2016
AnnualAnnualReport
Report2016
Leopalace21 Corporation

31, 31,
2016
2016
ForForthethefiscalfiscal
year
year
ended
ended
March
March

Annual Report 2016

GLOBALGLOBALVISIONVISION
forfor

EXPANDINGEXPANDING
VALUE
VALUE

CORPORATE PHILOSOPHY“Creating New Value”
1. We keep a close eye on modern-day needs,
and strive to create new value in our own unique way,
through flexible thinking and dynamic, inclusive teamwork.
2. We are only happy if our customers are happy.
We are constantly working to improve our products,
services, and technologies and to grow as a company.
3. We provide new value throughout society

Hotels & Resort
Business

as a leading company within the industry,
to help create a more comfortable and affluent society.

PROFILE
Leopalace21 has established a unique business model fusing
two core businesses, the Construction Business, which
involves constructing apartments aimed mainly at singleperson households, and the Leasing Business, which involves
renting units of apartments we manage after they are built.
Through efforts to strengthen the profitability of the Leasing
Business, Leopalace21 is moving forward with theestablishment of a “stock-based business model,” which
generates stable profits from renting apartments it manages.
At the same time, our portfolio extends to the Elderly Care
Business, Hotels & Resort Business, and Other Businesses.
In our International Business, we are expanding globallywith a focus on Asia.
In these ways, Leopalace21 is a one-stop provider in Japanand overseas of a wide range of real estate services.

International
Business

Leopalace21: Who We Are

Elderly Care
Business
Business Model and CompetitivenessLeasing
Business

Initiatives for Creating Value

Expanding globally with a focus on Asia
by harnessing the real estate know-how
we developed in Japan

Initiatives for Supporting Corporate Value

Construction
Business
Other Businesses(Solar Power Generation,
Small-amount,
Short-term Insurance)

Data Compilation

Leopalace21 Corporation / Annual Report 2016

1

EDITORIAL
RIAL POLRIAPOLICYOL Y
We publish an integrated report that combines an annual

er comprehension, the report includes macro-economic

report with corporate social responsibility (CSR) report-

data relating to our businesses, and the “Dataing. The purpose of this report is to enable management

Compilation” section enables readers to understandto communicate its message to all our stakeholders. We

trends to date. We take care to explain what we present

seek to present our management strategy, priority mea-

in ways that are readily understandable so that the reportsures, an overview of business conditions, etc. as well asserves as an effective communication tool that reaches

inform readers about our CSR activities.

our many stakeholders.

This report covers the fiscal year from April 1, 2015

In this report, the main focuses are on what we arethrough March 31, 2016 (fiscal year 2015). The scope isdoing to create value in the medium- and long-term andLeopalace21 Corporation and its consolidated subsidiar-our initiatives to reinforce the effectiveness of our corpo-

ies in Japan and overseas. Our aim is to publish to therate governance. It is our hope this report will help our

extent possible the latest information available as of the

stakeholders obtain a greater understanding of the

publication date. With the aim of promoting deeper read-Company.

CONTENTS
Leopalace21: Who We Are

Business Model
and CompetitivenessPresident Eisei Miyama’s message to
stakeholders contains core information for this integrated report, alongwith our framework for creating value
and results, and the transition of ourbusiness model over time.

LEOPALACE21 VALUE CREATIONThis section is on our business model,
our greater point of differentiation,and it explains advantages we think
will enable us to prevail over rivals.

4

TEN-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS 6
BUSINESS MODEL TRANSITION8TO OUR STAKEHOLDERS

10REFERENCE GUIDELINES

BUSINESS ENVIRONMENT AND COMPETITIVENESS

16

OUR BUSINESS MODEL

24• ISO26000• Global Reporting Initiative’s (GRI) fourth-generation (G4) of sustainability reporting guidelines

Forward-looking
g Statements
S
Statements made in thiss annual report with respect to plans, strategies and future performance that are not historical facts are forward-looking
orw d-looking sta
statementseminvolvingg risks andnd unce
un rtainties.
Leopalace21 cautions thatt a number
numof factors could cause actual results to differ materially from such statements due to a numberr oof factors includ
including, but not limite
ted to, general
economic conditions in Leop
opalace21’s markets; demand for, and competitive pricing pressure on, Leopalace21’s products and services
s in the marketplac
marketplace;ace; Leopalace21
21’s ability to continue
to win acceptance for its produ
ducts and services in these highly competitive markets; and movements of currency exchange rates.

2

Leopalace21 Corporation / Annual Report 2016

Leopalace21: Who We Are

Initiatives for Creating Value
Special Feature:

Business Overview
28

AT A GLANCE

42

Construction Business Strategy

32

LEASING BUSINESS

44

International Business Strategy

36

CONSTRUCTION BUSINESS

46

Elderly Care Business Strategy

38

ELDERLY CARE BUSINESS

48

Strategy to Motivate Women to
Aim Higher at Work

HOTELS & RESORT BUSINESS

49

40

OTHER BUSINESSES

50

TOPICS

51

Business Model and CompetitivenessLeasing Business Strategy

DIALOGUE ON LEOPALACE21’S
CORPORATE GOVERNANCE

Initiatives for Creating Value

Initiatives for Supporting Corporate Value
Basic CSR Action Policy

TOWARD INCREASING LEOPALACE21’S
CORPORATE VALUE
52
CORPORATE GOVERNANCE

58

BUSINESS AND OTHER RISKS62

CSR ISSUES TO BE TACKLED AND
OUR VALUE CHAIN
64

PROVIDING HIGH-QUALITY SERVICES ANDSUPPORTING AFFLUENT LIVING
69
CREATING PLEASANT WORK ENVIROMENTS AND
DEVELOPING DIVERSE HUMAN RESOURCES 71
CONTRIBUTING TO LOCAL COMMUNITIES74

CREATING AN ENVIRONMENTALLYFRIENDLY SOCIETY

76

Initiatives for Supporting Corporate Value

Leopalace21 and CSR

ENGAGING IN SOUND, CONSTRUCTIVE
COMMUNICATION WITH STAKEHOLDERS 68

LEOPALACE21’S MANAGEMENT PLAN
66
AND CSR ACTIVITIES

Data Compilation
78

CORPORATE HISTORY88

DATA COMPILATION82

CORPORATE PROFILE90

Leopalace21 Corporation / Annual Report 2016

Data Compilation

FINANCIAL STATEMENTS

3

LEOPALACE21 VALUE CREATIONTaking into account social issues relating to housing, Leopalace21 delivers value that addresses social issues by harnessing our competitive advantages as a total solutions provider on matters involving real estate.

Elderly Care
Business

Business Environment• A growing elderly cohort and low
fertility rate
• Increasing concentration of
population in large cities

Hotels & Resort
Business• Diversifying lifestyles• Globalization of people, goods, andcurrencies• Greater responsibility to care forthe environment• Establishment of corporate
governance code

International
Business

Housing-related
Social Issues and Needs
Other Businesses(Solar Power Generation,
Small-amount,
Short-term Insurance)• Housing responsive to diversifying
lifestyles and family makeup• Housing arrangements that enablepeople living alone, seniors, andforeigners to form connections withlocal communities• Effective use of land

Five Basic CSR Action Policies• Housing that promotes safe, secureliving styles• Providing high-quality services and supporting
affluent living• Housing with built-in environmental
features• Contributing to local communities• Creating pleasant work environments anddeveloping diverse human resources

Corporate
Philosophy

4

Leopalace21 Corporation / Annual Report 2016

Corporate Codeof Ethics

Leopalace21: Who We Are

Leasing
Business
Business Model and Competitiveness

Deliver value
to stakeholders• Provide living spaces where tenants
can live in safety and comfort andcustomize them to their own tastes

Initiatives for Creating Value

Leopalace21’s
Competitive
Advantages• Propose land-use ideas in concert
with the needs of property owners• Provide nursing-care facilities
where seniors can enjoy theirremaining years in safety and comfort• Supply oversea resorts with facilities• Provide total support for overseas
assignments

Initiatives for Supporting Corporate Value

Construction
Business• Creating an environmentally friendly society• Engaging in sound, constructive communication
with stakeholders
Data Compilation

Corporate
GovernanceCompliance

Leopalace21 Corporation / Annual Report 2016

5

TEN-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS
For the years ended March 31’07/3 FY2006
Net sales
Leasing Business
Construction Business
Elderly Care Business
Hotels & Resort Business
Other Businesses
Cost of sales
Selling, general and administrative expenses
Operating income (loss)
Leasing Business
Construction Business
Elderly Care Business
Hotels & Resort Business
Other Businesses Adjustments
EBITDA (Operating income + depreciation)
Net income (loss)’08/3 FY2007’09/3 FY2008’10/3 FY2009¥

631,608
277,163316,117
5,345
7,140
25,842474,71380,88776,007
7,031
74,614308(2,628)(3,318)80,56637,358¥672,973
302,731327,540
11,173
6,071
25,456
511,053
90,516
71,402
3,036
73,267
1,261(1,116)(5,046)76,565342¥

733,235
334,560
359,154
7,952
5,610
25,956589,833
93,24450,156(1,538)70,112(1,538)(805)(16,072)
55,9399,951¥

620,376
342,316
237,0628,812
6,734
25,451
570,749
79,354(29,727)(47,875)
29,744(1,994)(1,324)(8,278)(23,432)(79,075)¥

454,819
185,784
53,159¥493,956
170,155
49,710¥467,300
146,442
44,188¥396,51170,97961,318¥63,308(15,930)(17,018)¥

11,745
148(26,779)¥

62,843(10,048)(33,885)¥(12,990)(8,889)15,281¥

1,054.99
234.6850.00¥

1,036.43
2.15
80.00

¥

967.40
63.54
30.00

¥

466.76(521.91)—

At year-end:
Total assets
Net assets
Interest-bearing debt
Cash flow:
Cash flow from operating
Cash flow from investing
Cash flow from financing
Amounts per share: (Yen)Net assets
Net income (loss)
Cash dividend
Ratio:
Units under management

388,500

442,025

506,742

Average annual occupancy rate (%)

92.84

92.36

88.51

82.25

Orders received (Millions of yen)

362,493

463,044

337,883

250,247

37.0
24.8
8.6
21.3
0.3
7,409

33.4
0.2
0.1
3,720.9
0.3
8,678

31.3
6.4
2.1
47.2
0.3
9,926

17.9
(72.8)(18.3)—
0.9
8,582

Equity ratio (%)
Return on equity (ROE)(%)
Return on assets (ROA) (%)
Payout ratio (%)
Debt/equity ratio (%)
Number of employees

551,773(Notes) 1. U.S. dollar amounts are translated from yen at the rate of ¥112.68 = U.S. $1, the approximate rate prevailing at March 31, 2016.
2. Return on equity (ROE) = Net income/average net assets during the fiscal year x 100
3. Return on assets (ROA) = Net income/average total assets during the fiscal year x 100
4. Debt/equity ratio = Interest-bearing debt/(net assets – non-controlling interests)
5. In this report, net income attributable to shareholders of the parent is stated as “net income.”

Net Sales

Operating Income (Loss)/ Operating Margin

Total Assets/ ROA(Millions of yen)

(Millions of yen)(%)

(Millions of yen)(%)

800,000

80,00016

500,000

10

60,00012

400,000

8

300,000

6

40,0008
200,000

4

20,0004
100,00020

0

600,000

400,000

200,00000

0−40,000’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Operating Income (Loss) (left axis)

6

Leopalace21 Corporation / Annual Report 2016−20

−8
’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3

Operating Margin (right axis)

Total Assets (left axis)

ROA (right axis)

’11/3 FY2010

Leopalace21: Who We Are(Thousands of
U.S. dollars)(Millions of yen)

’12/3 FY2011’13/3 FY2012’14/3 FY2013’15/3 FY2014’16/3 FY2015’16/3 FY2015¥

459,436
380,307
62,913
8,845
6,228
1,142
403,572
51,278
4,585
5,248
4,309
(855)
(1,663)(2,453)
10,632
1,588¥

454,222
383,574
53,369
9,482
6,657
1,137
396,508
50,299
7,413
8,687
2,747
(742)
(1,005)(2,272)
13,097
13,335¥

471,089
388,768
63,135
10,1717,571
1,442
401,51055,906
13,673
15,5672,954(610)(1,118)(3,119)19,666
15,229¥483,188399,316
61,312
10,608
8,951
2,999
407,433
60,992
14,763
20,532210(606)(1,289)(4,084)
22,49914,507¥

511,424410,552
74,16010,798
11,427
4,485
422,604
67,82320,996
22,7603,339(1,354)(697)(3,051)
30,611
19,432$ 4,538,736
3,643,527
658,147
95,835
101,41739,8083,750,484
601,912186,340
201,995
29,632(12,017)(6,192)(27,078)
271,665
172,453¥

298,274
33,04043,858¥

264,783
33,831
51,654¥

261,649
58,151
49,026¥

287,459
104,860
37,227¥308,274
126,473
44,487¥

326,890
146,21150,824$ 2,901,054
1,297,583
451,047¥(28,337)
13,143(15,890)¥(3,174)(3,537)
7,245

¥

6,069
(6)
9,148

¥

15,584(6,929)8,848¥

15,715(17,550)
1,747¥

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

196,171(98,396)
12,201¥

195.91(261.03)—¥199.739.40—¥

274.8074.50—¥

398.7867.17—¥

481.0555.19—¥

556.06
73.92
10.00

$

4.93
0.66
0.09

556,207546,204

548,912554,948

561,961

80.09

81.16

82.94

84.58

86.57

87.95

80,33850,01973,006

81,13987,39586,43911.1(78.7)(11.8)
—
1.3
7,114

12.8
4.8
0.6
—
1.5
6,165

22.2
29.0
5.1
—
0.8
6,277

36.5
18.7
5.5
—
0.4
6,758

41.0
12.5
4.9
—
0.4
7,339

44.7
14.3
6.1
13.5
0.3
7,846

EBITDA

Interest-bearing Debt

(Millions of yen)(%)

(Millions of yen)

(Millions of yen)

200,000

40

100,000

80,000150,000

30

75,000100,000

20

50,00050,00010

25,000

0

0

0

−80

−25,000

Net Assets/ ROE——$

767,125

Initiatives for Supporting Corporate Value

571,656

Initiatives for Creating Value

484,390356,606
107,821
7,785
6,491
5,686
448,392
59,605(23,607)(30,094)
11,971(1,509)(1,974)(1,999)(17,155)(40,889)

Business Model and Competitiveness

¥

—
—
—
—
—
—

60,000

Data Compilation

40,00020,0000’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Net Assets (left axis)

ROE (right axis)
Leopalace21 Corporation / Annual Report 2016

7

BUSINESS MODEL TRANSITION
Macro-Environment and Business Performance Trends
Economic Expansion

Global Recession（Pre-Lehman Brothers Collapse in 2008）（Post-Lehman Brothers Collapse）

Construction and Leasing Businesses：Full-scale Operation of Synergy Model

Stagnation of Synergy Model

Master lease system: up to 30 years, rent fixed for initial “ten years,” renewable every two years thereafter(Billionsof yen)Net Sales and Operating Income

800

Leasing Business (left axis)
Construction Business (left axis)
Operating income (loss)(right axis)
Others (left axis)

Restrained orders at
Construction Business

600

400

200

0

-200
Each fiscal year
ends onMarch 31

2003

2004

2005

2006

In economic expansion in the run-up to the global financial
crisis, demand grew for apartments for company
employees transferred to locations away from where theirfamilies live or as company dormitories not only in large
cities but also regional communities. While continuing tosteadily meet this need, we substantially increased the
new supply of apartment stock and grew our Construction
Business by addressing the concerns of landowners about
vacancy risk through the introduction of our 30-year
master lease system. The Leasing Business was also
supported by healthy growth in corporate demand,
enabling us to achieve rental income growth in concert
with growth in the number of apartments leased. During
this span, we realized an “Earnings Enhancement Cycle,”
where the Construction Business led our performanceand also drove growth at the Leasing Business.

(%)

Average Occupancy Rate

95
90
85
80
0

8

Leopalace21 Corporation / Annual Report 2016

2008

2009

2010

Construction Business pulled into a downdraft
due to “Lehman shock”
As a result of the rise in the unemployment rate acrossJapan due to the global financial crisis triggered by the2008 collapse of Lehman Brothers, apartment demandalso sagged. Many tenants vacated apartments wemanaged near factories in regional communities, andthe decline in rental income eroded profits at the
Leasing Business. In addition, the financial crisis caused
financial institutions to tighten loan screening, which inturn reduced orders at the Construction Business. We
fell into an “Earnings Deterioration Cycle,” where theConstruction Business shrank following earnings
erosion at the Leasing Business caused by the decreasein tenants.

2011

Embarked on business restructuring

Increase of new apartment supply prioritized2007

Decline in occupancy rate
Many apartments near factories
vacated as unemployment rate rose.

Economic Recovery

Medium-term Management Plan

（Present and Onward）

Targets for Final Year（FY ending March 31, 2017）

Comprehensive Reinforcement of Earnings from Rental Housing

Leopalace21:
Who weWho
areWe Are

In the period of economic growth, our Construction Business drove our growth, sharply expanding new apartment supply. Following the financial crisis triggered by the 2008 collapse of Lehman
Brothers, however, we recorded operating losses as orders at the Construction Business declined.
Our aim amid the current economic recovery and beyond is to thrive by shifting to a stable earnings model that achieves a balanced earnings mix from the Leasing Business and Construction
Business while expanding our international businesses.

Master lease system: up to 30 years, rent fixed for initial “two years,” renewable every two years thereafter80

Established stable earnings model
based on Leasing Business60

Net sales

Business Model and Competitiveness(Billionsof yen)¥528.0 billion
Operating income

40

20¥22.5 billion
ROE

0

2012

2013

2014

2015

12.0

%

2016

We implemented business structure reforms in the wake of the global financial
crisis amid a string of weak earnings. While sharply restricting the supply ofapartments to specific areas in the Construction Business, we strove to cut
costs and boost rental income through improvement in occupancy rates, in aneffort to rebuild the profitability of the Leasing Business. We also commenced
sales of security systems and solar power systems as a way to enhance theproperty value of the existing buildings we managed.
In fiscal 2011, we returned to profit after two fiscal years of losses in the wakeof the global financial crisis, and since then we have established a stableearnings model based on our Leasing Business. Together with aforementioned
business structure reforms, our success in reorienting our earnings model
reflects an upturn in business sentiment and stronger corporate demand for
employee housing and dorms, benefiting from the pickup in stock prices andyen weakening following the December 2012 start of the Abe administration.

In the rental housing market, factors such as the return of manufacturing industries to Japan, etc. arecreating new sources of demand,and demand for higher quality
housing is firm.
Against this backdrop, at the
Leasing Business, we are working
to improve earnings steadily via afocus on boosting occupancy rates
by offering products and services
that are a step ahead of the times.
In contrast, at the Construction
Business, we are striving to broaden our product mix to areas such as
facilities for seniors, commercial
buildings, and custom-built homes.
Moreover, we are also rolling out
new businesses overseas, including
rental housing brokerage in Asia as
well as service apartments and service offices.

Upturn in occupancy rate

Leopalace21 Corporation / Annual Report 2016

Data Compilation

More sophisticated core business initiatives
and international business expansion
Initiatives for Supporting Corporate Value

Earnings from rental housing reinforced via
rigorous business restructuring

Apartment supply limited to areas
where tenant demand is strong

Initiatives for Creating Value-20

9

TO OUR STAKEHOLDERS

We are expanding globally, drawing on
the foundation of trust and experience
we built in Japan as housing professionals.
Through our provision of offices andresidences in Japan and overseas thatenables people to lead healthy lives, we areworking to increase our corporate value.

10

Leopalace21 Corporation / Annual Report 2016

Leopalace21: Who We Are

Sixth Successive Year of Operating Income Growth in Fiscal 2015
and operating income of 20.9 billion yen for a sixth successive year of profit growth. The 2008 Lehman
Brothers collapse caused enormous damage, but weovercame the difficulties that emerged and attendant
impacts have faded entirely. As a result, we believe wehave progressed in our restructuring aimed at building a
structure that can respond to multiple risk factors that
could plausibly affect us in the future.

Earnings Trend
Net sales (Billions of yen)

Operating income (Billions of yen)

800

80

600

60

400

40

200

20

0

0
‘09/3 FY2008 ‘10/3 FY2009 ‘11/3 FY2010 ‘12/3 FY2011 ‘13/3 FY2012 ‘14/3 FY2013 ‘15/3 FY2014 ‘16/3 FY2015 ‘17/3 FY2016
Plan■ Leasing ■ Construction ■ Others ● Operating income

Steady Progress in Year Two of our Medium-term Management Planof young employees from fiscal 2016 onward.
For fiscal 2016, the plan’s final year, we aim to attainplan targets while retaining our current policies at the
Leasing Business and Construction Business.

Sales by Segment(Billions of yen)

600
400

Initiatives for Supporting Corporate Value200
0‘13/3 FY2012 ‘14/3 FY2013 ‘15/3 FY2014 ‘16/3 FY2015 ‘17/3 FY2016
Plan■ Leasing ■ Construction ■ Elderly Care
■ Hotels & Resort ■ Others

Leopalace21 Corporation / Annual Report 2016

Data Compilation

The occupancy rate, the most important indicator for the
Leasing Business, continued to rise in year two of theMedium-term Management Plan, broadly in line with theplan. The success of measures aimed at boosting property value and growth in supplementary income enabled theCompany to exceed year-two targets. This outperformance reflected greater interest in hiring at companies
compared with when the current Medium-termManagement Plan was devised, and this in turn has translated into growing corporate demand for apartments.
At the Construction Business, fiercer competition in
urban centers threw our order plan off track but our costsof sales improved steadily on the use of industrial methods for building apartments and revisions to order placements for building materials. This improvement in costsof sales is an important step forward for profit growth,and we expect the sales force at the Construction
Business to be strengthened by the growing dynamism

Initiatives for Creating Value-40‘08/3 FY2007

Business Model and CompetitivenessIn fiscal 2015 (fiscal year ended March 31, 2016), we
recorded higher profits than the year-earlier period on
earnings growth driven by improving occupancy rates atthe core Leasing Business. The Construction Businessdid not reach its order plan or its sales forecast as aresult of fiercer competition in urban centers, but thanks
to the earnings contribution of the Leasing Business, theCompany reported overall net sales of 511.4 billion yen

11Stronger Efforts to Sign Up Student Tenants to Complement Corporate DemandWith regards to initiatives for fiscal 2016, I’d like to startwith the Leasing Business.
The most important factor in securing steady profits at
the Leasing Business is maintaining and improving occupancy rates, and we will again take the steps necessary
to secure tenants in fiscal 2016.
Given this, we will continue with our focus on locking in
corporate demand. We recognize corporate demand varies
considerably by housing type and the number of units companies need to be ready for a single transaction. Even so,
we aim to differentiate ourselves and capture demandthrough our ability to market proposals to corporate clients,
drawing on the know-how we have built and our scaleadvantage as the manager of one of the largest rental housing portfolios in Japan. We will also strengthen our marketing to public-sector organizations with large workforces
such as the Ministry of Defense and Ministry of Finance.
We are also forging ahead with securing student tenants, which often reside in housing for a fixed period. We
created a sales team dedicated to marketing to educational institutions to form relationships with them while
also coming up with proposals that meet the needs ofstudents going to those universities and vocational
schools with the aim of securing tenants.
Moreover, our Group companies are working together
to broaden and improve the range of services we offer
tenants. The tastes of individual tenants differ withregards to room design and specifications, but once theyfind a room they like, tenants tend to sign up for longterm leases. We will improve our menu of services bystaying in touch with the latest trends in tenant preferences, and aim to add more tenants.

Kindai University

Tokyo Metropolitan University

Dohto University

Tohoku Gakuin University

Hamamatsu Design College

TBC Gakuin (Kokusai TechnicalRiyo Biyo Senmon Gakko)

Stronger efforts to secure student tenants via ties with educational institutions

Aiming to Expand Construction Orders via Sales Channel Diversification
At the Construction Business, in contrast, we aim to
expand orders and profits in fiscal 2016 by leveraging
three elements: improving cost of sales, opening up andharnessing new sales channels, and bolstering andextending our marketing capabilities.
First, to improve costs of sales, we will further pushforward industrial methods we have introduced to dateand make greater use of apartment designs and construction methods that do not require on-site work amida sharp upturn in labor costs. Moreover, we will work to

12

Leopalace21 Corporation / Annual Report 2016

reduce costs via revisions to order placements.
A new sales channel we are working to develop is thepromotion of business matching contracts via partnerships with three kinds of professional service providers,
namely financial institutions, tax accountants and judicial
scriveners. All three closely interact with property owners—the client base of our Construction Business—on
matters such as taxes and bequeathing assets to heirs,
and we believe we can harness the information they
glean from their client relationships as a new, untappedsales channel to secure orders.
Moreover, as a result of growing emphasis we are putting on the Leasing Business, we have been bolstering
its sales force, which had grown understaffed. In fiscal
2016, we feel the crop of young sales people we broughtin via recent stepped-up hiring of new college graduates
have gone through various training programs and areready to become a marketing force that can complement
an increase in experienced veterans on our sales force,
which reflects a decline in turnover on factors such as an
improved work environment in the past few years. We
think this strong mix of youthful energy and veteranknow-how will boost our sales and marketing capabilities
and contribute to order expansion.

stakeholders. In fiscal 2015, we sold one such domestic
hotel. With use of our Guam resort hotel facilities by the
U.S. military as lodging for personnel for various exercises expected to be 10,000 rooms annually, we expect toinvest in improving and enhancing facilities we believe
are necessary going forward.

Business Model and Competitiveness

Stepped-up Measures to Expand our International Businesses
Meanwhile, a serviced apartment for Japanese residents in Thailand, acquired in October 2015, is one
example of our expansion overseas. Already at full occupancy, it is off to a very smooth start. In addition, preparations to start operations of a serviced apartment in
Cambodia with a planned 2017 opening are moving forward. We are also developing serviced offices forJapanese companies in Manila in the Philippines andYangon in Myanmar.
The needs in each nation are different, so our international businesses need to carefully examine each market
as they expand. As we expect these businesses to drive
growth, we intend to reinvest 50% of consolidated net
income into real estate, mostly properties domiciled
overseas but with a modest allocation to Japan.

Initiatives for Supporting Corporate Value

Amid a domestic housing market that lacks growth prospects, we see ample opportunities for our international
businesses to contribute to profits and see it as a growthenterprise. Under our global vision of “Expanding Asia”
for creating new value based on the foundation of trustand experience we built in Japan, we are stepping up the
opening of new branches overseas. We have fifteen
branches overseas at present and plan to add more.

Initiatives for Creating Value

I have so far discussed our core Leasing Business andConstruction Business. In recognition of the promising
linkages between these core businesses and the Elderly
Care Business and the Hotels & Resort Business, we are
expanding in a different direction from our competitors toharvest such synergies.
First, at the Elderly Care Business, we have worked
with the Construction Business to leverage our strengthin building construction to increase the number of new
facilities we operate in the expectation that we could
secure profits on economies of scale once we achieved
sufficient scale in facility ownership. Taking a close lookat the profitability of each facility, we intend to implement measures to boost earnings at individual facilities.
At the Hotels & Resort Business, we plan to elevate
our earnings power by proceeding with even greater
selectivity and focus. In contrast, one aim of our hotels
business is hosting stakeholders of our Leasing
Business and Construction Business, so we are studying
whether to sell facilities where there is not much use by

Leopalace21: Who We Are

Aiming to Earn Profits on Elderly Care Soon via Core Business Synergies

Data Compilation

Serviced office in Manila in the Philippines

Leopalace21 Corporation / Annual Report 201613

Nomination and Compensation Committee to Bolster Corporate Governance

We are forging ahead with our growth strategy to attainthe targets in our Medium-term Management Plan, as I
mentioned earlier. In recognition of the importance weassign to corporate governance, we are taking steps tostrengthen it.
Starting with the establishment of the Compliance
Committee in 2006, we have reformed our governanceover time with a series of moves, adopting the executive
board system, setting up the CSR Committee and the
Risk Management Committee, establishing the Auditing
Council, and inviting outside directors to join the Board of
Directors. As the next step in this reform effort, theBoard of Directors decided in November 2015 to form

the Nomination and Compensation Committee.
The Committee is aimed at facilitating a structure thatreinforces the functions of the Board of Directors so as
to advance in a swift and precise manner concerning
measures necessary to increase corporate value. We
believe the Committee is vital to building a forward-leaning governance structure.
Outside directors are to comprise a majority on the
Nomination and Compensation Committee. We think
this structure will translate into stronger overall earnings
by actively supporting measures for increasing corporate
value and energizing our management team throughnomination and compensation recommendations.
Moreover, a key task for the Nomination andCompensation Committee is the issue of who will succeed me as the next president and CEO. A process for
top management succession means the Company must
put into place a system to develop candidates to moveinto senior roles in the years ahead. Going back many
years, the bulk of our leaders have been professionals
with strong-willed personalities who have insisted on
doing things their way. For that to change, I believe weneed to develop executives with experience as the headof multiple businesses, with many contacts in the corporate sales function that is crucial to our core Leasing
Business, and with the know-how to interact with people from companies outside the apartment construction
and leasing industry.

Promoting Diversity with a Focus on Enabling Women to Thrive
As a way to strengthen the role of outside directors, we
added another slot for an outside director on the Boardof Directors in 2015 so there are now two seats for outside directors. Yoshiko Sasao, who joined the Board as
an outside director in 2015 as the first women to serve inthis role at the Company, is knowledgeable about andhas valuable experience in the field of elderly care, abusiness we are developing.
Since Ms. Sasao joined, she has advised us concerning the Elderly Care Business and offered us various recommendations on how we can promote diversity. Our

14

Leopalace21 Corporation / Annual Report 2016

goals in promoting greater prominence for female
employees are to increase the number of female managers to about 150 by end-March 2021 from 54 at present,
and to increase the cumulative years in service of ourfemale employees to over 80% of that of our male
employees from the current level of 60.5%. Ms. Sasao
has attended “diversity forums” aimed at raising awareness about the importance of diversity across theCompany as one initiative to help achieve these goals, so
she has been an active contributor to the Company
beyond her role on the Board of Directors.

shareholders, we are working to reinforce earnings
growth and our balance sheet so we can pay a steady
dividend based on a 30% target payout ratio. That said,
a 30% payout ratio is merely our current target rather
than a ceiling, and we intend to retain the discretion to
respond flexibly to evolving conditions. Meanwhile, we
believe we need to invest now to support growth todrive corporate value expansion over the medium- andlong-term, so we think repurchasing shares to hold astreasury stock is unlikely to become a focal point of ourapproach anytime soon.

CSR as a Management Foundation Reflects our “Creating New Value” Philosophy

Initiatives for Creating Value

With respect to our stakeholders, I would like in closing to humbly request your continued support andencouragement.

June 2016

Initiatives for Supporting Corporate Value

Eisei Miyama
President and CEO

Data Compilation

With the aim of increasing corporate value over the
medium- and long-term, we are strengthening corporate
governance and promoting diversity initiatives as a way
to support our growth strategy, as I mentioned earlier.
Meanwhile, we recognize communities and civil society
are urgently calling on us to conduct ourselves as a force
for good in addressing social issues.
We have grown over the years as a company with a
trailblazing business model in the rental housing sector,
namely apartments. We regard corporate social responsibility (CSR) as a management foundation in keepingwith our corporate philosophy of “creating new value” asan expression of Leopalace21’s founding DNA. The fivethemes informing our Basic CSR Action Policy all ultimately go back to our corporate philosophy, and we seethese themes as pillars not only of our Medium-termManagement Plan but also as pillars supporting sustained growth over the long run. With this in mind, our
CSR Committee meets regularly to confirm the results of
our activities and dares to question whether we are following the proper pathway in pursuit of our aspirations.
As Japanese society continues to grow older in theyears ahead, what people expect from housing amidsocial trends attendant with the nation’s aging willalmost certainly go beyond current expectations. As
housing professionals, Leopalace21 will continue with avariety of initiatives to provide housing that enables people to live in good health.

Business Model and Competitiveness

There has been a substantial change in our approach toreturning profits to shareholders. We have refrained
from paying dividends since Lehman Brothers collapsed
to rebuild our management foundation but in fiscal 2015
we paid dividends for the first time in seven years goingback to fiscal 2008. We think paying dividends is a minimum obligation we owe to shareholders who retained
our shares over this span as well as to shareholders
who later became supporters those years, and so wefeel we have at last begun to fulfill our mission as afor-profit company.
As for our future approach to returning profits to

Leopalace21: Who We Are

Dividend Payments Restored in Fiscal 2015 for First Time since Fiscal 2008

Leopalace21 Corporation / Annual Report 2016

15

BUSINESS ENVIRONMENT AND COMPETITIVENESS
Business Environment 1

Upturn in Rental Housing Starts for the First Time in Two Years

New housing starts dropped sharply from fiscal 2008 to
fiscal 2009 due to the economic slump following theLehman Brothers collapse, but they subsequently
moved into a gradual recovery as a result of policy support for housing investment. In fiscal 2014, however,owner-occupied housing starts dropped sharply to thelowest level in 50 years against elevated demand levelsin the months ahead of the April 2014 consumption tax
rate hike, and rental housing starts also declined for the
first time in three years. Rental housing starts grew
again in fiscal 2015 as the impact of the consumption
tax hike faded, with the number of units rising 7.1%
year on year to 383,678.

