of guarantees
In order to reserve for losses due to its rent obligation guarantees
business, the Company’s consolidated subsidiary, Plaza Guarantee
Co., Ltd., records the amount of loss expected based on the rate ofpast guarantee fulfillments.

(22) Earnings per share
Basic earnings per share of common stock is computed by net
income available to common shareholders divided by the weighted-average number of common stock outstanding for the period.
Diluted earnings per share of common stock reflects the potential dilution that could occur if securities or other contracts to issuecommon stock were converted or exercised into common stock or
resulted in the issuance of common stock.

(16) Amortization method and period of goodwill
The Company has adopted a policy whereby goodwill is amortizedon a straight-line basis over the period in which the economic
benefits are expected to be realized. However, if the amount is
negligible, it is amortized at once when it is recognized.
(17) Income taxes
Income taxes comprise corporate, inhabitant and enterprise taxes.
The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
(18) Leased assets
Leased assets are depreciated by the straight-line method overthe lease-term of respective assets as their useful lives with noresidual value.
(19) Foreign currency transactions
All monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the spot exchange
rates as of each balance sheet date. The foreign exchange gains
and losses from translation are recognized in the consolidated
statement of income.
(20) Foreign currency financial statements
The assets and liabilities of consolidated overseas subsidiaries
are translated into Japanese yen at the spot exchange rates as ofeach balance sheet date, and income and expenses are translated
at the average exchange rates of the fiscal year. Foreign currencytranslation adjustments resulting from the translation of assets,
liabilities and net assets are reclassified into foreign currencytranslation adjustments and non-controlling interests.
(21) Interest capitalization
Leopalace Guam Corporation, a consolidated subsidiary, of whichinterest paid on borrowing for real estate development business82

Leopalace21 Integrated Report 2022

(23) Accounting Standard for Revenue Recognition
The Company has adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, issued on March 31, 2020,
hereinafter the “Accounting Standard for Revenue Recognition”)
and related Guidance from the beginning of the fiscal year ended
March 2022. The Company recognizes revenues at the amount
expected to be received in exchange for the promised goods orservices when control of the promised goods or services is transferred to the customer.
The following is a summary of the main performance obligations in the Company’s and its consolidated subsidiaries’ primarybusinesses relating to the revenues from contracts with customers
and a point in time or a period of time at or over which such performance obligations are fulfilled (a point in time or a period of timeat or over which revenues are recognized).
In the Leasing Business, the Company primarily leases andmanages apartments. For these transactions, the performanceobligation is deemed to be performed when the contractual
conditions are fulfilled, and revenue is recognized at that time.
Accordingly, key money, rent discounts, monthly contract fees, andvarious service fees, etc., which were previously recognized at
the time of contract, are now recognized as revenue on a pro-ratabasis over the average period of occupancy.
In addition, for LEONET video subscription fees, which werepreviously recognized as revenue at the gross amount received
from customers, the Company now recognizes revenue at the net
amount received from customers less amounts paid to suppliers.
The Company considers that it is dealing with a third-party service
provider as an agent and it is the Company’s performance obligation to arrange for such service to be provided.
The consideration for transactions related to the Leasing
Business is received in accordance with the terms of the contract
and generally prior to the fulfillment of performance obligations,and the amount of consideration does not include a significant
financial component.

The impact on per share information is stated in the relevant
section.
The Company has not presented a note on revenue recognition
for the fiscal year ended March 2021 in accordance with the transitional treatment prescribed in Paragraph 89-3 of the AccountingStandard for Revenue Recognition.

Cover Story(2) Application of Accounting Standard for Fair Value
Measurement and related Guidance
The Company has adopted Accounting Standard for Fair Value
Measurement” (ASBJ Statement No. 30, July 4, 2019, hereinafter the “Accounting Standard for Fair Value Measurement”)
from the beginning of the fiscal year ended March 2022, and has
applied prospectively the new accounting policy prescribed in the
Accounting Standard for Fair Value Measurement in accordancewith the transitional treatment stipulated in Paragraph 19 of the
Accounting Standard for Fair Value Measurement and Paragraph44-2 of the “Accounting Standard for Financial Instruments” (ASBJ
Statement No. 10, July 4, 2019). The impact of this change on the
consolidated financial statements is immaterial.
The Company has also included notes on the breakdown of
the fair value of financial instruments by level in the notes to“Financial Instruments.” In accordance with the transitional
treatment stipulated in Paragraph 7-4 of the “Implementation
Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, July 4, 2019), the Company
however has not presented such notes related to the previous
consolidated fiscal year ended March 2021 in this report.

Sources ofCompetitive Advantage
Business Model
Corporate Governance(3) Changes in presentation method(a) Consolidated Balance Sheet
The amount of operating loans under current assets, which
was separately presented in the consolidated fiscal year ended
March 2021, is included in others in the consolidated fiscal
year ended March 2022, as it has become insignificant in termsof amount. The consolidated balance sheet for the fiscal year
ended March 2021 has been reclassified to reflect this change
in presentation.
As a result, JPY 86 million (USD 705 thousand) presented
as operating loans under current assets in the consolidatedbalance sheet for the fiscal year ended March 2021 has been
reclassified as others.
Electronically recorded obligations-operating under current
liabilities, which was separately presented in the consolidated
fiscal year ended March 2021, is included in others in the consolidated fiscal year ended March 2022 because it has become
insignificant in terms of amount. The consolidated balance
sheet for the fiscal year ended March 2021 has been reclassified to reflect this change in presentation.

Data Section

Leopalace21 Integrated Report 2022

Materiality

4. Changes in Accounting Policies(1) Application of Accounting Standard for Revenue Recognition(Basis for recording significant revenues and expenses)
The Company has adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, issued on March 31, 2020,
hereinafter the “Accounting Standard for Revenue Recognition”)
and related Guidance from the beginning of the fiscal year ended
March 2022. The Company recognizes revenues at the amount
expected to be received in exchange for the promised goods orservices when control of the promised goods or services is transferred to the customer.
Accordingly, key money, rent discounts, monthly contract fees,and various service fees, etc., which were previously recognized at
the time of contract, are now recognized as revenue on a pro-ratabasis over the average period of occupancy.
In addition, for LEONET video subscription fees, which werepreviously recognized as revenue at the gross amount received
from customers, the Company now recognizes revenue at the net
amount received from customers less amounts paid to suppliers.
The Company has followed the transitional treatment prescribed in the proviso of Paragraph 84 of the Accounting Standard
for Revenue Recognition. The cumulative effect of retrospective
application of the new accounting policy prior to the beginning of
the fiscal year ended March 2022 is added to or deducted fromretained earnings at the beginning of the fiscal year ended March
2022, and the new accounting policy is applied from the balance atthe beginning of the fiscal year ended March 2022.
However, the new accounting policy has not been applied
retrospectively to contracts for which almost all revenue amounts
were recognized prior to the beginning of the fiscal year ended
March 2022 in accordance with the previous treatment, applying
the method prescribed in Paragraph 86 of the Accounting Standard
for Revenue Recognition. In addition, the Company has applied themethod prescribed in Paragraph 86 and Note (1) of the Revenue
Recognition Standards and accounted for changes in contract
terms prior to the beginning of the fiscal year ended March 2022
based on the contract terms after reflecting all changes in contract
terms and the cumulative effect of such changes. The cumulative
effect of these changes is added to or deducted from retained
earnings at the beginning of the fiscal year ended March 2022.
As a result, for the fiscal year ended March 2022, net sales
increased by JPY 1,325 million (USD 10,827 thousand), cost of
sales decreased by JPY 1,580 million (USD 12,915 thousand),
operating profit increased by 2,905 million (USD 23,743 thousand),ordinary loss decreased by the same amount, and income before
income taxes increased by the same amount. The balance ofretained earnings at the beginning of the period was decreased by
JPY 4,963 million (USD 40,557 thousand).

83

As a result, JPY 19 million (USD 159 thousand) presented
as electronically recorded obligations-operating under current
liabilities in the consolidated balance sheet for the fiscal year
ended March 2021 has been reclassified as others.
Asset retirement obligations under current liabilities andasset retirement obligations under non-current liabilities, whichwere separately presented in the consolidated fiscal year
ended March 2021, are included in others in the consolidated
fiscal year ended March 2022 because they have become insignificant in terms of amount. The consolidated balance sheet
for the fiscal year ended March 2021 has been reclassified toreflect these changes in presentation.
As a result, JPY 30 million (USD 251 thousand) presented asasset retirement obligations under current liabilities and JPY
63 million (USD 517 thousand) presented as asset retirement
obligations under non-current liabilities in the consolidatedbalance sheets for the fiscal year ended March 2021 have been
reclassified as others.
(b) Consolidated Statement of Income
Bond issuance cost under non-operating expenses, which was
separately presented in the consolidated fiscal year ended
March 2021, is included in other in the consolidated fiscal year
ended March 2022 because it has become insignificant interms of amount. The consolidated statement of income for the
fiscal year ended March 2021 has been reclassified to reflect
this change in presentation.
As a result, JPY 251 million (USD 2,053 thousand) presented
as bond issuance cost in non-operating expenses in the consolidated statement of income for the fiscal year ended March
2021 has been reclassified as other.

5. Accounting Standard for Revenue Recognition(1) Information on the breakdown of revenues from contracts
with customers
Information on the breakdown of revenues from contracts withcustomers is presented in Notes (27. Segment Information).
(2) Basis for understanding revenue from contracts withcustomers
The Group recognizes revenue from contracts with customers
based on the following five-step approach.
Step 1: Identify the contracts with customers.
Step 2: Identify the fulfillment obligations in the contracts.
Step 3: Calculate the transaction prices.
Step 4: Allocate the transaction prices to the fulfillment obligationsin the contracts.
Step 5: Recognize revenue when the obligation is fulfilled.

84

Leopalace21 Integrated Report 2022

Information that provides a basis for understanding revenues and expenses is presented in Notes (Basis of Presenting
Consolidated Financial Statements) 3. Summary of Significant
Accounting Policies (23) Accounting Standard for Revenue
Recognition (Basis for recording significant revenues and expenses.)(3) Information about the relationship between contractual
obligations with customers and cash flows from such contracts, and the amount and timing of revenue expected tobe recognized in the fiscal year ended March 2023 or laterfrom contracts with customers that exist at the end of the
fiscal year ended March 2022(a) Balance of contractual assets and liabilities
March 31, 2022
Receivables arising from contracts withcustomers (beginning balance)
Receivables arising from contracts
with customers (ending balance)
Contractual assets(beginning balance)
Contractual assets (ending balance)
Contractual liabilities(beginning balance)
Contractual liabilities (ending balance)

JPY million

USD thousand

7,930

64,8008,618

70,415

524

4,288

443

3,620

41,613340,007

39,153319,905

In the consolidated financial statements, credits arising fromcontracts with customers are recorded in accounts receivable,
contractual assets are recorded in accounts receivable for completed projects; contractual liabilities are recorded in advances
received, customer advances for projects in progress, and longterm advances received.
Contractual assets consist primarily of unbilled accounts
receivable related to revenues recognized based on the measurement of the stage of completion of construction contracts.
Contractual liabilities consist primarily of rents for which performance obligations have not been fulfilled as of the end of
the fiscal year.
The amount of revenue recognized in the fiscal year ended
March 2022 that was included in the contractual liability atthe beginning balance was JPY 32,509 million (USD 265,623
thousand).
Contractual liabilities decreased by JPY 2,460 million (USD
20,101 thousand) in the fiscal year ended March 2022. This was
mainly due to an increase in the beginning balance as a resultof the application of the revenue recognition accounting standard, while there was a reversal of the beginning balance dueto the revenue recognition.

March 31, 2022
Equal or less than one year
More than one year
Total

JPY million

USD thousand

289,104
133,860
422,965

2,362,156
1,093,722
3,455,879(Note) The practical expedient method is applied, and the tableshows the remaining performance obligations related
to rent, incidental services, and maintenance, etc., in(a) Information on the breakdown of revenues from contracts with customers.

Cover Story(b) Transaction price allocated to remaining performance obligations
The aggregate transaction price allocated to the remaining
performance obligations and the period over which revenue is
expected to be recognized are as follows.