16

Leopalace21 Corporation / Annual Report 2016

Number of New Housing Starts (Number of Housing Units by Use)
1,000 (1,000 units)
750
500
250
0
’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014’16/3
FY2015■ Rental units ■ Residential houses for allotment sales■ Condominium units for allotment sales ■ Owner-occupied houses ■ Others* Source: New housing starts statistics for the fiscal year ended March 2016,
the Ministry of Land, Infrastructure, Transport, and Tourism

561,961

Competitive Advantage 1

One of Japan’s largest rental housing
management companies

rooms(as of March 31, 2016)

Leopalace21: Who We Are

Apartment Rooms
under Management

Business Model and CompetitivenessInitiatives for Creating Value

Apartment Rooms under Management
600 (1,000 units)

Initiatives for Supporting Corporate Value

400

200

0
’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Leopalace21 Corporation / Annual Report 2016

Data Compilation

In the lease management business, many believe “thecompany that controls the battle for tenants rules theindustry,” and therefore competition is intense. Our rental housing business centers on studio (one-room type)apartments for people living alone that come with furniture and electrical appliances as standard features. Ourability to respond to the needs of clients, such as students and company employees living alone, has enabled
us to keep growing. We also address needs for shortterm stays, such as business trips, and about half of ourleases are for company housing and dormitories forunmarried employees. With over 560,000 apartment
rooms under management, Leopalace21 is one ofJapan’s largest lease management companies.

17

Business Environment 2

Uptrend in Single-person Households to Continue

Room types

Studio apartments

Market Positioning
D2(Leopalace21
market research)

S

Company

Company

JUNE

Short-termLong-term

2018 2019

Leopalace21

Length of stay

2016 2017

D1

Company

Family-type rooms

The number of Japanese households is expected to
decline gradually but the number of single-person households is projected to keep growing for a while, according
to population-related projections for Japan. The singleperson household cohort is likely to continue growing
beyond 2025, when the total number of households is
expected to start declining, and remain in an uptrend
through 2030. As a result, forecasts call for 18.45 million
households in 2035, up 1.67 million from 16.78 million in
2010, and for the number of single-person households asa percentage of all households to be 37.2% in 2035, up
4.8 points from the 32.4% of 2010.

Trend in Number of Households
60,000 (1,000 households)

40,00020,000

0
’05

’10

’15

’20

’25

’30

’35

(projected) (projected) (projected) (projected) (projected)）■ Single ■ Married couple ■ Married couple, children■ Single parent, children ■ Others* Source: 2010 Population Census, the Ministry of Internal Affairs and Communications;Household Projection for Japan (January 2013),
National Institute of Population and Social Security Research18

Leopalace21 Corporation / Annual Report 20162016

Ratio of Corporate Leases

Rooms with Corporate Leases

277,261

Competitive Advantage 2

Leveraging Our Strength inSingle-person Households

rooms(as of March 31, 2016)

Leopalace21: Who We Are

54.5%

Business Model and CompetitivenessInitiatives for Creating Value

Some of the Amenities and Fixtures Provided in Leopalace21 Apartments

Corporate Leases as a Ratio of Our Total Portfolio
55 (%)

Initiatives for Supporting Corporate Value

50

45

40
1Q

2Q

3Q

’13/3 FY2012

4Q

1Q

2Q

3Q

4Q

’14/3 FY2013

1Q

2Q

3Q

’15/3 FY2014

4Q

1Q

2Q

3Q

4Q

’16/3 FY2015

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Since a little over a decade after its founding, the Company
has focused on urban-type apartments, especially housing
for people living alone with better quality than conventional rooms. Given this, our core pillars of apartment
construction and leasing management have over the past
thirty years accumulated know-how in design, specifications, and management sought by single-person households and put this know-how to full use. The needs oflarge companies for high-quality housing as dormitories
for single employees and company housing for people
living alone matches up well with our skills and capabilities. As a result, the ratio of corporate leases to our total
portfolio has risen to 54.5% as of March 31, 2016.

19

Business Environment 3

Higher Tenancy Rates in Large Cities

TOKYO

Conducted in 2013, the latest survey on total housing
units and homeownership shows the homeownershiprate was 61.7% and the tenancy rate was 35.5%.
Homeownership rates have remained at around 60%
since the survey started in 1973. This trend varies byregion with low homeownership rates and high tenancy
rates in major metropolitan areas. Of the prefectures withthe lowest homeownership rates, Tokyo is first, Fukuoka
Prefecture is third, Osaka is fourth, Aichi Prefecture isseventh, and Kanagawa Prefecture is eighth. Given this, it
is safe to say that tenant demand for rental housing islargely concentrated in metropolitan areas.

20

Leopalace21 Corporation / Annual Report 2016

Homeownership and Tenancy Rates of Households
60 (%)

40

20

0
Tokyo

Okinawa Fukuoka

Osaka

Hokkaido National
average■ Homeownership rates of households ■ Tenancy rates of households* Source: 2013 House and Land Survey, Statistics Bureau, Ministry of Internal Affairs and Communications

Nationwide Portfolio Breakdown by Region

Competitive Advantage 3

Focused on Three Major Metro Areas
where Client Demand Is Strong

About

70

%

(as of March 31, 2016)

OSAKA

Business Model and Competitiveness

NAGOYA

Leopalace21: Who We Are

Ratio in Three Major Metro Areas

Initiatives for Creating Value
Initiatives for Supporting Corporate Value

Kinki region

Chubu region

14% 16%

Kanto region

36%

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Harnessing our know-how in housing for people living
alone, Leopalace21’s regional strategy is based on thewatchword “selectivity and focus.” The expansion of ouroperations is focused on the three major metro areas
where demand for housing for people living alone is highand net population inflows are expected to continue. Of
our total managed property portfolio, 36% is in the Kanto
region, 16% is in the Chubu region, and 14% is in the
Kinki region, and these three regions combined accountfor about 70% of our portfolio. The decision to focus ourmanaged properties business in these three metro areas
will enable us to keep occupancy rates stable and high.

21Business Environment 4

Steady Growth in Japanese Nationals Living in Asia

Beijing

DalianSeoul
Busan

Shanghai

Guangzhou

TaipeiHa Noi

YangonBangkok

ManilaPhnom Penh
Sriracha

Ho Chi Minh

Jakarta

Unlike Japan, with its flagging birthrate and shrinking population, the populations and economies of Southeast Asian
nations continue to grow, attracting an increasing number ofJapanese companies. In addition to nations like Thailand,
Malaysia, and Singapore that have been active destinations
for Japanese firms for years, companies have recently moved
into up-and-coming markets such as Vietnam, Cambodia, andMyanmar. As a result, the number of Japanese nationals livingin Asia, especially Southeast Asia, has been increasing steadily. The number of Japanese nationals in Asia on long-termstays or who have become permanent residents increased
1.58% year on year to about 380,000, according to the mostrecent annual report on Japanese living abroad issued by the
Ministry of Foreign Affairs (MOFA).

22

Leopalace21 Corporation / Annual Report 2016

Trends in Japanese Nationals Living Overseas by Region（October 1 of each respective year）

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0

3

6

9

12

15
（Unit: 100,000）■ Asia ■ Oceania ■ North America ■ Central America ■ South America■ Western Europe ■ Eastern Europe/CIS* ■ Middle East ■ Africa
Source: Annual reports of statistics on Japanese nationals overseas, Trends in Japanese nationals living overseas by region, MOFA*The original members of the Commonwealth of Independent States (CIS), formed when the former Soviet Union dissolved in 1991,
were Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Azerbaijan andGeorgia joined the group in 1993, while Turkmenistan withdrew in 2005 and is now an associate member.

Building up a Solid Presence in Asia

15

Branches/
Subsidiaries in Asia

(as of March 31, 2016)

Leopalace21: Who We Are

Competitive Advantage 4

Business Model and CompetitivenessInitiatives for Creating Value

Leopalace21’s Overseas Branches and Subsidiaries
Beijing, Shanghai, Dalian, Guangzhou

Korea

Busan, Seoul*

TaiwanTaipeiThailand

Bangkok, Sriracha

VietnamHo Chi Minh, Ha Noi

Cambodia

Phnom Penh

Myanmar

YangonPhilippines

ManilaIndonesia

Jakarta

Data Compilation

China

Initiatives for Supporting Corporate Value

Despite a fresh inflow of Japanese companies entering
Asian nations such as Vietnam, Cambodia, and Myanmar,
there has not been corresponding progress in infrastructure such as offices and housing to enable Japanesenationals sent to those nations to carry out operations
longer term. Leopalace21 has actively set up overseas
branches and subsidiaries in Asia so we can provide services such as housing and office space brokerage thatsatisfy our clients. We intend to suitably expand our footprint in Asia, which stood at 15 locations as of March
2016, to build up a strong presence in Asia in the years
to come.

*The Seoul Gangnam and Seoul Jongno centers were merged in April 2015.

Leopalace21 Corporation / Annual Report 201623

OUR BUSINESS MODEL
A Distinctive Business Model Based on Our 30-year Master Lease System
Leopalace21 has time and again bolstered its presence as an industry leader in leasing management for apartments since the 1985 full-scale launch of Leopalace21 urban apartments. Our greatest strength is our superior business model, which we have honed via knowledge that has beenamassed across the Group over the years. With the Leasing Business and Construction Businessserving as our foundation, we seek to unearth synergies between these two core businesses andthe Elderly Care Business and the Hotels & Resort Business, and we are directing resources to ourInternational Business. In these ways, we seek to further reinforce our strengths.

Master Lease
SystemLeasing
Business

1

Construction
Business

Existing apartments undermaster lease system

Leasing-related
businesses

Construction ofbuildings otherthan apartments

Rebuilding, property valueenhancement measures, renovation

Corporate housing
management

4

Rent payment guarantee
Overseas office &housing brokerage

New apartments
3

5

Nursing care facilities,
commercial buildings,
built-to-order houses

Tenants(corporations,individuals)

Property
owners2

Other Businesses(Solar Power Generation,
Small-amount,
Short-term Insurance)

Elderly Care
Business• Solar power generationon leased rooftops• Insurance sales to tenants• Operates facilities built by
the Construction Business

24

6

6

Hotels & Resort
Business

International
Business• Use by owners and tenants• Use by corporate clientsfor trips and employee
benefit programs• Introduce and broker
overseas transactions• Develop and operate
serviced apartments
and serviced offices

Leopalace21 Corporation / Annual Report 2016

Master Lease
Systemm

Budgeting Maintenance andRepair Costs for a 30-year Period

Management of Rental Revenues
for a 30-year Period

Secures funds for property
maintenance and future repairs

Rent collection operations etc.

Tenants

New
apartments

Individuals (general)Companies (dorms, company-leased
housing)

Payments of master-lease rents are
made to owners regardless of whether or
not there are vacancies

Recruitment and Managementof Tenants for a 30-year Period

Rents fromMaster Leases

Tenant recruitment and everyday
tenant management operations etc.

Existing
apartments
under master
lease system

Leasing-related
businesses

Construction ofbuildings otherthan apartments

New apartments
Elderly
CareBusiness

Tenants

Hotels &ResortBusiness

Our Pledge to Landowners• Provide effective land-use proposals• Ensure apartment construction yields savings on inheritance taxes
and lessens fixed asset and city planning taxes

Property
ownersOther
Businesses

International
Businesswhile reducing their burden. In addition to disbursing fixed
rent payments to owners over a prescribed period whether
or not there are vacancies, we also collect rent from tenants and provide management, maintenance, and repair
services. The master lease system can result in losses for
us if vacancies are sharply higher than we expect but oursystem enables us to reduce such risks and avoid losses
with relentless creative thinking. Our efforts include supplying properties that match the needs of customers andcommunities, enhancing the appeal of buildings across
many dimensions such as interiors, exteriors, and fixtures,
as well as working to diversify contract forms.

Total for3 Metro Areas
Approx.

Age Composition of Leopalace21 Individual Apartment Owners

70 %(as of the end of March 2016)■ Under 50 .............. 1,316/ 5.0%
■ 50s..........................3,248/ 12.3%■ 60s..........................7,724/ 29.3%■ 70s..........................5,500/ 20.8%■ 80s..........................3,936/ 14.9%■ 90s..........................1,235/ 4.7%
■ Over 100 ..................... 61/ 0.2%
■ Age unknown .......3,367/ 12.8%

Sub-total for individual owners
Sub-total for corporate owners
Grant total for all owners

Leasing
Business

Construction
Business
Existing
apartments
under master
lease system

Leasing-related
businesses

Construction ofbuildings otherthan apartments

New apartments
Elderly
CareBusiness

Tenants

Hotels &ResortBusiness

Property
ownersOther
Businesses

International
Business

enables us to maximize our potential.
Many of the apartment owners in our system are older,with about 70% over age 60 and about 40% over age 70.
Many of them are thus part of a demographic that will bequeath assets in the not-so-distant future.
Leopalace21 Corporation / Annual Report 2016

Data Compilation

To succeed in business, it is essential to apply selectivity
and focus to resource allocation so as to maximize gains
from the resources that a company has. Since the fulllaunch of Leopalace21 urban apartments in 1985, we haverestricted our focus to areas in large urban centers, where
demand is greatest for apartments for people living alone,a key demographic for our business model. This strategy
of selectively concentrating new supply in these areas

26,387
1,362
27,749Master Lease
Systemm

Initiatives for Supporting Corporate Value

2 Restrict New Supplies to Specific Areas

Initiatives for Creating ValueOf the property owners in the Leopalace21 system, manyare individuals and regard apartment management as away to manage their assets. While major real estate developers aim for high-risk, high-return projects, individuals dislike the risk of losing out on rent revenues due to vacancies
and view low-risk, middle-return investments as ideal.
With this in mind, the Company developed the 30-year
master lease system, an industry first. It reduces risk
for owners by offering them a total support package forapartments and condo properties from construction to
management for up to 30 years.
This system helps ensure stable income for owners

Construction
Business

Business Model and Competitiveness

Property Owners

Leasing
Business

Leopalace21: Who We Are

1 Developed Industry-First “Master Lease System”

25

3 Channel Strategy Aimed at Attracting Tenants
Master Lease
Systemm
Directly
managed
OfficesPartners

Leasing
Business

Existing
apartments
under master
lease system

Leasing-related
businesses

Main
Channels

Construction
Business
Construction ofbuildings otherthan apartments

New apartments
Elderly
CareBusiness

Tenants

Hotels &ResortBusiness

Property
ownersOther
Businesses

International
Business

Cooperative
Real Estate
BrokersWeb

The Leasing Business can also be seen as a matchingbusiness that brings together apartment owners whoneed tenants and prospective tenants who seek rental
housing. To ensure smooth progress in matching themup, we are not only developing new channels, but arealso coming up with creative ways to use existing ones.
Specifically, we harness our network of directly run
offices and Leopalace Partners franchisees to convince

potential tenants to become actual ones while expanding
our channels online. Moreover, our comprehensive channel strategy has initiatives targeting all untapped tenant
segments, unearthing demand in the individual market
via seminars for those actively looking for rental housing,etc., offering proposals to corporate clients for dormitories for singles, etc., and developing student demandthrough seminars at universities and vocational schools.

4 Measures to Enhance Existing Property Values
Master Lease
Systemm

Security
services

Leasing
Business

Construction
Business
Existing
apartments
under master
lease system

Leasing-related
businesses

Construction ofbuildings otherthan apartments

New apartments
Elderly
CareBusiness“Room
Customize”
planJapanese housing policy is moving in a direction that emphasizes greater supply of high-quality housing for longterm occupancy, and boosting housing values is also an
important issue for the rental housing market.
As a result, we are moving ahead with measures toenhance product development and boost the value ofexisting properties by focusing on features of particularimportance to would-be tenants—comfortable living environments, eco-consciousness and disaster preparedness,

26

Leopalace21 Corporation / Annual Report 2016

Tenants

Hotels &ResortBusiness

Property
ownersOther
Businesses

International
Businessand safety and security. Among measures we think help
raise the value of existing properties are operational tieups we have with major security companies in security
systems aimed at ensuring tenant safety and security,
the installation of solar power systems that contribute toenvironmental conservation, and our “Room Customize”
plans, which improve the appeal of older properties. We
thus use a variety of measures to ensure the properties
we manage are preferred by tenants.

Master Lease
Systemm
Fee-based residential homewith nursing care

Property owners

Leasing
Business

Construction
Business
Existing
apartments
under master
lease system

Leasing-related
businesses

Construction ofbuildings otherthan apartments

Hotels &ResortBusiness

Property
ownersOther
Businesses

International
Business

as a plank in our effort to be a one-stop provider of landuse solutions.
We anticipate potential demand for facilities for employee welfare and benefit programs and expect to make suchproposals to clients that we have institutional contracts
with, and envision a host of ways to capture synergies
with our Construction Business.

6 Core Business Synergies with International Business, Hotels & Resort BusinessSupport overseas trips and assignments, serve as intermediary for office
and residential space overseas, develop and operate overseas properties

International
Business

Master Lease
Systemm

Leasing
Business

Tenants

Property owners

WING MATE

New apartments
Elderly
CareBusiness

Business trips and training events,
employee benefit programs

Hotels & Resort BusinessTravelLeopalace Hotels

TravelConstruction ofbuildings otherthan apartments

Tenants

Hotels &ResortBusiness

Property
ownersOther
Businesses

International
Business

Guam resorts
Training Program (TITP) for foreigners to help alleviate the shortage of skilled labor in Japan, which is becoming a social issue.
We envision the Hotels & Resort Business as providing venues to offer services and hospitality to clients of our Leasing
Business and Construction Business.
We encourage clients of our core businesses to use our domestic Leopalace Hotels for business trips and training events.
We market use of our Guam resorts to tenants and property
owners as an overseas tourist destination and to corporate clients as a facility for their employee benefit programs.
We hope use of these businesses will encourage our clients
to form long-term relationships with us.

Data Compilation

In our International Business, we are expanding our leasing
operations overseas based on the real estate know-how wedeveloped in Japan. At the same time, with respect to clientsof our core businesses in particular, we launched “World
Business Support (WBS)” to provide support services fortheir overseas business trips and assignments as well as introducing clients to office and residential space overseas. The
wide-ranging WBS menu of services includes arranging planetickets for overseas business trips and assignments, securing visas, and introducing clients to office and residential space overseas. We also collaborate with initiatives between the Japaneseand Vietnamese governments to promote the Technical Intern

Initiatives for Supporting Corporate Value

Corporate clients
Clients ofour corebusinesses

Construction
Business
Existing
apartments
under master
lease system

Leasing-related
businesses

Initiatives for Creating Value

The projected rise in the senior segment of the Japanese
population means the potential market for our Elderly
Care Business is growing, and we see it as a standalone
growth business. Beyond this, however, we recognize thepotential for this business to generate synergies with ourcore Construction Business.
The Elderly Care Business runs a network of nursing
care facilities under the ”Azumi En” brand in the greater
Tokyo metropolitan area and the Kanto region as well as
the Chubu region, a catchment area that mirrors that ofour core Construction Business. As a result, even in cases
where we cannot market a single-person household apartment to a landowner, we may be able to propose a plan
for a senior care facility. This synergy is thus indispensible

Tenants

Business Model and CompetitivenessNew apartments
Elderly
CareBusiness

Leopalace21: Who We Are

5 Synergies between our Elderly Care Business and Construction Business

Leopalace21 Corporation / Annual Report 201627

Special Feature: Leasing Business Strategy

OUR STRATEGY FOR IMPROVING OCCUPANCY RATESAt the Leasing Business, earnings growth accompanies rising occupancy rates.
We are focusing on the execution of four measures to improve occupancy rates.
Occupancy Rates

Strategy 1: Maximize Owner-Tenant Matching Capabilities

90(%)
88

Strategy 2: Further Bolster Corporate Sales

86
84

Strategy 3: Expand Services for Tenants

82
80

Strategy 4: Initiatives Aimed at Enhancing Property Values

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
’13/3 FY2012’14/3 FY2013’15/3 FY2014’16/3 FY2015

Strategy 1: Maximize Owner-Tenant Matching Capabilities
Maximize Owner-Tenant Matching Capabilities via Offline-Online Fusion
Directly run
sales
officesPartners

Cooperative
Real Estate
Brokers

Web＋

Directly run sales ofﬁces 189
Of which, domestic 182

Leopalace Partners
franchisee offices 130

Of which, overseas 7

Local agents focusedon rental housing:about 28,000

Brick-and-mortar network

28

Nationwide Coverage via Directly Run and Partner
Offices

Information on Rentals Nationwide Always Available atour Website

We market our leasing services through 189 directly run
sales offices (182 domestic and seven overseas), 130
offices run by Leopalace Partners franchisees, and about
28,000 cooperative local agents with a focus on placing
tenants into rental housing. Combining these three categories, our brick-and-mortar network provides us withnationwide coverage. At our brick-and-mortar sales offices,
we identify the specific needs of clients who are looking
for rental housing and work to improve tenant satisfaction.

In the past few years, more and more prospective tenants,
especially students and young adults, use their smartphones
to access rental property information when they want it. In
response, we are strengthening our use of virtual channels
to send out information to complement initiatives implemented via offline channels, centering on our network ofbrick-and-mortar offices. At our dedicated website, we
ensure the latest information on rental properties acrossJapan is available whenever prospective tenants seek it.

Leopalace21 Corporation / Annual Report 2016

We Lease Apartments to About 80% of Listed
Companies in Japan

Ratio of Listed Companies Using Our Services（as of March 31, 2016）

Fine-tune Our Marketing to Respond to Each
Sector入社

277,261

300,000 (Units)219,239

228,708

246,272

262,577

+5.6%
+4.2%

200,000

+9.2%
+5.3%
+4.8%

100,000

+5.0%
+8.3%
+3.0%

0

’12/3
’13/3
’14/3
’15/3
’16/3 Year-on-Year
FY2011FY2012 FY2013 FY2014
FY2015■ Manufacturing ■ Personnel Dispatch/Business Outsourcing ■ Services■ Retail ■ Food & Beverage ■ Construction ■ Other

Customer’s Voice

We went to Leopalace21 for its furnished apartments with furniture and home appliances because they make the transition
easier for new hires as well as employee relocations andtransfers. We have service stations and sales offices nationwide. Many of our employees are recent high-school graduates who left home for the first time when they joined us andare anxious about their first experience living alone. For suchcases, we find furnished apartments with furniture and home
appliances to be very helpful.
Moreover, there are benefits not only for employees living inthese apartments but also for us in management. In particular,a major benefit is that Leopalace21 greatly reduces our monetary and labor burdens associated with concluding lease contracts and employee-housing related management matters.
We have been impressed by the responsiveness of
Leopalace21 salespeople. In many cases in the rental housing
industry, the job is done once a company signs a contract forrental housing, but Leopalace21 salespeople are good at satisfying clients. They always look after us and go the extra mile
to find out what our needs are beyond corporate housing operations. We think there will be a lot of value for us in continuing
to use their services.

Mr. Hideo Sone
General Manager,
Human Resources
Department,
Management
Headquarters
ENEOS WING Corp.

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Launched in 2013 as awholly owned subsidiaryof J&S Fleet Holdings, aholding company jointly
formed by JX Nippon Oil &Energy Corp. and Suzuyo
Shoji Co., LTD., ENEOSWING runs a growing service station network thatstands at about 400 stations at present. Its businesses range from petroleum products, auto parts,
and insurance sales to
auto leasing and vehicle
maintenance and regulatory inspection services.

Corporate-Leased Housing Contracts by Industry

Initiatives for Supporting Corporate ValueENEOS WING
Corporation* Companies listed on Japan’s TSE1, TSE2,
regional stock exchanges, or startup
stock markets

Initiatives for Creating Value

Given the extensive breadth of our corporate clients andindustries, we have set up marketing teams for each key
industry. With expert teams for each industry, we areable to develop a well-rounded understanding of client
attributes and fine-tune our marketing for them, proposing leasing plans that best meet their needs in terms ofcontract type, length, and number of rooms.

79.6%

Business Model and CompetitivenessAt the Leasing Business, about half of the rooms areleased for use by corporate clients. Industries we caterto range from manufacturing to personnel dispatch andbusiness outsourcing, services, retail, and others. About
80% of listed companies across Japan use properties wemanage. We think the breadth of corporate usage of ourapartments is a testament to their positive evaluation ofthem and the services we provide.

Leopalace21: Who We Are

Strategy 2: Further Bolster Corporate Sales

29

Strategy 3: Expand Services for Tenants
Client-oriented Service “Room Customize” Plan Lifts Contracts beyond 20,000
To improve occupancy rates, it is important to keep thevacant period of rooms as short as possible, so we promote long-term occupancy. Our “Room Customize” plan
enables tenants to customize and form attachments totheir apartments, an option that is not available for mostrental housing. With the ultimate aim of promoting longterm tenancy, the option enables tenants to change wall
paper and make other changes to suit their preferences.
The customization plan has been well received since its
launch in 2012, with the cumulative number of leases
increasing to 26,542 at present.

Cumulative “Room Customize” Contracts
30,000 (Number of contracts)
20,00010,000
0
1Q

2Q

3Q

4Q

’14/3 FY2013

1Q

2Q

3Q

4Q

’15/3 FY2014

1Q

2Q

3Q

4Q

’16/3 FY2015

Various Services via Alliances with Corporate Partners
A flexible lesson package
at fitness studios via analliance with LessonPass,
Inc., a subsidiary of
GREE, Inc.

A car sharing service offered
via an alliance with Park 24
Co., Ltd.

We offer a wide range of services to tenants via allianceswith large corporations who are also our clients. Amongthese are a flexible, fixed-fee lesson package at fitness
studio franchisees arranged by a subsidiary of GREE, Inc.
and a car sharing service we promote via an alliance with
Park 24 Co., Ltd. In addition, through a tenant-exclusive
website, “My Page,” tenants can order home-delivery
laundry service and other daily-life-related services available via tie-ups with large corporate partners.

Home-delivery laundry cleaning service via our “My Page” website fortenants

Bolstering Our School Relationships via Internships and School-Sponsored Events

Kindai University

Tokyo Metropolitan University

Tohoku Gakuin University Hamamatsu Design College

Initiatives led by industry-academia consortiums

30

Leopalace21 Corporation / Annual Report 2016

Dohto University

TBC Gakuin (Kokusai TechnicalRiyo Biyo Senmon Gakko)

We created a sales team dedicated to marketing to educational institutions to develop the student tenant market. This
sales team thinks stronger relationships with schools canlead indirectly to securing student tenants through rental
housing introductions, etc., so it is assertively pushing ahead
with initiatives involving industry-academic collaboration andlocal communities. In fiscal 2015, we worked to strengthen
our relationships with educational institutions by participating
in industry-academia-government consortiums aimed atenergizing rural communities (four times), joining
school-sponsored events with corporate participants to support students in developing their careers (90 times), andinviting students to apply for the internship program run by
our human resources department.

Security Systems for “24-hour, 365-day” Safety and Peace of Mind for TenantsInstallations of Home Security Systems
300,000 (Units)
200,000

0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q’13/3 FY2012’14/3 FY2013’15/3 FY2014’16/3 FY2015

Initiatives for Creating Value

100,000

Business Model and CompetitivenessFor prospective tenants, attractive housing
goes beyond design, room layout, and builtin amenities and fixtures. For tenants ofapartments aimed at single-person households like the ones Leopalace21 builds andoperates, a well-conceived security arrangement that offers safety and peace of mind isa major attraction. For this reason, we haveoperational tie-ups with major security companies and are installing security systems inapartments we manage.
Of the total portfolio of rooms we manage,
45.7%, or 256,900 rooms have a security
system installed. We expect to install systems in more rooms, with the aim of creating housing for people who put a high value
on safety and peace of mind.

Leopalace21: Who We Are

Strategy 4: Initiatives Aimed at Enhancing Property Values

Renovations and Rebuilding Keeps Aging Apartments Attractive

Renovated a twenty-year-old
apartment with four 2DK-typerooms into a building with ten
1K-type rooms.

Renovated a twenty-year-old
apartment with four 2DK-typerooms into a building with six
1K-type rooms and two
1DK-type rooms.

Data Compilation▶

Initiatives for Supporting Corporate Value▶

As the years pass, the fixtures and fittings ina residence age and grow obsolete. Without
upkeep, the attractiveness of a residence
declines, the number of tenants decreases,
and occupancy rates fall. At Leopalace21,
we always track the structures, fixtures andfittings of the apartments we manage andour upkeep ensures they always remain
attractive regardless of their age. When thetime comes to rebuild or renovate them, or
to replace their fixtures and fittings, we doso. In such cases, we always keep the voiceof our customers in mind while proceedingwith renovations. In particular, the uniquevalue-added interior spaces and refined exterior designs we create are popular. Our renovations translate into higher property values
while ensuring the buildings are more attractive than before.

Note: “D” is for dining space and “K” is for kitchen space.

Leopalace21 Corporation / Annual Report 201631

Special Feature: Construction Business Strategy

STRATEGIC PRODUCTS FOR MODERN NEEDS BASEDON LANDOWNER DEMAND
We face fiercer competition from large housing developers in apartment construction but we are building a competitive advantage via the execution of four
strategies based on landowner needs.
Construction Business Sales and Gross Profit Margin
120 (Billions of yen)

30

60

20

30

10

0

0

’11/3
FY2010Strategy 1: Marketing Focused on Metro Areas(%) 4090’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014’16/3
FY2015■ Sales (left axis) ● Gross Profit Margin (right axis)

Strategy 2: Consulting Sales Based on Understanding Landowner Needs
Strategy 3: Rollout of High-quality, Cutting-edge Strategic Products’17/3
FY2016(Plan)

Strategy 4: Broadening our Construction Product Mix

Strategy 1: Marketing Focused on Metro Areas
Focusing on Three Major Metro Areas with Many Rebuilding Candidates
Leopalace21 applies a “selectivity and focus” approach inexecuting its regional strategies for harnessing its strengths
in housing for single-person households. Specifically, we arebuilding out network of sales offices, etc. in Japan’s threemajor metro regions of Kanto, Chubu, and Kinki, where single-person housing needs are concentrated.
Of our total portfolio of managed rooms, 36% are in the
Kanto region, 16% are in the Chubu region, and 14% are in

the Kinki region, and the ratio for these three regions combined is about 70%.
The net inflow of domestic migration into the three metro
areas continues, and a large number of buildings in thesemetro areas are near an age when they need to be rebuilt.
The concentration of the portfolio of apartments we manage
in these three metro areas is a reflection of our “selectivity
and focus” approach.

Privately Owned Rental Housing over 35 Years Old (Rooms, % of total)

Our Nationwide Apartment Portfolio:
Ratio in Each Major Metro Area,
Ratio for Three Metro Areas Combined

Built before 1980 (over 35 years old)
283,500
15.5%
Tokyo’s 23 wards
429,900
14.9%
Major government-designated cities
Other municipalities

551,600

13.8%

Total of four major metropolitan areas

1,265,000

14.5%Grand total in Japan

2,193,400

15.0%

Kinki area Chubu area

14% 16%

Total for 3 Metro Areas
Approx.
%70

Kanto area

36%

Source: 2013 Housing and Land Survey, Statistics Bureau, Ministry of Internal Affairs and Communication (MIC)

Population Inflows/Outflows by Prefecture in Japan in 2012-2015(Thousands of people)

Tokyo: 230 thousand● Number of LP21 offices ■ Prefectures with LP21 offices

8

8

45

4

30
15
0

Source: Report on internal migration in Japan derived
from the basic resident registers,
Statistics Bureau, MIC

20

1

4

1 1

2 4 1

3
1

2

-15

Okinawa
Kagoshima
Miyazaki
Oita
Kumamoto
NagasakiSaga
Fukuoka
Kochi
Ehime
KagawaTokushima
Yamaguchi
Hiroshima
Okayama
ShimaneTottoriWakayama
Nara
Hyogo
Osaka
Kyoto
Shiga
Mie
Aichi
Shizuoka
Gifu
NaganoYamanashi
Fukui
Ishikawa
ToyamaNiigata
Kanagawa
Tokyo
Chiba
SaitamaGunma
Tochigi
Ibaraki
Fukushima
Yamagata
Akita
Miyagi
Iwate
Aomori
Hokkaido-30

32

Leopalace21 Corporation / Annual Report 2016

Leopalace21: Who We Are

Strategy 2: Consulting Sales Based on Understanding Landowner Needs
Apartment Construction Proposals Reflect Our Tax System Knowledge
Consulting-based Proposals with Benefits for Landowners
Sales tolandowners

Consultations

Land
owned

Land owned

Land
usage

Land owned Investigate,
arrangeLandowners
Sales toothersProceeds fromasset sales

Apartment management
Use asset sale proceeds for construction costs

Business Matching via Tax Accountants and Judicial Scriveners

Initiatives for Creating Value

Individual landowners that are considering whether tobuild apartments are often in regular contact with professional service providers such as tax accountants and judicial scriveners to protect their wealth, along with financial
institutions. Leopalace21 has signed business matching
contracts with professional service providers like these
who advise landowners on taxes and bequeathing assets
to heirs. We believe we can harness the information they
glean from their client relationships as a new sales channel to secure orders.