Sources ofCompetitive Advantage

6. Cash and Cash Equivalents
A reconciliation between cash and cash equivalents in the consolidated balance sheet and consolidated statement of cash flows
are as follows:
JPY million

Cash and deposits in the consolidated balance sheet
Time deposits with original maturities of more than three months
Cash and cash equivalents in the consolidated statement of cash flows

2021

2022

45,523(1,500)44,02354,863(1,517)53,346

371,953(12,255)
359,698

and the longest repayment date is 5 years and 9 months subsequent to the fiscal year end.
As of end of the year ended March 2022, there was no balance of derivative transactions.
(c) Risk management for financial instruments
Credit risk management for operating receivables and loans outstanding follows the “Receivables management rules”. Whileeach business division manages the extension of credit to its
customers, and each division is also organized for early detection and loss reduction of accounts where collection is doubtful
due to worsening credit or similar problems.
Regarding securities and investment securities, the Company
periodically investigates and understands the share price andthe financial condition of the share issuing organization. In
addition, for items other than held-to-maturity securities, theCompany considers the relationship with the trading partnercompanies and constantly re-evaluates its holdings.
Trade payables and debts are exposed to liquidity risk, but
this risk is monitored by various means such as the preparationof a monthly financial plan by each company in the Companies.

Corporate GovernanceMateriality(d) Supplementary explanations on fair value offinancial instruments
Fair value of financial instruments whose quoted market price is
not available is calculated based on a fluctuating factor, and thevalue might differ if different assumptions are used.

Leopalace21 Integrated Report 2022

Data Section(b) Nature and extent of risks arising from financial instruments
Operating receivables and loans outstanding are exposed tocredit risk.
Foreign currency denominated debts and credits originated inconjunction with overseas business development are exposed to
exchange rate risk.
Securities and investment securities are mainly held-to-maturity securities and shares of the companies with which theCompany has a business or capital alliance, and those securities are exposed to market risk and credit risk associated with
the issuers.
Almost all electronically recorded obligations, accounts
payable, accounts payable for completed projects which areoperating liabilities, and account payable-other are scheduled tobe paid within one year.
Loans payable are mainly for the purpose of raising funds
necessary for the repair works, and lease obligations related tofinance lease transactions are mainly for investment in facilities,

2022

Business Model

7. Financial Instruments(1) The financial instruments and related disclosures(a) Policy for financial instruments
The Companies are mainly involved in raising funds (mostly bankborrowing and corporate bond issuance) needed for planned
capital investments excluding special cases. Temporary excess
funds are invested in highly secured financial assets, and shortterm working capital is raised by borrowing from the bank.

USD thousand85

(2) Fair value of financial instruments
The carrying value on the consolidated balance sheet and fair value of financial instruments as of March 31, 2022 and 2021 as well as the differences between these values are described below. The table does not include the financial instruments whose market prices do not exist.
JPY million

March 31, 2022
(1) Securities and investment securities(2) Long-term loans
Allowance for doubtful accounts *(iii)Net(3) Bad debts
Allowance for doubtful accounts *(iii)
Net
Total
(1) Long-term debt *(iv)(2) Lease obligations
Total

Carrying value

Fair value

Difference

2,179
1,126
(140)
985
267
(267)
—
3,165
30,4832,562
33,045

2,180

0

908

(77)

—
3,089
29,682
2,575
32,257

—
(76)
(800)
12
(787)

*Notes:(i)	Cash is not stated, and deposits, accounts receivable, accounts payable, accounts payable for completed projects and accounts payable-otherare not stated because they are settled in a short period of time and their fair value approximates their book value.
(ii)	The following financial instruments are not included in “(1) Securities and investment securities” because they do not have market prices. The
carrying amounts of such financial instruments on the consolidated balance sheets are as follows.
March 31, 2022
Unlisted stocks
Shares in unconsolidated subsidiaries and affiliates
Investment in anonymous association
Total

JPY million

1,694
1,394
111
3,201

(iii) Allowance for doubtful accounts provided individually for long-term loans and fixed operating claims is deducted.
(iv) As of March 31, 2022, bonds due within one year of JPY 53 million are included in long-term debt.

86

Leopalace21 Integrated Report 2022

JPY million

Difference

54,863
8,455
643

—
—
5

91

8

1,016

—

—
65,070
19
3,687
9,593
30,0304,641
47,972

—
14
—
—
—
(699)
(37)
(737)

Business Model

Fair value

54,863
8,455
638
86
(3)
83
1,096
(79)
1,016
249
(249)
—
65,056
19
3,687
9,593
30,7304,678
48,709Sources ofCompetitive Advantage

Carrying value

Cover Story

March 31, 2021
(1) Cash and deposits(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(ii)Net(5) Long-term loans
Allowance for doubtful accounts *(ii)Net(6) Bad debts
Allowance for doubtful accounts *(ii)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Accounts payable-other(4) Long-term debt *(iii)(5) Lease obligations
Total*Notes:(i)	The following financial instruments are not included in “(3) Securities and investment securities” because they do not have market prices. The
carrying amounts of such financial instruments on the consolidated balance sheets are as follows.
JPY million

Corporate GovernanceMarch 31, 2021
Unlisted stocks
Shares in unconsolidated subsidiaries and affiliates
Unlisted bonds (corporate bonds and subordinated bonds)
Subordinated beneficiary interests in loans and monetary claims trusts
Investment in anonymous association
Total

1,757
1,336
824
861
113
4,893

(ii)	Operating loans, long-term loans and bad debts have deductions of their respective allowance for doubtful accounts, which are recorded separately.
(iii) As of March 31, 2021, current portion of long-term debt of JPY 144 million are included in long-term debt.
Materiality
Data Section

Leopalace21 Integrated Report 2022

87

USD thousand

March 31, 2022
(1) Securities and investment securities(2) Long-term loans
Allowance for doubtful accounts *(iii)Net(3) Bad debts
Allowance for doubtful accounts *(iii)
Net
Total
(1) Long-term debt *(iv)(2) Lease obligations
Total

Carrying value

Fair value

17,8109,201(1,145)8,055
2,183(2,183)—25,866
249,064
20,938270,002

17,818Difference

7

7,421

(633)

—
25,240242,525
21,040263,566—(626)(6,539)102(6,436)*Notes:(i)	Cash is not stated, and deposits, accounts receivable, accounts payable, accounts payable for completed projects and accounts payable-otherare not stated because they are settled in a short period of time and their fair value approximates their book value.
(ii)	The following financial instruments are not included in “(1) Securities and investment securities” because they do not have market prices. The
carrying amounts of such financial instruments on the consolidated balance sheets are as follows.
March 31, 2022
Unlisted stocks
Shares in unconsolidated subsidiaries and affiliates
Investment in anonymous association
Total

USD thousand

13,846
11,395913
26,156(iii) Allowance for doubtful accounts provided individually for long-term loans and fixed operating claims is deducted.
(iv) As of March 31, 2022, bonds due within one year of USD 438 thousand million are included in long-term debt.
(3) The scheduled redemption amounts of monetary claims and investment securities with maturity subsequent to fiscal year end
JPY million

March 31, 2022
Cash and deposits
Trade receivables and accounts receivable forcompleted projects
Securities and investment securities
Held-to-maturity debt securities(1) Government and municipal bonds(2) Corporate bonds
Other securities with maturities(1) Government and municipal bonds(2) Bonds (Corporate bonds)(3) Others
Long-term loans
Bad debts
Total

88

Leopalace21 Integrated Report 2022

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

45,523

—

—

—

8,618

—

—

—

200
—

100
—

200
—

—
—

—
—
—
18
—
54,360

—
—
—
644
—
744

36
—
—
21
—
257

—
824
857
441
267
2,389

JPY million

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

Cash and deposits

54,863———

Trade receivables and accounts receivable forcompleted projects

8,455

—

—

—

(1) Government and municipal bonds

100

300

200

—

(2) Corporate bonds

—

—

—

—

(1) Government and municipal bonds

—

—

36

—

(2) Bonds (Corporate bonds)

—

—

—

824

(3) Others

—

—

—

861

Operating loans

22

36

19

8

Long-term loans

14

606

12

462

Cover Story

March 31, 2021

Securities and investment securities
Held-to-maturity debt securities
Sources ofCompetitive Advantage

Other securities with maturities

Bad debts

—

—

—

249

63,456

942

268

2,406

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

371,953———

70,415

—

—

—

1,634
—

817
—

1,634
—

—
—

—
—
—
154
—
444,158

—
—
—
5,267
—
6,084

294
—
—
174
—
2,103

—
6,734
7,002
3,603
2,183
19,524

Business Model

Total

USD thousand

March 31, 2022

Corporate GovernanceMateriality

Cash and deposits
Trade receivables and accounts receivable forcompleted projects
Securities and investment securities
Held-to-maturity debt securities(1) Government and municipal bonds(2) Corporate bonds
Other securities with maturities(1) Government and municipal bonds(2) Bonds (Corporate bonds)(3) Others
Long-term loans
Bad debts
Total

Data Section

Leopalace21 Integrated Report 2022

89

(4) Scheduled repayment amounts of bonds payable, long-term debt, lease obligations, and other interest-bearing debt subsequent to fiscal year end are as follows:
JPY million

March 31, 2022

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Short-term borrowings

—

—

—

—

—

—

Bonds

—

—

—

—

—

—

Long-term debt

53

62

73

30,084

97

111

Lease obligations

1,992

465

77

26

0

—

Total

2,046

528

150

30,11097

111

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

JPY million

March 31, 2021
Short-term borrowings

—

—

—

—

—

—

Bonds

—

—

—

—

—

—

Long-term debt

114

98

107

117

30,102

189

Lease obligations

3,133

1,178

276

70

19

—

Total

3,248

1,277

384

188

30,121

189

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

—

—

—

—

USD thousand

March 31, 2022
Short-term borrowings

—

—

Bonds

—

—

—

—

—

—

Long-term debt

438

513

597

245,808

793

913

Lease obligations

16,282

3,805

634

213

1

—

Total

16,720

4,319

1,231

246,021794

913(5) Matters concerning the breakdown of the fair value of financial instruments by level
The fair value of financial instruments is classified into the following three levels based on the observability and materiality of the inputs
used to calculate fair value.
Level 1 fair value: Fair value calculated based on quoted market prices for assets or liabilities for which such fair value is calculated in an
active market among the inputs used to calculate observable fair value.
Level 2 fair value: Fair value calculated using inputs other than Level 1 inputs to the calculation of observable fair value among the inputs
used to calculate observable fair value.
Level 3 fair value: Fair value calculated using inputs related to the calculation of unobservable fair value.
When multiple inputs that have a significant impact on the calculation of fair value are used, fair value is classified to the level with thelowest priority in the calculation of fair value among the levels to which each of those inputs belongs.
(a) Financial instruments carried on the consolidated balance sheet at fair value
JPY million

March 31, 2022

Level 1

Level 2

Level 3

Total

Securities and investment securities
Other securities

90

Government bonds, municipal bonds, etc.

35

—

—

35

Credits (corporate bonds)

—

806

—

806

Others

—

836

—

836

Total

35

1,642

—

1,678

Leopalace21 Integrated Report 2022

USD thousand

Level 1

Level 2

Level 3Total

Cover Story

March 31, 2022
Securities and investment securities
Other securities

293

—

—

293

—

6,588

—

6,588

Others

—

6,834

—

6,834

Total

293

13,422—

13,715

Sources ofCompetitive Advantage

Government bonds, municipal bonds, etc.
Credits (corporate bonds)(b) Financial instruments other than those recorded on the consolidated balance sheets at fair value
JPY million

March 31, 2022

Level 1

Level 2502—

Level 3

Total

Securities and investment securities
Held-to-maturity securities
Government bonds, municipal bonds, etc.

—

502

—

908

—

908

502

908

—

1,410

Long-term debt—

29,682—

29,682

Lease obligations

—

2,575

—

2,575

Total

—

32,257—32,257

Level 3Total

Business Model

Long-term loans
Total

USD thousand

Level 1

Level 2

Corporate GovernanceMarch 31, 2022
Securities and investment securities
Held-to-maturity securities
Government bonds, municipal bonds, etc.

4,103

—

—

4,103

—

7,421

—

7,421

4,103

7,421

—

11,524Long-term loans
Total
Long-term debt—

242,525—

242,525

Lease obligations—

21,040—21,040

Total—

263,566—

263,566

Long-term debt and lease obligations
The fair values of these items are determined using the discounted
present value method based on the sum of the principal and interest, plus an interest rate that takes into account the remaining termof the debt and credit risk. They are classified as Level 2 fair value.

Leopalace21 Integrated Report 2022

Data Section

Securities and investment securities
Government bonds are valued using quoted market prices. Since
government bonds are traded in active markets, their fair value
is classified as Level 1 fair value. On the other hand, bonds (corporate bonds) and other (subordinated beneficiary rights) held by
the Company are classified as Level 2 fair value because they aretraded infrequently in the market and are not considered quoted
prices in an active market.

Long-term loans
The fair values of long-term loans are categorized by period foreach credit risk under credit management. They are calculatedusing the discounted present value method based on the interest
rate obtained by adding a credit spread to the future cash flows
and an appropriate index such as the yield of government bonds.
They are classified as Level 2 fair value.

Materiality

Note:
Explanation of valuation methods used in the fair value measurement and on inputs related to the fair value measurement;91

8. Securities(1) On March 31, 2022 and 2021, information with respect to held-to-maturity debt securities for which market prices are available
is summarized as follows:
JPY million

Consolidated balance
sheet amount

Fair value

Government and municipal bonds

300

301

1

Corporate bonds

—

—

—

Others———Subtotal

300

301

1

Government and municipal bonds

200

200

(0)

Corporate bonds

—

—

—

March 31, 2022

Difference

Securities whose fair value exceeds the consolidatedbalance sheet amount:

Securities whose fair value does not exceed the consolidatedbalance sheet amount:

Others———Subtotal

200

200

(0)

Total

501

502

0

JPY million

Consolidated balance
sheet amount

Fair value

Government and municipal bonds

602

607

5

Corporate bonds

—

—

—

March 31, 2021

Difference

Securities whose fair value exceeds the consolidatedbalance sheet amount:

Others———Subtotal

602

607

5

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Subtotal

—

—

—

Total

602

607

5

Securities whose fair value does not exceed the consolidatedbalance sheet amount:

92

Leopalace21 Integrated Report 2022

USD thousand

Fair value

Difference

2,454

2,467

13

Corporate bonds

—

—

—

Others

—

—

—

2,454

2,467

13

March 31, 2022

Cover Story

Consolidated balance
sheet amount

Securities whose fair value exceeds the consolidatedbalance sheet amount:
Government and municipal bonds

Sources ofCompetitive Advantage

Subtotal
Securities whose fair value does not exceed the consolidatedbalance sheet amount:
Government and municipal bonds

1,641

1,635

(5)

Corporate bonds

—

—

—

Others———Subtotal

1,641

1,635

(5)

Total

4,095

4,103

7

Business Model(2) Investment securities classified as other securities as of March 31, 2022 and 2021 are as follows:
JPY million

Consolidated balance
sheet amount

Acquisition cost

Difference

—

—

—

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

March 31, 2022
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock

Others———Others———Subtotal

—

—

—

—

—

—

Government and municipal bonds

35

36

(0)

Corporate bonds

806

824

(17)

Others

836

857

(20)

Others———Corporate Governance

Bonds:

Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:
Stock
Bonds:

1,678

1,717

(39)

1,678

1,717

(39)

Materiality

Subtotal
Total

Leopalace21 Integrated Report 2022

Data Section

Note:
March 31, 2022
Unlisted shares of JPY 1,694 million, shares in unconsolidated subsidiary and associates of JPY 1,394 million, and investments in silent
partnership of JPY 111 million, are not included in the other securities given above, because they have no fair value and assigning them fairmarket prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) and the subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of non-recourse apartment loans that
financial institutions had loaned to clients as funds for paying construction charges to the Company.
93

JPY million

Consolidated balance
sheet amount

Acquisition cost

Difference

—

—

—

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Others———Subtotal

—

—

—

—

—

—

March 31, 2021
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock
Bonds:

Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:
Stock
Bonds:
Government and municipal bonds

36

36

(0)

Corporate bonds

—

—

—

Others———Others———Subtotal

36

36

(0)

Total

36

36

(0)

Note:
March 31, 2021
Unlisted shares of JPY 1,757 million, shares in unconsolidated subsidiary and associates of JPY 1,336 million, unlisted bonds (corporate
bonds and subordinate corporate bonds) of JPY 824 million, subordinate beneficiary rights to loans and accounts receivable in trust of JPY
861 million, and investments in silent partnership of JPY 113 million, are not included in the other securities given above, because they haveno fair value and assigning them fair market prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) and the subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of
non-recourse apartment loans that financial institutions had loaned to clients as funds for paying construction charges to the Company.

94

Leopalace21 Integrated Report 2022

USD thousand

Consolidated balance
sheet amount

Acquisition cost

Difference

Cover Story

March 31, 2022
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock

—

—

—

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Others———Subtotal

—

—

—

—

—

—

Bonds:

Sources ofCompetitive Advantage

Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:
Stock
Bonds:
293

296

(3)

Corporate bonds

6,588

6,734

(146)

Others

6,834

7,002

(168)

Others———Subtotal

13,715

14,034

(318)

Total

13,715

14,034(318)

Business Model

Government and municipal bonds

Corporate Governance

Note:
March 31, 2022
Unlisted shares of USD 13,846 thousand, shares in unconsolidated subsidiary and associates of USD 11,395 thousand, and investments insilent partnership of USD 913 thousand, are not included in the other securities given above, because they have no fair value and assigningthem fair market prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) andthe subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds for paying construction charges to the Company.
(3) Proceeds from sales of other securities and gain or loss on these sales for the years ended March 31, 2022 and 2021 are summarized as follows:
JPY million

Stock

Gain on sale in total

Loss on sale in total

60

0

—

Materiality

March 31, 2022

Proceeds from sale

Bonds:
Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Others

—

—

—

Total

60

0

—
Data Section

Leopalace21 Integrated Report 2022

95

JPY million

March 31, 2021

Proceeds from sale

Gain on sale in total

Loss on sale in total

5,151

4,065

114

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others

—

—

—

Stock
Bonds:

Others

—

—

—

Total

5,151

4,065

114

USD thousand

March 31, 2022

Proceeds from sale

Gain on sale in total

Loss on sale in total

490

4

—

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Others

—

—

—

Total

490

4

—

Stock
Bonds:(4) Investment in non-consolidated subsidiaries and associates included in investment securities of the consolidated balance
sheet is as follows:
JPY million

Investment securities (stocks)
Of which, investment in joint venture

9. Derivative Transactions(1) Derivative transaction not subjected to the application of hedge accounting
For the year ended March 31, 2022
None
For the year ended March 31, 2021
None(2) Derivative transaction subjected to the application of hedge accounting
For the year ended March 31, 2022
None
For the year ended March 31, 2021
None

96

Leopalace21 Integrated Report 2022

USD thousand

2022

2021

2022

1,394

1,336

11,395

94

83

773

JPY million

USD thousand

2021

2022

Cover Story

10. Main Properties(1) Breakdown of major property, plant and equipment
2022

3,266

3,303

26,68623,88724,097

195,176

Leopalace Resort Manenggon Hills Guam

20,331

19,412

166,123

Leopalace Power (solar power systems)

6,932

7,861

56,646

Sources ofCompetitive Advantage

Residential properties for rent
Head office and branches(2) Due to acceptance of national subsidies, the following reduction entry amount is deducted from the acquisition cost of relevant assets:
JPY million

USD thousand

2022

2021

2022

Machinery, equipment, and vehicles

155

155

1,266

Tools, instruments, and fixtures (other in non-current assets)

44

44

367

PurposeBusiness-use assets andshared assets

Location

Impairment loss
JPY million

USD thousand

105

865

0

5

Leased assets

04

Others (non-current assets)

0

2

Others (intangible fixed assets)

7

63

Others (intangible fixed assets) Elderly Care Business Division(located in Fujimi City, Saitama
Prefecture and other places)

3

30

118

971

Buildings and structures
Machinery, equipment andvehiclesTotal

assets were reduced to the recoverable amount, and the amountof the reduction was recorded as impairment loss.
The recoverable amount of business-use assets and sharedassets is measured according to the net selling price based on thevalue in use.

Materiality

The Companies recognized each property in domestic rental assets
as a unit, and group the overseas assets by managerial accounting
segmentation. In addition, assets owned by some consolidated
subsidiaries are grouped on a company basis.
For the domestic business, which has been in a continuous
operating loss, the book values of business-use assets and shared

Morizou Co. Ltd.
(Toda City, Saitama Prefecture)

Corporate Governance

Shared assets

Category

Business Model(3) The Companies recognize impairment loss on the following asset groups for the years ended March 31, 2022 and 2021:
March 31, 2022

Data Section

Leopalace21 Integrated Report 2022

97

March 31, 2021
PurposeCategory

Impairment loss

Location

JPY million

Rental assets (Apartment buildings and others, 18 units)

Building and Structures

Hotel

Land

Chigusa-ku, Nagoya City,
Aichi Prefecture

Rental assets(Serviced apartment)

Building and Structures

Sriracha District, Chonburi,
Thailand

Land

Land

Hakata-ku, Fukuoka City,
Fukuoka Prefecture, etc.

1,254
2,299
82
177
110

Others (non-current assets)

1

Shared assets

Others (non-current assets)

Elderly Care Business Division,
Koga-City, Ibaraki, etc.

OthersGoodwill

—

107

Total

The Companies recognized each property in domestic rental assets
as a unit, and group the overseas assets by managerial accounting
segmentation. In addition, assets owned by some consolidated
subsidiaries are grouped on a company basis.
The Companies wrote down book values of rental assets and a
hotel which were determined to be sold and rental assets whose
profitability significantly declined, to recoverable amount and recognized the reduced values as impairment losses.
Recoverable amount of rental assets and a hotel are measured
in their net realizable values.
For the domestic business, which has been in a continuous

8
4,041

operating loss, the book values of shared assets were reduced
to the recoverable amount, and the amount of the reduction wasrecorded as impairment loss.
The recoverable amount of shared assets is measured according to the net selling price based on the value in use.
In addition, for the goodwill posted when the Company
acquired Enplus Inc., the Company recorded all of the unamortizedbalance of the goodwill as impairment loss because profitability inthe original business plan examined at the time of acquisition was
no longer expected.

11. Bad Debts
Bad debts are claims as stipulated under Article 32, Paragraph 1, and Item 10 of the Regulation concerning Financial Statements. Bad debts
on March 31, 2022 and 2021 consist of the following:
JPY million

98

USD thousand

2022

2021

2022

Bad debts

70

70

577

Others

196

178

1,605

Total

267

249

2,183

Leopalace21 Integrated Report 2022

JPY million

USD thousand

2022

59,879
6,256
6,072
3,286
1,948
877
833
756
408
258
190
168
115
55
1,899
83,008(58,266)(18,142)(76,408)
6,599

51,292
10,260
5,627
2,957
3,754
260
720
962
455
184
262
164
118
84
1,283
78,390(51,274)(24,893)(76,167)2,222

489,249
51,116
49,617
26,852
15,919
7,170
6,810
6,183
3,336
2,112
1,553
1,379
945
457
15,523
678,227(476,073)(148,231)(624,305)
53,922

—
(14)
(14)
6,584

(20)
(17)
(38)
2,184

—
(121)
(121)
53,801

Corporate Governance2021

Business Model

2022

Sources ofCompetitive Advantage

Deferred tax assets:
Loss carried forward for tax purposes *(ii)Provision for losses related to repairs
Impairment loss
Retirement benefit liability
Provision for apartment vacancy loss
Allowance for doubtful accounts
Advances received
Provision for fulfillment of guarantees
Elimination of unrealized gain
Advances from customers
Excess amortization on software
Deposits received
Asset retirement obligations
Accounts payable - other
Others
Sub total
Valuation allowance for tax loss carryforwards *(ii)Valuation allowance for deductible temporary differences
Less: valuation allowance *(i)Total deferred tax assets
Deferred tax liabilities:
Provision for special depreciation
Fixed asset retirement expenses
Total deferred tax liabilities
Net deferred tax assets

Cover Story

12. Income Taxes(1) Significant components of deferred tax assets and liabilities as of March 31, 2022 and 2021 are as follows:

Materiality*Notes:(i)	The valuation allowance increased by JPY 240 million (USD 1,968 thousand) from the previous fiscal year. The increase was JPY 6,691
million (USD 54,673 thousand) in valuation allowance for loss carryforwards as a result of the Company’s effective statutory tax rate
being increased from 30.6% to 34.6%, whereas major decreases were JPY 4,779 million (USD 39,053 thousand) in valuation allowancefor provision for losses related to repairs, and JPY 2,029 million (USD 16,585 thousand) in valuation allowance for apartment vacancy loss
due to the easing trend of the impact of the COVID-19 and the improvement of property profitability.
(ii) Loss carryforwards for tax purposes and deferred tax assets carried forward by due date.
JPY million

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(i)

677

844

1,158

826

1,416

54,95559,879Valuation allowance

(677)

(844)

(1,158)

(826)

(842)

(53,916)(58,266)

Deferred tax asset

—

—

—

—

573

1,039

1,612*(ii)March 31, 2022

Data Section*Notes:(i)	Tax loss carryforwards are calculated by multiplying the statutory tax rate.
(ii)	Deferred tax assets of JPY 1,612 million are recorded for tax loss carryforwards of JPY 59,879 million (the amount multiplied by thestatutory tax rate).The Company does not recognize a valuation allowance for such tax loss carryforwards to the extent that it is deemed
recoverable based on projected future taxable income.