Business Model and CompetitivenessOf the landowners that we build apartments for, manyown property as individuals. Of these, quite a few regard
apartment management as a way to reduce taxes arisingfrom bequeathing assets. In the Japanese tax system,
the inheritance tax payable on land inherited with a structure such as an apartment building on it differs from thaton unused land. We are knowledgeable about the tax system and strive to uncover latent needs by proposing plansthat best fit the circumstances of each individual owner.

Customer’s Voice

Tokyo Prefecture

Data Compilation

An inheritance problem that rose when my mother passed away is what first brought me
into contact with Leopalace21. Based on my first impression of the two young salesmen
who came to visit us, I thought there is no way I can entrust these young guys with ourfamily’s precious assets. What won me over was when they told me Leopalace21 pays
rent for every room in apartment buildings they manage even when there are vacancies.
Since then, my relationship with Leopalace21 has grown to five apartment buildings. The
salespeople have repeatedly come to me over these years with ideas and explanations I
found compelling and urged me to act. I want to express how thankful I feel that theybuilt a foundation for my family’s prosperity. My aim in the years ahead is to build five
more and own a total of ten apartments. As Leopalace21 is starting to expand its international business, I hope I can be involved when it seeks to develop overseas properties.

Initiatives for Supporting Corporate Value

Mr. Katsumi Wada
Mr. Kentaro Wada

Our relationship with Leopalace21 goes back nearly 15 years. At first we were completely uninterested in what its salespeople proposed but their enthusiasm in pitchingus ideas won us over and we eventually decided to build apartments on land weinherited. I still remember well that when the project began, Leopalace21 went
beyond just construction and helped us negotiate with neighbors. Since then, we
have continued to do business with Leopalace21, which now manages apartments
for us in four locations. Starting with the second one, the apartments we have built
have been on newly purchased sites.
The reason we keep doing business with Leopalace21 is because it comes to us withideas on what we should do based on a life plan with a view to our future rather than justtrying to sell us apartments. I feel Leopalace21 has changed our lives in a major way.

Mr. Masakazu Muto
Ibaraki Prefecture

Leopalace21 Corporation / Annual Report 201633

Strategy 3: Rollout of High-quality, Cutting-edge Strategic Products
Lines of Sight into L-SECtion Apartments Blocked to Help Prevent Crime
In response to tenant needs for safety and peace of mind,
we have installed security systems that are run throughour operational tie-ups with major security companies inapartments we manage. In addition, we offer apartmentbuildings designed to help prevent crime. Security concerns are particularly a problem for first-floor tenants in

low-rise apartment buildings, and the high-quality apartment designs we have developed such as the L-SECtion
address such concerns. With 1.7-meter parapet walls on
its balconies that block lines of sight into first-floor apartments, this model protects tenant privacy.

Improves Security for First-Floor Tenants: L-SECtion

A built-in bunk-bed
unifies bed andstorage

Wall-type pre-cast concrete: Burliant

A balcony withhigh parapet wallschanges sightlines

Entrance hall

Our Industry-leading Sound Insulation Fixtures
Many years ago Leopalace21 apartments were thought tohave thin walls. This may be why prospective tenants
who valued their privacy tended to avoid our apartments.
We have since then, however, developed sound insulation features, such as highly rated sound-insulated flooring “non-sound floors,” sound-insulated walls,
sound-damping drainage pipes, and other features thatlessen unwanted noise that we have combined into a“non-sound system” that now comes as a standard feature in our apartments. With industry-leading sound insulation as a differentiator that sets our products apart, ourapartments, we believe, enable tenants to live more comfortably than they could anywhere else.

Our “Non-sound System” Improves Sound Insulation
Non-sound floors
Reduces impact noise from upper floors; soundinsulation is two or three ranks more effective thanconventional floors

Wood framesSound-insulating flooring
ALC board
Plaster board
Ply board

Wood-frame
V-modelCuts unwanted
noise in

half!

Floor-reinforcing
materials
Floor beams
Plaster board
Wooden ceiling joists
Plaster board

Glass wool
Wooden ceiling joists
Wooden ceiling beams
Original high-damping,shearing-type,vibration-proof ceiling hangers

Steel framesSound-insulating flooring
Ply board
Heavy-weight,
sound-insulating sheet

Steel frame
standard model
Reduces unwanted
noise bySound-damping drainage pipes

Improved sound insulation via changes to the composition of
separating walls between adjoining residences; achieved
TLD*-45 for wood frames and TLD-50 for steel frames

Installed to reduce drainage noise; 15dB reduction
versus normal PVC pipes to a level on par with libraries
or suburbs late at night

Wood frames

TLD-45Everyday activity
noises reduced to alevel where they
are faintly
perceptible*A TLD（transmission loss difference）
value is used to rate soundinsulation performance fortests in acoustic laboratories.

Steel frames

Glass wool
Original high-viscosity rubber,special vibration-proof ceiling hangers

Leopalace21 Corporation / Annual Report 2016

ALC board
Steel beams
Steel ceilingjoistsTwo-sheetplaster board

Bottom layer:
plaster board
Glass wool
Insulating structure:
horizontal furring strips
Laminated wood column
Top layer: reinforced plasterboard
Bottom layer: plaster board
Filling material for
four sides:
rock felt ＋ U-tight x 2

Film
Reducesdrainage pipe
noise by

15dB

versusnormal pipes

Sound-insulating
material
Sound-absorbing
material
PVC pipe

Cross section of a pipe
Two-sheet reinforced
plaster board
Steel column
Glass wool

TLD-50

two-thirds!

34

Highly-rated sound-insulating walls

Everyday activity
noises reduced to alevel where they
are almost
imperceptible

Panel strip: plaster board
Two-sheet reinforced
plaster board
Filling material
for four sides:
rock felt ＋ U-tight x 2

Installed pipes

Leopalace21: Who We Are

Strategy 4: Broadening our Construction Product Mix
Realizing Ideal Land Usage with Plans Fine-Tuned to Suit Each Site
as custom-built homes, facilities for seniors such as nursing-care facilities, and store and retail facilities for restaurant chains, convenience stores and the like, as well asmega solar projects and parking lots. We can satisfy theneeds of property owners by presenting them with ideas
fine-tuned to suit each site, thereby supporting ideal land
usage from their perspective.

Ideal land usage
Apartments

OthersIn response to the growing population of senior citizens, we are
expanding a matching businesswhere we bring together property owners and nursing
care providers.

Elderly care facilities

We build primary homes
with an accessory apartment that can earn rental
income. The primary house forthe owner’s exclusive use is basedon a flexible design.

We construct retail facilities
for road side locations andsites near train stations forrestaurant chains, convenience stores,
and drugstores. We also propose mixeduse tenant buildings with apartments.

StoresLeopalace21’s
land usage
proposals

Initiatives for Creating ValuePrimary homes withan accessory apartment

We offer apartment designs thatmeet diversifying tenant needs. We
lease back apartments in toto under
our master lease system andexecute all lease management tasks.

Business Model and CompetitivenessWith 561,961 rooms under management, Leopalace21 is
one of the largest managers of leased housing in Japan,
but our Construction Business does not restrict itself toconstructing apartment buildings. Drawing on the knowhow and track record we have amassed so far, we havedeveloped a system for responding to a wide assortmentof construction contracting work beyond apartments such

Among the land-use ideas we propose to property owners are mega-solar projects and parking lots.

Data Compilation

With our March 2015 acquisition of Morizou Co.,
Ltd., the builder of custom-built homes made with
Kiso Hinoki wood, among the highest-quality woodin Japan, became a subsidiary. The “Taiga” line ofcustom-built homes, which we developed jointlywith Morizou, is targeted at property owners with ataste for luxurious living.
Made with high-quality Kiso Hinoki wood basedon a flexible design, these homes can last a century
owing to the durability of Kiso Hinoki wood materials, a ventilation system that protects against degradation, and ingenious quake-resistant features suchas the well-balanced placement of vibration-control
dampers across its structure.

Initiatives for Supporting Corporate Value

Flexible-plan “Taiga” Homes: Built with the Highest-grade Kiso Hinoki Wood

Leopalace21 Corporation / Annual Report 201635

Special Feature: International Business Strategy

EXPANDING OUR INTERNATIONAL BUSINESSDRAWING ON KNOW-HOW HONED IN JAPANWe offer serviced offices and serviced apartments to Japanese nationals andJapanese companies and total support services to employees sent on overseas assignments.

Our mainstay approach so far

Introduce properties inJapan to foreigners

DalianBeijing+

Seoul

South Korea

Busan

Our future approach

Act as a broker for Japaneseindividuals and companies byintroducing them to local
properties in Asia

Shanghai● Offices where we introduce and consummatecontracts for domestic properties● Offices where we broker and introduce
properties in Asia
● Offices where we perform both of theaforementioned functions

China

Guangzhou

TaipeiTaiwan*Plan to open a Singapore office in July 2016

MyanmarWith the planned opening of an office in Singapore, a place thatdraws a diverse mix of people and information, we are stepping-up
efforts to gather information on investment projects in the region
and analyze them. One role this office is expected to perform is toact as a headquarters for our overseas network.

Ha Noi
YangonLaos
Thailand
ManilaBangkok
Sriracha

The Philippines

Vietnam

Cambodia

Phnom Penh
Ho Chi Minh

BruneiMalaysia
Singapore
Indonesia

Jakarta

36

Leopalace21 Corporation / Annual Report 2016

Strong Corporate Demand for Our Thai Serviced Apartment, with Plans for Cambodia

Serviced apartment in Sriracha

Staff at our Cambodia office

Launched Serviced Offices in Philippines and Myanmar

Serviced Office in Manila

Staff at our Myanmar office

Various Services to Support Entry into Overseas Markets

Initiatives for Creating Value

In many of the markets Japanese companies have entered in
the past few years, we have seen numerous cases where
small teams sent by new entrants before they are ready toconstruct an office building work in challenging office environments. It is thus our view that not only do employees sent onsuch overseas entry assignments lack adequate housing but
they also lack satisfactory office space. In responses to theheadaches and challenges faced by new corporate entrants,
we have opened serviced offices with meeting rooms andreception desks in the Philippines and Myanmar.

Business Model and CompetitivenessMany Japanese companies have entered the rapidly growing Cambodian and other markets in the past few years but
we have seen many cases where housing for Japaneseemployees on long-term assignments was not up to
scratch. As a service drawing on the know-how we developed in Japan, we opened a 72-room serviced apartment inThailand in October 2015, and we plan to open serviced
apartments in Cambodia and Vietnam in the future.

Leopalace21: Who We Are

Supporting Japanese Companies Overseas with Modern Apartments and Offices

Total Support for Entry into Overseas Markets
Initiatives for Supporting Corporate Value

As a new addition to our international business, we launched World BusinessSupport (WBS) to provide total support for Japanese employees sent on overseas assignments with a variety of services. In addition to introducing them torental residential and office space overseas, WBS offers business travel management such as arranging plane tickets and obtaining visas, making hotel reservations, and performing other tasks. WBS also offers a wide range of support
services in Japan for Japanese employees sent overseas from looking after
their residences while they are overseas to sub-leasing or selling their housing
assets to arranging to move their belongings overseas.

Bringing Vietnamese Apprentices to Japan via Technical Intern Training Program

Leopalace21 Corporation / Annual Report 2016

Data Compilation

As a part of our international business, we have been at the fore in bringing foreign
apprentices via the Technical Intern Training Program (TITP) to Japan. Building contractors we work with accepted 18 apprentices from the first TITP class in July
2015, and we have so far supported 50 apprentices who have been accepted atcontractors via this program. TITP recruits start out in Vietnam studying construction
trade skills. Once they complete Japanese language and building trade terminology
courses, they come to Japan for further language study before joining a Japanesebuilding contractor as a building trade apprentice. We will continue to support TITP
recruits joining contractors as building trade apprentices in the years ahead.

37Special Feature: Elderly Care Business Strategy

ADD FACILITIES AND IMPROVE PROFITABILITY IN
VIEW OF GROWTH PROSPECTS
The Elderly Care Business is a strategic growth business and we plan to increase
the number of facilities in our network by about 50% in the next two years. At thesame time, we will work to improve profitability via management improvements.

Group Homes• Accept elderly patients withdementia, provide personalized
nursing care
• Use completely private rooms that
protect privacy as a source of appeal

Nursing Care Centers withDay Services, Short-stays

Fee-based Residential
Homes with Nursing Care

• Provide same-day and overnight
nursing care service• Private long-term residences withon-site staff providing daily-life
support and nursing care

• Add day services and short-stayservices at more fee-based homes,
and add sites with same-day
outpatient care services“Azumi En” Facility Map“Azumi En” Facility Network
Facilities
Group homes
Tochigi

Sekigawa

Gunma

Chichibu

Ota Tatebayashi

Honjo

Saitama

Gyoda
Kitamoto
Ageo

Shimodate

Yuki
Koga
Shinkoga
Koga-chuo

Hanyu

Higashimatsuyama

Sites including fee-based nursing homes

Utsunomiya▲
Tochigi-Daicho Nogi

KanumaHorigome
Isezaki▲Day-service, short-stay centers

Yaita

◆

Ina
Hanasaki-no-oka

Iwai

IbarakiMihashiMinami-sakurai Showa
Sayama Komuro
Yoshikawa
HamuraGamou
Shimizu-koen Tsuchiura● ◆Mizuho Goseki
Oume
Yashio ▲KokinuIrumagawa●
Soka
Yanagisawa
Komakidai
Hirasawa
Abiko
Takamihara
SakasaiNakanoTatemachi Tokyo
Tokiwadaira
Takatsukashinden
MisakiNamikicho
Katsutadai Ino▲
WakabaKatsuragi
Kanagawa
Takaoka Nakazawa
Oyumi
Tsurumaki
Chiba
Tsukuihama
Ichihara
Yamakita ▲ Hiratsuka**▲ Kisarazu*Azumi En Gifu is to open in July 2016**Azumi En Hiratsuka is to open in August 2016***Azumi En Toyota is to open in September 201638

Leopalace21 Corporation / Annual Report 2016

Total

2
47
21
70

*As of June 1, 2016
★ Fee-based home with nursing care,day/short-stay services◆ Fee-based home with nursing care,short-stay service■ Fee-based home with nursing care,
day service● Fee-based home with nursing care
★ Fee-based residential homes
with day/short-stay services◆ Fee-based residential homes
with short-stay service● Fee-based residential homes○ Group homes▲ Day/short-stayservices● Day services

Gifu◆ Short-stays▲
Gifu*▲ Kakamigahara▲
Kasugai▲ Toyota***◆Moriyama ▲ Aichi
Anjo

Low Profitability at Individual Facilities amid Fierce Competition

Business Model and CompetitivenessPremised on the concept of Leopalace21 as a one stop
service provider for housing, the Company rapidly scaledup the Elderly Care Business to provide support to seniors
looking for residences and daily-life assistance. The elderly
care market is seen as a growth field as the cohort ofseniors in Japan grows but the entry of many firms fromother industries has led to much fiercer competition, creating conditions where improving profitability is challenging.
Moreover, compared with rivals, a higher ratio of
Leopalace21 staff are recent graduates hired on a career
track or are full-time employees, so this raises fixed costs
and squeezes earnings. Unless occupancy rates at facilities are increased, it will be hard to boost earnings.

Leopalace21: Who We Are

Offering Value to Seniors Who Need Care Premised on Our Unique Philosophy

Aims to Improve Profitability at Each Facility While Not Relying on Scale Economies from Expansion
Initiatives for Creating ValueAt the Elderly Care Business, Leopalace21 is forging
ahead with initiatives to expand the size of its network byadding more facilities while working to improve the costsof sales so each individual facility becomes profitable. It
plans to step up network expansion in the next two years
en route to increasing the total number of facilities to 104
as of March 31, 2018 from 67 as of March 31, 2016. At
the same time, it is working to achieve profitability at thelevel of individual facilities by controlling the costs ofsales, along with a focus on reviewing various fixed
costs, so it does not want to rely on economies of scalefrom expansion alone for earnings.

Outside Director
After departing Recruit Co., Ltd. (nowRecruit Holdings Co., Ltd.), she became
an executive at TEPCO PARTNERS Co.,
Inc., a nursing-care provider. Her accomplishments include helping to return
TEPCO PARTNERS to profit just two
years after it reported 2 billion yen in losses.

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Yoshiko Sasao

The Elderly Care Business does not measure its performance in terms ofefficiency alone. I feel one of its positives is its willingness to accept evendifficult-to-treat elderly applicants such as those with dementia or those
who are hard to nurse. It is common for nursing-care homes to turn away
such patients. That said, no business can stay open if it continues to run
up losses. If I were to offer the Elderly Care Business advice based on myexperience in returning TEPCO PARTNERS to profit, I would recommend it
retain this admirable stance but also strive to standardize service quality
and show its approach can be effective as a business model where profitability can be improved. I presume the team at the Elderly Care Businesshas ample experience and knowledge, so once it is able to develop service
drafts and test them in the field so they can readied as manuals for dissemination to staff as practical know-how, my sense is the Elderly Care
Business will return to profit swiftly.

Initiatives for Supporting Corporate Value

Improve Profitability via a Business Model with Standardized Services

39Special Feature: Strategy to Motivate Women to Aim Higher at WorkMOTIVATING WOMEN TO AIM FOR FULL CAREERS IS
VITAL TO INCREASING CORPORATE VALUE
Companies cannot afford to wait to adopt programs to motivate women in theworkplace with the law* promoting female participation in the workplace taking
effect from April 2016 and other changes shaping the business climate. We are
putting our muscle into advancing measures with targets set at a higher level
than prevailing industry practice.
*Act of Promotion of Women’s Participation and Advancement in the Workplace

Promoting Diverse Work Styles as a Way to Motivate Women to Aim for Full Careers
Advancing an Action Plan to Double Female Managers at Leopalace21
For Japan, with its shrinking population, finding ways
to motivate women to pursue careers throughout
their lives is a pressing, important issue. This theme
is a concern that we at Leopalace21 share. With thelaw promoting female participation in the workplacecoming into effect in April 2016, we drew up an
action plan to motivate women to aim higher in theircareers and set targets to increase the ratio of
females in our employee hiring and our ratio of
female managers. To reach such targets, we aim toincrease the number of female managers from 78 asof April 1, 2016 to 150 as of March 31, 2021, andraise our ratio of female managers to over 10%, alevel that would put us above the prevailing practicein the rental housing industry.

40

Leopalace21 Corporation / Annual Report 2016

Ratio of female managers
200 (People)(%) 20

150

150
100

0

10

78

10

50

15

4

5
0

ResultTargetas of April 1, 2016as of March 31, 2021

●Number of female managers (left axis)●Ratio of female managers (right axis)

Business Model and CompetitivenessIn our efforts to motivate female employees, we have found theprospect of important life events such as marriage and then having
children have tended to pose an obstacle in motivating women in
their mid-to-late twenties to aim higher in their careers, and female
employees in general are often ambivalent about seeking promotions. Among the measures we are adopting to address this situation
are: reforming the system for taking paid vacation to enable employees to request paid leave in increments as small as one hour; introducing an at-home telework option mainly for people on a short
workday schedule; and establishing a “working support” hotline as aresource for employees to obtain counseling on how to navigate aworkable balance between work and life events such as pregnancy,
preparing for childbirth, a spouse’s relocation or transfer, and the like.
As a way to support women pursuing careers at Leopalace21, we
also plan to conduct interviews to help them smoothly return to work
after childcare leave and offer seminars on “motivating women toaim higher.” Moreover, we are working to create a work environment that instills a sense of purpose in our employees.

Leopalace21: Who We Are

Healthy Work-Life Balance, Workplaces with a Sense of Purpose

Initiatives for Supporting Corporate Value

In addition to putting into place systems to encourage
female employees to aim higher, Leopalace21 is sponsoring diversity forums with the aim of raising awarenessabout the need to motivate women to pursue careers in
the workplace. Our sponsorship of this series reflects ourconviction that the mindsets of both male and female
employees about work and their careers must evolve. A
December 2015 forum hosted a panel discussion on motivating women to pursue careers and an April 2016 forum
featured a talk about the law promoting female participation in the workplace. We heard valuable comments atthese from Outside Director Yoshiko Sasao, Ayako Ito of
Sustainability Accounting Co., Ltd., from which we
receive consulting on our CSR activity practices, and Yoko
Yajima of Mitsubishi UFJ Research and Consulting Co.,
Ltd., who is seen as one of the first to call attention to theneed to promote active female participation at work.

Initiatives for Creating Value

Forums Raising Awareness on Need to Motivate Women to Aim Higher at Work

Create Workplaces where All Women Strive to Be Role Models for SuccessLeasing Business Division,
Corporate Sales Department
Deputy Division Chief

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Yuko Shimizu

The thing I pay attention to as an individual in thinking about how to motivate female
employees to seek careers is keeping in regular contact with former coworkers who
are on childcare leave rather than focusing just on the employees who report to me
now. I constantly look for ways I can make the environment here one that is welcoming to former employees.
I communicate to my female colleagues what I see in the workplace as an executive and how hard but interesting it is for me to take on responsibility as an executive
based on my experience. I continue to strive to be a role model so that women who
work hard are encouraged to aim high and become an executive.

41

LEASING
BUSINESSBusiness
Overview

CONSTRUCTION BUSINESSAT A GLANCELEASING BUSINESSCONSTRUCTION BUSINESS

P44

P46

This business is involved in renting rooms in properties we manage
based on our master lease system. One rental agreement wedeveloped allows usage fees to be paid on a monthly basis, easing
the burden of initial costs. Another contract, the monthly agreement, requires upfront payment of usage fees for furniture andhome appliances but does not require payment of water bills andutility costs. We seek to secure tenants using our outlets, franchisesales offices, cooperative real estate agents, etc. and raise occupancy rates by offering a richer array of services that improvetenant satisfaction.

This business engages in construction, mainly apartments. We areworking to bolster our product competitiveness, offering products
designed from a female perspective and those for young people living on their own for the first time. Outside of apartments, we are
expanding construction of commercial properties and elderly carefacilities. We also plan to expand contracting for custom-built
homes.
To boost custom-built home contracting, we converted Morizou
Co., Ltd., a builder of high-end custom homes, into a subsidiary,broadening our construction product mix with the rollout of products jointly developed with Morizou.

Segment overview

key subsidiaries and affiliates• Leopalace Leasing Corporation (corporate housing agency/property
brokerage)• Plaza Guarantee Co., Ltd. (lease guarantee business)• Leopalace21 Business Consulting (Shanghai) Co., Ltd. (consulting business)• Leopalace21 (Shanghai) Property Management Co., Ltd. (property
brokerage)• LEOPALACE21 VIETNAM CO., LTD. (property brokerage)• Leopalace21 (Thailand) CO., LTD. (property brokerage)• Leopalace21 (Cambodia) Co., Ltd. (property brokerage)• LEOPALACE21 REAL ESTATE CAMBODIA Co., Ltd.
Net Sales(real estate business)
Breakdown• LEOPALACE21 PHILIPPINES INC.
(real estate brokerage)• PT. Leopalace21 Properti Manajemen(real estate brokerage)
FY ended• PT. Leopalace Duasatu Realty (real estate business)
March 31, 2016
• Woori & Leo PMC Co., Ltd.
(leasing management services)

key subsidiaries and affiliates• Morizou Co., Ltd.

Net Sales
Breakdown

80.3%

14.5%
FY ended
March 31, 2016

Changes in Net Sales
450 (Billions of yen)

100 (Billions of yen)
75

300

50
150

25
0

0

’13/3
FY2012’14/3
FY2013’15/3
FY2014’16/3
FY2015’17/3
FY2016(Plan)’13/3
FY2012’14/3
FY2013’15/3
FY2014’16/3
FY2015’17/3
FY2016(Plan)Key Data

Occupancy Rates

Master Lease Apartment Completions (as of end-March 2016)

90(%)(Number of buildings, % of totaL)
Chugoku region

8886

32, 4.7%

Tohoku region

84

46, 6.7%

82

Chubu region

57, 8.3%

80

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
’13/3 FY2012

42

Other

39, 5.7%’14/3 FY2013

Leopalace21 Corporation / Annual Report 2016’15/3 FY2014’16/3 FY2015

685棟

Tokyo
metropolitan area

342, 49.9%

Kyushu/Okinawa

Kinki region71, 10.4%

98, 14.3%

HOTELS & RESORT BUSINESSOTHER BUSINESSESELDERLY CARE BUSINESSHOTELS & RESORT BUSINESSOTHER BUSINESSES

P49

Under the brand name “Azumi En”, ournetwork of community-based nursing carebusinesses spanned 67 locations in the
Kanto region as of March 31, 2016. We
manage fee-based nursing homes, centersoffering day services and short stays, andgroup homes as well as businesses offering home visits by nursing care staff andin-home nursing care support, etc.

Our overseas subsidiary Leopalace Guam
Corp. operates sports facilities such as golfcourses and baseball fields as well as
resort facilities such as hotels and condominiums on the island of Guam. This business also manages hotels at six locations
across Japan.

key subsidiaries and affiliates

key subsidiaries and affiliates• Leopalace Guam Corporation (hotels and resort
business on Guam)• WING MATE Co., Ltd. (travel agency services)• Azu Life Care Co., Ltd. (elderly care)

Net Sales
BreakdownThis segment centers on small-amount,
short-term insurance and solar power generation. The latter installs solar power systems acquired with internal funds onleased rooftops and earns profits fromreselling the electricity generated (solar
panel installations on leased rooftops).

• Asuka SSI (small-amount, short-term insurance)• Leopalace Power Corporation (solar power
generation)• Leopalace Energy Corporation (power producer
and supplier, PPS)
• Leopalace Smile Co., Ltd. (special subsidiary forproviding clerical services)

Net Sales
Breakdown

2.1%

Net Sales
Breakdown

2.2%

0.9%

FY ended
March 31, 2016

FY ended
March 31, 2016

12 (Billions of yen)

12 (Billions of yen)

4.5 (Billions of yen)

8

8

3.0

4

4

1.5

0

0

0

’13/3
’14/3
’15/3
’16/3
FY2012 FY2013 FY2014 FY2015’17/3
FY2016(Plan)

’13/3
’14/3
’15/3
’16/3
FY2012 FY2013 FY2014 FY2015’17/3
FY2016(Plan)

Guam/Domestic Hotel Occupancy Rates(Annual Average)(Annual Average)

100 (%)

100 (%)

75

75

50

50

25

25

0

’17/3
FY2016(Plan)

Data Compilation

Elderly Care Facility Occupancy Rates

’13/3
’14/3
’15/3
’16/3
FY2012 FY2013 FY2014 FY2015

Initiatives for Supporting Corporate ValueFY ended
March 31, 2016

Initiatives for Creating Valuekey subsidiaries and affiliates

P50

Business Model and CompetitivenessP48

Leopalace21: Who We Are

ELDERLY CARE BUSINESS

0

’13/3
FY2012’14/3
FY2013’15/3
FY2014Day services
Short-stays
Private residential nursing homes, etc.

’16/3
FY2015’13/3
FY2012
Guam Resort
Domestic hotels’14/3
FY2013’15/3
FY2014’16/3
FY2015Westin Guam

Leopalace21 Corporation / Annual Report 201643

Business Overview

LEASING BUSINESS

Performance
In fiscal 2015, the Leasing Business posted net sales of 410,552
million yen (a 2.8% increase from the previous fiscal year) andoperating income of 22,760 million yen (a 10.9% increase fromthe previous fiscal year). To maintain stable profit, we strove tosecure stable occupancy rates by promoting long-term tenancy
via expansion of our service mix such as the “Room Customize” plan and a tenant-exclusive website; by stepping up efforts
to lock in corporate and female tenant demand via greater installation of security systems; and by expanding contracts withforeign customers via support system improvements. As aresult, the number of rooms managed at the fiscal year-end
rose to 561,961 (up 7,013 rooms from the previous fiscal yearend), the occupancy rate at the fiscal year-end was 90.53%(up 1.24 percentage points from the previous fiscal year-end),
and the average annual occupancy rate was 87.95% (up 1.38
percentage points from the previous fiscal year-end).

Operating Income (Loss) and Average Annual Occupancy Rate(%) 9620 (Billions of yen)

10

92

0

88

-30

84

80

-50
’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016(Plan)

Operating income (loss) (left axis)

Average annual occupancy rate (right axis)

Number of Vacant Rental Housing and the Proportion of Vacant Houses (Japan)
5,000 (Thousands of units)

Business Environment and Related Issues
The domestic rental housing market is already saturated dueto the declining population and an increase in vacant houses.
Given these conditions, it is difficult to expect a nationwide
recovery in demand in the near future. As a result, in our Leasing Business, we are going as far as we can to differentiate
our services by making full use of our distinctive strengths likestudio apartments and rental agreements that include furnitureand home appliances, and by taking steps that enable us toattract tenants even in this fiercely competitive environment.
In addition, to secure stable occupancy rates it is necessary to
reduce tenant outflow while moving ahead with cost reduction
by correcting master lease rents in view of market rent levels
and periodically reviewing routine property management tasks.

44

Leopalace21 Corporation / Annual Report 2016(%) 25

4,000

20

3,000

15

2,000

10

1,000

5
0

0
1983 1988 1993 1998
Number of vacant houses for rent or sale (left axis)

2003 2008 2013
Proportion of vacant houses (right axis)* Source: Housing and Land Survey the Ministry of Internal Affairs and Communications

Corporate sales:
By building a sales system that is not overly reliant on one
particular industry, we have made our portfolio resilient toeconomic swings. In addition, our development and operation of LAM System, a website aimed exclusively at corporate partners, enables us to dig deep into our existing clientbase in a bid to identify unmet needs and strive to add newclients and thus bolsters our marketing to corporations.

Measures aimed at international students:
Our overseas branch network includes four sales offices in
China, two in South Korea, one in Taiwan, two in Vietnam,
two in Thailand, and one each in Cambodia, Myanmar, thePhilippines, and Indonesia. In addition to call centers, we
use “LAM School,” a website aimed exclusively at partner
schools, to bolster our efforts to sew up demand amonginternational students.
Expanding international businesses:
We have to date provided overseas customers with rental housing in Japan through outlets overseas, but we are
expanding our leasing management and brokerage services
in overseas markets and working to facilitate greater collaboration between our overseas units and Japanese corporate
sales function.

Key Products/Services

Initiatives for Supporting Corporate Value“Room Customize”:
This innovative service enables tenants to customize their living space
to suit their own tastes—even for rental properties. The number ofcontracts for the “Room Customize” service, which allows tenants
to change the wallpaper on one wall for free, has already exceeded
26,000. With this service, we aim to promote long-term occupancy byenabling tenants to personalize and form attachments to their rooms.

Initiatives for Creating Value

Measures aimed at female tenants:
Females comprise only 30% of Leopalace21’s tenants. We
aim to attract more female tenants by offering places where

women find it comfortable to live, such as apartments with
anti-crime security features, and thereby raise occupancy
rates. Specifically, we intend to enhance our services targeting women living on their own. For example, we plan to
do more to offer housing with plenty of storage or a kitchen
where cooking is enjoyable.

Business Model and CompetitivenessPromoting long-term occupancy and limiting tenant outflow:
In order to secure stable occupancy rates, it is important
not only to increase tenants but also to reduce tenant
outflow. Thus, we contact tenants who plan to leave andpresent them with a proposal to relocate to another Leopalace21-managed apartment. In addition, we are drawing
on fresh ideas such as our “Room Customize” plan and our
MY PAGE website exclusively for tenants to spruce up ourservice mix.

Leopalace21: Who We Are

Strategies

MY PAGE website for tenants:
Through this website exclusively for tenants we developed in collaboration
with corporate partners, tenants can use myriad services such as broadband Internet access service LEONET, online shopping, cleaning services,
home delivery of dry-cleaned items, etc. We also provide tenants with various services and campaign information via this website.
Monthly agreements:
Monthly agreements for as few as 30 days are available for short-term use.
These are furnished rooms, with utilities charges included in the rental fee,making them suitable for long-term business trips or periods of training.

Data Compilation

Security systems:
With “24-hour, 365-day safety and security” as our motto, we havepartnered with two major nationwide security companies to install
security systems in properties we manage. The number of security
system installations has already exceeded 250,000 rooms. We are also
focusing on security camera installations, with the number of buildings
with cameras in place now above 7,800.
Leopalace21 Corporation / Annual Report 201645

Business Overview

CONSTRUCTION BUSINESS

Performance
In fiscal 2015, total orders at the Construction Business were
86,439 million yen (a 1.1% decline from the previous fiscal year),net sales 74,160 million yen (a 21.0% rise from the previous fiscal year) and operating income 3,339 million yen (a3,128 million yen increase from the previous fiscal year).
We took many steps to improve margins at the Construction Business, enabling us to achieve sharp income
growth. These measures included supplying apartments
mainly in urban areas where we expect high tenancy
rates; introducing high-quality products with anti-quake
features and sound-dampening insulation; rolling out new
brands that refresh our image with tenants and bolster
our competitiveness; adding more construction plan variations based on ideal land use concepts; and advancing
initiatives to boost profit margins via reassessments ofproduct prices, procurement routes, etc.