Leopalace21 Integrated Report 2022

99

JPY million

March 31, 2021

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(iii)

4,566

611

762

1,035

769

43,546

51,292

Valuation allowance(4,566)

(611)

(762)

(1,035)(767)(43,530)(51,274)

Deferred tax asset

—

—

—

—

2

15

18*(iv)*Notes:(iii)	Tax loss carryforwards are calculated by multiplying the statutory tax rate.
(iv)	Deferred tax assets of JPY 18 million are recorded for tax loss carryforwards of JPY 51,292 million (the amount multiplied by the statutory
tax rate).The Company does not recognize a valuation allowance for such tax loss carryforwards to the extent that it is deemed recoverable based on projected future taxable income.
USD thousand

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(v)

5,532

6,901

9,465

6,756

11,571

449,022489,249

Valuation allowance(5,532)(6,901)(9,465)(6,756)(6,886)(440,530)(476,073)

Deferred tax asset

—

—

—

—

4,684

8,491

13,175*(vi)March 31, 2022

*Notes:(v) Tax loss carryforwards are calculated by multiplying the statutory tax rate.
(vi)	Deferred tax assets of USD 489,249 thousand dollars are recorded for tax loss carryforwards of USD 13,175 thousand (the amount multiplied by the statutory tax rate).The Company does not recognize a valuation allowance for such tax loss carryforwards to the extent that
it is deemed recoverable based on projected future taxable income.
(2) Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate for the year
ended March 31, 2022 and 2021:
2022

Effective statutory tax rate

2021

34.6%

—

Impact of decrease in valuation allowances(65.1)—

Difference in tax rates between consolidated subsidiaries

(2.8)

—

Entertainment expenses and other items not permanently deductible forincome tax purposes

0.6—

Equalization of residential taxes

1.7

—

0.5

—

(30.5)—(Adjustment)

Others
Effective tax rate after application of tax effect accounting

Information concerning reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate isomitted, since net losses before tax were recorded in March 2021.
(3) Revision of deferred tax assets and deferred tax liabilities due to the change in income tax rates
As of August 10, 2021, the Company reduced its capital to JPY 100 million, which made the pro forma standard taxation of corporate
enterprise tax inapplicable. Consequently, the effective statutory tax rate used to calculate deferred tax assets and deferred tax liabilities
was changed from 30.6% to 34.6%. As a result of the change in tax rate, the amount of deferred tax assets (after deducting the amount ofdeferred tax liabilities) increased by JPY 475 million (USD 3,882 thousand) and income taxes-deferred decreased by the same amount.

100

Leopalace21 Integrated Report 2022

(4) The amount stated in the fiscal year ended March 2022

Deferred tax assets

USD thousand

2022

2021

2022

6,596

2,194

53,897

Cover Story

JPY million

Sources ofCompetitive Advantage(5) Information on significant accounting estimates for identified items
temporary differences and other adjustments in the future, it has
Deferred tax assets are recognized for the recoverability ofrecorded deferred tax assets.
scheduled deductible temporary differences and tax loss carEstimates of taxable income are based on future businessryforwards based on the Company’s estimate of future taxable
plans, the key assumptions of which are rent income, contractual
income from earnings. The Company recorded a deferred tax
adjustment of master lease rent and reduction of leasing manageasset of JPY 4,139 million (USD 33,823 thousand) in the fiscal
year ended March 31, 2022.
ment costs. The impact of the COVID-19 infection on our business
The Company has been experiencing a decline in occupancy rate
performance is limited, as both infection control measures anddue to the construction defects problem announced in April 2018
economic activities are progressing, and demand from foreign
and the impact of the COVID-19 infection in the fiscal year ended
nationals, which had been stagnant, will be recovering to the level
March 31, 2021. However, due to the continuation of drastic strucbefore the COVID-19 spread due to the easing of entry restrictions.
Since the recoverability of deferred tax assets depends ontural reforms, the Company returned to profitability for the first time
estimates of future taxable income, any change in the conditions
in four fiscal years since the fiscal year ended March 31, 2018.
or assumptions on which these estimates are based may have a
In the consolidated fiscal year ended March 2022, the Company
material effect on the amount of deferred tax assets in the consoldid not generate taxable income and has tax loss carryforwards.
Since the Company expects to generate taxable income before
idated financial statements for the fiscal year ending March 2023.

Business Model

JPY million

USD thousand

2021

2022

2022

Current portion of long-term debt, with average interest rate of 8.10%

53

114

438

Current portion of lease obligations, with average interest rate of 2.02%

1,992

3,133

16,282Long-term debt, due 2023 to 2027, with average interest rate of 14.41%

30,42930,615

248,626

569

1,544

4,655

33,04535,409270,002

Long-term lease obligations, due 2023 to 2027, with average interest rate of 2.70%
Total

Corporate Governance

13. Short-term Borrowings and Long-term Debt
(1) Short-term borrowings, long-term debt and lease obligations on March 31, 2022 and 2021 consist of the following:

Materiality

Note:
The average interest rates above are calculated in weighted average in terms of the fiscal year-end balance of the borrowings and debts.
Please note, however, that the current portion of lease obligations and lease obligations (net of the current portion) are recorded in the consolidated balance sheet in the amount before deducting the interest portion from total lease liabilities for certain consolidated subsidiaries,
and that such lease obligations are not included in the calculation of the average interest rate.
(2) The amounts of long-term debt and lease obligations (excluding their current portion) scheduled for repayment in five years
from fiscal year ended March 31, 2022 are as follows:

Data Section

JPY million
Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

Long-term debt

62

73

30,084

97

Lease obligations

465

77

26

0

Leopalace21 Integrated Report 2022

101

USD thousand
Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

Long-term debt

513

597

245,808

793

Lease obligations

3,805

634

213

1

(3) Assets pledged as collateral for short-term borrowings and long-term debt on March 31, 2022 and 2021 are as follows:
JPY million

Cash and deposits

USD thousand

2022

2021

99

126

2022

812

Real estate for sale

38

37

310

Others (current assets)

244

242

1,998

Buildings and structures

4,813

5,094

39,330Machinery, equipment, and vehicles

1

45

13

Land

24,98824,988204,171

Others (intangible fixed assets)

1,052

1,010

8,600

Investment securities

2,261

2,339

18,477

Others (investments and other assets)

103

100

849

33,60433,985274,565

Total(4) Liabilities with collateral at March 31, 2022 and 2021 are as follows:
JPY million

2021

2022

Current portion of long-term debt

USD thousand

2022

53

65

438

Long-term debt

30,42930,437

248,626

Total

30,48330,502

249,064

Note:
Within the assets pledged as collateral, cash and deposits, others (current assets) and JPY 35 million (USD 293 thousand) in investment
securities are pledged as collateral for investees of consolidated subsidiaries and lenders of client’s housing loans, and there are no liabilities
with collateral.
(5) Securities and investment securities which have been deposited with the Legal Affairs Bureau on March 31, 2022 and 2021 are
as follows:
JPY million

2022

2021

2022

Deposit for housing construction warranty

726

788

5,932

Advanced payment certificate in accordance with Payment Services Act

332

332

2,712

Deposit for operation stipulated in Building Lots and Buildings Transaction
Business Act

70

100

576

Deposit for business security under the Insurance Business Act

200

201

1,641

Deposit for housing defect warranty

214

109

1,755

2

2

19

Others102

USD thousand

Leopalace21 Integrated Report 2022

Cover Story

reference to job level and length of service.
Also, retirement allowances may be paid with a premium for
retired employees.
Certain consolidated subsidiaries have adopted a simplified
method in calculating the liability for retirement benefits andretirement benefit liabilities expense. Since the amount is immaterial, it is included in following notes based on the general rule.

Sources ofCompetitive Advantage

14. Retirement Benefit Plans(1) Outline of retirement benefit plans
The Companies have an unfunded defined benefit pension plan
and a defined contribution pension plan to provide for employees’
retirement benefits. The defined benefit plan is a lump-sum retirement distribution plan (unfunded, but certain plans are funded as
the Companies have adopted a retirement benefit trust for the
lump-sum retirement distribution plan), and the amounts of retirement benefits are provided mainly based on accumulated points in(2) Defined benefit pension plan(a) List of adjustments between the balances of retirement benefit obligations at the beginning and end of year are as follows:
JPY million

USD thousand

2022

2021

2022

Beginning balance of retirement benefit obligations

9,650

13,57678,849

983

1,159

8,036

39

48

326

Actuarial gains and losses accrued

(56)

68

(459)

Retirement benefits paid

(1,092)(742)(8,923)

Decrease due to a large number of leavers—(4,451)—Others

—

(8)

—

9,525

9,650

77,829

Closing balance of retirement benefit obligations

Business Model

Service cost
Interest cost

Corporate Governance(b) List of adjustments between the balances of pension assets at the beginning and end of year are as follows:
JPY million

USD thousand

2021

2022

Beginning balance of pension assets

—

4,874

—

Expected return on plan assets

—

28

—

Actuarial gains and losses accrued

—

(5)

—

Retirement benefits paid

—

(62)

—

Decrease due to large number of leavers—(4,834)—

Closing balance of pension assets

—

—

—

Materiality

2022(c) List of adjustments between the closing balances of retirement benefit obligations and pension assets and the liabilities andassets related to the retirement benefit posted in the consolidated balance sheet are as follows:
JPY million

USD thousand

2021

2022

Funded retirement benefit obligations

—

—

—

Pension assets

—

—

—

Unfunded retirement benefit obligations

9,525

9,650

77,829Net amount of the liabilities and assets posted in the consolidated balance sheet

9,525

9,650

77,829Liability for retirement benefit

9,525

9,650

77,829Net amount of the liabilities and assets posted in the consolidated balance sheet

9,525

9,650

77,829

Leopalace21 Integrated Report 2022

Data Section

2022

103

(d) Retirement benefit expenses and breakdown amounts are as follows:
JPY million

Service cost

USD thousand

2022

2021

2022

983

1,159

8,036

Interest cost

39

48

326

Expected return on plan assets

—

(28)

—

Amortization of actuarial gain or loss

53

434

439

Retirement benefit expenses related to the defined benefit plan

1,077

1,614

8,802

Premium severance pay (Note)

—

2,479

—

Loss on partial termination of retirement benefit plan (Note)

—

427

—

Note:
Premium severance pay and loss on partial termination of retirement benefit plan are recorded as special severance allowance and retirement benefit cost in extraordinary losses.
(e) Items posted as the remeasurements of defined benefit plans (before tax effects) are as follows:
JPY million

USD thousand

2022

2021

2022

Actuarial gains/losses

(111)

(403)

(908)

Total

(111)

(403)

(908)

(f) Cumulative items posted as the remeasurements of defined benefit plans (before tax effects) are as follows:
JPY million

USD thousand

2022

2021

2022

Unrecognized actuarial gains/losses

31

142

256

Total

31

142

256

(g) Matters concerning pension assets are as follows:
None(h) Main calculation basis for actuarial assumptions are as follows (shown as weighted average):
Discount rate

2022

2021

0.03 – 0.64%

0.03 – 0.81%(3) Defined contribution pension plan
The necessary contribution amount for the defined contribution plan was JPY 368 million (USD 3,010 thousand) and JPY 408 million for theyears ended March 31, 2022 and 2021, respectively.

104

Leopalace21 Integrated Report 2022

Cover Story

15. Stock Options(1) Stock option expenses recorded relating to stock options:None(2) Gain recorded relating to unused and expired share subscription rights
None2016 Stock Option

2017 Stock Option

Sources ofCompetitive Advantage(3) Outline of stock options and activities are as follows:(a) Outline of stock options:2018 Stock Option

8 Directors(excluding outside Directors)
and 15 executive officers of
Leopalace21 Corporation, and 9
Directors of subsidiaries

8 Directors(excluding outside Directors)
and 16 executive officers of
Leopalace21 Corporation, and 15
Directors of subsidiaries

Type and numberof stock options*

Common stock: 252,700 shares

Common stock: 282,800 shares

Common stock: 348,000 shares

Grant dateAugust 18, 2016

September 14, 2017

September 14, 2018

Vesting conditions

Not applicable vesting conditions
are specified

Not applicable vesting conditions
are specified

Not applicable vesting conditions
are specified

Vesting period

Not applicable period ofservice is specified

Not applicable period ofservice is specified

Not applicable period ofservice is specified

Exercise period

From August 19, 2016 toAugust 18, 2046

From September 15, 2017 to
September 14, 2047

From September 15, 2018 toSeptember 14, 2048

Business Model

Title and numberof grantees

8 Directors(excluding outside Directors)
and 12 executive officers of
Leopalace21 Corporation

Corporate Governance

Note:
Reported by converting to the number of shares

Materiality
Data Section

Leopalace21 Integrated Report 2022

105

(b) Stock option transactions:
Number of stock options as of the fiscal year ended March 31, 2022 is reported by converting to the number of shares.
Number of stock options:2016 Stock Option

2017 Stock Option

2018 Stock Option

Non-vested (number of shares)
Previous fiscal year-end

—

—

—

Granted———Forfeited———

Vested———Outstanding

—

—

—

109,500

121,100

146,600———

Exercised

18,70021,40027,900Forfeited

—

400

—

90,80099,700118,7002016 Stock Option

2017 Stock Option

2018 Stock Option

1

1

1

Average stock price at exercise

144

144

144

Fair value at the grant date

547

528

332

Vested (number of shares)
Previous fiscal year-end
VestedOutstanding

Price information (JPY):
Exercise price(4) Estimate method of fair value of stock options:
None(5) Estimate method of the number of stock options vested:
Due to the difficulty in rationally estimating the actual number of stock options that will be forfeited in the future, the actual number of forfeited stock options is adopted in the estimate.

16. Gain on Sale of Property, Plant and Equipment
Gain on sale of non-current assets for the years ended March 31, 2022 and 2021 are as follows:
JPY million

Buildings and structures
Machinery, equipment, and vehicles
Land
Others (Property, plant and equipment)
Total

106

Leopalace21 Integrated Report 2022

USD thousand

2022

2021

2022

82
—
34
3
120

12
0
212
—
225

671
—
281
27
981

JPY million

USD thousand

2022

2021

2022

—
—
—
—

4
13
0
18

—
—
—
—

Sources ofCompetitive Advantage

Buildings and structures
Land
Others (Property, plant and equipment)
Total

Cover Story

17. Loss on Sale of Property, Plant and Equipment
Loss on sale of non-current assets for the years ended March 31, 2022 and 2021 are as follows:

18. Loss on Retirement of Non-current Assets
Loss on disposal of non-current assets for the years ended March 31, 2022 and 2021 are as follows:
JPY million

2022

2021

2022

37
—
—
8
0
45

52
3
7
11
38
114

307
—
—
66
1
375

Business Model

Buildings and structures
Machinery, equipment, and vehicles
Leased assets
Others (Property, plant and equipment)
Others (Intangible fixed asset)
Total

USD thousand

Corporate Governance

19. Loss Related to Repairs
For the year ended March 2022
None
For the year ended March 2021, repair costs and incidental expenses are incurred as repair works to the defect properties constructed by
the Company.

20. Reversal of Provision for Losses Related to Repairs
For the fiscal year ended March 2022, it was due to a reduction in unit repair cost as a result of efforts to place batched orders, use in-housemanpower resources for repair works, and agreements with property owners to change repairing methods; due to a decrease in the number
of apartment buildings because of reviewed defects judgment criteria and demolition agreements with property owners.

Materiality

For the fiscal year ended March 2021
The reversal of provision was made reflecting a lowered unit repair cost placing batch orders and by employing a new construction method.

Data Section

Leopalace21 Integrated Report 2022

107

21. Special Severance Allowance
For the year ended March 2022
None
For the year ended March 2021, the special severance allowance was paid to the employees who left the Company by applying for the voluntary retirement program.

22. Rental Properties
The Companies possesses rental apartments in major cities andregions throughout Japan. Some subsidiaries possess rental
residences and rental buildings. For the years ended March 31,
2022 and 2021, income arising from these rental properties are
JPY 504 million (USD 4,123 thousand) and JPY 502 million, andimpairment losses are JPY - million (USD - thousand) and JPY

3,843 million, respectively.
Furthermore, the changes in book value of rental properties
during the years ended March 31, 2022 and 2021, and the fairvalue as of March 31, 2022 and 2021 and increase (decrease)during the period are as follows:

March 31, 2022
JPY million

Balance as of April 1, 2021

Increase/(Decrease)

Balance as of March 31, 2022

Fair value as of March 31, 2022

8,092

(1,171)

6,920

9,754

March 31, 2021
JPY million

Balance as of April 1, 2020

Increase/(Decrease)

Balance as of March 31, 2021

Fair value as of March 31, 2021

13,886(5,793)

8,092

10,859March 31, 2022
USD thousand

Balance as of April 1, 2021

Increase/(Decrease)

Balance as of March 31, 2022

Fair value as of March 31, 2022

66,117(9,571)56,54679,700Notes:(i)	Book values recorded on the consolidated balance sheets are the amount after deducting accumulated depreciation and accumulated
impairment loss from acquisition cost.
(ii)	For the years ended March 31, 2022 and 2021, the main decreases are due to the sale of rental properties of JPY1,178 million (USD 9,625
thousand) and JPY 2,085 million, and impairment losses of JPY - million (USD - thousand) and JPY 3,843 million, respectively.
(iii) Fair values as of the end of the fiscal years are calculated by the Company mainly based on “Real-estate appraisal standards”.

23. Asset Retirement Obligations
Disclosure is omitted due to immateriality in the consolidated financial statements.

108

Leopalace21 Integrated Report 2022

Cover Story

24. Supplemental Information to the Statement of Changes in Equity(1) Main changes in equity for the year ended March 31, 2022(a) Shares issued and treasury stocks for the year ended March 31, 2022 are as follows:
SharesApril 1, 2021

Increase

Shares issued
Common stock

Type of shares

Decrease

March 31, 2022

329,389,515——

329,389,515

Total

—

—

329,389,515

561,610—68,000493,610

Total

561,610—68,000493,610Sources ofCompetitive Advantage

329,389,515

Treasury stock
Common stock **Note:
A decrease of 68 thousand shares in treasury stock is due to exercise of subscription rights to shares.
(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2022 are as follows:
Number of shares issued upon exercise of SARs

Outstanding as of March 31, 2022

Class of sharesissued upon
exercise of SARs

April 1, 2021

Increase

Decrease

March 31, 2022

JPY million

USD thousand

5th series SAR*

Common stock

159,748,700——

159,748,700

215

1,762

SARs as stock option

—

—

—

—

—

141

1,157

Total

—

159,748,700——

159,748,700

357

2,919

Business Model

Type

Corporate Governance*Note:
An increase of 159,748 thousand shares in the 5th series of stock acquisition rights in the year ended March 31, 2022 is due to the issuanceof stock acquisition rights.
(c) Matters concerning dividends for the year ended March 31, 2022 are as follows:
None
There are no dividends with record dates in the consolidated fiscal year ended March 2022 but with effective dates in the following fiscal year.
(2) Main changes in equity for the year ended March 31, 2021
(a) Shares issued and treasury stocks for the year ended March 31, 2021 are as follows:
April 1, 2020

Increase

Decrease

March 31, 2021

Shares issued
Common stock *(i)244,882,515

84,507,000—

329,389,515

Total

244,882,515

84,507,000—

329,389,515

Treasury stock
Common stock *(ii)771,210—

209,600

561,610

Total

771,210—

209,600

561,610Materiality

SharesType of shares

Data Section*Notes:(i)	An increase of 84,507 thousand shares in common stock is resulting from the third party allotment with the payment due on
November 2, 2020.
(ii) A decrease of 209 thousand shares in treasury stock is due to exercise of subscription rights to shares.

Leopalace21 Integrated Report 2022

109(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2021 are as follows:Type

5th series SAR*
SARs as stock option
Total

Outstanding as ofMarch 31, 2021

Class of sharesissued upon
exercise of SARs

April 1, 2020

Increase

Decrease

March 31, 2021

JPY million

Common stock
—
—

—
—
—

159,748,700—
159,748,700———

159,748,700—
159,748,700

215
172
388

Number of shares issued upon exercise of SARs

*Note:
An increase of 159,748 thousand shares was from new shares issuance in exercise of new share acquisition rights.
(c) Matters concerning dividends for the year ended March 31, 2021 are as follows:
None
There were no dividends with record dates in the consolidated fiscal year ended March 2021 but with effective dates in the following fiscal year.

25. Leased Assets(1) Finance lease transactions
The Company primarily leases furniture and electronic appliances
to apartments in their leasing business. Leased assets are depreciated in the straight-line method over the lease-term of respective
assets as their useful life, with no residual value.

(2) Operating lease transactions
Future minimum lease payments related to non-cancelable operating leases subsequent to March 31, 2022 and 2021 are as follows:

JPY million

March 31, 2022
Due within one year
Due after one year
Total

Future lease payments Prepaid lease payments

216,521(216,396)
88,810(88,701)
305,332(305,098)

332
(332)
282
(282)
614
(614)

Differences

216,189(216,064)
88,528(88,419)304,718(304,484)

JPY million

March 31, 2021
Due within one year
Due after one year
Total

Future lease payments Prepaid lease payments

227,409(227,272)
91,075(90,858)
318,485(318,130)

538
(538)
611
(611)
1,150
(1,150)Differences

226,871(226,733)
90,464(90,246)
317,335(316,980)

USD thousand

March 31, 2022
Due within one year
Due after one year
Total

Future lease payments Prepaid lease payments

1,769,111(1,768,093)
725,638(724,747)
2,494,750(2,492,840)

2,712(2,712)2,306(2,306)
5,019(5,019)Note:
Future minimum lease payments fixed under master lease agreements in leasing business are shown in parentheses.
110

Leopalace21 Integrated Report 2022

Differences

1,766,398(1,765,380)
723,331(722,440)
2,489,730(2,487,820)

JPY million

Guarantee obligations to financial institutions forcustomers who have a home mortgage
Total

2022

2021

2022

392
392

430
430

3,208
3,208

accordance to accounting policies adopted in the preparation of
consolidated financial statements. The reportable segment profits(or losses) represent operating profits (or losses). Inter-segment
sales and transfers are based on prevailing market prices.
(3) Changes in Reportable Segments
As described in 3. Summary of Significant Accounting Policies (23)Accounting Standard for Revenue Recognition (Basis for recording significant revenues and expenses), the Company adopted“Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 31, 2020) and other related accounting standards
from the beginning of the fiscal year ended March 2022, andchanged accounting method for revenue recognition, as well as themeasurement method of profit or loss by business segment.
As a result of this change, compared with the previous method,
net sales and income of the Leasing Business increased by JPY
1,325 million (USD 10,827 thousand) and JPY 2,905 million (USD
23,743 thousand), respectively, in the consolidated fiscal year
ended March 2022.

Business Model
Corporate Governance(2) Calculation Method for Sales, Profits or Losses, Assets,
Liabilities, and other Items by Reportable Segment
The accounting methods for reportable segments are in

USD thousand

Sources ofCompetitive Advantage

27. Segment Information(1) Overview of Reportable Segments
The Company’s reportable segments are the components for which
separate financial information is available, and whose operating
results are reviewed regularly by the board of directors in order todetermine allocation of resources and assess segment performance.
The Company comprises three segments, the Leasing Business,
the Elderly Care Business and the Other Businesses.
The Leasing Business operations comprise the leasing andmanagement of apartment rooms and other properties, repair
works, broadband internet service, rent obligation guarantee,
company residence agency business, solar power generation business, and small-amount short-term insurance business, real estate
brokerage, running serviced apartments and serviced offices andothers. The Elderly Care Business operates elderly care facilities.
The Other Businesses operate resort facilities in Guam, financing
business and others.