Operating Income, trend in building completions
80 (Billions of yen)

(Buildings) 5,000

40

4,000

30

3,000

20

2,000

10

1,000

0

0
’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016(Plan)

Operating income (left axis)

Number of building completions (right axis)

Number of New Rental Housing Starts
600 (Thousands of units)

Business Environment and Related Issues
Due to recovery in the domestic economy and our earnings, the environment facing our Construction Business is
improving. Yet, as shown by the continued decline in new
rental housing starts from a peak of 537,943 units in fiscal
2006, the rental housing market is saturated when assessedat the national level. In such a difficult environment, we aim
to identify areas where high occupancy rates are likely andexpand orders based on a more detailed supply plan, notably
in the three largest metropolitan areas. At the product level,
we also look to bolster competitiveness by adding tenant
perspectives, especially women’s, into our product development, strengthening anti-quake functions, and doing more to
improve sound insulation and security.

46

Leopalace21 Corporation / Annual Report 2016

400

200

0
’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015* Source: Statistics on New Housing Starts of the Ministry of Land, Infrastructure, Transport, and Tourism

Introducing new brands:
We launched MIRANDA and CLEINO, new brands withmore high-end design features that improve on the value-added specifications of Leopalace21 apartments suchas industry-leading sound insulation, security features
to keep tenants safe and secure, and rooms furnishedwith furniture and home appliances. With the addition ofthese new brands, we aim to revitalize our image among
tenants and bolster our competitiveness.
Broadening construction plan variations:
We are expanding our business-use building contracting
beyond apartments to encompass elderly care facilities,
for which demand is expected to grow, and buildings
with retail and commercial space. We have launchedcustom-built “Taiga” homes, which we jointly developed with Morizou Co., Ltd., a subsidiary that builds
custom-built homes made using high-quality Kiso-hinoki
wood. Our product lineup thus responds to a wide rangeof land-use needs.

Key Products/Services
MIRANDA:
With a key concept of “decorative,” the MIRANDA brand brims withnew ideas that “surprise” and “dazzle” potential tenants and invites
fresh thinking about living spaces that come with unique added value.

Initiatives for Supporting Corporate Value

CLEINO:With improved fine-tuned floor plans, fittings and fixtures, and specifications
based on extensive market surveys, CLEINO branded designs still enableconsiderable flexibility in matching the style and ideas of prospective residents and making their lives even more comfortable.

Initiatives for Creating Value

Enhancing product competitiveness:
We are actively working to reduce unwanted noise bycombining sound-insulating flooring (“non-sound floor”),
walls, and drainage pipes in a “non-sound system” withan industry-leading level of sound insulation that comes
as a standard feature in apartments we build. We aim
to erase the perception that Leopalace21 buildings havethin walls and build high-quality apartments that enable
tenants to live comfortably. Among the building designs
we are marketing are “L-SECtion,” which improves security against crimes for first-floor rooms by blocking linesof sight into those rooms from outside the building, and“Burliant,” which is made with quake-resistant materials.

Business Model and Competitiveness

Actively supplying apartments to specific areas:
Since the occupancy rate is high for relatively new buildings and, in particular, extremely high demand continues
to be expected in Japan’s three largest metropolitan
areas, we aim to expand the number of apartments we
supply, focusing on those areas. To establish a sales system based on tenant demand for apartments, we run a
network of 60 branches, centering on 39 branches in theTokyo metropolitan area.

Leopalace21: Who We Are

Strategies

Burliant:
Manufacturing concrete parts for Burliant apartments in factories enabled
us to shorten the construction period by two months, thereby reducing thenumber of tasks to be performed on-site and shrinking on-site workloads.
Along with realizing high wind resistance and water tightness, wall-type precast concrete makes the structure so resistant to earthquakes it can withstand up to a seven seismic-intensity quake without collapsing.

Data Compilation

Custom-built “Taiga” homes:
Based on a flexible design, custom-built “Taiga” homes are made withthe highest quality Kiso-hinoki wood. In addition to durability of hinoki
wood materials, these homes are designed to last a hundred years
thanks to innovative features such as a ventilation system that protects
against degradation and reinforcements against earthquakes.

Leopalace21 Corporation / Annual Report 201647

Business Overview

ELDERLY CARE BUSINESS

Performance
At the Elderly Care Business, which runs the Group’s“Azumi En” nursing-care facilities, net sales in fiscal
2015 came to 10,798 million yen (a 1.8% increase fromthe previous fiscal year). The business recorded an operating loss of 1,354 million yen, a widening of 748 million
yen from the previous fiscal year on a run-up in new facility opening costs.

Operating Income (Loss), Trend in Nursing-care Facilities
2 (Billions of yen)

(Number of facilities) 80

1

40

0

0

-1
-2

Business Environment and Related Issues’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016(Plan)

Operating Income (Loss) (left axis)

The business environment surrounding the Elderly Care
Business is difficult. While the population requiring careis growing and the market is expanding, the number offacilities for seniors is also increasing. As a result, competition with other companies in the same business is
growing fiercer. Under such circumstances, we aim torealize a near-term return to profitability through creative
efforts and expansion of services at existing facilities, but
we are also actively looking at the development of new
facilities to attract demand with certainty.

Key Products/Services
Azumi En:As of March 31, 2016, we manage 67 “Azumi En” facilities in the Kanto and Chubu regions. Services at eachfacility include fee-based homes for seniors that offer support for their daily lives in a family-like atmosphere; grouphomes with daily-living support through fine-tuned nursing
care; and day and short-stay services where elderly people
living in their own homes can access services for a day,come for temporary stays, etc.

48

Leopalace21 Corporation / Annual Report 2016

Trend in nursing-care facilities (right axis)

Strategies
We have designated the Elderly Care Business a strategic growth business. Amid stable occupancy rates atexisting facilities, we seek to open more new facilities
in cooperation with the Construction Business with theaim of boosting earnings. At the same time, we aim toensure healthy margins via controls on costs of sales.

Business Overview
Leopalace21: Who We Are

HOTELS & RESORT BUSINESSBusiness Model and Competitiveness

Performance

Business Environment and Related Issues

-1

-2

-3
’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016(Plan)

Strategies
To encourage longer stays by senior citizens, we market
our Guam resort in ways that raise its profile as a golf
destination. In addition, we are putting greater effort into
attracting visitors from Asia. At our domestic hotels, weoffer the event halls in our hotel facilities for sports group
activities and company training exercises. As a way topromote sales in our two core pillars, the Leasing Business and the Construction Business, we encourage our
stakeholders, starting with shareholders and extending toproperty owners, tenants, and corporate partners, to use
these facilities.

Key Products/Services

Initiatives for Supporting Corporate Value

Attendant with the increase in the number of tourists
from Japan going overseas, the business environment
for our Guam resort facilities is turning favorable. Moreover, we have been consistently attracting tourists from
Asian countries such as South Korea, China, and Taiwan,
while domestic demand, particularly from business travelers, is also increasing along with the economic pickup.

Operating Income (Loss)
0 (Billions of yen)

Initiatives for Creating Value

In fiscal 2015, net sales at our Hotels & Resort Business (Guam resort facilities and hotels in Japan) grew to
11,427 million yen (a 27.7% increase from the previous
fiscal year) on higher room occupancy rates thanks tothe success of our campaign promoting use by corporateclients of our Leasing Business. Despite higher occupancy, the business booked an operating loss on continuing heavy depreciation costs, but the operating loss
narrowed by 591 million yen versus the year-ago level to
697 million yen. During fiscal 2015, we sold from within
our domestic portfolio the hotel in Niigata in July.

Leopalace Hotels:
Our hotels are situated across Japan in six locations: Sapporo, Asahikawa, Sendai, Nagoya,
Okayama, and Hakata. Aimed at both long-term and short-term stays, these hotels run restaurants under the direct management of Leopalace21 and provide free laundry facilities.

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Leopalace Resort Guam:
Leopalace Guam resort is fully equipped with sports facilities that meet international standards. Its swimming facilities have been authorized as a “JOC authorized swimming competition center” and its golf courses have been recognized as a “Japan Golf Association-designated golf course.” It is used not only as a resort but also as a training camp site for athletes.
*We sold Westin Resort Guam in April 2016.

49

Business Overview

OTHER BUSINESSES

Performance
In fiscal 2015, net sales at Other Businesses, which
includes solar power and small-amount, short-term
insurance businesses, came to 4,485 million yen (a49.5% increase from the previous fiscal year) andoperating income came to 337 million yen (a 979.3%
surge from the previous fiscal year).

Operating Income (Loss)
1 (Billions of yen)
0
-5
-10
-15
-20

Business Environment and Related Issues
Since the feed-in-tariff (FIT) scheme for renewableenergy took effect in July 2012, power utilities havebeen required to purchase electricity generated byrenewable energy sources such as solar and wind atfixed prices for a prescribed period. The FIT purchaseprice is adjusted every year to take into account changes
in the cost of renewable energy facilities, and thepurchase price for solar power has fallen every year
since the scheme commenced. As a result, solar panels
installed relatively early on after the launch offer greater
economic benefits.

’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016(Plan)

Strategies
Since fiscal 2012, we have scaled up our solar powerbusinesses through our energy subsidiary Leopalace
Power Corporation. Using a portion of the funds raised
through a public equity offering announced in November
2013, we have pressed ahead with solar panel
installations on the rooftops of apartments we manage.
We aim to secure stable earnings from these panels, as
fixed purchase prices are guaranteed for 20 years under
the FIT scheme.

Key Products/Services
Solar power systems:
Most of the apartments we manage have flat roofs with more surface area than iscommon for normal housing, so many of these rooftops are well suited for solar panel
installations. Since these apartments were built based on our designs, we can install on
these rooftops without extra costs such as new tests to investigate whether they canwithstand more weight, etc.
We are also careful to ensure that our solar panel installations do not negatively impact
apartments. We install metal grippers we developed onto rooftop protrusions and place
panels on top of these grippers so that drilling holes into roofs can be avoided. Our
installation method means rainwater leaks are not a concern.

50

Leopalace21 Corporation / Annual Report 2016

Metal Gripper

TOPICS: IR Activities, Returning Profits to Shareholders
Leopalace21: Who We Are

We believe proactively disclosing information in an appropriate manner is important tobuilding relationships based on trust and deepening mutual understanding with stakeholders such as shareholders and other investors. As a step in this direction, we hold explanatory seminars aimed at individual investors. Moreover, we are focusing on returning profits to shareholders and providing a shareholders’ benefit program.

IR Events and Seminars for Individual Investors
Business Model and CompetitivenessWith the aim of promoting a deeper understanding of our businesses,
strategy, and earnings among individual investors, we host IR events
at major cities across Japan. Moreover, we are bolstering our communication with individual investors through active participation in seminars for them arranged by sponsors such as Tokyo Stock Exchange,
Nomura Investor Relations Co., Ltd., etc.
In fiscal 2015, we hosted or participated in 14 events and seminars
for individual investors. There are plans for the same kind of eventsand seminars for fiscal 2016 as well. We intend to step up information
disclosure to individual investors in the years to come.

Our profit allocation policy is to return profits to shareholders in the form of dividends drawn from profits generated by ourbusiness activities. We reinitiated dividend payments for the first time in seven years in fiscal 2015, paying a dividend of 10
yen per share at the fiscal year-end. In fiscal 2016, we plan to pay a total dividend of 22 yen per share.

Dividend Payout Plan

Basic Policy on Returning Profits to Shareholders◆ With a longer-term target of a 30% dividend payout ratio, we
strive to maintain stable dividend payments while linking our
return of profits to our earnings performance.

Year-end dividend (¥ per share)
Annual total dividend (¥ per share)
Total sum allocated for dividends (¥ mn)
Dividend payout ratio (%)

Fiscal 2015 (estimate)

Fiscal 2016 (plan)

Ended March 31, 2016

Ended March 31, 2017

0.00
0.00
0.00
0
0.0

0.00
10.00
10.00
2,628
13.5

10.00
12.00
22.00
5,783
31.3

Shareholders’ Benefit Program
Shareholders’ Benefit Program(1) For shareholders withat least 100 shares
up to 999 shares
Holding
period ofless than
three years (2) For shareholders withmore than
1,000 shares▶

Total: A set of 4 tickets
for all eligible shareholders▶

at least 100 shares•Free lodging at Leopalace Resort Guam: 2 tickets•50% discount for domestic hotels:
8 tickets

Total: A set of 10 tickets
for all eligible shareholders(3) For shareholders withup to 999 shares
Holding
period ofmore than
three years (4) For shareholders withmore than
1,000 shares•Free lodging at Leopalace Resort Guam: 2 tickets•50% discount for domestic hotels:
2 tickets▶

•Free lodging at Leopalace Resort Guam: 3 tickets•50% discount for domestic hotels:
3 tickets

Total: A set of 6 tickets
for all eligible shareholders▶

•Free lodging at Leopalace Resort Guam: 3 tickets•50% discount for domestic hotels:
12 tickets

Data Compilation

Leopalace21 has a benefit program for shareholders who are on our shareholder registry asof the record date to whom shareholder rights
accrue for the relevant period twice a year (atthe end of the interim and the end of the fiscal
year). Under our shareholders’ benefit program,
we provide tickets for free lodging at Leopalace
Resort Guam and tickets to receive a 50% discount on a stay at one of the Group’s domestic
hotels. For shareholders who have retained ourshares for three years or longer, we add more
free Guam resort tickets and 50% discount tickets to the tickets normally provided.

Initiatives for Supporting Corporate Value◆ Through growth investments in real estate, expansion of ouroverseas operations, M&A, systems investment, R&D, etc., wework to increase shareholder value via expansion of earnings
per share.

Interim dividend (¥ per share)

Fiscal 2014
Ended March 31, 2015

Initiatives for Creating Value

Dividends Restored in Fiscal 2015, our First Payments since Fiscal 2008

Total: A set of 15 tickets
for all eligible shareholders

Leopalace21 Corporation / Annual Report 2016

51

DIALOGUE ON LEOPALACE21’S CORPORATE GOVERNANCETOWARD INCREASING LEOPALACE21’S CORPORATE VALUE

Eisei Miyama
President and CEO, Leopalace21

X

Yoshiko Sasao
Outside Director, Leopalace21(

Representative Director,
SHiDAX BEAUTY CARE
MANAGEMENT CORPORATION)X (Tetsuji Taya

Outside Director, Leopalace21

With the aim of increasing corporate value over the longer term by harnessing the knowledge of our outside directors, who have extensive business management experience, Leopalace21 executes operations.
In this feature, President Eisei Miyama discusses with our two outside directors our form of governanceaimed at increasing Leopalace21’s corporate value.

What is Necessary in Governance to Increase Corporate Value over the Longer Run
Miyama: Our Board of Directors in the past was mostly

52

tions, I’m not yet satisfied we have enough cog-

comprised of insiders who knew the industry

nitive diversity on our Board, so I would like tovery well but whose knowledge did not extend

add even more depth by inviting individuals withmuch beyond that, so we had few Board mem-knowledge of other fields to join. Among thebers with a suitably balanced perspective. This

items in the Corporate Governance Code pro-imbalance caused us real harms, such as a span

moted by the Tokyo Stock Exchange in 2015 forof years when society was changing, but Board

member companies is the inclusion of at least

members sought to go in a different direction.

two outside directors on the Board, but theWe have added considerable depth to ourCompany is not merely conforming with theBoard since then, with Mr. Tetsuji Taya joining inCode. I believe in my heart that external view-

2010 and Ms. Yoshiko Sasao joining in 2015 as

points are necessary for good management, so

outside directors. Yet, even with these addi-

I have invited outsiders to join our Board.

Leopalace21 Corporation / Annual Report 2016)

Board Member & Managing Director,
Industrial Growth Platform, Inc.

Miyama: We never hire outside recruitment firms toI actually met Ms. Sasao through an introduc-select outside director candidates. I act on thetion from an advisor to the Company. I asked

assumption we are looking for a certain type of

this advisor whether he knew any women who

person or a person who will articulate certain

understood the elderly care business and was

opinions, so I speak directly to people I thinkknowledgeable about human resources (HR)would be good for our Board.

development at companies.

I feel I can offer advice
on the Elderly Care
Business and the best
ways to harness thecapabilities of female
employees.

she just mentioned, is a specialist in corporate
management and HR development. I would liketo add even more depth to our Board by inviting
more individuals like these two to join as outside directors.

Business Model and Competitiveness

How Outside Directors Contribute to Increasing Corporate Value over the Longer Term

Leopalace21: Who We Are

How Leopalace21 Conducted its Search for its Two Outside Directors

Taya: Leopalace21 was in the midst of implementing
restructuring measures when I joined the Board
departure. At the time, the Company was decidSasao: The expertise I have developed over the years

ing whether to brake or accelerate, but the boardroom milieu has clearly changed in the past 18

and ways to harness the capabilities of female

months or so. What should the Company do to

employees. In terms of business management,

spur growth again is a major theme of discus-

I provide support and advice to the Elderly Caresions, and with growth always comes risk. Rather

Business. I am also pleased that I can advise

than serve as a brake or accelerator on deci-

the Company on how to ensure its female

sion-making, I think one of the most important

employees can do their best work. The main

roles I play is to bring risks that invariably accom-task of an outside director is monitoring opera-pany growth to the Board’s attention.

tions. With regards to my knowledge base andWhile helping to determine how hard to step onareas of expertise, I offer my views on how tothe accelerator and drive growth, I think one of my

improve operations.

key tasks is to clear out any “landmines” that may

For example, as Leopalace21 expands in thelie in our path.

years ahead, in the domain of developing
human resources, I am speaking at various
occasions to manager-class employees on theneed for stronger conceptualization skills andInitiatives for Supporting Corporate Valueis in corporate management, HR development,

Initiatives for Creating Valueas an outside director, so that was my point ofproblem-solving abilities. Perhaps reflecting theinfluence of my proposals, the personnel system will for the first time assess employees as
Data Compilation

innovators this cycle, so changes to promote
growth are becoming visible.
Miyama: I would describe the contribution of outside
directors as bringing various issues to my attention rather than advice.
Mr. Taya runs his own firm, and Ms. Sasao, as

I think my most important role is to stay alert for risks that invariably
accompany growth and bring them to the Board’s attention when
they emerge.

Leopalace21 Corporation / Annual Report 2016

53

One of the best qualities of Leopalace21 is theable, there is the risk that sticking to Japanese

speed of its decision-making. I think the speed

standards in building out its footprint overseas

with which the Company has built its overseas

could lead to entirely different results in eachfootprint is impressive. The next crucial step iscountry. I would like such risks to be watched

whether it can horizontally organize these branch-across the Company and help build the know-how

es and subsidiaries into a network. This is

to manage such risks well.

because, while entering markets abroad is laud-Outside Director Input that Factored into Management Decisions
They advised me to pay
attention to risks in theInternational Businessand adopt diverse
working styles in the
Elderly Care Business.

into whether it is fine the way it is now. Ms.
Sasao thinks, for example, the Company should
introduce more diverse forms of employment tohelp lower costs. I listened carefully to the valuable advice of both, share their concern about
the problems they identified, and have sought toadvance measures to improve related matters.

On Issues at the Elderly Care BusinessMiyama: Our goal is to expand our overseas footprint
from 15 locations to 20 in the future, but this is

Sasao: Elderly care is considered a growth market andmerely a numerical target. We do not intend to

the entry of firms from other industries has led

be dismissive of risk just so we can reach a

to much fiercer competition, stimulating greaternumber. As for building condominiums over-

M&A activity. As a result, profitability has fur-seas, we think there is a market need but wether deteriorated in this already low-profit field,

are uncertain whether this is the time for such aand this could lead to a shakeout, so without

move. I travel overseas frequently these days

proper management, the Company could be

and see some large Japanese companies launch

forced to exit the business.

projects that I think are unlikely to ever be in

Leopalace21 sees this business as a growthdemand. If I were in their shoes, I would

field and aggressively expanded into it but per-disperse my risks a bit more widely. There arehaps a result of rapid expansion, profitability has

many cases where companies draw up a busi-

suffered. I think the right course is to proceed

ness plan and set numerical targets for overseas
expansion, and then acquire land because they
think it is the only way and proceed to the execution stage without sufficient marketing. Mr.
Taya mentioned “landmines” earlier, and I agree
entirely with his assessment on that score. I
think it is important to stay alert to where any“landmines” could be buried.
I’ve also received plenty of useful advice from
Ms. Sasao. She is an expert in elderly care, andrecently when the issue came up at meetings ofthe Board of Directors and the Corporate
Management Council, she said she understoodthat the Company recognized the Elderly Care
Business as a growth field but raised the pointof whether there should be a bit more analysis

54

Leopalace21 Corporation / Annual Report 2016

I feel the Elderly Care Business has many strengths, so recording
them in manuals and testing them in the field so they can be disseminated widely to staff as practical knowledge will lead to swift
improvements in the business.

On Issues at the Hotels & Resort Businesswhile keeping the level of each service above acertain level. It is a high-degree-of-difficulty

Taya: The Hotels & Resort Business is in someapproach but I think the Company needs torespects a legacy cost. The business has a col-attempt to navigate such a path.

lection of underutilized assets and is not easy to

One thing that has impressed me about
Leopalace21’s Elderly Care Business is its willingness to accept even elderly applicants withexit, but merely selling such assets off is also
not the answer.
Given these constraints, we must attempt tosomehow convert this business into a profit

common for nursing-care homes to turn away

center by selling off some of the businesssuch patients. This is surely a reflection of

hotels, for example, or rebalancing the portfolio.

Leopalace21’s philosophy. Accepting such appli-

If the business is converted into a profit center,cants will surely throw up many hurdles in terms

the next option could be raise its value and sellof management but I think developing service

it. Seen from a different pair of eyes, however,quality standards while leveraging such willing-

the business could even open up the next

ness and converting that approach into a busi-

growth strategy. We acquired in 2014 a travel

ness model where profitability can be improved

company where we saw potential for synergies

could well prove an effective approach.

with the Hotels & Resort Business. The pairing

I feel the Elderly Care Business has manyis still at the trial stage, so we think it is still too

knowledge that can be widely disseminated will
lead, I believe, to swift improvements in thebusiness. Our local reputation is already positive,
but if we can improve it further, I think it will be

The pairing with ourrecently acquired travelcompany is still at a trial
stage, so I think it is still
too soon to write it off
as a failure.

Initiatives for Creating Valuesoon to write it off as a failure.

them in manuals and testing them in the field inways that enable employees to develop practicalBusiness Model and Competitivenessdementia or those who are hard to care for. It isstrong practices and approaches, so recording

Leopalace21: Who We Are

with further expansion and improve profitability

easier to hire people.

Miyama: I think properly evaluating people is the most

Sasao: I think it would be good to clarify the kinds ofpeople Leopalace21 seeks to serve in executive

Compensation Committee comprises me and two

and board roles in a decade from now and tooutside directors so that people are not appointed

look at people who match the identified criteria.

merely because I like them. The outside directors

As for me in my current role, however, what I

proposed as a nomination process that each can-strive to be is objective and fair and to keep in

didate be vetted by the Committee members inmind the need for buy-in on the part of internal

person. Each candidate will be required to make a

stakeholders as well as external ones. I thinkpresentation in front of the Committee on their

we need to be able to explain properly why can-

expectations for the Company and their thinking

didates were nominated, and this is why weon management issues. In this way, theintroduced the presentation process at theCommittee will be able to assess them on mat-Committee, as Mr. Miyama just mentioned.

ters apart from whether they satisfy the formal

Thanks to this process, I have developed a clear

qualifications to serve as executive officers, orunderstanding of where Leopalace21’s current

directors on the Board of Directors.

management team excels and where it can

Data Compilation

important thing. The three-person Nomination andInitiatives for Supporting Corporate Value

What to Keep in Mind on Nomination and Compensation Committee Decision-making

improve. As a result, I think it will be easier to

Leopalace21 Corporation / Annual Report 201655

discuss future management policies, which I

ask them to clearly articulate their action plans.

think is a very good thing.

If they do so, it is easier for me as an outsider
to evaluate them.

Taya: When I accepted a position on the Nomination
I ask nominees for executive and board positions
to clearly articulate theiraction plans for the fiscal
year.

and Compensation Committee, I made arequest. As an outsider, I do not know muchabout the day-to-day activities inside theCompany, so I asked that articulation of anaction plan for the upcoming fiscal year bemade a component of candidate presentations.
While nominees for executive and board roles
tell us their targets for the current fiscal year, I

On Developing the Next-generation of Executive Officers
Miyama: In fiscal 2014, we began inviting outside lectur-as blue (“sei”) is Leopalace21’s corporate color. I

ers to give talks as part of our training program

have launched new projects entirely through myfor developing next-generation executives.

own resources and exertions since I was a young

What emerged from the program is that many

man. When a project moved beyond the launch

employees at that level are not very good atphase and was up and running on its own, I

determining on their own what they need to do.

moved on to what I felt was the next big thing, so

Perhaps this reflects the top-down approach the

I was always advancing new projects. In that

Company has relied on to date.

sense, compared with the current generation, I

When given an assignment, they are very
good at moving it forward but when it comes toam better at coming up with new project ideas
and thinking through what must be done.

deciding what they must do on their own, they

Leopalace21 has not until recently adopted afall well short of what we need. Addressing thatprocess for collecting ideas from employees inis the next key issue.

the field, escalating proposals to senior man-We decided to provide stepped-up training asagement for assessment and selection, andan initiative for fiscal 2015. At the same time, atthen authorizing employees in the field to exe-

the end of the work day once a month there iscute them. A horizontal organization that cuts

an informal gathering for line managers at eachacross divisions and seeks bottom-up input

business division to promote interaction. At thewas launched in 2014, and the right conditions

gathering, we ask managers to exchange theirfor the new organization to function as intend-

views on matters such as what we need to do

ed are at last in place. As a result, I believe aabout urgent challenges in the next two or three

new generation of employees will emerge toyears, and if their proposals are convincing, welead the Company in the future through these

implement them.

initiatives we have set up for each employee to

We have dubbed the monthly meeting for business division line managers “Mirai Sosei Jyuku”

think for themselves and come up with ideas
and proposals.

On CSR Activities
Sasao: Leopalace21 provides a positive environment

56

tion, a high ratio. Moreover, the Company

where employees can do their work without

adopted a system in 2016 where employees

impediments. Employees do not work much

can use paid vacation in increments as small as

overtime and use about 70% of their paid vaca-

one hour, an approach that is unusual among

Leopalace21 Corporation / Annual Report 2016

offers a very flexible, positive workplace.
Setting targets using a method for improving
female employee motivation and prominencein the workplace, Leopalace21 targets a 2020
female manager ratio of 10%, a much higher

Leopalace21: Who We Are

large companies. For female employees, I feel it

I think Leopalace21 canfurther increase its corporate value if its
female manager ratio
increases to a level thatranks it among industry
leaders as of 2020.

level than that set by industry leaders. What is
important to note is that many large companies
place welcoming of a healthy work-life balance

programs and mentoring for women to prepare

but not in ways that increase female employee

them to succeed in executive roles and there-

enthusiasm and motivation. Some believe thisby increases the female manager ratio to ais why at large companies the female manager

level that ranks it among industry leaders as ofratio does not seem to rise despite various ini-

2020, I think this would further increase its cor-

tiatives. I believe if Leopalace21 offers training

porate value.

Business Model and Competitivenessare putting a lot of effort into creating a work-

On Returning Profits to Shareholders and Working with Stakeholders
Taya: Leopalace21 has finally returned to good health

While Mr. Taya says Leopalace21 has changed
considerably in the past two years, we have notfocusing on whether Japanese companies sen-done enough to tell the public about those

sibly return profits to shareholders, and givenchanges, which I recently realized is a missed

this awareness, paying dividends is unavoidable.

opportunity.

Yet a key concept that is important to bear inmind in thinking about capital allocation is what

Miyama: I think it takes about a decade to change public

to do about growth, and growth requires invest-

perceptions. People still remember us fromment funding. As Leopalace21 does not manage“Monthly Leopalace21” service ads on TV anditself as an old-line, mature operator without

it will take years to cancel that out.
The ratio of employees holding shares in the

toward future growth. In that sense, I think theCompany stood at 16% as of March 31, 2015,

capital allocation plan for fiscal 2015 is aand with our encouragement, the ratio is now at

well-balanced one.

56.7%, approaching the 60% level. This ratio ishigher than the average at listed companies. I

Sasao: Keeping the dividend payout ratio at a level of at

think it is evidence that our employees want toleast 30% will surely enable us to attract long-

invest in the Company and the sense of unity

term shareholders, so in that sense it is a posi-

within the firm is stronger than it was before.

tive. Since I joined the Board as an outside
director, the perception of the Company I had

Initiatives for Supporting Corporate Value

growth opportunities, we naturally direct money

Initiatives for Creating Valueand aims to grow. My sense is investors arefrom the outside and that I have from inside thefirm are complete opposites. On this basis, wehave set our dividend payout ratio at 30%, a
Data Compilation

point I think we need to assertively communicate
to society and shareholders. I think if we strive toimprove understanding of our positives, we will
form good relationships with society and shareholders and this will further elevate public trustin our operations.

Leopalace21 Corporation / Annual Report 201657

CORPORATE GOVERNANCE
Leopalace21 sees the maintenance and reinforcement of corporate governance as oneof its most critical management tasks. In addition to putting related systems into place,
the Company discloses information and keeps management organizations and management systems working in order to ensure corporate governance functions well.

Our Corporate Governance Philosophy
We see the construction and reinforcement of corporate
governance as one of our most critical management tasks,
and it is our basic philosophy of corporate activities to pursue
efficient, fair, and highly transparent operations to attaingreater corporate value for the sake of all our stakeholders.
Based on this philosophy, we seek to improve management organizations and management systems throughsuch measures as reinforcing check-and-balance functions
in our decision-making processes and building good relations with shareholders, business partners, etc.
Specifically, we set up the Board of Directors toenhance business performance through appropriate andrapid decision-making, responding dynamically to changes
in the business and management environment. At thesame time, we strive for stronger management oversight
through the Audit & Supervisory Board. Moreover, throughcommittees set up as advisory bodies to the Board of
Directors, we have established a compliance system andrisk management system. The newly established
Nomination and Compensation Committee, set up in fiscal
2015, discusses and reviews candidates nominated toserve as executive officers or on the Board of Directors, aswell as compensation decisions.
Our corporate operational structure comprises four
headquarters. The Marketing and Sales Headquarters
oversees various businesses; the Corporate Business
Promotion Headquarters enhances collaboration among
businesses; the Management Planning Headquarters is
responsible for devising management plans and monitoring; and the Management Headquarters supports business operations. With this structure in place to clarify
responsibilities and authorities, we strive to bolster oursystems further and corporate governance.
Through the PR and IR Group in the Management
Planning Headquarters, we assertively disclose information by disclosing information on our website, participating
in presentations aimed at individual investors and IR fairs,
and holding regularly scheduled meetings attended by
Japan-based analysts and institutional investors.
Moreover, top executives visit investors in Asia and North
America when necessary.

Corporate Governance System

As of June 29, 2016

General Shareholders’ Meeting
Appointment/Removal

Corporate Management Council
All directors/standing Audit &Supervisory Board Members

Appointment/
RemovalDiscuss
Important
Matters

Various Committees
・Risk Management Committee・CSR Committee
・Compliance Committee
・Personnel Committee
・IT Committee
・Nomination and Compensation
Committee

Appointment/
Removal

Accounting Auditors
Accounting
Audit

Cooperation

Board of Directors
11 Directors(including
3 outside directors)

InquireReportAppointment/
RemovalAppointment/
RemovalAudit & Supervisory Board
2 Standing Audit & Supervisory Board Members
2 Outside Audit & Supervisory Board Members

Audit

ReportMarketing and Sales
Headquarters

58

Leopalace21 Corporation / Annual Report 2016

Corporate Business
Promotion Headquarters

ReportAuditing Department(internal audit, internal controls)

Executive Board
MutualInformation
Sharing

Cooperation

Auditing Council

President and CEO
All Directors
Outside director/standing Audit &Supervisory Board Members

Appointment/
RemovalReportExecutive
Actions

Management
Planning Headquarters

Work-Life Balance
Promotion Office

Management
HeadquartersGovernance System and Initiatives
Corporate Governance System

The Board of Directors (the Board), a decision-making body,is composed of eleven directors, including three outside
directors. It holds regular meetings once a month, while
extraordinary meetings can be called at any time as
required, in order for decisions to be made on critical management matters as well as to monitor business performance. Furthermore, regular meetings of the Corporate
Management Council are held to discuss business operation policies or to study measures for their implementation.

Tadashi Kodama (Outside Director)

Nomination and Compensation Committee

Career summary

October 2010
June 2015
June 2016
Attendance atBoard of Directors
meetings—

Tetsuji Taya (Outside Director)
Reason forappointment

The Company expects that he will actively provide advice from an independent andfair perspective during Board of Directors meetings and other meetings, using the
keen insight he has accumulated during his career and his deep knowledge andexperience in corporate management.