Cover Story

26. Guarantee Obligations
Guaranteed obligations as of March 31, 2022 and 2021 are as follows:

Materiality
Data Section

Leopalace21 Integrated Report 2022

111

(4) Information Regarding Sales, Profits (Losses), Assets, Liabilities, and other Items by Reportable Segment for the years ended
March 31, 2022 and 2021 are as follows:
JPY million

Reportable segment

March 31, 2022
Sales
Rent income
Ancillary service income
MaintenanceRental guarantee
Company housing agency fee
Roof lease solar power generation
Construction subcontracting
Other
Sales from contracts with customer
Furniture insurance
Other sales
Sales to customers
Inter-segment sales and transfers
Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property, plant and equipment,
and intangible fixed assets

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment Total

Adjustments*(i)Consolidated
Total *(ii)278,740
53,51735,315
4,559
788
2,775
3,145
456
379,299
3,744
3,744
383,04376
383,120
7,719
63,393

—
—
—
—
—
—
—
14,25814,258——14,258—14,258
(789)
3,261

—
—
—
—
—
—
—
1,064
1,064
—
—
1,064
249
1,314
(1,668)21,369278,740
53,51735,315
4,559
788
2,775
3,145
15,779394,6213,744
3,744
398,366
326
398,692
5,261
88,024

—
—
—
—
—
—
—
—
—
—
—
—
(326)
(326)
(3,486)
57,406

278,740
53,51735,315
4,559
788
2,775
3,145
15,779394,6213,744
3,744
398,366—
398,366
1,774
145,430

6,480

32

1,087

7,600

1,752

9,352

1,596

5

22

1,624

513

2,137

JPY million

Reportable segment

March 31, 2021
Sales
Sales to customers
Inter-segment sales and transfers
Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property, plant and equipment andintangible fixed assets

112

Leopalace21 Integrated Report 2022

Adjustments

Consolidated
Total

408,959747
409,706(21,658)
96,239

—
(747)
(747)
(7,524)65,469408,959—
408,959(29,182)
161,708

1,097

8,601

1,815

10,416

154

2,386

608

2,994

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment Total

391,964143
392,108(19,385)
71,80014,524—
14,524
(720)
3,557

2,469
603
3,073
(1,551)
20,881

7,456

47

2,204

26

USD thousand

March 31, 2022

Segment Total

Adjustments*(i)Consolidated
Total *(ii)2,277,478
437,269
288,549
37,257
6,440
22,67425,701
3,730
3,099,102
30,59630,5963,129,699
625
3,130,324
63,073517,960

—
—
—
—
—
—
—
116,498
116,498——
116,498—
116,498(6,453)
26,645

—
—
—
—
—
—
—
8,695
8,695
—
—
8,695
2,042
10,738(13,631)
174,605

2,277,478
437,269
288,549
37,257
6,440
22,67425,701
128,925
3,224,296
30,59630,5963,254,893
2,667
3,257,560
42,988719,210

—
—
—
—
—
—
—
—
—
—
—
—
(2,667)(2,667)(28,487)
469,0442,277,478
437,269
288,549
37,257
6,440
22,67425,701
128,925
3,224,296
30,59630,5963,254,893—
3,254,893
14,5001,188,255

52,947263

8,887

62,09814,31776,415

13,04642

186

13,275

4,192

17,467

Business Model

Other
Businesses

Sources ofCompetitive Advantage

Sales
Rent income
Ancillary service income
MaintenanceRental guarantee
Company housing agency fee
Roof lease solar power generation
Construction subcontracting
Other
Sales from contracts with customer
Furniture insurance
Other sales
Sales to customers
Inter-segment sales and transfers
Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property, plant and equipment,
and intangible fixed assets

Elderly Care
Business

Cover Story

Reportable segment
Leasing
Business

JPY million

Inter-segment eliminations
Corporate expenses*
Total

Corporate GovernanceNotes:(i) Breakdown of adjustments is as follows:
Segment profit (loss)
USD thousand

2022

2021

2022

153
(3,639)(3,486)169(7,693)(7,524)

1,252(29,740)(28,487)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are not part of reportable segments.
Materiality

Segment assets
JPY million

Surplus operating funds, long-term investment funds andassets not belonging to any reportable segments

USD thousand

2022

2021

2022

57,406

65,469469,044

Increase in non-current assets and intangible assets

Capital expenditures which do not belonging to any reportable segments

Data Section

JPY million

USD thousand

2022

2021

2022

513

608

4,192

(ii) Segment profit (loss) is adjusted to operating profit (loss) on the consolidated statement of income.

Leopalace21 Integrated Report 2022

113

Related information
1. Products and services
Information concerning products and services is omitted, since similar information is reported in “27. Segment Information”.
2. Geographic area
(1) Sales
Information concerning sales by geographic area is omitted, since more than 90% of sales reported in the consolidated statement ofincome are generated in Japan.
(2) Plant, property, and equipment
March 31, 2022
JPY million
Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

44,212

20,3310010764,652

March 31, 2021
JPY million
Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

49,316

19,412

512

667

143

70,052Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

361,239

166,1232

0881

528,247

March 31, 2022
USD thousand

3. Major customers
Information concerning sales to major customers is omitted, since no sales to any particular customer exceed 10% of sales reported in the
consolidated statement of income.
Information concerning impairment loss on non-current assets by reportable segments
March 31, 2022
JPY million

Impairment loss

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

115

3

—

—

118

March 31, 2021
JPY million

Impairment loss

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

3,950

8

82

—

4,041

March 31, 2022
USD thousand

Impairment loss

114

Leopalace21 Integrated Report 2022

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

940

30

—

—

971

Cover Story

Information concerning goodwill amortization and unamortized balance by reportable segments
March 31, 2022
JPY million

Goodwill amortization
Balance

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

7
6

—
—

—
—

—
—

7
6

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

6
12

—
—

—
—

—
—

6
12

March 31, 2021
Sources ofCompetitive Advantage

JPY million

Goodwill amortization
Balance

Note:
The Company posted impairment loss of JPY 107 million for goodwill in the Leasing Business.
March 31, 2022

Goodwill amortization
Balance

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

58
51

—
—

—
—

—
—

58
51

Business Model

USD thousand

Corporate Governance

Information concerning gain on negative goodwill by reportable segments
For the years ended March 31, 2022 and 2021.
None

28. Revenues from Contracts with Customers
Revenues are not separately presented for revenues derived from contracts with customers and other revenues.
The amount of revenue from contracts with customers is presented in “27. Segment information (4) Information Regarding Sales, Income(Losses), Assets, Liabilities, and other Items by Reportable Segment”.

Materiality
Data Section

Leopalace21 Integrated Report 2022

115

29. Amounts per Share
The following tables set forth the net assets and net income per share of common stock for the years ended March 31, 2022 and 2021.
JPY

Net assets
Net income (loss) attributable to shareholders of the parent
Diluted net income per share

USD

2022

2021

2022

3.25
36.04
32.23

(25.83)(84.88)
—

0.027
0.294
0.263

Notes:(i)	Diluted net income per share is not indicated for the year ended March 31, 2021 because net loss per share is indicated, although there
are potential common shares with dilutive effects.
(ii) Basis of computation of basic and diluted net income per share for the year ended March 31, 2022 and 2021 are as follows:
JPY million

Net income (loss) per share
Net income (loss) attributable to shareholders of the parent
Amount not attributable to common stock
Net income (loss) attributable to common stock
Basic weighted-average shares during the year (Thousands of shares)
Diluted net income per share
Adjustments of net income (loss) attributable to shareholders of the parent
The number of increase in common stock (Thousands of shares)
Dilutive securities without dilutive effects and excluded from calculationof diluted net income per share

USD thousand

2022

2021

2022

11,854—
11,854
328,888(23,680)—(23,680)
279,00396,858—96,858328,888—
38,927———38,927—Note:
As stated in 4.Additional Information (1) Application of Accounting Standard for Revenue Recognition (Basis for recording significant
revenues and expenses), the Company has adopted the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March
31, 2020) and other related standards and followed the transitional treatment stipulated in the proviso of paragraph 84 of the AccountingStandard for Revenue Recognition.
As a result, net assets per share decreased by JPY 6.26 (USD 0.051), net income per share increased by JPY 8.83 (USD 0.072), anddiluted net income per share increased by JPY 7.90 (USD 0.065) for the fiscal year ended March 2022.

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Leopalace21 Integrated Report 2022

Cover Story

30. Related Party Transactions
For the year ended March 31, 2022 and 2021.
None
31. Business Combinations
Business Combination under common control
None

Sources ofCompetitive Advantage

32. Other
The following tables set forth quarterly information for the year ended March 31, 2022.
Cumulative period

Net sales (JPY million)

First quarter

Second quarter

Third quarter

Full-year

10,244

199,550

297,470

398,366

Income (loss) before income taxes (JPY million)

(329)

1,945

7,572

9,693

Net income (loss) attributable to shareholders of the parent (JPY million)

(957)

647

5,865

11,854

Net income (loss) per share (JPY)(2.91)

1.97

17.83

36.04

Net income (loss) per share (JPY)
Cumulative period

First quarter

Second quarter

Third quarter

Full-year(2.91)

4.88

15.87

18.21

First quarter

Second quarter

Third quarter

Full-year

819,059

1,630,446

2,430,514

3,254,893(2,668)15,89561,87579,204

Net income (loss) attributable to shareholders of the parent(USD thousand)(7,822)

5,291

47,92596,858Net income (loss) per share (USD)(0.024)(0.016)

0.146

0.294

First quarter

Second quarter

Third quarter

Full-year(0.024)

0.040

0.130

0.149

Accounting period

Net income (loss) per share (USD)

Corporate GovernanceNet sales (USD thousand)Income (loss) before income taxes (USD thousand)Business Model

Accounting period

Materiality
Data Section

Leopalace21 Integrated Report 2022

117

33. Subsequent Events(1) Important company split
The Company determined, under the approval of the Board of Directors on August 26, 2022, to transfer the Company’s Elderly Care
Business to its wholly owned subsidiary, Azu Life Care, Inc.(hereinafter “Azu Life Care, Inc.”), effective on November 1, 2022, by means ofan absorption-type company split (hereinafter “Company Split”).
(a) Purpose of the Company Split
In the environment surrounding the nursing care industry, the number of people requiring nursing care is increasing due to the super aging
society, and the related market is expanding. On the other hand, combined with the increase in the number of facilities and the difficulty
in recruiting caregivers, competition among companies in the industry is intensifying.
In this environment, the purpose of this transfer is to establish a flexible organizational structure to provide better services to customers in a timely manner by integrating businesses and accelerating decision-making.
(b) Business description and book value of the assets and liabilities to be split as of March 31, 2022
Business description
Elderly Care Business
Assets to be split
JPY 1,805 million (USD 14,754 thousand)JPY 780 million (USD 6,374 thousand)Liabilities to be split(c) Method of the Company Split
The Company will be the splitting company and Azu Life Care will be the succeeding company in the Company Split.
(d) Overview of succeeding company as of March 31, 2022
Name
Azu Life Care Co., Ltd.
Address
1-12-8, Hon-cho, Nakano-ku, Tokyo, Japan
Hiroshi Takeda, Representative Director
Representative
Capital
JPY 80 million (USD 653 thousand)
JPY (1,977) million (USD -16,158 thousand)Net assets
Total assets
JPY 895 million (USD 7,319 thousand)Business description
Elderly Care Business(e) Effective date of the Company Split
November 1, 2022
(f) Details of allocation of shares in the Company Split
Since the Company Split will be conducted between the Company and its wholly owned subsidiary, no shares or other consideration willbe allocated upon the Company Split.
(g) Overview of the planned accounting treatment
The transaction will be accounted as a transaction under the common control based on “Accounting Standard for Business Combinations”
and “Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures”.

118

Leopalace21 Integrated Report 2022

Cover Story(2) Transfer the shares in the important subsidiary
The Company determined, under the approval of the Board of Directors on September 9, 2022, to transfer the whole shares in Morizou Co.,
Ltd. (hereinafter “Morizou”), a consolidated subsidiary of the Company, and the transfer has completed on October 1, 2022.
(a) Reasons for the share transfer
The Company has built a capital relationship with Morizou and created synergy effects in the construction business since March 2015.
The Company has decided to transfer its shares in Morizou considering optimal allocation of management resources throughout theCompany group in the future and for the further growth of Morizou.

Sources ofCompetitive Advantage(b) Name of the purchaser
GRANDES, Inc.
(c) Effective date of the share transfer
October 1, 2022

Business Model(d) Name and business description of the subsidiary to be transferred and relationship with the Company
Name
Morizou Co., Ltd.
Design, construction and supervision of custom-built detached houses; Renovation and maintenanceBusiness description
Relationship with the Company	The Company has business relationship with Morizou in referral of customers. The Company lends
funds to Morizou.

Corporate Governance(e) Number of shares transferred, value and profit/loss of the transfer, and shareholding after the transfer
170,000 shares
Number of owned shares to transfer
JPY 1
Value of the transfer
Profit/loss of the transfer	Extraordinary loss of about JPY 30 million (USD 245 thousand) will be recorded on a consolidated basis for the first half of fiscal year ending March 2023.
Number of owned shares after the transfer
0 shares

Materiality
Data Section

Leopalace21 Integrated Report 2022

119

120

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Cover Story

Sources ofCompetitive Advantage
Business Model

Corporate GovernanceMateriality

Data Section

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Sources ofCompetitive Advantage
Business Model

Corporate GovernanceMateriality

Data Section

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Sources ofCompetitive Advantage
Business Model

Corporate GovernanceMateriality

Data Section

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Sources ofCompetitive Advantage
Business Model

Corporate GovernanceMateriality

Data Section

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Sources ofCompetitive Advantage
Business Model

Corporate GovernanceMateriality

Data Section

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Sources ofCompetitive Advantage
Business Model

Corporate GovernanceMateriality

Data Section

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Leopalace21 Integrated Report 2022

Data Section

Data Compilation
Social Key Performance Indicators
The Company engages in sustainable management initiatives under the leadership of the Sustainability Committee, which is chaired by thesustainability officer, in collaboration with departments and Group companies. The Sustainability Committee reports on the progress of initiatives in line with the five themes of the Basic Sustainability Action Policy based on the quantitative targets set by each department and Group
company, and moves initiatives to the next phase of the PDCA cycle. For the fiscal year 2021, we updated the material issues identified for theprevious fiscal year considering the current socioeconomic climate as well as the Company’s own business conditions, and set KPIs for eachmateriality. Key topics and KPIs are approved by the Sustainability Committee, and these are periodically reported to the Board of Directors,
thereby conducting sustainability activities.

Governance
FY2019FY2021

FY2020Outside directors

7

6

5

Female directors

2

1

1

Directors’ compensation (JPY million)

228

170

160

Directors (excluding outside directors)

131

56

60

Audit & Supervisory Board members(excluding outside ASB members)

13

16

18

Outside directors and ASB members

83

97

82

Employee Composition (on a non-consolidated basis)
FY2019Total

Men

FY2021

FY2020
Women

Total

Men

Women

Total

Men

Women

No. of employees

5,814

4,035

1,779

4,169

2,671

1,498

4,454

2,400

2,054

No. of regular employees

5,461

3,830

1,631

3,864

2,499

1,365

3,561

2,241

1,320

353

205

148

305

172

133

893

159

734

38 years, 39 years,
8 months 3 months
10 years,
11 years,
6 months 10 months

36 years,
4 months
7 years,
6 months

39 years,
0 months
10 years,
6 months

40 years, 37 years,
0 months 3 months
12 years,
7 years,
0 months 10 months

40 years,
3 months
11 years,
3 months

41 years,
6 months
13 years,
1 month38 years,
1 month
8 years,
1 month

Women

Total

No. of temporary hires
Average age
Average cumulative years ofserviceWork-Life Balance (on a non-consolidated basis)
FY2019Total

FY2021

FY2020
Men

Women

Total

Total number of working hours
per month

166.3

160.3

165.3

Overtime work hours per month

13.3

11.4

11.3

No. of employees with
reduced working hours
No. of employees onchildcare leave

132

Men

Men

Women

277

15

262

216

3

213

228

9

219

268

37

231

246

47

199

122

23

99

Rate of paid leave usage

84.3%

83.1%

87.1%

90.5%

92.4%

86.1%

81.7%

79.6%

85.6%

Workforce turnover rate

12.4%

11.2%

15.1%

31.4%

35.9%

20.8%

13.1%

11.8%

16.0%

Ratio of new hires

22.1%

17.3%

28.3%

16.7%

18.2%

14.3%

22.6%

17.3%

29.3%

Leopalace21 Integrated Report 2022

Diversity (Consolidated (excluding Guam), Non-consolidated basis but with Leopalace Smile for employees with disabilities)
FY2019
Men

Women

Total

Men

Women

Total

No. of employees with disabilities (annual average)

154.0

107.9

103.1

% of employees with disabilities (annual average rate)

2.26%

2.33%

2.73%

Men

Women

No. of mandatory retirees that have been rehired

21

17

4

22

15

7

19

12

7

No. of foreign national employees

366

143

223

218

89

129

180

63

117

26

20

6

22

16

6

19

14

5

No. of people newly employed

523

229

294

329

149

180

275

115

160

Gender ratio for new hires

100.0%

44.7%

55.3%

100.0%

45.3%

54.7%

100.0%

41.8%

58.2%

No. of managers

1,671

1,549

122

1,061

987

74

815

753

62

Gender ratio for managers

100.0%

92.7%

7.3%

100.0%

93.0%

7.0%

100.0%

92.4%

7.6%

Support for Employees Seeking to Obtain Qualifications
FY2019FY2021

266

170

179

144

69

78

13

6

7

109

95

94

Community Contributions
FY2020

FY2021

2,309

1,002

0

Of which, in vicinity of existing properties

0

0

0

Of which, in vicinity of construction sites

2,309

1,002

0

Total sum of donations (JPY thousand)

3,708

1,998

1,073

111

0

76

No. of cleanup campaign participants

No. joining observation tours and
OTJ training at Leopalace Smile

Real estate broker

636

Rental property manager

403

General insurance solicitor(basic course/fire insurance course)

500

Architect (first-class, second-class)

207

Building construction management engineer(1st Grade, 2nd Grade)
Certified skilled worker of financial planning(1st Grade, 2nd Grade)

165
190

Land surveyor, Assistant land surveyor

19

Care worker

687

Care support specialist

185

Home-visit care worker (1st Grade, 2nd Grade)

308

Efforts to Reduce Environmental Impact
FY2021FY2019FY2020CO2 emissions from the use ofelectricity and gas use (t-CO2)

13,624

9,350

8,528

Head office and branches

6,343

4,647

3,499

Azumi En nursing care facilities

4,899

4,395

5,029

Leopalace hotels

2,381

307

0

CO2 emissions from vehicle gasoline(t-CO2)

3,172

2,212

1,988

FY2019FY2020

FY2021

No. of labor accidents

56

46

33

Scope 3 CO2 emissions (t-CO2)

692,463

693,388748,745

Accidents requiring time off work

21

19

14

Category 1 (purchased materials)

10,898

5,850

83

Accidents not requiring time off work

35

27

19

Category 2 (capital goods)

12,692

9,621

5,041

5,701

4,931

4,217

663,171

672,987

739,403

Materiality

Labor Safety and Health(People)Corporate Governance

FY2019Certified Employees (as of March 2022)

Business Model

No. of employees using support for
obtaining qualifications
No. of employees using support systemfor obtaining specified qualifications
No. of employees in program for
language skills improvement
No. of employees awarded an
incentive payment for obtaining
Takken qualification

FY2020Sources ofCompetitive Advantage

No. of foreign national managers

Cover Story

Total

FY2021

FY2020Category 3 (electricity-related)

Stakeholder Communication Initiatives

Category 6 (business travel)
FY2020

FY2021

No. of property owner briefing sessions

381

87

0

No. of dialogue with institutional investors

204

95

103

Category 7 (employee commuting)
Category 13 (electricity and gas
use by tenants in rental housing)

Leopalace21 Integrated Report 2022

Data Section

FY2019133

Data Section

Leasing Business Data
(Units)Units Under Management
The number of units under management forms theincome foundation for the Leasing Business, and at theend of fiscal year 2021, that number stood at 567,314
after two years of decline. The number of units undermanagement decreased in all regions, including greater
metropolitan Tokyo.

FY2019FY2021

FY2020

Hokkaido

13,866

13,55013,390

Tohoku35,62335,32735,099Kita-Kanto

40,49440,43740,260Tokyo metro area

171,080

170,320

167,446
39,793

Hokuriku-Koshinetsu

39,981

39,943

Chubu

88,08687,75687,030Kinki

81,01180,85979,796

Chugoku

39,41539,39039,010Shikoku

14,736

14,736

14,714

Kyushu-Okinawa

51,50651,35550,776

Total

575,798

573,673

567,314

FY2019FY2020

FY2021(%)

Fiscal Year-End Occupancy Rates by Region
Occupancy rates increased in all regions year-on-year
due to implementation of regional strategies, deepening
relationships with existing corporate customers,
strengthening relationships with real estate agents, andother measures to improve occupancy, and due to the
reduced impact of COVID-19.

73.1

69.8

Tohoku

84.7

83.0

85.1

Kita-Kanto

77.2

77.3

82.0
85.3

Tokyo metro area

84.9

81.8

Hokuriku-Koshinetsu

79.1

80.6

83.1

Chubu

81.9

80.3

84.8

Kinki

81.5

81.8

85.4

Chugoku

87.0

86.5

88.0

Shikoku

83.4

82.6

84.4

Kyushu-Okinawa

87.4

86.5

88.3

Total

80.8

78.9

81.2

Occupied Units by Contract TypeThe fiscal year 2021 saw an increase in both corporate
and individual contracted units year-on-year, due tocontinued improvement in sales to corporate customers
expected to generate stable, long-term earnings, thereduced impact of COVID-19, and other measures.
Meanwhile, immigration restrictions caused a decreasein the number of international students in Japan, which
resulted in a reduced number of student contracts
year-on-year.

Number of Leasing Sales Offices andSales Personnel
In the fiscal year 2021, we reduced the number of
directly-managed Leopalace Center and Leopalace
Partners offices by strengthening relationships withreal estate agents. We have switched directions fromreducing personnel numbers to increasing them, and at
the end of the fiscal year 2021 had 1,064 employees.

134

Leopalace21 Integrated Report 2022

77.9

Hokkaido

FY2019Corporate
Of which, foreign
nationals (%)
Individuals
Of which, foreign
nationals (%)
Students
Of which, foreign
nationals (%)
Total

FY2021

FY2020

Units

%

Units

%

Units

%

272,566

57.0

266,81456.9

280,811

58.2

—

6.0

—

5.3

—

5.2

165,594

34.6

164,44135.1

167,380

34.7

—

5.4

—

5.6

—

5.8

40,135

8.4

37,5488.0

34,597

7.2

—

35.2

—

32.4

—

26.1

478,295 100.0

468,803 100.0

FY2019482,788 100.0

FY2020

FY2021

No. of leasing sales offices

295

239

206

Of which, Leopalace Centers
Of which, Leopalace Partners(franchisees)
No. of leasing sales personnel

189

139

109

106

100

97

1,339

1,047

1,064

Ancillary Equipments and Services
FY2019FY2021

FY2020314,776

315,196

Security cameras installed (cumulative, buildings)

14,671

14,74914,758

No. of incoming calls to Services Centers382,518

380,343

235,791

Of which, inquiries

266,644

237,564

119,702

Of which, maintenance-related

92,762

114,988

93,872

Of which, complaints or claims

23,112

27,791

22,217—

13,69739,338

No. of web-based agreement (cumulative since April 2020)

Monthly Occupancy Rates for the Past 10 Years

Sources ofCompetitive Advantage

313,382

Cover Story

Security systems installed (cumulative, units)

(%)

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

FY2012

81.77

82.18

82.69

82.53

82.90

83.13

82.59

82.55

82.29

83.39

84.48

84.81

FY2013

83.32

83.67

83.69

83.50

83.84

84.28

84.23

84.31

84.12

85.61

86.92

87.47

FY2014

86.00

86.03

85.96

85.63

85.78

86.33

86.14

86.10

85.69

87.24

88.65

89.29

FY2015

87.88

87.61

87.59

87.32

87.26

87.70

87.26

87.14

86.89

88.38

89.80

90.53

FY2016

88.97

88.55

88.60

87.95

87.78

88.31

87.50

87.41

86.97

88.41

90.18

91.66

FY2017

90.51

90.28

90.55

89.75

89.88

90.21

89.73

89.69

89.44

90.83

92.43

93.72

FY2018

92.82

92.76

92.10

90.45

89.41

88.40

87.24

86.38

85.26

85.38

85.57

84.33

FY2019

82.35

81.95

81.40

80.67

80.21

80.07

79.49

79.21

78.91

80.19

81.82

83.07

FY2020

81.40

79.91

79.43

78.56

78.18

78.09

77.46

77.09

77.07

78.16

79.60

81.72

FY2021

80.65

80.32

80.91

80.59

80.53

81.13

80.70

80.58

80.45

81.14

82.62

85.10

Corporate GovernanceMay

Business Model

Apr*Occupancy rate = The number of contracted units (excluding the ones for which the settlement procedure is completed following the contract termination) divided by number of units under management.