Career summary

April 1987
Joined The Fuji Bank, Limited (now Mizuho Bank, Ltd.)
April 2007
Board Member & Managing Director, Industrial Growth Platform, Inc.
September 2009 Representative Director, Industrial Growth Platform, Inc.
June 2010
Director, the Company (Current)
March 2011
Board Member & Managing Director, Industrial Growth Platform,
Inc. (Current)

Attendance atBoard of Directors Board of Directors meetings: 14 of 16 meetings
meetings

Yoshiko Sasao (Outside Director)
Reason forappointment

Career summary

The Company expects that she will supervise business execution of the Company
from an independent and fair perspective, using her keen insight as a senior manager of business corporations and her deep knowledge and experience in corporate
management.
April 1984
Joined Recruit Co., Ltd.
April 2000
Joined RECRUIT STAFFING CO., LTD. on loan
April 2004
Joined RECRUIT STAFFING CO., LTD.
Manager of Marketing Support 1 Division
April 2006
Joined Tokyo Electric Power Company, Incorporated
November 2007 Joined TEPCO PARTNERS Co, Inc. on loan Managing Director
July 2010
Representative Director, TEPCO PARTNERS Co, Inc.
June 2015
Director, the Company (current)
June 2015
Representative Director, SHiDAX BEAUTY CARE MANAGEMENTCORPORATION (current)

Attendance atBoard of Directors Board of Directors meetings: 13 of 13 meetings
meetings

Masahiko Nakamura (Outside Audit & Supervisory Board Member)
Reason forappointment

Career summary

Outside Directors/Outside Audit & Supervisory Board Members

The Company expects that he will supervise the Company’s management from an
objective perspective, using his abundant experience and wealth of expertise in thefields of tax administration and financial accounting accumulated as an employee of
the National Tax Agency and a certified tax accountant.
April 1966
Joined Sendai Regional Taxation Bureau, National Tax Agency
July 1994
Deputy District Director of Musashino Tax Office, National Tax Agency
July 2002
District Director of Suginami Tax Office,Tokyo Regional Taxation Bureau, National Tax Agency
July 2006
Assistant Regional Commissioner (Fourth Large Enterprise Examination),
Tokyo Regional Taxation Bureau, National Tax Agency
August 2007
Established Masahiko Nakamura Certified Tax Accountant Office
Representative,Masahiko Nakamura Certified Tax Accountant Office (Current)
June 2010
Audit & Supervisory Board Member, the Company (Current)
July 2015
Outside Audit & Supervisory Board Member, HOMENET Co., Ltd. (Current)

Attendance atBoard of Directors
Board of Directors meetings: 16 of 16 meetings
meetings and Audit
Audit & Supervisory Board meetings: 10 of 10 meetings& Supervisory
Board meetings

Takao Yuhara (Outside Audit & Supervisory Board Member)
Reason forappointment

Career summary

The Company expects that he will supervise the Company’s management from an
objective perspective, using a high level of his knowledge in many fields and abundant experience and expert knowledge as an audit & supervisory board member ofseveral companies.
May 1971
Joined Sony Corporation
June 2003
Corporate Senior Vice President and Group CFO,
Corporate Executive Officer, Sony Corporation
December 2007 Managing Executive Officer, Zensho Co., Ltd.
(now ZENSHO HOLDINGS CO., LTD.)
June 2008
Audit & Supervisory Board Member, Ricoh Company, Ltd. (Current)
May 2011
Managing Executive Director and CFO, Zensho Co., Ltd.
June 2013
Audit & Supervisory Board Member, mofiria Corporation (Current)
June 2014
Auditor, KAMEDA SEIKA CO., LTD. (Current)
June 2015
Audit & Supervisory Board Member, the Company (Current)
December 2015 Auditor, T.HASEGAWA CO., LTD.

Attendance atBoard of Directors
Board of Directors meetings: 12 of 13 meetings
meetings and Audit
Audit & Supervisory Board meetings: 7 of 7 meetings& Supervisory
Board meetings

Leopalace21 Corporation / Annual Report 2016

Data Compilation

By nominating outside directors as well as outside Audit &Supervisory Board members, Leopalace21 strives tostrengthen the oversight function to ensure that decision-making by the Board and business execution comply
with relevant laws and regulations in order to achieve management transparency and fairness. At the same time, it
hopes that the outside directors and Audit & Supervisory
Board members provide advice from an objective standpoint
based on the experience and knowledge they have obtained
through their business careers as well as their insight as
executives. The Company informed the Tokyo Stock
Exchange that three outside directors and two outside Audit& Supervisory Board members (five in total) are independent
directors/auditors, a regulatory criteria for independence.

April 2004
April 2010

Joined The Dai-Tokyo Fire & Marine Insurance Co., Ltd.
(now Aioi Nissay Dowa Insurance Co., Ltd.)
Director, Aioi Insurance Co., Ltd.
(now Aioi Nissay Dowa Insurance Co., Ltd.)
Representative Director, President, Aioi Insurance Co., Ltd.
Representative Director, Executive Officer,
MS&AD Insurance Group Holdings, Inc.
Representative Director, Vice Chairman of the Board of Directors,
Aioi Nissay Dowa Insurance Co., Ltd.
Retired from Aioi Nissay Dowa Insurance Co., Ltd.
Director, the Company (current)

Initiatives for Supporting Corporate Value

The company has established policies on the selection of
directors, Audit & Supervisory Board members, and executive officers as well as on policies concerning compensation
for directors, Audit & Supervisory Board members, andexecutive officers. To ensure the best candidates are nominated and compensation is set based on these policies, theNomination and Compensation Committee, comprising thepresident and three outside directors, was established.
Nomination and compensation decisions are made after proceeding through deliberations at the Nomination andCompensation Committee, an advisory body to the Board.

April 1970
June 2001

Initiatives for Creating Value

The Audit & Supervisory Board, composed of four members(two standing Audit & Supervisory Board members and two
non-standing Audit & Supervisory Board members), is abody set up to monitor the performance of duties by directors. Audit & Supervisory Board members attend important
meetings of the Board, etc. in accordance with the audit
plan to monitor the decision-making processes for key decisions and the status of performance of duties by directors.
At the same time, Audit & Supervisory Board strives toensure the system in place enhances audit effectiveness byconducting operational status investigations and periodicallyexchanging views and opinions with the president.

The Company expects that he will provide advice on the overall management of theCompany, using his abundant insight as a senior manager of a listed company.

Business Model and Competitiveness

Audit & Supervisory Board

Reason forappointment

As of June 29, 2016

Leopalace21: Who We Are

Board of Directors

59Internal Audit
The Auditing Department, established as a department
directly reporting to the president, oversees internal controls and internal audit functions and conducts audits,
including of subsidiaries and affiliates. The Auditing
Council, set up to maintain sound internal controls, istasked with monitoring management activities and risk
management and thereby strengthens governance.

Accounting Audit
Leopalace21 hired Grant Thornton Taiyo LLC to audit its financial statements. The auditing contract we signed is for audits
to be performed in accordance with Japanese legislation, theCompanies Act, and the Financial Instruments and ExchangeAct. The status of audits by our accounting auditor is reported at regular intervals to the Audit & Supervisory Board.

Compensation for Directors, etc.
Compensation for directors comprises three categories:
basic remuneration, stock options, and bonuses.
Compensation is determined based on the policies described
below. The compensation of Audit & Supervisory Board
members is decided by Audit & Supervisory Board members
after mutual consultation within a framework determined at
the shareholder meeting that sets a ceiling on the aggregate
amount.
(Basic Compensation)
This is determined for each directors based on a comprehensive assessment of the attributes of the operations
they oversee, the scope of these operations, their busi-

ness performance, etc.
(Stock options)Leopalace21 has adopted a stock-based compensation
stock option plan with the objectives of ensuring board
members and stockholders share gains and losses fromshare price movements and of giving board members incentive to enhance earnings performance. The size of the granttakes into account earnings and share price performance,
and is calculated based on our corporate bylaws, including
whether or not a grant is awarded. Outside directors are notallocated any stock options.
(Bonuses)
The size of the bonus awarded, including whether or not
one is awarded, reflects quantitative factors such as company earnings, etc. and qualitative factors such as bolstering the management foundation, etc. and factors in acomprehensive assessment of the magnitude of contribution by each director, etc. Outside directors are not awarded a bonus.

Amount of Compensation Awarded to Directors and Audit &Supervisory Board Members(Millions of yen)
Total remuneration, etc. across categories
Total
Basic
remuneration remuneration
7 Directors (excludes outside directors)
2 Audit & Supervisory Board members(excludes outside Audit & Supervisory
Board members)
5 Outside directors/Audit &Supervisory Board members

Stockoptions

Bonuses

280

280

—

—

32

32

—

—

34

34

—

—

* The above includes one Audit & Supervisory Board member who resigned as of June 29, 2016.

Compliance and Risk Management Systems
The basic policy of the internal control system is to baseour corporate activities on compliance with laws and regulations as well as with social ethics. We are working to
identify and correct problems from time to time, and to further improve and reinforce internal control systems.
With regards to the compliance system, the Compliance
Committee has been set up as an advisory body to theBoard of Directors, in addition to the establishment of the
Corporate Code of Ethics and an internal reporting system

Content
Compliance training

Theme
Compliance basics, basic rules concerning premiums and representations, etc.

E-learning

Basic knowledge concerning contracts and contract forms, the “My Number” system,a check for sexual harassment awareness, etc.

Distribution of compliance publications

Information management, etc.

With regards to the risk management system, the Risk
Management Committee has been created as an advisory
body to the Board of Directors to ascertain and manage therisks facing the entire Company in a comprehensive manner, with a view to strengthening risk management. With

60

with the aim of strengthening compliance. With the president serving as chair, the Compliance Committee includes
lawyers and other external experts. As one plank in ourefforts to bolster governance, the committee develops various measures relating to compliance such as enhancing
educational training and reinforcing the information management system. We are also working to bolster monitoring
systems and to identify and improve problems.

Leopalace21 Corporation / Annual Report 2016

the president serving as chair, the Risk Management
Committee includes lawyers and other external experts. It
not only verifies risk management conditions but also plans
and implements training and other measures in its efforts
to reduce risk and increase preparedness and prevention.

Leopalace21: Who We Are

Directors (As of June 29, 2016)

Business Model and CompetitivenessBottom row, left to right
Director Hiroshi Takeda, Director Tadahiro Miyama, President and CEO Eisei Miyama, Director Yuzuru Sekiya, Director Kazuto Tajiri

Executive Officers (As of June 29, 2016)

Initiatives for Creating Value

Back row, left to rightOutside Director Tadashi Kodama, Outside Director Tetsuji Taya, Outside Director Yoshiko Sasao, Director Yoshikazu Miike,
Director Hiroyuki Harada, Director Bunya Miyao

Initiatives for Supporting Corporate Value
Data Compilation

Back row, left to rightExecutive Officer Katsuhiko Nanameki, Executive Officer Yasushi Mizuno, Executive Officer Kenichiro Samejima,
Executive Officer Shigeru Ashida, Executive Officer Shu Ikeda, Executive Officer Tatsuya Sasaki
Bottom row, left to rightExecutive Officer Seiji Shinozaki, Managing Executive Officer Motoyoshi Ohishi, Managing Executive Officer Naomichi Mochida,
Senior Executive Officer Satoshi Abe, Managing Executive Officer Fujio Sato, Executive Officer Hideki Matsunaga
Leopalace21 Corporation / Annual Report 2016

61

BUSINESS AND OTHER RISKS
Listed below are the principal risks that we believe could
affect the Leopalace21 Group’s business performance

3. Risks Associated with Tangible Fixed Assets and Real
Estate Held for Resale

and financial position. However, this list is not all-inclusive

Impairment losses or appraisal losses due to declines inand does not cover all the risks that could affect Groupthe current market value of marketable securities,businesses. All forward-looking statements included

property for sale, fixed assets, or other assets could

herein reflect the judgment of the Leopalace21 Groupadversely affect the Company’s business performance

management as of the end of the consolidated fiscal

as well as its financial position. Moreover, withterm under review.

regard to the Company’s hotel and resort related
businesses, there will be a continuing need for regularinvestments in facility replacement and renewal. As a

1. Revenue-related Risk

result, changes in depreciation expenses could have an

Leopalace21 apartments are primarily utilized by single

effect on the Company’s business performance.

persons, and corporate contracts typically involve shortterm leases of apartments for use as company
dormitories by workers travelling on company business.

4. Loan Losses, and Reserve for Bad Debt

As a result, changes in the performance of the overall

The Company conducts financing activities, and carries

economy and corporate business results could affecton its books a balance for operating loans receivable

employment rates or the demand for business trips, andcomprising apartment construction loans and real estatethis could negatively impact occupancy rates at theequity loans. The Company also may guarantee theCompany’s apartments.

housing loans and membership fee loans offered to its

In addition, we have included in our forecasts all

customers by financial institutions. Apartment and othercontracted orders for apartment construction, howeverloans where repayment has become doubtful are

the possibility that the client may not be able to obtainaccounted for separately as doubtful receivables

the necessary financing or loans from a financial(tangible), and a reserve is made for bad debt in each

institution is an important risk factor. Changes in thesuch case; however, our business results could be

willingness of financial institutions to provide credit,

affected if amounts of uncollectible debt shouldchanges in the assessed value of real estate to be used

increase, or if we should be obliged to honor claims

as collateral, and fluctuations in interest rates could

pertaining to these loan guarantees.

affect Company revenues and adversely affect theCompany’s business results.

5. Reserve for Apartment Vacancy Loss
In order to prepare for a risk of losses due to an increase

2. Cost of Sales

in apartment vacancies, Leopalace21 has established a

Based on the Company’s apartment construction“Reserve for apartment vacancy loss” reserve fund equal

contract, the Company concludes a master leaseto the amount of loss that may be expected to beagreement with apartment owners to lease back theincurred during a reasonably estimable period. The

constructed apartment for a period of time and at a rent

amount of this reserve is based on the rent levels set forlevel that are both fixed at the time the contract is

individual leased units, the number of households, andconcluded. Therefore, fluctuations in the amount ofoccupancy rate forecasts calculated for each apartment

rental income received from tenants during the contract

building. Should any of these figures fall below theperiod could adversely affect the Company’s profitability.

estimated values it could become necessary to increase
the amount of the reserve, and this could adversely affectthe results of the Company’s leasing business.

62

Leopalace21 Corporation / Annual Report 2016

The Leopalace21 Group holds a great deal of information,

owners held as an advance for apartment repair andincluding personal information obtained through therenovation. These consist mainly of deposits received

consent of, or as a result of non-disclosure agreementsfrom property owners as a portion of future repair andwith client companies. To control information security,

renovation expenses, following the dissolution of

the Company has drawn up the required information

Leopalace21 Owners Mutual Insurance Association.

security guidelines, and set up a Compliance Committee

Leopalace21 makes a concerted effort as a leasing

to thoroughly educate our executive officers andbusiness operator to ensure the soundness of theemployees about information security issues.

apartment maintenance structure, through which

Nevertheless, in the unlikely event that a leak ofproperties fully leased from the owner are operated andinformation of some type should occur, there is amaintained. However, an unexpected, large-scale repair

possibility that the Group’s reputation could be damaged,

or renovation could have an impact on Leopalace21’s

and that business performance might be affected.

financial position.
Leopalace21 also has deposits for Leopalace Resort

9. Other Risksof which date to the opening of the resort complex in

The Group is aware that it incurs a variety of risks in theJuly 1993. The Leopalace21 Group works to increase

course of promoting its businesses, and it attempts tomember usage by improving facilities and member

prevent, distribute or avoid risk whenever possible.

services, but should there be an unexpected number of

Nevertheless, the Group’s business performance andrequests for reimbursement of these deposits, this could

financial position may be affected by changes inhave an impact on Leopalace21’s financial position.

economic conditions, the real estate market, the financial
and stock markets, legal regulations, natural disasters,
and a variety of other factors.

7. Financial Covenants
Financial covenants have been set on the numerous loan

Initiatives for Creating Value

memberships related to the Guam resort business, mostBusiness Model and Competitiveness8. Information Leaks

Leopalace21 has long-term deposits from property

Leopalace21: Who We Are

6. Leasehold Deposits and Guarantee Deposits

and corporate bond agreements that Leopalace21 hasconcluded with financial institutions. Accordingly, should
Initiatives for Supporting Corporate Value

consolidated net assets, consolidated or nonconsolidated operating or recurring profit, or the debtservice coverage ratio (DSCR) in the solar power
generation business violate the conditions of a financial
covenant, there is a possibility that the Company, at thebehest of the financial institution, could forfeit thebenefit of the term for corporate bonds or otherborrowings, which could have an impact on
the Company’s operating performance.

Data Compilation

Leopalace21 Corporation / Annual Report 2016

63

Leopalace21 and CSR

CSR ISSUES TO BE TACKLED AND OUR VALUE CHAIN
We continue to advance initiatives daily to resolve CSR issues for all
our stakeholders involved in our businesses across the value chain.

International Business
Providing High-quality Services (P69-70 )Promoting Diversity (P71-73 )Developing Human Resources (P73 )Hotels & Resort Business
Providing High-quality Services (P69-70 )Developing Human Resources (P73 )64

Leopalace21 Corporation / Annual Report 2016

Business Model and Competitiveness

Providing High-quality Services (P69-70)
Improving Quality in our Response
to Customers (P69-70)
Developing Human Resources (P73)
Cultivating Strong Ties with
Local Communities (P74-75)

Leopalace21: Who We Are

Leasing BusinessInitiatives for Creating Value

Construction Business
Developing Human Resources (P73)
Caring for the Environment (P76-77)

Initiatives for Supporting Corporate Value

Elderly Care Business
Developing Human Resources (P73 )Cultivating Strong Ties with
Local Communities (P74-75 )Data Compilation

Other Businesses
Solar power generation business (P77)

Leopalace21 Corporation / Annual Report 2016

65

LEOPALACE21’S MANAGEMENT PLAN AND CSR ACTIVITIESBased on our corporate philosophy of “creating new value,” Leopalace21 strives to meet the
expectations of all our stakeholders and continues to be a contributor to building a sustainable society in ways that suit the needs of the times.

Basic CSR Action Policy“Creating New Value”
Basic CSR Action Policy
Engaging in sound,constructive communication
with stakeholders

Creating anenvironmentallyfriendly society

Creating pleasant work
environments and developing
diverse human resources

Contributing tolocal communities

Clientcompanies
Apartment tenants,
landowners
Local
communities

Providing high-quality
services and supporting
affluent living

In 2013, we devised a new Basic CSR Action Policy with five themes
in response to the changing needs of our stakeholders, social andenvironmental problems, and the requirements of ISO 26000 andother standards and guidelines.
Based on compliance and corporate governance that supports ourbusinesses, we intend to implement CSR activities in accordancewith the new policy, with the aim of “creating new value" together
with all of our stakeholders.
We update our key performance indicators (KPIs) and key topics
for our CSR initiatives from time to time to address CSR issues thatare linked to our businesses and change in concert with the currentsof the times.

Compliance

ance
Corporate Govern

Corporate
Code of Ethics

ophy
Corporate Philos

Employees
Globalenvironment
Investors andshareholders

CSR Management
In our CSR management, members of the
CSR Committee serve as coordinators tobring together separate divisions anddepartments to engage in various CSR initiatives. The general manager of theManagement Planning Headquarters
chairs the committee. Meeting four times
a year, the CSR Committee receives
reports on progress against quantitative
targets set each quarter by each divisionand department regarding initiatives thatcomport with the five themes of the BasicCSR Action Policy, and moves initiatives
to the next phase of the PDCA cycle.
Key topics and KPIs are also approvedby the CSR Committee.

Stakeholder’s Voice
Leopalace21 devised a new Basic CSR Action
Policy based on compliance and corporate governance in 2013 in response to growing interest in
the past few years in CSR and corporate governance. To respond more precisely to evolvingsocial expectations, and in recognition of theimportance of generating shared benefits in our
CSR activities and business plans in moving
toward the realization of a sustainable society,
we update our CSR activities and the KPIs we
use to track them from time to time. Through ourbusinesses, we are working to identify solutions
to various social problems involving places where
people live and their lifestyles, and to promoterelevant CSR activities.

Yuzuru Sekiya
Director, Senior
Executive Officer, CSR
Committee Chairman

CSR Committee, Participating Divisions
and Departments
Corporate Business Promotion Headquarters
Product Engineering Supervisory Division
Subcontracting Management Department
Construction Department
Leasing Sales Planning Promotion Division
Leasing Management Department
LEONET Promotion Department
Asset Management Division
Class “L” Secretariat
Elderly Care Business Division
Hotel Operations Division
Resort Marketing Department
Personnel Department
General Affairs Department
Legal Affairs Department
Auditing Department
Corporate Management Department

66

Leopalace21 Corporation / Annual Report 2016

Basic CSR Action Policy

Restatement as ISO26000
Core Subjects

Engaging in sound, constructive
communication with stakeholders

Stakeholder engagement

Providing high-quality services andsupporting affluent living

Consumer issues

Creating pleasant work environments anddeveloping diverse human resources

Human rights, labor practices

Contributing to local communities

Community involvement

Creating an environmentally friendly society

Environment

Basic CSR
Action Policy
Engaging insound,
constructive
communication
withstakeholders

FY2015 achievements

No. of meetings for landowners:

250 times

257 times◎

250 times

Offer programs for students to
support their career development

No. of sessions in student programs to support
career development:
35 times

31 times○

35 times+ leasing salesofﬁces nationwide

Conduct proactive IR activities

No. of meetings for individual investors,
including IR fairs:
16 times

19 times◎

20 times

Host get-togethers for international exchange students

Hold 60 get-togethers

82 get-togethers◎

82 get-togethers

Expand and improve MY PAGE

Launch 20 new MY PAGE tenant services

22 new services

Create synergies between
corporations and tenants

Run 60 new tie-up projects withcorporate clients

Reduce incoming calls to service
centers

Incoming call ratio (monthly avg.) of
below 10% of total tenants move-ins

Devise and market products thattake surroundings into accountCumulative security system installations:
240,000 rooms
Cumulative security camera installations:
7,000 buildings

36 new tie-up projects
9.8%

256,900 rooms

◎
△
◎

◎

22 services
36 tie-up projects
Below 9.5%

270,400 rooms
9,700 buildings

7,848 buildings

No. of training participants:

a total of 2,450

A total of 3,220 people◎

A total of 5,064 people

Provide compliance training

e-learning enrollment rate:over 90%

97.51%◎

Over 90%

Hire diverse human resources

Disabled employee ratio:

2.0%

2.06%

◎

2.12%

Accommodate diverse working
stylesPaid vacation days usage rate:

70%

70.1%

◎

70%

571 people
3 times○638 people
3 times

A total of 2,240 sites△

5 participants per site

4 times◎

4 times, a total of
3,780 participants

25 times○

26 times

All hotels registered○

Keep all hotels
registered

182 offices○

190 ofﬁces◎

Register newly opened
facilities

No. of disabled who join workplace tours and/or receive OTJ training:
620
No. of offsite lectures:
3 timesNo. of cleanup events at construction sites:
a total of 3,200 sites
No. of companywide cleanup campaigns hosted:
4 timesNo. of cleanup events at domestic hotels:
26 times
All domestic hotels registered

Register our network for“Kodomo #110”

No. of sales offices registered: 190 offices

67 facilities

Fund for children in areas stricken by the Great
East Japan Earthquake:¥150,000¥121,000

Support for UNHCR (UN institution supporting
refugees):¥800,000¥836,000

Contributions from property owners:
615 “Leo Miles” point packages donated627 point packages

Donations from “volunteer” vending machines:¥1,560,000¥1,520,000○¥1,520,000

Install solar power generation
systems

Solar power system installations: 535 buildings
Capacity:
8,436kW608 buildings
9,670kW◎

Reduce CO2 emissions
by 23,000t via Groupsolar power generation

Convert Azumi En facilities to
LED lighting

No. of facilities with LED lighting installed: 62

62 facilities◎

Install at all facilities

Switch to energy-efficient
copiers

Replacement of 40 copiersMonitor electricity use & CO2 reduction

Replaced 40 copiers
Upgraded models cut
power use 70.4% andreduced CO2 48.5%◎

Initiative accomplished

Reuse discarded materials

Reuse 6,000 boxes of expired-retention
documents

3,584 boxes△

5,125 boxes

Collect charitable contributions○◎◎◎: Attainment exceeded 100% ○: Attainment of 80% but less than 100%

¥150,000¥800,000
660 point packages

Data Compilation

Azumi En facilities are registered when newly
openedInitiatives for Supporting Corporate Value

Implement planned employee
training

Implement cleanup campaigns

Creating anenvironmentallyfriendly society

FY2016 goals

Build positive relationships withlandowners

Contribute to society with afocus on disabled persons

Contributing
to localcommunities

Selfassessment

Initiatives for Creating Value

Creating
pleasant work
environments
and developing
diverse humanresources

FY2015 goals

Business Model and Competitiveness

Providinghigh-quality
services andsupporting
affluent living

Main content of initiatives

Leopalace21: Who We Are

Overview of FY2015 Goals and Achievements, and FY2016 Goals△: Attainment was below 80%

Leopalace21 Corporation / Annual Report 201667

Basic CSR Action Policy

ENGAGING IN SOUND, CONSTRUCTIVE
COMMUNICATION WITH STAKEHOLDERS
Through our business activities, we actively disclose information to and engage in dialogue
with our stakeholders to build healthy, positive partnerships.

Basic View: Importance of Dialogue and Disclosure
We recognize the creation of corporate value over the
medium- and long-term and our sustainable growth as anenterprise stem from our provision of resources and contributions to customers, business partners, local communities, employees, shareholders, and creditors. This
reflects our understanding of the importance of strivingfor proper collaboration with stakeholders. We are also

working to disclose financial and non-financial information in a timely, transparent manner to a wide range ofstakeholders, including our shareholders. Through continued proactive dialogue with various stakeholders, we aim
to deliver new value via our corporate activities by grasping social needs with greater precision.

Goals and Achievements
Main Activities

FY2015 goals

FY2015 achievements

No. of meetings for landowners

250 times

257 times

No. of meetings for individual
investors, etc.

16 times

FY2016 goals
250 times
New KPI

19 times

Hold 20 IR fairs

Leopalace21’s Main Stakeholders
Apartment Tenants

Landowners• MY PAGE (website
exclusively for tenants)• Cooking classes
for women• Tenant surveys• Tenant monitors

A meeting for
landowners

A cooking class forfemale tenants

Apartment
Tenants

Partners• Set up a system where
employees in charge
follows up with owners• Host apartment ownermeetings• Arrange events and seminars

Landowners

Employees• Cleanup campaign events (see page 74)• Provide employee training (see page 73)
Partners

Companywide cleanup campaign

Local
Communities

Employees

Investors/
Shareholders

Employee training

Investors/Shareholders
Local Communities• Host workplace
experience days
• Accept volunteer groupsat Azumi En (see page 75)
A workplace experience day

68

Leopalace21 Corporation / Annual Report 2016

An IR fair

• Hold earnings results
briefings• Arrange small meetings
for institutional investors• Participate in IR events• Program to support careerdevelopment

Basic CSR Action Policy

Amid the growing diversity of rental housing needs in an increasingly diverse society, we offer
tenants living spaces that are comfortable and pleasant via new lifestyle proposals.

Leopalace21: Who We Are

PROVIDING HIGH-QUALITY SERVICES ANDSUPPORTING AFFLUENT LIVING
Basic View: Lifestyle Diversificationcompared with the 1990 level. In concert with such population trends, rental housing needs are becoming morediverse. At Leopalace21, we are responding to social
needs arising from the growing diversity of lifestyles, andwe see such changes as offering opportunities to develop products and services in tune with the times.

Goals and Achievements
Main Activities

FY2015 achievements

FY2016 goals

Cumulative security systeminstallations: 240,000 rooms

256,900 rooms

270,400 rooms

Cumulative security camera
installations:7,000 buildings

7,848 buildings

9,700 buildings

Incoming call ratio at service
centers (monthly avg.): below 10%

9.8%

New KPI

Below 9.5%

Ideas for Personalized Living Styles
Community Space “L+” (L plus)

Initiatives for Supporting Corporate Value

We have set up community spaces we call “L+” asplaces all our clients can use based on the concept of “aplus for lifestyle.”
In fiscal 2015, we carried out projects bringing together
companies and academic collaborators to promote deeper
ties between Leopalace21 and students. To make ourcommunity spaces more attractive as gathering spots, wecommissioned students in the visual design department
at Kindai University to come up with designer art for our
Osaka L+ space and students at Tokyo Metropolitan
University to do the same for our Shinjuku L+ space.
At our Sendai L+ space, Kamoi Kakoshi Co., Ltd.
presented an exhibit on easy-to-make interior decorations
made from masking tape.

To ensure each of our tenants enjoy their lives more,
we aim to provide spaces where they can interact withneighboring tenants.

Initiatives for Creating Value

High-quality services enablingsafety and peace of mind;
improve client services further

FY2015 goals

Business Model and CompetitivenessAttendant with shifting family composition reflecting thetwin demographic trends of a growing elderly cohort anda low fertility rate and changing times, the number ofsingle-person households continues to grow. At thesame time, the foreign population in Japan continues togrow, with a three-fold increase in the number of international exchange students enrolled in schools in Japan

Designer art by Kindai University students
decorates the steps at Osaka L+

Art made from Kamoi Kakoshi Co., Ltd.’s masking
tape is exhibited at Sendai L+

Data Compilation

Leopalace21 Corporation / Annual Report 201669

Improving Customer Satisfaction with High-Quality Services
Launching an Industry-first Electronic
Contract Service
We launched Leo-sign, the first electronic
contract service in the rental housing industry, for tenants on corporate and individual
contracts. In consummating an apartment
lease, an entire sequence of steps havebeen moved to the Leo-sign platform fromdisplaying estimates to concluding contracts
as well as processing contract options suchas a parking space. The system enables us
to lighten our clients’ workload while also
improving our own operational efficiency.
Compared with the previous approach, the
new system streamlines various office tasks
such as preparing documents and storing
contracts and the like, reducing paper usage
substantially and thus lightening our environmental impact.

Stakeholder’s Voice
Mr. Akio Inomata LIXIL VIVA Corp.
General Affairs and Personnel Department, Section Chief
We average about 10 contracts (for employee housing)per month, but in peak months new contracts canexceed 50.
Since the Leo-sign system was introduced, the processing of contracts has moved speedily, from getting
an estimate to the online equivalent of consummating contracts with an
inkan seal. The system enables us to reduce resource and time costs.

Mr. Akiyoshi Takahashi EDOICHI Co., Ltd.
Personnel Department General Manager
Many of our relocations come with a change of address, and processing
the paperwork (for rental housing contracts) has been a major burden. I am
reminded almost daily of the convenience of the Leo-sign system, which
has simplified contract processes and reduced mailing and other correspondence costs. I am pleased Leopalace21 came to us with a presentation on the benefits of the Leo-sign system.

Service Centers Offer Full Post-Move-in Support
Leopalace21 has systems in place to respond swiftly tovarious problems and emergencies that can arise after
moving in to an apartment. At our service centers, our
specialist communicators accurately analyze inquiries
from customers and continuously add and update the listof frequently asked questions (FAQs) on our website. In
this way, we ease customer doubts and anxieties andimprove satisfaction levels, and thus enable them to live
safe, comfortable lives in the apartments we manage.
Our menu of tenant services is reshaping what people
expect from rental housing, such as concierge services

that respond to tenant requests via MY PAGE, a site
exclusively for tenants launched in 2013.
■Trend in Incoming Calls to Our Service Centers
1,000,000 (Number of calls)
750,000
500,000
250,000
0’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015■ Inquiries ■ Maintenance ■ Complaints and claims

Services for International Tenants, Supporting SmoothMove-ins, Comfortable Living
Across multiple dimensions, we provide support to enable international tenants
to live comfortably.
Our rental housing website is available in English, Chinese, Korean, Portuguese,and Vietnamese, and our call center accepts calls in these five languages. We holdgatherings for exchange students with an orientation on move-in manners where
we inform them of key dos and don’ts for contracts, move-ins, and departures.
In fiscal 2015, 1,306 people came to the get-togethers we hosted at 82 sites
across Japan. Over 90% of those who came gave them high marks, telling us
they went away with a solid understanding of what was communicated.
We are building out our overseas office network, especially in Southeast Asia,
so we have in place a well-developed system for helping with room searches
and sewing up contracts before foreign customers even come to Japan. In our
personnel assignments to our domestic offices, we are proactively assigning
more employees with foreign citizenship (277 employees as of March 31, 2016),
and we will continue to help people coming to Japan by supporting convenient
apartment searches and comfortable living.

70

Leopalace21 Corporation / Annual Report 2016

Stakeholder’s Voice
Ami Campus, Ibaraki University
There are about 140,000 international
exchange students studying in Japan.
Exchange students with various cultural
backgrounds come to Japanese universities.
For exchange students coming to Japan
from Indonesia and Thailand, we asked
Leopalace21 to organize a course on
everyday manners in Japan. As theexchange students said there are many
situations where manners in their homelands seem to differ from manners inJapan, we are confident the course helped
promote mutual understanding and also
provided important benefits for Japanese
students who interact with exchange students on campus.

Basic CSR Action Policy

We believe human resources are important as upholders of our corporate philosophy of “creating new value.” Our aim is to build pleasant workplaces where people
enjoy work, enabling all employees to express their diverse individuality and harness their capabilities.

Leopalace21: Who We Are

CREATING PLEASANT WORK ENVIROMENTS AND
DEVELOPING DIVERSE HUMAN RESOURCES

Our Basic View: Diversifying Work Styles and Human Resourcesfrom a wide-range of backgrounds with diverse perspectives, including women, will enable us to respond todiversifying social needs and contribute to the creation of
new value, and we expect these kinds of people to contribute in a major way to our growth. We thus aim to create workplaces where employees with diverse backgrounds work together easily and effectively and apply
their skills and talents on the job.