(%)

Ratio of General Contracts andMonthly Contracts Over 10 Years

Monthly contracts

82.9

17.1

FY201385.8

14.2

FY201488.4

11.6

FY201589.8

10.2

FY201690.0

10.0

FY201791.1

8.9

FY201894.1

5.9

FY201993.2

6.8

FY202093.9

6.1

FY2021

93.6

6.4

Leopalace21 Integrated Report 2022

Data Section

FY2012

Materiality

Ratio of monthly contracts have been declining overthe past 10 years, while the proportion of more stableleasing contracts is increasing in general contracts
without a fixed contract period increasing from 82.9%
in the fiscal year 2012 to 93.6% in the fiscal year 2021.

General contracts

135

Data Section(JPY million)

Orders

FY2019After the discovery of the construction defects problem,
we suspended accepting orders for new apartments andput our efforts into following up with property owners,
which resulted in a sharp 95.2% drop in apartment andother orders year-on-year.

Building categories
4,852

2,546

123

Elderly care facilities

156

0

0

Stores & commercial space

280

0

0

Custom-built homes bysubsidiary Morizou

2,526

3,381

2,669

0

0

0

7,814

5,927

2,792

Apartments

Solar power systems
Total

Wealth Management Offices and Personnel
In accordance with the business portfolio changes in thefiscal year 2020, the Wealth Management Department
was established under the Leasing Business Division tostrengthen ties with property owners and restore trust,and it took over the development project function formerly handled by the Building Contract Sales Department.
Branches have been set up in various regions in order tocarefully follow up with property owners.

FY2021

FY2020

FY2021

No. of offices

65

No. of sales personnel

214

Elderly Care Business Data
(Facilities)

Number of Facilities
We have positioned elderly care as a strategic business,and our plan is to stabilize these operations in order tobetter handle Japan’s aging population. At the end of
March 2022, we had a total of 87 facilities, a number
unchanged since the end of March 2019.

FY2019FY2021

FY2020Fee-based nursing homes

21

21

21

Day-care services,
Short-stays

64

64

64

Group homes

2

2

2

Total

87

87

87

(Utilization rate, %)Utilization Rate
The utilization rate at fee-based nursing homes,
group homes, and short-stay facilities remains high at
roughly 90%. We are focusing on day-care services andshort-stay facilities, and while the impact of the spreadof COVID-19 continued into the fiscal year 2021, theutilization rates remained relatively stable.

136

Leopalace21 Integrated Report 2022

FY2019FY2020

FY2021Day-care services

72.8

67.1

65.9

Short-stays

95.6

92.1

91.1

Fee-based nursing homes &group homes

92.4

93.0

89.4

External Environment(Thousand units)

New housing starts in the fiscal year 2021 increased 6.6% year-on-year.
Construction of rental units increased for the first time in five years to
330,000 units, a 9.2% increase year-on-year. Meanwhile, the number ofunits under 30 square meters (mainly for single occupancy) dropped to
50,000 units, a 6.9% decrease from the previous year.

FY2019FY2020

FY2021

Rental housing

335

303

331

Of which, under 30m2

53

53

50

Other

549

509

535

Total

884

812

866

Cover Story

Number of New Housing Starts

Sources ofCompetitive Advantage

Source: H ousing starts statistics, the Ministry of Land, Infrastructure, Transport,
and Tourism(Thousand households)

Number of Households
The declining birth rate and aging population ofJapan is expected to result in decreased household
numbers from 2025. However, the number ofsingle-person households is expected to continue toincrease until 2030.

2020

2025

2030

2035

2040

2010

2015

16,785

18,41819,342

19,960 20,254 20,233 19,944

2,060

2,021

2,009

1,879

1,781

1,681

1,584

2,999

2,987

2,830

2,795

2,705

2,558

2,429

6,745

7,157

7,479

7,774

7,809

7,577

6,968

4,980

6,253

7,025

7,512

7,959

8,418

8,963

10,26910,758

11,101

11,203

11,138 10,960

10,715

14,474

14,342

14,134

13,693

13,11812,465

11,824

4,535

4,770

5,020

5,137

5,141

5,074

4,924

Other

5,779

5,044

4,510

4,123

3,833

3,583

3,350

Total

51,84253,332

54,107

54,116 53,484

52,31550,757

Married couple
Married couple
with child(ren)Single parent
with child(ren)Business Model

Single-personhouseholds
Of which,under age 25
Of which,age 25–34
Of which,age 35–64
Of which,age 65 or older(projection) (projection) (projection) (projection) (projection)

Corporate GovernanceSource: Household projections for Japan (2019), the National Institute of Population and Social Security Research

Number of Vacant Homes in Japan
Number of vacanthouses for rent
(thousand units)
Houses for rent
(thousand units)
Ratio of vacanthouses (%)

1993

1998

2003

2008

2013

2018

2,336

2,619

3,520

3,675

4,127

4,292

4,327

14,015

15,691

16,73017,166

17,77018,51919,065

14.3

14.3

17.4

17.6

18.8

18.8

18.5

Source: Housing and Land Survey (2018), the Ministry of Internal Affairs and Communications*Ratio of vacant homes = number of vacant housings for rent / (number of vacant housings for rent + houses for rent)

Materiality

With concentration of population in urban centers,
the number of vacant homes, particularly in rural
areas, is increasing. According to the Housing andLand Survey of Japan, the number of vacant rental
properties stands at 4.3 million, or roughly one inevery five houses are vacant. In order to operate insuch a harsh business environment, we must improve
the added value of apartments under management.

1988(Ten thousand people)

Projected Future Population of Japan

2030

2035

2040

2010

2015

2020

Age 0–14

1,680

1,595

1,503

1,407

1,321

1,246

1,194

Age 15–64

8,103

7,735

7,509

7,170

6,875

6,494

5,978

Age 65–74

1,517

1,752

1,742

1,497

1,428

1,522

1,681

Age 75 or older

1,407

1,627

1,867

2,180

2,288

2,260

2,239

Unknown
Total
Proportion age 75 orolder (%)

(projection) (projection) (projection) (projection)

Data Section

The population of Japan peaked in 2008 and has
been declining ever since. The population is expected
to fall below 120 million to 119.13 million in 2030.
Meanwhile the elderly population aged 75 or overis expected to increase until 2030, meaning thatthe proportion of people over the age of 75 is also
gradually increasing.

2025

98
12,806 12,709 12,532 12,254 11,913 11,522 11,092
11.0

12.8

14.8

17.8

19.2

19.6

20.2

Source: Annual Report on the Ageing Society 2022, Cabinet Office

Leopalace21 Integrated Report 2022

137

Data Section

Corporate Profile
Corporate Data

Directors and Audit & Supervisory Board Members(As of March 31, 2022)(As of June 29, 2022)

Company Name:

Leopalace21 Corporation

Head Office:	2-54-11 Honcho, Nakano-ku, Tokyo 164-8622
TEL: +81-3-5350-0001 (Main phone number)
Established:

August 17, 1973

Common stock:

JPY 100 million

Operations:	Construction, leasing and sales of apartments,
condominiums, and residential housing;development and operation of resort facilities;
broadband business; and elderly care business,
etc.
Number of Employees:	4,356 (consolidated basis)
3,589 (non-consolidated basis)

Director
Bunya Miyao
President and CEO
Director	Mayumi Hayashima
Naomichi Mochida
Shinji Takekura
Akio Yamashita
Jin Ryu
Director (Outside)	Akira Watanabe
Yutaka Nakamura
Takumi Shibata
Kan Ishii
Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Member (Outside) Jiro Yoshino
Full-time Audit & Supervisory Board Member
Kenichiro Samejima
Audit & Supervisory Board Member (Outside)
Takao Yuhara
Audit & Supervisory Board Member
Yoshitaka Murakami

Major Shareholders (Top 10) (As of March 31, 2022)
Number of Shares(thousands of shares)

Percentage of
Outstanding Shares

1 Chidori Godo Kaisha

84,50725.69

2 Ardisia Investment, Inc.

50,581

15.37

3 The Master Trust Bank of Japan, Ltd. (Trust Account)

24,470

7.44

4 Noriyasu Shimada

13,045

3.96

5 STATE STREET BANK AND TRUST COMPANY 505103

9,389

2.85

6 MSIP CLIENT SECURITIES

6,334

1.92

7 Stockholding Association for Leopalace21’s Apartment Owners

6,115

1.85

8 Stockholding Association for Leopalace21’s Business Connection

5,706

1.73

9 GOLDMAN SACHS INTERNATIONAL

3,967

1.20

10 JP JPMSE LUX RE J.P. MORGAN SEC PLC EQ CO

3,859

1.17

Shareholder Name (honorific titles are omitted)

Notes: 1. At the Ordinary General Shareholders’ Meeting held on June 29, 2021, amendments to the Articles of Incorporation were made and the number of shares authorized was increased by 250,000,000 shares to
750,000,000 shares, effective that day.
2. Of the shares held by The Master Trust Bank of Japan, Ltd. (Trust Account) as of March 31, 2022, those held in trust accounts as part of trust bank operations were 10,206 thousand shares.
3. The above percentage of outstanding shares is calculated excluding treasury stock.
4. The Company confirmed that an absorption-type merger with UH Partners 2 as the surviving company and Ardisia Investment, Inc. as the non-surviving company was conducted on March 31, 2022, and that all
shares of the Company held by Ardisia Investment were transferred to UH Partners 2 as a result of the submission of a Statement of Changes and a Statement of Large-Volume Holdings on April 7, 2022.

Corporate Data (As of March 31, 2022)
Number of shares authorized: 750,000,000
Number of shares outstanding: 329,389,515
Number of shareholders:

50,972

Listing:	Prime Market of the Tokyo Stock Exchange
Administrator of shareholder registry:
Sumitomo Mitsui Trust Bank, Limited

Shareholder Composition (As of March 31, 2022)
Securities companies

Treasury stockBusiness corporations
and other legal entities

Individuals and others

Financial institutions

Foreign corporations

1.27%

42.87%
9.27%*Percentage figures have been adjusted.

138

Leopalace21 Integrated Report 2022

0.15%

27.97%

18.47%

Number of Apartment Rooms under Management and Domestic Leasing Sales Offices by Region(As of March 31, 2022)
Number of franchised sales offices
Number of directly managed sales offices

Number of managed rooms

567,314 units

Cover Story

Total number ofmanaged rooms

Total number of
directly managed sales offices

103 offices
5,927
Okinawa

3
1

2
5

13,390
Hokkaido

Sources ofCompetitive Advantage

Total number offranchised sales offices

97 offices
39,79335,0996
9

TohokuHokuriku-Koshinetsu
79,7969
740,2603
6

Kinki

Chugoku
44,84912
17

Business Model

39,01059Kita-Kanto

15
9
Kyushu167,446

87,030Shikoku

3
4
Chubu

Corporate Governance

14,714

26
23

13
13

Tokyo metro area

Share Price and Trading Volume (As of March 31, 2022)
Trading Volume

Share Price(Thousand shares)

300

60,000200

40,000100

20,000Materiality(JPY)

Data Section

0

0

Apr
2021

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2022

Feb

Mar

Leopalace21 Integrated Report 2022

139

Leopalace21 Corporation
2-54-11 Honcho, Nakano-ku, Tokyo 164-8622, Japan
TEL: +81-3-5350-0001 (Main Line)
http://eg.leopalace21.com/©Leopalace21 Corporation 2022
Printed in Japan