Business Model and CompetitivenessJapan’s working-age population is projected to halve by
2060 versus the 2010 level attendant with the twin trendsof a growing cohort of seniors with a low fertility rate,according to statistics published by the Ministry of Land,
Infrastructure, Transport and Tourism (MLIT). Attracting
and retaining talented, capable people, regardless of theirnationality or gender, is an important foundation for sustainable growth at companies. We think cultivating people

Goals and Achievements
Main Activities

Implement planned training:a total of 2,450 employees

FY2015 achievements

FY2016 goals

A total of 3,220 employees

A total of 5,064 employees

70.1%

70%

Paid vacation day usage rate: 70%

Appropriate Personnel Evaluations
evaluations, final evaluations, and evaluations byexecutives and board members are the next steps before
a final overall evaluation is determined. For employees on
short work-hours schedules or temporary leave, we set
targets based on the number of hours they work and theduration of their employment in a bid to ensure fair andappropriate evaluations.

Creating Employee-friendly Workplaces
Progress in Initiatives Advanced by Work-life Balance
Promotion Office■ Comparison of Total Working Hours(Monthly Average)
230 (Hours)

Data Compilation

We believe promoting work-life balance is an important
issue. The Work-Life Balance Promotion Office,established in January 2014 as a unit that reports directly
to the President, promotes diverse working styles.
To accompany our in-place system for requestingvacation in increments as small as half a day, we
introduced the “refresh” vacation system in April 2015,
and as a result, the usage rate for paid vacation days
climbed to 70.1% in fiscal 2015, a sharp jump from a
33.0% rate in fiscal 2014.
Since April 2016, we further refined our vacation
system so employees can request vacation in increments
as small as one hour. We believe this will enable
employees to adopt even more diverse working styles.

Introducing an at-home telework system for employees
who are raising children or taking care of family members,
we will work to build workplaces where each individual
can fully harness their capabilities and potential.

Initiatives for Supporting Corporate Value

We conduct personnel evaluation interviews with all
employees every six months to ensure fair andappropriate personnel evaluations. At the first stage,
personnel evaluations are based on three elements:
proficiency, how much effort the employee is perceived
to be making, and track record, and at the second stage,
third parties provide evaluations. Factoring in relative

Initiatives for Creating Value

Promote work-life balance
Foster diversity

FY2015 goals

210

190

170

’14/3 FY2013 ’15/3 FY2014 ’16/3 FY2015■ Managerial ■ Non-managerial
Leopalace21 Corporation / Annual Report 201671

Measures to Promote Active Female Participationin the Workplace
Encouraging women to aim higher in their careers is one
plank in our management strategy. With a nudge fromthe law promoting female participation in the workplacetaking effect from April 2016, we introduced various
measures under a collaborative framework bringing
together the Personnel Department and the Work-Life
Balance Promotion Office.
In fiscal 2015, recognizing the need to create a platformto promote active female participation in the workplace,
we sponsored a forum, THE DANKAI, for female
executives and female employees to talk to each otherabout career development and ways of working thatenable them to effectively navigate important life events.
We also convened a diversity forum every quarter withthe aim of raising employee awareness of the importanceof retaining female employees (see page 41).
In fiscal 2016, we are working to newly commence a“working support” hotline, conduct interviews to help
female employees on childcare leave return smoothly towork, provide training to managers on human resource

Third-party Praise for our Efforts to Promote Active
Female Participation at Work
In August 2015, we awarded gold certification by
Saitama Prefecture as a company enabling diverse
working styles. Saitama Prefecture’s Womenomics
Project is aimed at stimulating the prefecture’s economy
through the power and participation of women. As one
initiative of the project, the prefectural government
certifies companies for adopting various measures to

Taking Steps to Hire More Disabled EmployeesWith the aim of promoting the use of diverse humanresources and creating a workplace that also motivatesthe disabled with a sense of larger purpose, we havetaken steps to hire disabled employees.
In 2009, Leopalace Smile Co., Ltd. was established asa special subsidiary to employ more of the disabled, andEmployee Safety and Health
Our aim at Leopalace21 is to create workplaces where
employees can be safe and healthy on the job. The
Employee Health Committee is a ten-member
committee with an industrial physician that convenes at
22 work sites per month, disseminates useful healthrelated information to employees, and publishes reports
on progress in reducing the number of overtime hours inconnection with worker health. In fiscal 2015, the rate of
employee participation in health checkups was 99.9%,
and the number of labor accidents at the parent company

72

Leopalace21 Corporation / Annual Report 2016

development focusing on female employees, and provide
training for female employees to help them cultivate aforward-leaning mindset in their career development.
We have issued numerical targets established inconjunction with the law promoting female participationin the workplace coming into force.

1. Increase the number of female managers to 150 as ofMarch 31, 2021
2. Raise the ratio of the average continuous years ofservice of our female employees to at least 80% ofthat of our male employees.
Ratio of females in employee hiring

61.0%

Ratio of female employees to total workforce

39.0%

Female manager ratio

4.9%

Ratio of female employees obtaining
childcare leave
Females on short work-hours schedule system

100.0%
124 persons

Parent company data as of March 31, 2016; see the Data Compilation for further details

support work-life balance.
As has been the case since fiscal
2012, Leopalace21 was again
recognized by the Ministry of Health,
Labor, and Welfare for its manymeasures to support parenting, and as
a result, obtained the “Kurumin mark.”
The Kurumin markwe now have 25 disabled employees.
In fiscal 2015, the Elderly Care Business at the parent
company achieved an annual average disabled employee
ratio of 2.06%, and from fiscal 2016, we will continue toadvance initiatives ahead of the scheduled 2018 revision
to the statutory employment rate set by the law
promoting employment of the disabled.

came to 28. In fiscal 2016, under the slogan “Healthy
employees are a driving force supporting the Company,”
the Employee Health Committee will continue to strive
to provide workplaces where employees canenergetically work in good health.

FY2015

No. of labor accidents

28

Accidents requiring time off work

8

Accidents not requiring time off work20

1 Training for executive learning

Division managers

2 Strategy mapping projects

Site leaders

3 Training to foster highly capable managers
4 Follow-up training to foster highly capable managers

Team leadersFunction heads

5 Training to foster worksite leaders

6 New employee training --> Follow-up training -->Complete new employee training

New employees

FY2015

460

2,739

3,220

76,32677,087

81,218Support for Employees Seeking to Obtain
Qualifications

7 Training for stronger
marketing capabilities

Site leaders

9 Training for stronger
marketing capabilities

8 Training for sales offices on how tointeract with customers (role playing, etc.)

Function heads
Operations
sub-heads

10 Follow-up training foryoung employees

New employees

understanding of tasks across divisions and departments,
intra-company interaction, work-life balance, labormanagement problems, and the like.

Training with Specified Purposes
We provide regular training as necessary for specified
purposes such as mental health training, compliancetraining, work-life balance training, and training on how topromote female participation in the workplace.

Stakeholder’s Voice

We award employees with a bonus depending on their
TOEIC score.

Rather than relying entirely on
on-the-job training, we have introduced an education system forsalespeople on how to market proposals, what marketing methods
to apply and the like. With a common curriculum across all employee ranks to foster a unified underTatsushi Ishikura
standing of rules and methods, we
Personnel Department
are starting to see results via a
General Manager
strengthening of the organizational
capabilities of our sales teams, and this is translating into a
decline in our employee turnover rate. To ensure benefits
from training are not merely temporary, we are working tomaximize the gains from training by making verification ofwhat was learned an ongoing, routine task.

Cross-divisional Training
In addition to our human resource development system,a cross-divisional training program commenced in fiscal
2014 aimed at bolstering the entire organization as partof an initiative to improve our vertical organizational
structure.
In fiscal 2015, a total of 280 employees—core
representatives from each division and department—
came together over three sessions to share information,exchange views, and propose new initiatives that extend
beyond the boundaries of our organizational chart. The
training sessions focused on renewing mutual

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Program for language skill improvement (English)

Initiatives for Supporting Corporate Value

We support the efforts of employees to obtain every
category of public qualification directly linked tooperations at our businesses such as real estatetransaction specialists, first-class architects, first-classbuilding operation and management engineers, andfinancial planners.

Division managers

Initiatives for Creating ValueFY2014

Construction business

Team leaders
Non-managers

FY2013

Leasing business

Executives

Business Model and Competitiveness

Function sub-heads

Employee rankManagers■ Employee Training System

Per-head training costs (yen)Training sequence based on employee rank

Executives■ Training According to Division

The regular training system is essentially split along twolines: training according to employee rank and training
according to division. The former is designed to enable all
employees to obtain the knowledge and capabilities theyneed in a series of stages. The latter is aimed at enabling
employees to polish their expertise and thus improvecustomer satisfaction.

No. of participants

Employee rank

Non-managers

Employee Training System■ Training According to Employee Rank

Managers

Leopalace21 is channeling resources into developing
human resources to achieve new growth. Specifically,
we support each employee in developing their capabilities through our human resources development system
while striving to bolster the organization as a wholethrough cross-divisional training. Moreover, in fiscal 2015,
the Shonan Human Resources Development Center
commenced operations as an in-house employee training
center. We are implementing the following measures via
our human resources development system.

Leopalace21: Who We Are

Developing Diverse Human Resources

73

Basic CSR Action Policy

CONTRIBUTING TO LOCAL COMMUNITIESTogether with local communities, we are continuing our activities in our immediatesurroundings as a company providing living space with the aim of creating places
where people can live in safety.

Our Basic View: Our Businesses Help Strengthen Local Community Connections
With more people living in dense cities and the ruralcountryside becoming depopulated, connections withincommunities are becoming more tenuous, and thesetrends have given rise to many problems such as elderly
people dying alone and more crime targeting children. In
serving to promote interaction and collaboration amongneighbors, the structure of residential neighborhoods andhow people live play important roles. At Leopalace21, weare promoting initiatives to contribute to local communities through our businesses and employees and handson interaction with local communities, important stakeholder group. We think such contributions will build confidence in our operations in local communities. Our aim is
to become a welcomed, trusted company.

Goals and Achievements
Main Activities

FY2015 goals

FY2015 achievements

Companywide events:
4 events

Companywide events:
4 events (2,552 buildings)

Vicinity of construction sites:
3,200 buildings,
16,000 participants

Vicinity of construction sites:
2,240 buildings,
10,641 participants

FY2016 goals
Companywide events: 4 events

Involve stakeholders in cleanup
activities

New KPI

A total of 3,780 participants incompanywide events
New KPI

Ratio of 5 persons per site for construction site vicinity cleanups

Cleanup Campaigns
Creating Better Places to Live via Our Cleanup Campaigns
We are continuing with our neighborhood cleanup campaigns to encourage our employees to form attachments
to the towns and regions where we operate businesses
and to promote deeper interaction among stakeholders.
Those participating in the campaigns are, naturally,
Leopalace21 employees as well as landowners andtheir families and local contractors who work for us atapartment construction sites.
The campaigns seek to foster
communication between themand local residents.

Initiatives via Diverse Channels Leveraging Core Businesses
Leopalace21 continues to cooperate with “Kodomo#110,” a program where private-sector businesses register to provide emergency refuge to children who feelthreatened or troubled. It is seen as effective in preventing an array of harms from coming to children. Of our
182 directly run sales offices, 132 offices are registered
for the program, and 50 offices run by Leopalace
Partners franchisees are also registered. All Hotel
Leopalace locations are registered. With five new74

Leopalace21 Corporation / Annual Report 2016

additions to the Azumi En facility network, all 67 facilities
have been registered.
In addition, Hotel Leopalace Sendai procures food materials sourced locally to support the “local consumption of
local produce” community model, and Hotel Leopalace
Sapporo continues to support snow removal efforts. As amember of communities where we do business, theHotel Leopalace locations we run will continue to support
efforts that enable their residents to live in safety.

Along with theSugibuchikai troupe,
which performs folksongs, kindergarteners
from nearby Miura
Kindergarten comeevery year to our facility
as volunteers.
Rumiko Takahashi
Seniors who prefer
Azumi En Tsukuihama
not to interact much
Facility Chiefwith others change
when the kindergarteners arrive, actively calling out to them andpatting them on the head with a smile on theirfaces. The seniors as well as the staff feel
happy watching how cute the kindergarteners
are when they sing and dance for everyone.

Kindergarteners from Miura Kindergarten sing and dance for the seniors

Initiatives for Creating Value

Christmas concert performed by thebass band club of Inamachi Minami
Junior High School

Stakeholder’s Voice

Folk songs performed by Sugibuchikai,a troupe of singing local volunteers■ Cumulative Registrations for

Site Vicinity Cleanups■ Breakdown: Donations andCharitable Fundraising (FY2015)“Kodomo #110”

15,000 (persons)

260 (Number of calls)

Fundraisingfor Ultraman
Foundation¥121,940

Fundraisingfor Leopalace
Recycle Reading**¥2,171

250
10,000

UNHCR
support¥836,937“Volunteer”
vending
machines*¥1,520,679

240
5,000
230

Total sum of¥2,577,831
220

0’14/3 FY2013’15/3 FY2014’16/3 FY2015

Taiwanearthquake
support¥96,104

Initiatives for Supporting Corporate Value

Visual Presentations of Our Social Contributions■ No. of Participants in Construction

Business Model and CompetitivenessWith nearly 70 Azumi En nursing care facilities located in the Kanto
and Chubu regions, we are actively striving to create opportunities
for seniors at our facilities and members of local communities tointeract, and we regularly invite local volunteers to visit our facilities.
At the Azumi En Ina facility in Saitama Prefecture’s Ina town,
about 30 students in the brass band club at Inamachi Minami JuniorHigh School visited the facility to perform at a Christmas concert in
December 2015. Listening to the old-time standards the students
performed brought cheer and warm memories to the Ina facility
seniors. The two groups spoke openly with each other without paying much attention to age differences at the post-concert gathering.
With the seniors telling the students to “please come back!” andthe students responding “we will!,” the students seemed reluctant
to leave as they shook hands with their new friends when departing.
We arrange for events involving volunteers and people from thelocal community, such as magic shows, hula dance shows, guitar
performances, local community gatherings, and the like to ensure“happy hearts and minds” is not just a motto for seniors at Azumi
En facilities. Through such recreational activities, we make an effort
to nurture our local community ties.

Leopalace21: Who We Are

Local Community Interactions with “Happy Hearts and Minds” as a Motto*’14/3 FY2013’15/3 FY2014’16/3 FY2015“Volunteer” vending machines donate a percentage of their proceeds
voluntarily to charitable causes.
** Leopalace21 collects old books, CDs, and DVDs that employees nolonger want and sells them to corporate partner bookoffonline Corp.
and donates the proceeds to charities.

Data Compilation

Main NGOs and charities we support and are allied with• Japanese Red Cross Society• Japan Committee for UNICEF (United Nations Children’s Fund)• United Nations High Commissioner for Refugees (UNHCR)• Eco Cap Collection Box Promotion Network• Japan Society of Breast Health (certified NPO)
• Support Association for Corporate Employment of the Challenged (SACEC)• WWF Japan
Leopalace21 Corporation / Annual Report 201675

Basic CSR Action Policy

CREATING AN ENVIRONMENTALLY FRIENDLY SOCIETY
Recognizing the large impact our business activities have on the global environment, we remain steadfast in our pursuit of low-environmental-impact living space,
and we are working to reduce the environmental burden that arises from all of ourbusiness activities.

Our Basic View: Lowering Our Environmental Impact by Reducing CO2 Emissions
The Paris Agreement reached at the COP21 in Paris in2015 adopts a long-term target to reduce greenhousegas (GHG) emissions from human activities to effectively
zero. It calls for regular measurement and reporting of initiatives to reduce GHG emissions and an internationalframework for verification, so the importance of corporate commitments is growing. Once we carefully analyze
a precise statistical compilation of the Group’s CO2

emissions, Leopalace21 will add CO2 reduction targets to
its environmental KPIs. We will be hands on in taking
responsibility for reducing our environmental impacts.
Our aim is to be a firm that grows sustainably in harmony
with society through effective resource use and the provision of value-added goods and services that factor inenvironmental considerations.

Goals and Achievements
Main Activities
Solar power generation business
Factor environmental impact into
our business activities

FY2015 goals

FY2015 achievements

FY2016 goals

Solar power system installations:535 buildings (8,093,000kWh,
reduce CO2 emissions by 2,545t)

608 buildings (9,276,000kWh,
reduce CO2 emissions by 2,917t)

Reduce CO2 emissions
by 23,000t via Groupsolar power generation

Replacement of 40 old copiers

Finished replacing 40 old copiers

New KPI

Reducing Environmental Impact of Our Business Activities
We are working to reduce the environmental burden of
our business activities. In fiscal 2015, like in fiscal 2014,
we implemented a “Cool Biz” dress code for summer
and an Eco-green cards program, executed an initiative toreuse discarded materials, added more mini-cars to our
fleet, and converted more facilities to LED lighting.
These measures were implemented at parent company properties such as the head office and at all
Group facilities*, even as we took steps to reduce
electricity usage.
The head office monitors electricity usage, and we continue to advance ambitious initiatives in recognition of
the large size of the impacts of our business activities on
the environment. In fiscal 2015, electricity usage at thehead office came to 1,763,000kWh.
*This excludes owner salons, computer rooms, hotels, the Guam resort,and overseas offices

76

Leopalace21 Corporation / Annual Report 2016

■ Annual Electricity Consumption at Head Office2,000 (thousands kWh)

1,500

1,000

500

0

’12/3 FY2011 ’13/3 FY2012 ’14/3 FY2013 ’15/3 FY2014 ’16/3 FY2015

Replacement of Old Copiers

We continue with attempts to reuse documents in storage that no longer need to be retained. In fiscal 2015, wereused important documents that had been kept at thehead office and owner salons to make toilet paper andthis yielded 30,532 rolls. This equates to one month’s toilet paper for the Group’s entire workforce.

We finished replacing 40 old copiers with energy-efficientmodels in the two years from fiscal 2014 to fiscal 2015.
This brings to an end an initiative to upgrade all 486 copiers in the Group’s fleet.
This initiative reduced our electricity usage by 70.4%,
yielding a 48.5% reduction in CO2 emissions.

Business Model and CompetitivenessConverting Facilities to LED Lighting
We implement initiatives to save energy while ensuring
tenants can live comfortably. At all newly built apartments, LED lighting is a standard feature, and we install
LED lighting in common-use spaces when we renovate
existing apartments. We also install LED lighting in buildings at the Hotels & Resort Business and Elderly Care
Business. In fiscal 2015, we installed LED lighting at
Hotel Leopalace Hakata and at 46 elderly care facilities.

248,000kWh

Hotel Leopalace Nagoya

383,000kWh

Initiatives for Creating Value

Decline in annual electricity
usage via switch to LED lighting(year on year, results)
Hotel Leopalace Sapporo

Leopalace21: Who We Are

Paper Reuse

Initiatives for Supporting Corporate Value

Promotion of Our Solar Power Generation Business

Data Compilation

Since 2011 we have focused on three approaches toactively advance our solar power generation business:(1) solar panel installations via owner investments;(2) wholesaling electricity generated from solar panels
installed on rooftops leased from owners; and(3) the design and execution of a mega-solar project on avacant site.
As of March 31, 2016, we were nearly done installing
solar power generation systems on properties we own,
lease or manage. The aggregate capacity of these systems stands at 182.1MW, with installations on the rooftops of 12,964 buildings.
We will continue with initiatives to reduce CO2 emissions via solar power generation while continuing to harness solar power generation as a way to support safe,
sustainable energy generation.

Leopalace21 Corporation / Annual Report 2016

77

FINANCIAL SECTION
MANAGEMENT’S DISCUSSION AND ANALYSIS............................................ 79
CONSOLIDATED BALANCE SHEETS ................................................................. 82
CONSOLIDATED STATEMENTS OF OPERATIONS ........................................... 84
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ................... 85
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS .................... 86
CONSOLIDATED STATEMENTS OF CASH FLOWS ........................................... 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................................. 89
INDEPENDENT AUDITOR’S REPORT............................................................... 121

78

Leopalace21 Corporation / Annual Report 2016

FINANCIAL SECTION

Operating Profit by Segment

During the subject consolidated fiscal year, the domestic
economy showed gradual progression supported by
improvements in corporate earnings, employment,
income, and individual consumption, despite prospects
being uncertain due to the downturn in the Chinese economy as well as the drastic appreciation of the yen.
In the rental housing industry, recovery from the negative effects of the consumption tax increase has progressed, and new housing starts of leased units have
improved for the first time in two years (up 7.1% year-onyear). On the other hand, while the number of vacanthouses continues to increase and recovery in nationwide
demand becomes difficult, achieving stable occupancy
rates requires constructing apartments in areas with highdemand, in addition to providing high-quality products andservices that meet tenants’ needs.
Under these conditions, the Leopalace21 Group (theCompany) aims to achieve targets of the Medium-termManagement Plan “EXPANDING VALUE,” which is in its
second year, by building a solid management structure
focusing on the core businesses, made up of Leasing andConstruction. In addition, the Group aims to establish new
businesses that will contribute to future growth.

(Millions of Yen)FY2014FY2015

ChangeLeasing
Construction
Elderly Care
Hotels & Resort
OthersAdjustments
Total

20,532210(606)(1,289)31(4,116)
14,76322,7603,339(1,354)(697)
337(3,388)20,996

2,228
3,128
(748)
591
306
727
6,233

Net Sales by Segment(Millions of Yen)FY2014FY2015

ChangeLeasing
Construction
Elderly Care
Hotels & Resort
OthersTotal

399,316
61,312
10,608
8,951
2,999
483,188

410,552
74,16010,798
11,427
4,485
511,424

11,235
12,847
190
2,476
1,485
28,236

Others+0.3

20
Leasing
+2.2

15
10
5

FY201414.8

Elderly
Construction Care
-0.7
+3.1

Hotels &Resort+0.5

Adjustments+0.7

FY2015
21.0

0(3) Segment Information
Leasing Business
The occupancy rate at the end of the consolidated fiscal
year was 90.53% (up 1.24 points from the end of last fiscal year) and the average occupancy rate for the fiscal year
was 87.95% (up 1.38 points from last fiscal year).
In the Leasing Business, to establish stable profits led
by occupancy improvement, the Company implemented
measures to promote longer rent periods such as expanding tenant services including “Room Customize” and providing a website for tenants, as well as further strengthening sales for female and corporate customers by security
system installations. In addition, the Company aims toincrease foreign tenants by refining customer support.
The number of units under management at the end of
the consolidated fiscal year was 561 thousand (increasing
7 thousand from the end of last fiscal year), and the number of direct offices was 189 (increasing 1). The number offranchise offices was 130 (decreasing 11).
As a result of the above, net sales amounted to 410,552
million yen (up 2.8% year-on-year), and operating profit
was 22,760 million yen (up 10.9% year-on-year).
Construction Business
Orders received during the consolidated fiscal year were
86,439 million yen (down 1.1% from last fiscal year) andthe orders received outstanding at the end of the consolidated fiscal year stood at 66,347 million yen (up 14.1%
Leopalace21 Corporation / Annual Report 2016

Data Compilation(2) Earnings
Gross profit was 88,820 million yen (up 17.2% year-on-year),
operating profit was 20,996 million yen (up 42.2% year-onyear), recurring profit was 19,820 million yen (up 47.6% yearon-year), and net income attributable to shareholders of theparent was 19,432 million yen (up 33.9% year-on-year).

25

Initiatives for Supporting Corporate Value(1) Net Sales
Net sales during the fiscal year under were 511,424 million
yen (up 5.8% year-on-year). In the Leasing Business, net
sales was 410,552 million yen (up 2.8% year-on-year), andnet sales in the Construction Business was 74,160 million
yen (up 21.0% year-on-year).

(Billions of yen)

Initiatives for Creating Value

2. Analysis of Business Results

Change in Operating Profit

Business Model and Competitiveness1. Operating Environment

Leopalace21: Who We Are

MANAGEMENT’S DISCUSSION AND ANALYSIS

79

from last fiscal year).
In the Construction Business, the Company focused on
supplying apartments in metropolitan areas where solid leasing demand is anticipated, as well as providing high quality
products with earthquake-resistance and better sound insulation. In addition, the Company implemented a new brandattempting to strengthen product competitiveness andrefresh the image of tenants, expanded construction variations based on “ideal land use,” and has begun reconsidering suppliers and its product prices to improve profitability.
As a result, net sales came to 74,160 million yen (up21.0% year-on-year), and operating profit was 3,339 million yen (up 3,128 million yen year-on-year).

in customer advances for projects in progress, and 1,855
million yen in accounts payable for completed projects,
despite an increase in long-term interest-bearing debt of
24,159 million yen due to the issuance of corporate bonds
and 1,974 million yen in accrued income taxes.
Net assets increased 19,738 million yen from the end of
the previous fiscal year to 146,211 million yen, chiefly due
to a recording of 19,432 million yen in net income attributable to shareholders of the parent. The ratio of shareholders’ equity to assets rose 3.7 points from the end of theprevious fiscal year, to 44.7%.

Equity Ratio(%)

Elderly Care BusinessNet sales were 10,798 million yen (up 1.8% year-on-year),and operating loss was 1,354 million yen (increasing lossof 748 million yen year-on-year).

50
40
30
20

Hotels & Resort BusinessNet sales in resort facilities in Guam and hotels in Japan
were 11,427 million yen (up 22.7% year-on-year), and theoperating loss was 697 million yen (decreasing loss of 591
million yen year-on-year).
Other Businesses
In Other Businesses such as the solar power generation
business, the small-claims and short-term insurance business, and the finance business, net sales were 4,485 million yen (up 49.5% year-on-year), and operating profit was
337 million yen (up 979.3% year-on-year).

3. Analysis of Financial Position(1) Position of Assets, Liabilities, and Net assets
Total assets at the end of the fiscal year increased 18,616
million yen from the end of the previous fiscal year to326,890 million yen. This was mainly attributable to anincrease of 12,821 million yen in cash and cash equivalents, 3,291 million yen in deferred tax assets, 1,536 million yen in leased assets (net), 1,452 million yen in construction in progress, and 1,397 million yen in investment
securities, despite a decrease of 1,383 million yen in otheraccounts receivable and 1,919 million yen in buildings andstructures (net).
Total liabilities decreased 1,122 million yen from theend of the previous fiscal year to 180,679 million yen.
This primarily reflected a decrease of 17,823 million yen
in short-term interest-bearing debt, 5,327 million yen inlong and short term advances received, 1,903 million yen

80

Leopalace21 Corporation / Annual Report 201637.0
33.0 32.4

10

16.6

19.3

41.0

44.7

36.5

33.4 31.3
22.2
17.9
11.112.8

0(Fiscal year) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(2) Cash Flow Position
Cash flow from operating activities was a net inflow of
22,104 million yen (an increase of 6,389 million yen in net
inflow from the previous fiscal year). This was mainly due
to 19,061 million yen of income before income taxes, and9,614 million yen of depreciation, despite a decrease inadvances received of 5,386 million yen and a decrease inaccounts payable of 2,701 million yen.
Cash flow from investing activities was a net outflow of
11,087 million yen (a decrease of 6,462 million yen in net
outflow from the previous fiscal year). This was primarily
due to payments for the purchase of property, plant andequipment of 9,053 million yen.
Cash flow from financing activities was a net inflow of
1,374 million yen (a decrease of 373 million yen in net
inflow from the previous fiscal year). This was chiefly due
to proceeds from the issuance of bonds of 18,227 million
yen (after deduction of bonds redemption), despite arepayment of debt and finance lease obligations of 16,875
million yen (after deduction of proceeds from debt).
As a result, cash and cash equivalents at the end of theconsolidated fiscal year under review stood at 86,826 million yen, an increase of 12,321 million yen from the end of
the previous fiscal year.

Leopalace21 Corporation / Annual Report 2016

Data Compilation(2) Improving earnings power and developing new
businesses
For the Companies to grow sustainably, improving its
earnings power in the Leasing Business and developing
new business domains will be necessary. Although theCompanies have already made efforts to increase its earnings power by enhancing tenant services and implementing measures to increase the value of properties, in addition to implementing a “leased roof solar power generation business” through a solar power generation company,
operating the rental housing management businessthrough a joint venture in South Korea and the local realestate agency business and development of service apartments in countries of ASEAN, the Company will continue
to work on developing new business fields, products andservices, as well as its revenue base.

Initiatives for Supporting Corporate Value

The Company aims to build solid management strength
based on its fundamental policy of “focusing on core businesses and challenging itself with new business fields” asestablished in its Medium-Term Management Plan.
The Company aims to further develop the Leasing
Business as a highly profitable business by taking various
steps such as improving strong corporate sales, addressing tenant needs through “Room Customize” and security
system installations, strengthening efforts for foreign students who demonstrate solid demand, expanding its sales
network through new store openings, and reducing costsby reviewing routine property management tasks.
In the Construction Business, the Company will seek a
new profit foundation through measures such as supplying apartments in urban areas where a high occupancy
rate is expected, offering advanced new products, building
high-quality apartments by paying attention to earthquake
protection and sound insulation, etc., and expanding thenumber of orders received for buildings other than apartments such as elderly care, commercial facilities, and builtto-order houses.
During the Medium-Term Management Plan, theCompany positions the Elderly Care Business as a growthstrategy area and will endeavor to promote the opening ofcare facilities in cooperation with the Construction
Business. As a company-wide measure, the Company will
also maintain a low cost structure while strategically investing in costs (personnel, advertising, and sales promotion
expenses) necessary to expand future sales and earnings.

(1) Acquisition of individual clients and thepromotion of long-term occupancy
With respect to the tenants in the Company’s properties
under management, corporate clients constitute a rising
trend while individual clients constitute a declining trend.
The Company’s policy is to continue to enhance strong
corporate sales; however, taking into consideration thefact that corporate clients are easily impacted by economic
cycles, from the perspective of assuring stable sales andearnings, the Company will also strengthen its efforts totake in individual clients and promote long-term occupancy
through measures such as implementing advertising andsales campaigns for individual clients, expanding its sales
network through new store openings, and providing a variety of services for tenants.

Initiatives for Creating Value

5. Outlook

6. Issues to be Addressed by the Company

Business Model and CompetitivenessTo increase shareholders’ value, the Company will not only
distribute profit earned from business measures in theform of dividends, but will maximize mid- to long-term corporate value and increase EPS (earnings per share)through investments in matters such as real estate, international businesses, mergers and acquisitions, IT, andresearch and development. Concerning the dividend payout ratio, the Company will set a medium-term goal of
30% (in respect to net income attributable to shareholdersof the parent), in addition to maintaining a stable dividend.
For the subject fiscal year, the Company plans to pay
a year-end dividend of 10 yen, the first dividend inseven years.
For the fiscal year ending March 31, 2017, the Company
plans a mid-term dividend of 10 yen, a year-end dividendof 12 yen, with a total of 22 yen.

In the next fiscal year, the Company will strengthen competitiveness mainly in the core business, as well as expand
elderly care facilities in cooperation with the Construction
Business, and continue to construct and manage serviced apartments and offices in the ASEAN region.
The Company has set its financial targets for the fiscal
year ending March 31, 2017, the final year of its MediumTerm Management Plan, at 528,000 million yen (up 3.2%
year-on-year) for net sales, 22,500 million yen (up 7.2%)
for operating profit, 21,500 million yen (up 8.5%) for recurring profit, 18,500 million yen (down 4.8%) for net income
attributable to shareholders of the parent, 12.0% for ROE,
and 5.6% for ROA.

Leopalace21: Who We Are

4. Fundamental Policy on the Distribution of
Earnings and Dividends

81FINANCIAL SECTIONCONSOLIDATED BALANCE SHEETS
Leopalace21 Corporation and consolidated subsidiaries
March 31, 2016 and 2015

Thousands of U.S.
dollars (Note 1)

Millions of yen

ASSETS
Current assets:
Cash and cash equivalents (Notes 2-(2), 4, 5-(2), 11-(3))
Trade receivables (Note 5-(2))
Accounts receivable for completed projects (Note 5-(2))
Operating loans (Note 5-(2))
Securities (Notes 2-(4), 5-(2), 6)
Real estate for sale
Payment for construction in progress (Note 2-(15))
Raw materials and supplies
Prepaid expenses
Deferred tax assets (Note 2-(18), 10)
Other accounts receivable
OthersAllowance for doubtful accounts (Note 2-(10), 5-(2))
Total current assets
Non-current assets:
Property, plant and equipment: (Notes 2-(6), 2-(22), 8)
Buildings and structures (Notes 11-(3), 16)
Accumulated depreciation
Net
Machinery, equipment, and vehicles
Accumulated depreciation
Net
Land (Notes 11-(3), 16)Leased assets (Note 2-(19), 19)
Accumulated depreciation
Net
Construction in progress
Other
Accumulated depreciationNet
Total property, plant and equipment
Intangible fixed assets:
Goodwill (Note 2-(17))
Others (Note 2-(8))
Total intangible fixed assets
Investments and other assets:
Investment securities (Notes 2-(4), 5-(2), 6, 11-(3))
Long-term loans (Note 5-(2))
Bad debts (Notes 5-(2), 9)
Long-term prepaid expenses (Note 2-(9))
Deferred tax assets (Note 2-(18), 10)
Others (Note 11-(3))
Allowance for doubtful accounts (Notes 2-(10), 5-(2))
Total investments and other assets
Total non-current assets
Deferred assets:
Bond issuance cost
Total deferred assets
Total assets (Note 22)
The accompanying notes are an integral part of these statements.

82

Leopalace21 Corporation / Annual Report 2016

2016

2015

2016

88,043
6,779
1,992
885
880
21
785
588
2,847
5,659
1,630
4,283
(212)
114,185

75,221
6,254
1,714
1,135
831
21
647
609
3,656
4,447
3,013
4,907
(199)
102,263781,354
60,163
17,687
7,858
7,813
193
6,974
5,226
25,27050,223
14,46738,013(1,882)
1,013,364

130,653(72,673)
57,97923,369(7,264)
16,10584,241
17,663(8,246)9,417
2,444
11,850(10,001)
1,848
172,036

130,100(70,200)
59,89920,259(5,143)
15,11583,28914,809(6,928)
7,880
992
12,065(9,811)
2,253
169,430

1,159,506
644,954514,551
207,397
64,469142,928
747,620
156,760
73,18583,575
21,693
105,165
88,76016,405
1,526,773

1,530
7,804
9,334

1,684
7,210
8,894

13,582
69,25982,841

8,230
544
1,256
3,686
16,7342,232(2,023)30,661
212,033

6,832
540
1,297
3,416
14,654
2,905(2,085)27,561205,887

73,042
4,831
11,152
32,719148,512
19,810(17,956)
272,112
1,881,727

671
671
326,890

123
123
308,274

5,962
5,962
2,901,054

2,803
14,04960
23,0051,460
2,355
18,466
13
944
40,781
6,930
404
700
41
4,504
116,521

23,129108,216
2,351
12,53538,391
27,103
170,653
51
25,910343,465
44,611
3,974
7,632
306
38,172846,508

20,001
14,106
7,659
18,950
7,516
208
3,802
10,22469
2,754
85,294
180,679

3,960
7,196
6,450
22,198
8,019
253
5,280
9,351
76
2,492
65,279
181,801

177,502125,190
67,972
168,181
66,7081,849
33,74690,743621
24,446756,961
1,603,470

75,282
45,235
26,125(3,660)142,982

75,28251,501427(3,660)123,550

668,107401,448
231,855(32,486)
1,268,925

435
3,651
(895)
3,190
18
20
146,211
326,890379
3,545(1,021)2,904
18
0
126,473308,274

3,861
32,406(7,949)28,318159
180
1,297,583
2,901,054

Leopalace21 Corporation / Annual Report 2016

Data Compilation

2,606
12,193
265
1,412
4,326
3,054
19,2295
2,919
38,701
5,026
447
860
34
4,301
95,384

Initiatives for Supporting Corporate Value

2016

Initiatives for Creating Value

Capital surplus
Retained earnings
Treasury stock: 4,569,520 shares in 2016 and 4,569,430 shares in 2015 (Note 18)
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on “other securities” (Note 2-(4))
Foreign currency translation adjustments (Note 2-(21))
Remeasurements of defined benefit plans (Note 12)
Total accumulated other comprehensive income
Share subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

2015

Business Model and Competitiveness

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable (Note 5-(2))
Accounts payable for completed projects (Note 5-(2))
Short-term borrowings (Notes 5-(2), 5-(3), 11)Current portion of long-term debt (Notes 5-(2), 5-(3), 11)Bonds due within one year (Note 5-(2), 5-(3), 11)Lease obligations (Notes 5-(2), 5-(3), 11)
Accounts payable—otherAccrued expenses
Accrued income taxes
Advances received (Note 2-(16))
Customer advances for projects in progress
Reserve for warranty obligations on completed projects (Note 2-(13))
Reserve for fulfillment of guarantees (Note 2-(14))
Asset retirement obligations (Note 17)
OthersTotal current liabilities
Non-current liabilities:
Bonds (Note 5-(2), 5-(3), 11)Long-term debt (Notes 5-(2), 5-(3), 11)Lease obligations (Notes 5-(2), 5-(3), 11)Long-term advances received (Note 2-(16))
Lease/guarantee deposits received
Deferred tax liabilities
Reserve for apartment vacancy loss (Note 2-(12))
Liability for retirement benefit (Note 2-(11), 12)
Asset retirement obligations (Note 17)
OthersTotal non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock: (Note 18)
Authorized: 500,000,000 shares in 2016 and 2015
Issued: 267,443,915 shares in 2016 and 2015

2016

Leopalace21: Who We Are

Thousands of U.S.
dollars (Note 1)

Millions of yen

83FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF OPERATIONS
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of U.S.
dollars (Note 1)

Millions of yen

Net sales (Note 21)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (Note 21)
Other income (expenses):
Interest and dividend income
Equity in losses of affiliated companies
Foreign exchange gains (losses), net (Note 2-(20))
Interest expenses
Commission fee
Gain on sale of property, plant and equipment (Note 13)
Amortization of deposits received income
Compensation income
Gain (losses) on valuation of investment securities (Note 2-(4))
Refund of fixed asset tax
Loss on sale of property, plant and equipment (Note 14)
Loss on retirement of property, plant and equipment (Note 15)
Impairment loss (Note 2-(7), 8)
Others—net
Income before income taxes
Income taxes (Note 2-(18))
Current
RefundDeferred
Net income
Net income attributable to non-controlling interests
Net income attributable to shareholders of the parent (Note 22)
The accompanying notes are an integral part of these statements.

84

Leopalace21 Corporation / Annual Report 2016

2016

2015

2016

511,424422,604
88,82067,82320,996483,188
407,433
75,75560,992
14,7634,538,736
3,750,484
788,252
601,912186,340

121
(9)
(267)
(944)
(171)
26
102
61
58
—
(1)
(147)
(616)
(146)
19,061124(8)
52(1,143)
(461)
6
—
—
—
88
(0)
(309)
(224)
(8)
12,896

1,076(80)(2,378)(8,377)(1,521)
231
911
547
518
—
(14)
(1,311)(5,473)(1,301)
169,164

2,999(19)(3,347)(368)
19,429(2)
19,4321,016(0)(2,613)(1,597)
14,494(13)
14,507

26,618(173)(29,712)(3,267)
172,431(21)
172,453

FINANCIAL SECTION
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of U.S.
dollars (Note 1)

Millions of yen

2015

2016

19,42914,494

172,431

55
107
125
(1)
286
19,716
19,718
(2)

(47)
5,660
(205)
2
5,409
19,904
19,917
(13)

491
954
1,112
(14)
2,543
174,975
174,994(18)

The accompanying notes are an integral part of these statements.

Business Model and CompetitivenessNet income
Other comprehensive income
Net unrealized gains on “other securities”
Foreign currency translation adjustments (Note 2-(21))
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates
Total
Comprehensive income
Comprehensive income attributable to shareholders of the parent
Comprehensive income attributable to non-controlling interests

2016

Leopalace21: Who We Are

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Note)
Thousands of U.S.
dollars (Note 1)

Millions of yen

2016

96
(30)
65
(10)
55

(102)
—
(102)
55
(47)

856
(271)
585
(93)
491

107
—
107
—
107

5,660
—
5,660
—
5,660

954
—
954
—
954

(96)
221
125
—
125

(348)
142
(205)
—
(205)

(857)
1,969
1,112
—
1,112

(1)
286

2
5,409

(14)
2,543

Initiatives for Supporting Corporate Value

Amount accrued in the fiscal year
Total

2015

Initiatives for Creating Value

Net unrealized gains on “other securities”
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Net unrealized gains on “other securities”
Foreign currency translation adjustments (Note 2-(21))
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 associates accounted forusing equity method

2016

Data Compilation

Leopalace21 Corporation / Annual Report 2016

85

FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Millions of yen
Shareholders’ equity

Balance as of April 1, 2014

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityNet unrealized
gains on “othersecurities”

Foreigncurrencytranslation
adjustments

75,28251,501(15,788)(3,660)107,334427(2,116)

Cumulative effects of changes
in accounting policies
Restated balance after changes
in accounting policies

Accumulated other comprehensive income

1,708
75,28251,501

Net income attributable toshareholders of the parent(14,080)(815)(2,504)

18

13

1,708
(3,660)14,507Issuance of new shares
Acquisition of treasury stock(0)

109,042

Total net
assets104,860
1,708

427(2,116)(815)(2,504)18

13

106,568

14,507

14,507(0)(0)

Sales of treasury stock
Net change of items otherthan shareholders’ equity
Total change during period

Share
NonTotal accumulated
Remeasurements
subscription controllingotherof definedrightsinterests
comprehensive
benefit plansincome

(47)

5,662

(205)

5,409

—

(13)

5,396

—

—

14,507(0)

14,507

(47)

5,662

(205)

5,409

—

(13)

19,904

Balance as of March 31, 2015

75,28251,501427(3,660)123,550

379

3,545

(1,021)

2,904

18

0

126,473

Deficit disposition
Net income attributable toshareholders of the parent—(6,266)

6,266
19,432——
19,432Acquisition of treasury stock(0)

Sales of treasury stock

(0)

(0)

—

—

Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2016—
19,432

55

105

125

286

—

20

306

—

(6,266)

25,698(0)

19,431

55

105

125

286

—

20

19,73875,282

45,235

26,125(3,660)142,982

435

3,651

(895)

3,190

18

20

146,221

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Balance as of March 31, 2015
Deficit disposition

Accumulated other comprehensive income

Treasury
stock

Total
shareholders’equityNet unrealized
gains on “othersecurities”

Foreigncurrencytranslation
adjustments

457,059

3,792(32,486)

1,096,472

3,369

31,469(55,610)55,610———172,453

172,453

Capitalsurplus668,117—

Net income attributable toshareholders of the parent

172,453

Acquisition of treasury stock
Sales of treasury stock—

Balance as of March 31, 2016

25,777159

01,122,410

(0)

(0)

(0)

—

—
491

937

1,112

2,541

—

179

2,720

—

(55,610)228,063(0)

172,452

491

937

1,112

2,541

—

179

175,173

668,107401,448

231,855(32,486)

1,268,925

3,861

32,406(7,949)28,318159

180

1,297,583

The accompanying notes are an integral part of these statements.

86(9,061)

Total net
assets—Net change of items other thanshareholders’ equity
Total change during period

Share
NonTotal accumulated
Remeasurements
subscription controllingotherof definedrightsinterests
comprehensive
benefit plansincomeRetainedearnings

Commonstock

Leopalace21 Corporation / Annual Report 2016

FINANCIAL SECTION
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Thousands of U.S.
dollars (Note 1)

Millions of yen

19,061
9,614
154
180
(1,477)
(121)
944
267
9
(58)
(24)
147
616
32
(138)
643
(2,701)(1,903)(5,386)
(448)
911
3,960
24,28489(937)(1,331)
22,104

12,896
7,736—
10(4,072)
(124)
1,143
(52)
8
—
(6)
309
224
(734)
(80)
3,774
4,924
1,114
(9,572)
(529)
982
(124)
17,827108(1,139)(1,081)
15,715

169,164
85,325
1,370
1,605(13,115)(1,076)
8,377
2,378
80
(518)
(216)
1,311
5,473
292
(1,225)
5,712(23,976)(16,894)(47,807)(3,984)8,090
35,146
215,515791(8,318)(11,816)
196,171

The accompanying notes are an integral part of these statements.

Initiatives for Supporting Corporate Value

2016

Initiatives for Creating Value

2015

Business Model and CompetitivenessCash flows from operating activities:
Income before income taxes
Depreciation
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in reserve for apartment vacancy loss
Interest and dividend income
Interest expense
Foreign exchange loss (gain)
Equity in losses (earnings) of affiliated companies
Loss (gain) on valuation of investment securities
Loss (gain) on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Impairment loss
Decrease (increase) in accounts receivable
Decrease (increase) in payment for construction in progress
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in accounts payable
Increase (decrease) in customer advances for projects in progress
Increase (decrease) in advances received
Increase (decrease) in guarantee deposits received
Increase (decrease) in accrued consumption taxes
OthersSubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

2016

Leopalace21: Who We Are

CONSOLIDATED STATEMENTS OF CASH FLOWS

Data Compilation

Leopalace21 Corporation / Annual Report 201687

Thousands of U.S.
dollars (Note 1)

Millions of yen

Cash flows from investing activities:
Payment for purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for purchase of intangible assets
Payment for purchase of investment securities
Proceeds from sale of investment securities
Payment for purchase of shares in subsidiaries
Payment for loans
Proceeds from collection of loans
Payments for purchase of time deposits
Proceeds from withdrawal of time deposits
OthersNet cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from short-term borrowings
Repayment of short-term borrowings
Proceeds from long-term debt
Repayment of long-term debt
Repayment of finance lease obligations
Proceeds from share issuance to non-controlling shareholders
Proceeds from issuance of bonds
Payment for redemption of bonds
Payment for purchases of treasury stock
Dividends paid to non-controlling interests
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 4)
The accompanying notes are an integral part of these statements.

88

Leopalace21 Corporation / Annual Report 2016

2016

2015

2016

(9,053)666(754)(1,515)
93
—
(58)
21
(1,100)600
12(11,087)(15,532)
230
(998)
(101)
86
(812)
(10)
38
(600)
500
(349)
(17,550)(80,351)
5,961(6,696)(13,445)
832
—
(518)
194
(9,762)
5,324
108(98,396)

399
(176)
8,544
(23,244)(2,397)23
21,220(2,993)
(0)
(0)
1,374
(70)
12,321
74,50486,826

3,900(3,900)7,261(7,846)(1,606)
—
4,500
(560)
(0)
—
1,747
441
354
74,15074,504

3,548(1,567)75,825(206,291)(21,280)207
188,325(26,561)(0)(4)
12,201(628)
109,348
661,205
770,553

FINANCIAL SECTION
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

1. Basis of Presenting Consolidated Financial
Statements

Leopalace21 Corporation / Annual Report 2016

Data Compilation(2) Cash and cash equivalents
For the purpose of the statements of cash flows, theCompany considers all highly liquid investments withinsignificant risk of change in value that have maturities
of generally three months or less when purchased to beInitiatives for Supporting Corporate Value(1) Consolidation
The accompanying consolidated financial statements asof March 31, 2016 include the accounts of the Company
and its 21 (18 as of March 31, 2015) significant subsidiaries (together, the “Companies”). Of these 21 subsidiaries, LEOPALACE21 PHILIPPINES INC., PT. Leopalace21
Properti Manajemen, and PT. Leopalace Duasatu Realty
have been included in the scope of consolidation
because they were established in the consolidated fiscal
year. Affiliated companies over which the Company exercises significant influence in terms of their operating andInitiatives for Creating Value

2. Summary of Significant Accounting Policies

Business Model and CompetitivenessThe accompanying consolidated financial statements of
Leopalace21 Corporation (the “Company”) have been
prepared in accordance with the provisions set forth in
the Financial Instruments and Exchange Act of Japan andits related accounting regulations and in conformity withaccounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements
have been reformatted and translated into English (withcertain expanded disclosure) from the consolidated financial statements of the Company prepared in accordancewith accounting principles generally accepted in Japanand filed with the Financial Services Agency as requiredby the Financial Instruments and Exchange Act of Japan.
Some supplementary information included in the statutory consolidated financial statements, but not required forfair presentation, is not presented in the accompanying
consolidated financial statements.
The translation of the Japanese yen amounts into U.S.
dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at
March 31, 2016, which was 112.68 yen to US$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 in the previous year’s financial statements havebeen reclassified to conform to the current fiscal year’s
presentation.
Figures are rounded down to the nearest 1,000,000
yen or $1,000.

financial policies have been included in the consolidated
financial statements on an equity basis. Investments in 1
affiliate (1 as of March 31, 2015) have been included forthe year ended March 31, 2016. All significant intercompany balances and transactions have been eliminated.
Investments in subsidiaries and affiliates that are notconsolidated or accounted for by the equity method are
carried at cost or less. Where there has been a permanent decline in the value of such investments, theCompany has written down the investments.
Since the balance sheet date of Leopalace21 Business
Consulting (Shanghai) Co., Ltd., Leopalace21 (Shanghai)
Property Management Co., Ltd., LEOPALACE21
VIETNAM CO., LTD., Leopalace21 (Thailand) CO., LTD.,
Leopalace21 (Cambodia) Co., Ltd., LEOPALACE21 REALESTATE (CAMBODIA) Co., Ltd., LEOPALACE21
PHILIPPINES INC., PT. Leopalace21 Properti Manajemen,
PT. Leopalace Duasatu Realty, Leopalace Guam
Corporation, Leopalace Guam Distributing Corporation,
Leopalace Guam Service Corporation, and WING MATE
CO., LTD is December 31, their financial statements asof that date are used in the preparation of the Company’s
consolidated financial statement. When significant transactions occur at those subsidiaries between their fiscal
year end and the Company’s fiscal year end, these transactions are included in consolidation as necessary.
The former settlement date of Morizou Co., Ltd. was
September 30, and therefore its financial statements
based on a provisional settlement as of the consolidated
settlement date in accordance with the actual settlement
have been used in preparing consolidated financial statements. However, the settlement date has been changed
to the end of February as of this fiscal year, and since thedifference between the consolidated settlement date isless than three months, the financial statement as of thesettlement date has been used, and adjustments necessary for preparing the consolidated financial statements
have been made to the important transactions that took
place between February 29 and the consolidated settlement date. The period between April 1, 2015 andFebruary 29, 2016 is included in the Company’s consolidated financial statement.

Leopalace21: Who We Are

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

89

cash equivalents. These include cash on hand, demand
deposits at banks and highly liquid short-term investments with negligible risk of fluctuation in value andmaturities of less than three months.
(3) Inventories
Inventories of the Companies are primarily stated at cost(reflecting write down due to decline in profitability)
determined by the specific identification method.
(4) Securities
Held-to-maturity debt securities are stated at amortizedcost (straight-line method).
Other securities with available fair market values arestated at fair market value at the end of the fiscal year ofeach consolidated companies. Other securities without
available fair market values are stated at cost by the moving-average method.
Unrealized gains or losses on these securities arereported, net of applicable income taxes, as a separate
component of net assets. Cost of securities sold is computed using the moving-average method.
Investments in silent partnerships are reported using
the equity method, based on the latest financial statements available as at the closing dates stipulated by therespective partnership contracts.
(5) Derivative financial instruments and hedge
accounting
1. Accounting principles
Fair market value

2. Derivative transactions are accounted for using
hedge accounting.
(a) Hedge accounting method
The Company uses the deferred hedge accounting method.
The interest rate swaps that meet specific matching criteria are recognized and included in interest
expense or income.
(b) Hedging instrument and hedge items
Hedging instrument
Hedge items
Interest rate swaps
Long-term debt(c) Hedge policy
Interest rate swaps are utilized as a hedge against
possible future interest rate increases, in amounts

90

Leopalace21 Corporation / Annual Report 2016that fall within the range of the particular liability
being hedged.
(d) Method used to evaluate the effectiveness of thehedge
Cumulative interest rate fluctuations and changes
in cash flows are compared to evaluate the effectiveness of hedged item and hedging instrument.
However, evaluation as of the date of settlementof the effectiveness of interest rate swaps thatmeet specific matching criteria is omitted.
(6) Property, plant and equipment(except for leased assets)
Buildings for rent of the Company and domestic consolidated subsidiaries are stated at cost. Depreciation is computed generally on the straight-line basis. The range ofuseful lives is principally from 22 to 47 years for buildings
for rent.
Property, plant and equipment other than buildings forrent of the Company and domestic consolidated subsidiaries are stated at cost. Depreciation is computed generally by the declining-balance method. However, buildings(excluding accompanying facilities) obtained on or after
April 1, 1998 are depreciated by the straight-line method.
The range of useful lives is principally from 15 to 50
years for buildings and structures, 17 years 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 range of useful lives isprincipally from 20 to 40 years for buildings and structuresand from 3 to 5 years for tools, furniture and fixtures.
(7) Long-lived assets
The Companies review long-lived assets for impairment
whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not berecoverable. An impairment loss would be recognized if
the carrying amount of an asset or asset group exceeded
the sum of the undiscounted future cash flows expected
to be generated by the continued use and eventual disposition of the asset or asset group. The impairment loss
would be measured as the amount by which the carrying
amount of the assets exceeds their recoverable amount,which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the assets, or(8) Intangible assets
Software for internal use is amortized on a straight-line
basis over the estimated useful life of 5 years.

(17) Amortization method and period of goodwill
The Company has adopted a policy whereby goodwill isamortized on a straight-line basis over the period inwhich the economic benefits are expected to be realized.
However, if the amount is negligible, it is amortized atonce when it takes place.
(18) 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

Leopalace21 Corporation / Annual Report 2016

Data Compilation(12) Reserve for apartment vacancy loss
Reserve for vacancy losses on apartment units managed
under master lease agreements is calculated according
to the projected loss that could occur during a logically
predictable period to prepare for the risk of increased
vacancies. It is based on estimated losses resulting fromcurrent rental income and expected future occupancy
rates for each rental property managed by the leasing
division of the Company.

(16) Advances received
With respect to advances received, such as rent, theCompany reports the portion corresponding to more thana year in “long-term advances received” under “non-current liabilities,” and the portion corresponding to a year orless in “advances received” under “current liabilities.” This
allows the Company to more clearly present the characteristics and actual transactions of the Company’s leasing
business which receives rents, etc. over a long period oftime, such as monthly usage fees, as advances received.

Initiatives for Supporting Corporate Value(11) Liability for retirement benefit
In conjunction with the calculation of retirement benefit
obligations, the method for attributing projected retirement benefits for the period up to the end of the current
fiscal is based on straight-line basis.
Past service cost is amortized by the straight-line method over a specified period (5 years) within the averageremaining service years of employees at the time ofaccrual. Actuarial gains/losses, which are prorated according to the straight-line method over a specified period (5years) within the average remaining service years of
employees at the time of accrual, are amortized startingfrom the next fiscal year of the respective accruals.
Unrecognized actuarial gains/losses and unrecognized
past service cost are posted, factoring in tax effects, as
the cumulative amount of adjustments related to cumulated other comprehensive income in the net assets.

(15) Revenues and costs of construction contracts
In recognizing construction revenues and costs of constructions in process, the percentage-of-completion method is applied to such contracts in which the outcome of
the construction activity is deemed certain by the end of
the fiscal year ended March 31, 2016, while the completed contract method is applied to other constructions.
Progress of construction is estimated based on themethod of the ratio of actual cost incurred to total cost.

Initiatives for Creating Value(10) Allowance for doubtful accounts
The Companies maintain an allowance for doubtful
accounts to reserve for potentially uncollectible receivables. A general provision for doubtful receivables is provided by applying a certain reserve percentage of thereceivables based on experience from past transactions.
A specific reserve is provided for the estimated amounts
to be uncollectible based on the customers’ financial condition or other pertinent factors.

(14) Reserve for fulfillment of guarantees
In order to provide for losses attributable to its rent obligation guarantee business, the Company’s consolidated
subsidiary, Plaza Guarantee Co., Ltd., records the amountof loss expected based on the rate of past guarantee fulfillments.

Business Model and Competitiveness(9) Long-term prepaid expenses
Long-term prepaid expenses are amortized evenly over a
period mainly from 3 to 5 years.

(13) Reserve for warranty obligations on completed
projects
Reserve for warranty obligations on completed projects
is provided to reserve for execution of warranty obligations under defect liabilities in the future. It is calculatedusing the percentage of the past execution of warranty
obligations on the completed projects.

Leopalace21: Who We Are

the net selling price at disposition.

91

tax consequences of temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income
tax purposes.
(19) Leases
Leases are depreciated by the straight-line method overthe lease-term of respective assets as their useful lives
with no residual value.
(20) Foreign currency transactions
All monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at thecurrent exchange rates as of each balance sheet date. The
foreign exchange gains and losses from translation arerecognized in the consolidated statements of operations.
(21) Foreign currency financial statements
The assets and liabilities of consolidated overseas subsidiaries are translated into Japanese yen at the current
exchange rates as of each balance sheet date, andincome and expenses are translated at the averageexchange rates of the fiscal year. Foreign currency translation adjustments resulting from the translation ofassets, liabilities and net assets are included in foreign
currency translation adjustments and non-controllinginterests as a separate component of net assets.
(22) Interest capitalization
Leopalace Guam Corporation, a consolidated subsidiary,
capitalized interest paid on borrowing for real estatedevelopment business for the development period intoacquisition cost of property, plant and equipment.
Capitalized interests included in carrying value of property, plant and equipment were 2,194 million yen($19,474 thousand) and 2,260 million yen as of March 31,
2016 and 2015, respectively.
(23) Consumption taxes
National and local consumption taxes are basically
excluded from transaction amounts. However, Asuka
SSI, a consolidated subsidiary, includes national and local
consumption taxes in operating expenses and generaland administrative expenses. The nondeductible portionof consumption taxes on the purchase of assets isrecorded as long-term prepaid expenses and amortizedevenly over 5 years.

92

Leopalace21 Corporation / Annual Report 2016(24) Earnings per share
Basic earnings per share of common stock is computedby net income available to common shareholders divided
by the weighted-average number of common shares outstanding for the period.
Diluted earnings per share of common stock reflects
the potential dilution that could occur if securities orother contracts to issue common stock were converted
or exercised into common stock or resulted in the issuance of common stock.

3. Additional Information(Changes in Accounting Policies)(Application of accounting policies related to business combinations)
The Company has applied the Accounting Standard forBusiness Combinations (ASBJ Statement No. 21 on
September 13, 2013; hereinafter referred to as the“Business Combinations Accounting Standard”), the
Accounting Standard for Consolidated Financial
Statements (ASBJ Statement No. 22 on September 13,
2013; hereinafter referred to as the “Consolidated
Accounting Standard”), the Accounting Standard forBusiness Divestiture (ASBJ Statement No. 7 on September
13, 2013; hereinafter referred to as the “Business
Divestiture Accounting Standard”), and other standards
since the beginning of the consolidated fiscal year.
The Company changed accounting policies that changes in parent’s ownership interest while the parent retains
its controlling financial interest in its subsidiary areaccounted for equity transactions and any resulting differences are recognized directly in capital surplus, andacquisition related costs are accounted as expenses in
the consolidated fiscal year in which the costs are
incurred and the services are received. The Company
also changed accounting policies that the settlement of
tentative accounting treatment related to the businesscombinations that occur after the beginning of the consolidated fiscal year ending March 31,2016 is recognizedin consolidated financial statements for the period towhich the business combination belongs.
Moreover, the Company changed the presentation of
net income, etc., and the presentation of minority interests to non-controlling interests. To reflect changes in therelevant presentation, the Company reclassified consolidated financial statements for the previous consolidated
fiscal year.

(3) Effects Arising from Applying New Standard
and Guidance
Any impact of the adoption of the Guidance on
Recoverability of Deferred Tax Assets on the consolidated financial statements is under review at this point.

4. Cash and Cash Equivalents
A reconciliation between cash and cash equivalents in the consolidated balance sheets and consolidated
statements of cash flows are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and cash equivalents in the consolidated balance sheets
Time deposits with original maturities of more than three months
Cash and cash equivalents in the consolidated statements of cash flows(1) The financial instruments and related disclosures(a) Policy for financial instruments
The Companies are mainly involved in raising funds(mostly bank borrowing and corporate bond issuance) needed for capital investment to carry out
Leasing Business and Construction Business.

2015

2016

88,043(1,217)86,82675,221(717)
74,504

781,354(10,800)
770,553

Temporary excess funds are invested in highly
secure financial assets, and short-term working
capital is raised by borrowing from the bank. The
Companies conduct derivative transactions primarily for the purpose of avoiding interest rate andexchange rate risks, and have a policy not to conduct speculative trading.
Leopalace21 Corporation / Annual Report 2016

Data Compilation

5. Financial Instruments

2016

Initiatives for Supporting Corporate Value(Changes in presentation)(Consolidated Statements of Operations)
Since the quantitative significance of “Gain from cancellation of contracted work” and “Gain on adjustment ofaccount payables” previously recorded in non-operating
income has decreased, these has been recorded in“Others-net” from the subject consolidated fiscal year.
To reflect changes, the Company reclassified consolidated financial statements for the previous consolidated fiscal year.
As a result, 14 million yen recorded as “Gain from cancellation of contracted work” and 50 million yen recorded
as “Gain on adjustment of account payable” in the previous consolidated fiscal year has been reclassified as“Others-net.”

Initiatives for Creating Value(1) Overview
The accounting standard was revised mainly with a focus
on the Auditing Treatment relating to Recoverability ofDeferred Tax Assets (Report No. 66, the Audit Committeeof the Japanese Institute of Certified Public Accountants)
when transferring the guidelines for accounting and auditing practice in tax effect accounting (the portion concerning
accounting process) of the Japanese Institute of Certified
Public Accountants to the Accounting Standards Board ofJapan. The accounting standard is the edition to which necessary revisions have been made in the treatment of partof the amount of deferred tax assets and requirements forcompany categorization by basically following the set
framework. Under this framework, companies are categorized into five groups, and the amount of deferred tax(2) Effective Dates
The standards will be adopted from the beginning of theconsolidated fiscal year that begins on April 1, 2016.

Business Model and Competitiveness(Accounting standards issued but not yet effective)“Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No.26, March 28, 2016)

assets is estimated based on these categories, which provides guidelines for the application of the AccountingStandards for Tax Effect Accounting (Business Accounting
Council) for the recoverability of deferred tax assets.

Leopalace21: Who We Are

The Company applies the Business Combinations
Accounting Standard and other standards in compliancewith the transitional handling as set forth in Paragraph58-2 (4) of the Business Combinations AccountingStandard, Paragraph 44-5 (4) of the Consolidated
Accounting Standard and Paragraph 57-4 (4) of theBusiness Divestiture Accounting Standard, and it appliedthese standards from the beginning of the consolidated
fiscal year and will continue to apply them in the future.
There is no impact on the consolidated financial statements from the changes described above.

93

(b) Nature and extent of risks arising fromfinancial instruments
Operating receivables such as trade receivables
and accounts receivable for completed projects are
exposed to credit risk.
Foreign currency denominated debts and credits
originated in conjunction with overseas businessdevelopment are exposed to exchange risk.
Securities are mainly held-to-maturity securities
and shares of the companies with which theCompany has a business relationship, and thosesecurities are exposed to market risk.
Almost all accounts payable and accounts payable for completed projects which are operating liabilities are scheduled to be paid within one year.
Loans payable, corporate bonds, and leaseobligations related to finance lease transactions
are mainly for the purpose of raising funds necessary for investment in facilities, and the longest
repayment date is 15 years subsequent to fiscal
year end.
The derivative contracts represent interest-rate
swap transactions designed to hedge against therisk of future fluctuations in interest rates on borrowings, etc. Interest rate swap transactions usedby the Company are exposed to risks of fluctuations in the market interest rate. For details on
hedge accounting with respect to hedging instruments, hedging items, hedging policy and themethod for evaluating hedging effectiveness,please refer to the aforementioned “2. (5)Derivative financial instruments and hedge
accounting.”(c) Risk management for financial instruments
Credit risk management for operating receivables
and loans outstanding follows the “Receivables
management rules.” While each business division
manages the extension of credit to its customers,
it 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 and the financial conditionof the share issuing organization. In addition, foritems other than held-to-maturity securities, the94

Leopalace21 Corporation / Annual Report 2016

Company considers the relationship with the trading partner companies and constantly re-evaluates
its holdings.
The basic policy of derivatives trading is determined by the board of directors, and the execution
and administration of derivatives transactions are
conducted in accordance with the Company’s“Derivatives Trading Management Rules.” The
derivatives trading management situation is periodically reported to the board of directors for comprehensive risk management. The Company’s counterparties for derivative contracts are highly creditworthy financial institutions in Japan, and therefore
it does not assume the risk of counterparty default
on these contracts.
Trade payables and debts are exposed to liquidity
risk, but this risk is monitored by various means
such as the preparation of a monthly financial planby each company in the Companies.

(d) Supplementary explanations on fair value offinancial instruments
Fair value of financial instruments are measured
based on the quoted market price, or reasonably
assessed value if a quoted market price is notavailable.
Fair value of financial instruments which quoted
market price is not available is calculated basedon a fluctuating factor, and the value might differ
if different assumptions are used. Contract sums,
etc. in notes to derivative contracts do not themselves represent the volume of market risk onderivative contracts.

Leopalace21: Who We Are(2) Fair value of financial instruments
The carrying amount on the consolidated balance sheet and fair value of financial instruments as of March 31, 2016 and2015 as well as the differences between these values are described below. Financial instruments whose fair values
appear to be extremely difficult to determine are not included in the table. (See Note (b))
Millions of yen

March 31, 2016

Difference

88,043
8,772
4,457
885
(112)
773
544
(86)
457
1,256
(1,256)—
102,504
14,800265
24,327
15,518
10,71365,624—88,043
8,772
4,488

—
—
30

965

192

457

—

—
102,726
14,800265
24,425
15,866
10,801
66,158
—

—
222
—
—
98
347
88
534
—

Initiatives for Creating Value

Fair value

Business Model and Competitiveness(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts (*1)Net(5) Long-term loans
Allowance for doubtful accounts (*1)Net(6) Bad debts
Allowance for doubtful accounts (*1)
Net
Total assets(1) Accounts payable and accounts payable for completed projects(2) Short-term borrowings(3) Bonds (*2)(4) Long-term debt (*2)(5) Lease obligations
Total liabilities
Derivative transactions

Carrying value

Millions of yen

Fair value

Difference

75,221
7,969
4,485
1,135
(105)
1,030
540
(94)
445
1,297
(1,297)—
89,152
16,85260
5,420
30,202
8,805
61,339—75,221
7,969
4,503

—
—
17

1,242

212

445

—

—
89,382
16,85260
5,423
30,2398,772
61,347
—

—
229
—
—
3
37
(32)
8
—

Leopalace21 Corporation / Annual Report 2016

Data Compilation(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts (*1)Net(5) Long-term loans
Allowance for doubtful accounts (*1)Net(6) Bad debts
Allowance for doubtful accounts (*1)
Net
Total assets(1) Accounts payable and accounts payable for completed projects(2) Short-term borrowings(3) Bonds (*2)(4) Long-term debt (*2)(5) Lease obligations
Total liabilities
Derivative transactions

Carrying value

Initiatives for Supporting Corporate Value

March 31, 201595

Thousands of U.S. dollars

March 31, 2016
(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts (*1)Net(5) Long-term loans
Allowance for doubtful accounts (*1)Net(6) Bad debts
Allowance for doubtful accounts (*1)
Net
Total assets(1) Accounts payable and accounts payable for completed projects(2) Short-term borrowings(3) Bonds (*2)(4) Long-term debt (*2)(5) Lease obligations
Total liabilities
Derivative transactions

Carrying value

Fair value

Difference

781,354
77,85039,563
7,858
(994)
6,864
4,831
(770)
4,061
11,152(11,152)—
909,693
131,346
2,351
215,894
137,726
95,075582,394—

781,354
77,85039,834

—
—
271

8,568

1,704

4,061

—

—
911,668
131,346
2,351
216,769
140,80795,859587,135
—

—
1,975
—
—
874
3,081
784
4,740
—

(*1) Operating loans, long-term loans and bad debts have deductions of their respective allowance for doubtful
accounts, which are recorded separately.
(*2) As of March 31, 2016 and 2015, bonds due within one year of 4,326 million yen ($38,391 thousand for 2016) and
1,460 million yen, and current portion of long-term debt of 1,412 million yen ($12,535 thousand for 2016) and
23,005 million yen are included in bonds and long-term debt, respectively.

Notes:(a) Matters concerning the calculation method forthe fair value of financial instruments, securities, andderivative transactions

quoted price or the price presented by transacting
financial institutions.
For notes to securities by holding purposes,
please refer to “6. Securities.”

AssetsCash and cash equivalents
Trade receivables and accounts receivable forcompleted projects
These assets are stated at carrying amount as they
are settled in the short-term and their fair values
approximate their carrying amount.

Operating loans
The fair value of operating loans is stated at the netpresent value, which is calculated by discounting
the principal with interest by the discount rate (i.e.
the estimated interest rate for new transaction).

Securities and investment securities
Shares are stated at the stock exchange quoted
price; bonds are stated at either the stock exchange

96

Leopalace21 Corporation / Annual Report 2016

Long-term loans
Bad debts
The fiscal year-end outstanding balances are calculated mainly using expected future cash flows of thepotentially recoverable principal and interest.

BondsBonds issued by the Company are privately offered,and their fair value is stated at the net present value,
which is calculated by discounting the principal withinterest by the discount rate (i.e. the current market

Derivative transactions
Please refer to “7. Derivative Transactions.”(b) Financial instruments whose fair value appear to be extremely difficult to determine
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

2,815
824
886
125
4,652

1,253
824
891
209
3,178

11,123
7,314
7,908
1,860
28,207As they have no market value, and as it is understood that it is extremely difficult to estimate their future cash flow, theabove financial instruments are not included in “Assets: Securities and investment securities.”

Millions of yen

March 31, 2016

Due within 1 year

Due after 5 years
through 10 years

Due after
10 years

88,043———

Trade receivables and accounts receivable forcompleted projects

8,772

—

—

—

150
—

1,020
—

300
—

—
—

780

1,113

—

—

—

—

—

824

—
180
12
—
97,938

—
593
31
—
2,758

—
83
42
—
425

886
27
458
1,256
3,453

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
Operating loans
Long-term loans
Bad debts
Total

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Cash and cash equivalents

Initiatives for Supporting Corporate Value(c) The scheduled redemption amount of monetary claims and investment securities with maturity subsequent
to fiscal year end

Initiatives for Creating Value

Item
Unlisted shares
Unlisted bonds (subordinate corporate bonds)
Subordinate beneficiary rights of loans and accounts receivable in trustContributions to limited investment partnerships
Total

Due after 1 year
through 5 years

Business Model and CompetitivenessLong-term debt, Current portion of long-term debt
Lease obligations
These liabilities are stated at the net present value,
which is calculated by discounting the principal withinterest by the discount rate (i.e. the estimated interest rate for new borrowings or lease transaction).

Leopalace21: Who We Are

interest rate in consideration of residual value andcredit risk).

Liabilities
Accounts payable and accounts payable for completed projects
Short-term borrowings
These liabilities are stated at carrying amount asthey are settled in the short-term and their fair values approximate their carrying amount.

97

Millions of yen

March 31, 2015
Cash and cash equivalents
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
Operating loans
Long-term loans
Bad debts
Total

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

75,221

—

—

—

7,969

—

—

—

—
—

900
—

500
—

—
—

759

1,309

—

—

—

—

—

824

72
211
16
—
84,250

—
728
32
—
2,970

—
161
19
—
681

891
33
471
1,297
3,517

Due within 1 year

Due after 1 year
through 5 years

Thousands of U.S. dollars

March 31, 2016

Due after
10 years

Cash and cash equivalents

781,354———

Trade receivables and accounts receivable forcompleted projects

77,850———

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

1,331
—

9,052
—

2,662
—

—
—

6,922

9,877

—

—

—

—

—

7,314

—
1,605
110
—
869,174

—
5,268
279
—
24,478

—
739
375
—
3,777

7,871
245
4,065
11,15230,649(2)Bonds(Corporate bonds)(3)Others
Operating loans
Long-term loans
Bad debts
Total

98

Due after 5 years
through 10 years

Leopalace21 Corporation / Annual Report 2016

Leopalace21: Who We Are(3) Scheduled repayment amount of bonds payable, long-term debt, lease obligations, and other interest-bearing
debt subsequent to fiscal year end was as follows:
Millions of yen

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
Lease obligations
Total

265
4,326
1,412
3,054
9,057

—
3,966
1,202
3,000
8,168

—
3,966
1,143
2,648
7,758

—
3,966
1,034
1,574
6,575

—
3,066
931
433
4,430

—
5,037
9,795
1
14,834

March 31, 2015

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
Lease obligations
Total

60
1,460
23,0052,355
26,880

—
1,260
746
2,141
4,148

—
900
659
2,060
3,619

—
900
610
1,676
3,186

—
900
510
567
1,978

—
—
4,668
4
4,672

March 31, 2016

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
Lease obligations
Total

2,351
38,391
12,535
27,10380,382—35,197
10,667
26,62872,493—35,197
10,14523,507
68,850—35,197
9,184
13,97458,355—27,2098,263
3,845
39,318—44,701
86,92916
131,647

Millions of yen

Thousands of U.S. dollars(1) At March 31, 2016 and 2015, information with respect to held-to-maturity debt securities for which market
prices were available was summarized as follows:
Millions of yen

March 31, 2016

Market value

1,502
—
—
1,502

1,533
—
—
1,533

30
—
—
30

—
—
—
—
1,502

—
—
—
—
1,533

—
—
—
—
30

Difference

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Total

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Consolidatedbalance sheet
amountInitiatives for Supporting Corporate Value

6. Securities

Initiatives for Creating ValueDue after 1
through 2 years

Business Model and CompetitivenessMarch 31, 2016

Due within
1 year99

Millions of yen

March 31, 2015

Consolidatedbalance sheet
amountMarket value

1,442
—
—
1,442

1,460
—
—
1,460

17
—
—
17

—
—
—
—
1,442

—
—
—
—
1,460

—
—
—
—
17

Difference

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Total

Thousands of U.S. dollars

March 31, 2016

Consolidatedbalance sheet
amountMarket value

13,336——
13,336

13,607——
13,607

271
—
—
271

—
—
—
—
13,336————
13,607

—
—
—
—
271

Difference

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Total

100

Leopalace21 Corporation / Annual Report 2016

Leopalace21: Who We Are(2) Investment securities classified as other securities as of March 31, 2016 and 2015 were as follows:
Millions of yen

March 31, 2016

Consolidatedbalance sheet
amountAcquisition cost

Difference

1,040

446

593

1,863
—
—
—
2,904

1,829
—
—
—
2,276

34
—
—
—
628

12

13

(0)

38
—
—
—
50
2,955

38
—
—
—
51
2,328

(0)
—
—
—
(1)
627

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:

March 31, 2015

Acquisition cost

Difference

979

460

519

1,855
—
—
—
2,834

1,825
—
—
—
2,285

30
—
—
—
549

—

—

—

208
—
—
—
208
3,042

208
—
—
—
208
2,493

(0)
—
—
—
(0)
549

Initiatives for Creating Value

Millions of yen

Consolidatedbalance sheet
amountBusiness Model and Competitiveness

Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Total

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Total

Initiatives for Supporting Corporate Value

Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal101

Thousands of U.S. dollars

March 31, 2016

Consolidatedbalance sheet
amountAcquisition cost

Difference

9,237

3,966

5,270

16,541———
25,77816,236———
20,203

304
—
—
—
5,575

106

115

(8)

340
—
—
—
447
26,226

341
—
—
—
456
20,660

(0)
—
—
—
(9)
5,565

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Total(Note)March 31, 2016
2,815 million yen ($24,989 thousand) of non-listed
shares, 824 million yen ($7,314 thousand) of non-listedcompany bonds (subordinate corporate bonds), 886 million yen ($7,871 thousand) of subordinate beneficiaryrights to loans and money in trust, and 125 million yen($1,116 thousand) of contributions to silent partnerships
are not included in the other securities given above
because they have no market value and assigning themfair market prices is recognized to be extremely difficult.
The Company acquired the non-listed company bonds(subordinate corporate bonds) and the subordinate beneficiary rights to loans and money in trust as a result of the
securitization of non-recourse apartment loans that financial institutions had loaned to clients as funds for paying
charges for jobs contracted to the Company.

March 31, 2015
1,253 million yen of non-listed shares, 824 million yen of
non-listed company bonds (subordinate corporate
bonds), 891 million yen of subordinate beneficiary rights
to loans and money in trust, and 209 million yen of contributions to investment business limited partnerships
are not included in the other securities given above
because they have no market value and assigning themfair market prices is recognized to be extremely difficult.
The Company acquired the non-listed company bonds(subordinate corporate bonds) and the subordinate beneficiary rights to loans and money in trust as a result of
the securitization of non-recourse apartment loans that
financial institutions had loaned to clients as funds forpaying charges for jobs contracted to the Company.

(3) Proceeds from sales of other securities and gain or loss on these sales for the years ended March 31, 2016
and 2015 were summarized as follows:

March 31, 2016
None
March 31, 2015
None

102

Leopalace21 Corporation / Annual Report 2016

Thousands of
U.S. dollars

Millions of yen

2015

2016

23
23

34
34

206
206

7. Derivative Transactions(1) Derivative transaction not subject to the application of hedge accounting

March 31, 2016
None
March 31, 2015
None

8. Long-lived Assets

Initiatives for Supporting Corporate Value

March 31, 2015
Hedge accounting method: Exceptional accounting treatment for interest rate swaps
Type of transaction: Interest rate swaps, floating received rate and fixed paid rate
Major hedged item: Long-term debt
Contract value, etc.: 233 million yen
Contract value, etc. lasting longer than one year: 133 million yen
Fair value: The fair value of interest rate swaps subject to exceptional accounting treatment is included in the fair value ofthe corresponding long-term debt because they are recognized together with hedged long-term debt.

Initiatives for Creating Value(2) Derivative transaction subject to the application of hedge accounting
March 31, 2016
Hedge accounting method: Exceptional accounting treatment for interest rate swaps
Type of transaction: Interest rate swaps, floating received rate and fixed paid rate
Major hedged item: Long-term debt
Contract value, etc.: 158 million yen ($1,405 thousand)Contract value, etc. lasting longer than one year: 58 million yen ($517 thousand)Fair value: The fair value of interest rate swaps subject to exceptional accounting treatment is included in the fair value ofthe corresponding long-term debt because they are recognized together with hedged long-term debt.

Business Model and Competitiveness

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

2016

Leopalace21: Who We Are(4) In addition, investment in affiliates included in investment securities of the consolidated balance sheet was
as follows:(1) Breakdown of major plants, properties, and equipments were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2016

55,882
12,56324,34026,761
14,431
14,73557,007
12,88524,714
27,10415,157
13,729495,937
111,496
216,014
237,502
128,077
130,770

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Residential properties for rent
Domestic hotels
Head office and branches
Leopalace Resort Manenggon Hills GuamWestin Resort Guam
Leopalace Power (solar power systems)

2016

103

(2) Due to acceptance of national subsidies, the following reduction entry amount was deducted from theacquisition cost of relevant assets:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

155

155

1,375

Machinery, equipment, and vehicles(3) The Companies recognized impairment loss on the following asset groups for the years ended March 31,
2016 and 2015:

March 31, 2016
Impairment loss
PurposeCategory

Rental assets(Apartment buildings
and others, 21 units)

Land

Idle assets

Buildings and Structures

Location

Odawara-shi, Kanagawa,
etc.

Thousands of
U.S. dollars

605

5,369

4

37

7
616

66
5,473

Miura-shi, Kanagawa, etc.

Land
Total

The Companies recognized each property in domestic
rental assets as a unit and grouped overseas assets bymanagerial accounting segmentation.
The Companies wrote down book value of the rental
assets and idle assets whose profitability decreased seriously due to the slump in the rental income market andcontinuous decline in land prices, to recoverable
amounts and recognized the reduced values as impairment losses. The book value of the idle assets to be soldMillions of yen

is reduced to its recoverable value, and such reduction isrecorded as an impairment loss under extraordinary loss.
Recoverable amounts of rental assets were measured
at the higher of their values in use or their net realizablevalues in sale. Value in use was computed by discounting its future cash flows at 4.9%, while net realizablevalue in sale was determined based on publicly
appraised value.

March 31, 2015
Impairment loss
PurposeCategory

Location
Millions of yen

Rental assets(Apartment buildings
and others, 23 units)
Hotel

Buildings and Structures
Land
Buildings and Structures
Land

Total

The Companies recognized each property in domestic
rental assets as a unit and grouped overseas assets bymanagerial accounting segmentation.
The Companies wrote down book value of the rental
assets whose profitability decreased seriously due to the104

Leopalace21 Corporation / Annual Report 2016

Kawaguchi-shi,
Saitama, etc.

Yokkaichi-shi, Mie

1
160
58
3
224

slump in the rental income market and continuous
decline in land prices, to recoverable amounts and recognized the reduced values as impairment losses. The
book value of the domestic hotel to be sold is reduced to
its recoverable value, and such reduction is recorded asvalues in sale. Value in use was computed by discounting
its future cash flows at 4.9%, while net realizable value insale was determined based on publicly appraised value.

Leopalace21: Who We Are

an impairment loss under extraordinary loss.
Recoverable amounts of rental assets were measured
at the higher of their values in use or their net realizable

9. Bad Debts

Thousands of
U.S. dollars

Millions of yen

Claims in the process of bankruptcy
Bad debts
Others
Total

2016

2015

2016

1,066
73
116
1,256

1,066
107
123
1,297

9,461
656
1,033
11,152Business Model and CompetitivenessBad debts are claims as stipulated under Article 32, Paragraph 1, and Item 10 of the Regulation concerning Financial
Statements. Bad debts at March 31, 2016 and 2015 consisted of the following:

10. Income Taxes(1) Significant components of deferred tax assets and liabilities as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

38,26521,947
3,130
1,321
1,226
1,172
877
727
691
388
364
298
277
273
205
138
125
120
428
71,981(49,344)
22,63643,82522,858
3,024
811
1,295
1,730
867
1,387
654
432
384
247
270
120
92
133
132
120
551
78,942(59,605)
19,337

339,597
194,773
27,785
11,727
10,883
10,408
7,783
6,453
6,136
3,449
3,234
2,651
2,459
2,427
1,826
1,226
1,111
1,073
3,803
638,812(437,920)
200,892

(249)
(192)
(9)
(451)
22,185

(301)
(181)
(6)
(489)
18,847(2,217)(1,704)(83)(4,005)
196,886

Leopalace21 Corporation / Annual Report 2016

Data Compilation

2016

Initiatives for Supporting Corporate Value

2015

Initiatives for Creating Value

Deferred tax assets:
Loss carried forward for tax purposes
Impairment loss
Liability for retirement benefit
Bonuses payable
Loss on devaluation of property, plant and equipment
Reserve for apartment vacancy loss
Elimination of unrealized gain
Advances from customers for rent income
Allowance for doubtful accounts
Deposits received
Loss on devaluation of real estate for sale
Reserve for fulfillment of guarantees
Excess amortization on software
Accrued enterprise tax
Other payable
Reserve for warranty obligations on completed project
Asset retirement obligations
Sales promotion cost
Others
Sub total
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for special depreciation
Net unrealized gain on other securities
Fixed asset retirement expenses
Total deferred tax liabilities
Net deferred tax assets

2016

105

(Changes in the presentation)“Excess depreciation,” “Bad debt loss,” “Sales discountfor construction contracts,” “Loss on devaluation of
securities,” and “Low-value assets,” which were listed
separately in the deferred tax assets for the previous
consolidated fiscal year, are included in “Others” fromthe subject fiscal year under review due to the decreasein the quantitative significance of these items. The notes
to the consolidated financial statements for the previous

consolidated fiscal year have been revised to reflect
these changes in the presentation method.
As a result, 122 million yen in “Excess depreciation,”
80 million yen in “Bad debts loss,” 18 million yen in“Sales discount for construction contracts,” 14 million
yen in “Loss on devaluation of securities,” and 13 million
yen in “Low-value assets” presented under deferred tax
assets for the previous consolidated fiscal year have beenreorganized into “Others.”(2) Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax
rate for the years ended March 31, 2016 and 2015 were as follows:

Normal effective statutory tax rate
Adjustments:
Effect from decrease in valuation reserve
Impact of change in income tax rates
Entertainment and other expenses not deductible for income tax purposes
Per capital portion of inhabitants taxes
Tax deduction based on Tax Credits for Salary Growth
OthersActual effective tax rate

(Changes in the presentation)“Tax deduction based on Tax Credits for Salary Growth”
included in “Others” in adjustment for the previous consolidated fiscal year is listed separately in the subject consolidated fiscal year under review due to its increased
quantitative significance. The notes to the consolidated
financial statements for the previous consolidated fiscal
year have been revised to reflect this change in the presentation method.
As a result, –0.7% presented in “Others” in the notes
to the consolidated financial statements of the previous
consolidated fiscal year has been split and reorganized
into –0.4% in “Tax deduction based on Tax Credits for
Salary Growth” and –0.3% in “Others.”(3)Change in amount of deferred tax assets andliabilities due to the change in income tax rates
The Act for Partial Revision of the Income Tax Act, etc. (ActNo. 15 of 2016) and The Act for Partial Revision of the Local
Tax Act, etc. (Act No. 13 of 2016) were enacted on March
29, 2016. Consequently, the corporate tax rate, etc. will belowered from the fiscal year beginning on or after April 1,
2016. Accordingly, the effective statutory tax rate used
for the calculation of deferred tax assets and liabilities

106

Leopalace21 Corporation / Annual Report 2016

2016

2015

33.1%

35.6%

(53.9)
12.5
6.6
1.2
(1.1)
(0.3)
(1.9)

(94.3)
37.3
8.1
1.6
(0.4)
(0.3)
(12.4)

will change from 32.3%, which was used the previous
consolidated fiscal year, to 30.9% for temporary differences
expected to be returned or paid in the consolidated fiscal
year beginning April 1, 2016 and 2017, and to 30.6% for
temporary differences expected to be returned or paid in the
consolidated fiscal years beginning on or after April 1, 2018.
As a result of these changes in tax rates, deferred tax
assets (net of deferred tax liabilities) have decreased
1,110 million yen ($9,852 thousand), income taxes-deferredhave increased 1,120 million yen ($9,948 thousand), andnet unrealized gains on “other securities” have increased
10 million yen ($95 thousand).
Further, the limit on net operating loss deduction
under the carry-forward system for tax losses incurred inconsolidated fiscal years beginning on or after April 1,2016 is reduced to the amount equivalent to 60% of taxable income for the respective year, to 55% of taxable
income for tax losses incurred in consolidated fiscal years
beginning on or after April 1, 2017, and to 50% of taxable
income for tax losses incurred in consolidated fiscal years
beginning on or after April 1, 2018. As a result, the amountof the Company’s deferred tax assets decreased by 150
million yen ($1,331 thousand), and income taxes-deferredhave increased by the same amount.

(1) Short-term borrowings, long-term debt and lease obligations at March 31, 2016 and 2015 consisted of
the following:Thousands of
U.S. dollars

Millions of yen

2015

2016

265

60

2,351

Current portion of long-term debt,
with average interest rate of 1.53%

1,412

23,005

12,535Current portion of lease obligations,with average interest rate of 2.34%

3,054

2,355

27,103Long-term debt, due 2017 to 2031,
with average interest rate of 1.30%

14,106

7,196

125,190

Lease obligations, long-term, due 2017 to 2021,
with average interest rate of 2.14%

7,659

6,450

67,972

Total

26,49739,067

235,153(2) The amounts of long-term debt and lease obligations (excluding their current portion) scheduled for repayment in five years from the consolidated settlement of accounts were as follows:
Millions of yen

Thousands of U.S. dollars

Long-term debt
Lease obligations

1,202
3,000
Due after 1 through 2 years

10,667
26,628Due after 2 through 3 years

Due after 3 through 4 years

1,143
2,648
Due after 2 through 3 years

1,034
1,574

931
433

Due after 3 through 4 years

10,14523,507

Due after 4 through 5 years

9,184
13,974Due after 4 through 5 years

8,263
3,845

(3) Assets pledged as collateral for short-term borrowings and long-term debt at March 31, 2016 and 2015 wereas follows:
Thousands of
U.S. dollars

Millions of yen

2015

2016

17
—
—
55
—
72

17
26,19971,77776
420
98,490

150
—
—
492
—
642

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Cash and cash equivalents
Buildings and structures
Land
Investment securities
Others in Investments and other assets
Total

2016

Initiatives for Supporting Corporate Value

Long-term debt
Lease obligations

Due after 1 through 2 years

Initiatives for Creating Value(Note)
To calculate “average interest rate,” weighted-average rates and fiscal year-end balances are used. 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 expenses for certain consolidated
subsidiaries, and that such lease obligations are not included in the calculation of the average interest rate.

Business Model and Competitiveness2016

Short-term borrowings, with average interest rate of 0.63%

Leopalace21: Who We Are

11. Short-term Borrowings and Long-term Debt

107

(4) Secured borrowings with pledge of collateral at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Current portion of long-term debt

2016

2015

2016

—

22,270—(5) Securities and investment securities which have been deposited with the Legal Affairs Bureau at March 31,
2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

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

45

54

401

Deposit for housing construction warranty
Deposit for housing defect warranty

976
109

891
115

8,662
975

Advanced payment certificate in accordance with Payment andSettlement Regulations

678

920

6,019

(6) Bonds at March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Company nameName of bondIssuance date

2015

2016

Leopalace21
Corporation

12th unsecured
straight bondSeptember 30,
2009

360
(360)

920

3,194
(3,194)

Leopalace21
Corporation

13th unsecured
straight bondOctober 31,
2014

3,600
(900)

4,500

31,948(7,987)

Leopalace21
Corporation

14th unsecured
straight bondSeptember 30,
2015

11,067(1,666)—

98,216(14,785)

Leopalace21
Corporation

15th unsecured
straight bondSeptember 30,
2015

9,300
(1,400)—82,534(12,424)

24,327(4,326)5,420

215,894(38,391)

Total

—

—

Company nameName of bondInterest rate (%)

Collateral

Date of maturity

Leopalace21
Corporation

12th unsecured
straight bond

1.04

None

September 30, 2016

Leopalace21
Corporation

13th unsecured
straight bond

0.35

None

October 31, 2019

Leopalace21
Corporation

14th unsecured
straight bond

0.26

None

September 30, 2022

Leopalace21
Corporation

15th unsecured
straight bond

0.63

None

September 30, 2022

—

—

—

—

Total

(Note) Figures in parentheses represent the current portion.

108

2016

Leopalace21 Corporation / Annual Report 2016

Millions of yen

Due after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

4,326

3,966

3,966

3,966

3,066

Due within 1 year

Due after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

38,39135,19735,19735,197

27,209Thousands of U.S. dollars

12. Retirement Benefit Plans(1) Multi-employer plans
The amount of requested contributions for the employees’ pension fund program under multi-employer plans, which
is processed with the same accounting method as that for the defined contribution program for the year ended March
31, 2016 and 2015, was 1,300 million yen ($11,537 thousand) and 1,332 million yen, respectively.

Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Pension assets

64,01057,282568,070

Total of amount of benefit obligations under pension funding
programs and amount of minimum actuarial liabilities

68,96061,415612,004

Difference(4,950)(4,133)(43,934)($12,233 thousand) and 520 million yen will be treated bya method such as increasing the ratio of special premiums as necessary based on pension actuarial revaluation.
Further, the percentages below do not match the actual
percentage borne by the Companies.
Ratio of the Companies in the amount of contributions
for the multi-employer program was 35% from April 1,2015 to March 31, 2016 and 35% from April 1, 2014 toMarch 31, 2015.

Initiatives for Supporting Corporate Value

The main components of the difference were unrecognized past service costs of 3,572 million yen ($31,701
thousand) and 3,612 million yen, and deficiency carriedforward of 1,378 million yen ($12,233 thousand) and 520
million yen for the years ended March 31, 2016 and2015, respectively. The Companies recognized the special annuity premium of 96 million yen ($852 thousand)and 99 million yen as an expense for the years ended
March 31, 2016 and 2015, respectively.
The deficiency carried forward of 1,378 million yen

Initiatives for Creating Value

Recent funding status of the multi-employer plan as of March 31, 2016 and 2015 were as follows:Business Model and Competitiveness

Due within 1 year

Leopalace21: Who We Are(7) The amounts of bonds maturity in five years from the consolidated settlement of accounts were as follows:

Data Compilation

Leopalace21 Corporation / Annual Report 2016

109

(2) Defined benefit plan(a) List of adjustments between the balances of retirement benefit obligations at the beginning and end of year
were as follows:
Thousands of
U.S. dollars

Millions of yen

Beginning balance of retirement benefit obligations
Cumulative effect of accounting change
Balance at beginning of fiscal year reflecting accounting change
Service cost
Interest cost
Actuarial gains and losses accrued
Retirement benefits paid
Increase due to consolidation of additional subsidiary
Closing balance of retirement benefit obligations

2016

2015

2016

9,351
—
9,351
1,164
37
96
(425)
—
10,224

10,050(1,708)
8,342
1,014
36
348
(399)
9
9,351

82,990—82,99010,337330
857(3,772)—
90,743(b) List of adjustments between the closing balances of retirement benefit obligations and pension assets and theliabilities and assets related to the retirement benefit posted in the consolidated balance sheet were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

—
—
—

—
—
—

—
—
—

Unfunded retirement benefit obligations

10,224

9,351

90,743

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

10,224

9,351

90,743Liability for retirement benefit

10,224

9,351

90,743

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

10,224

9,351

90,743Funded retirement benefit obligations
Pension assets(c) Retirement benefit expenses and breakdown amounts were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Amortization of actuarial gain or loss
Amortization of past service cost
Retirement benefit expenses related to the defined benefit program

2016

2015

2016

2,464
37
221
—
2,724

2,347
36
136
6
2,526

21,874330
1,969—
24,174(Notes) 1. Contributions of 1,300 million yen ($11,537 thousand) and 1,332 million yen, including 516 million yen($4,583 thousand) and 525 million yen attributable to employees for the “Japan Housing Construction
Industry Employees’ Pension Fund” integrated employees’ pension funds, are included in the service costfor the year ended March 31, 2016 and 2015, respectively.
2. Retirement benefit expenses of domestic consolidated subsidiaries, which are calculated based on a simplified method, are posted as service cost.

110

Leopalace21 Corporation / Annual Report 2016

Thousands of
U.S. dollars

Millions of yen

2015

2016

—
(125)
(125)

(6)
211
205

—
(1,112)(1,112)(e) Cumulative items posted as the remeasurements of defined benefit plans (before deduction of tax effects)
were as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized past service cost
Unrecognized actuarial gains/losses
Total

2016

2015

2016

—
895
895

—
1,021
1,021

—
7,949
7,949

Business Model and Competitiveness

Past service cost
Actuarial gains/losses
Total

2016

Leopalace21: Who We Are(d) Items posted as the remeasurements of defined benefit plans (before deduction of tax effects) were as follows:(f) Main calculation basis for actuarial assumptions at the end of the fiscal year:
Discount rate for the years ended March 31, 2016 and 2015 were 0.03% to 0.89%.

Gain on sale of property, plant and equipment for the years ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery, equipment, and vehicles
Land
Total

2016

2015

2016

23
2
—
26

3
3
0
6

208
23
—
231

Loss on sale of property, plant and equipment for the years ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Land
Others (Property, plant and equipment)
Others (Intangible assets)
Total

2016

2015

2016

0
0
0
1

—
—
0
0

5
6
3
14

Initiatives for Supporting Corporate Value

14. Loss on Sale of Property, Plant and Equipment

Initiatives for Creating Value

13. Gain on Sale of Property, Plant and Equipment

15. Loss on Retirement of Property, Plant and Equipment
Loss on disposal of property, plant and equipment for the years ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2016

139
3
4
147

281
8
19
309

1,239
29
43
1,311

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Buildings and structures
Others (Property, plant and equipment)
Others (Intangible assets)
Total

2016

111

31, 2016 and 2015, income arising from these rental properties were 4,302 million yen ($38,182 thousand) and
4,266 million yen, and impairment losses were 605 million
yen ($5,369 thousand) and 161 million yen, respectively.
Also, the changes in book value of rental properties
during the year ended March 31, 2016 and 2015, and thefair value as of March 31, 2016 and 2015 were as follows:

16. Rental Properties
The Company possesses rental apartments in major cities
and regions throughout Japan. As a subsidiary company,
Leopalace Guam Corporation possesses rental housing
within resorts, Leopalace21 (Thailand) CO.,LTD. possesses a serviced apartment, and Plaza Guarantee Co., Ltd.
possesses buildings for rent. For the years ended March
March 31, 2016

Millions of yen

Consolidated balance sheet amount
Balance as of April 1, 2015

Increase/Decrease

Balance as of March 31, 2016

Fair value as ofMarch 31, 2016

63,819339

64,15966,145

March 31, 2015
Millions of yen

Consolidated balance sheet amount
Balance as of April 1, 2014

Increase/Decrease

Balance as of March 31, 2015

Fair value as ofMarch 31, 2015

64,030(210)

63,81965,435

March 31, 2016
Thousands of U.S. dollars

Consolidated balance sheet amount
Balance as of April 1, 2015

Increase/Decrease

Balance as of March 31, 2016

Fair value as ofMarch 31, 2016

566,377

3,014

569,392

587,022(Notes) 1. Carrying value recorded on the consolidated balance sheets is the amount after deducting accumulated
depreciation and accumulated impairment loss from acquisition cost.
2. For the years ended March 31, 2016 and 2015, the main increase was the acquirement of a serviced apartment of 1,278 million yen ($11,343 thousand) and – million yen, and the main decrease was impairment lossof 605 million yen ($5,369 thousand) and 161 million yen, respectively.
3. Fair value as of the end of the current consolidated fiscal year is calculated by the Company mainly based on“Real-estate appraisal standards.”

17. Asset Retirement Obligations
Omitted due to immateriality

18. Supplemental Information on the Statement of Changes in Net Assets
Shares issued and treasury stocks for the year ended March 31, 2016 were as follows:
SharesType of shares

April 1, 2015

Increase

Decrease———

Shares issued
Common stock

267,443,915

Total

267,443,915—

Treasury stock
Common stock

4,569,430

90

Total

4,569,430

90——(Note) Increase in treasury stock of 90 shares is the purchase of shares less than one unit.

112

Leopalace21 Corporation / Annual Report 2016

March 31, 2016

267,443,915
267,443,915
4,569,520
4,569,520

Class of sharesissued upon
exercise of
SARs

Type

SARs as stock option
Total

Number of shares issued upon exercise of SARs

Outstanding as of March 31, 2016

April 1, 2015

Increase

Decrease

March 31, 2016

Millions of yen

Thousands of
U.S. dollars

—
—

—
—

—
—

—
—

18
18

159
159

—
—

(Resolution)

Total amount of dividends

Class of shares

June 29, 2016
General shareholders’ meeting

Common stock

Millions of yen

Thousands of U.S. dollars

2,628

23,329Dividends per share

Source of dividend

Retained earnings

Yen

Dollars10

0.09

Basis date

Effective date

March 31, 2016

June 30, 2016

SharesType of shares

Shares issued
Common stock
Total
Treasury stock
Common stock

Increase

Decrease

March 31, 2015

267,443,915——

267,443,915

267,443,915——

267,443,915

4,569,210

220—

4,569,430

4,569,210

220—

4,569,430

Total(Note)Increase in treasury stock of 220 shares is the purchase of shares less than one unit.

Stock acquisition rights (SAR) and own share options for the year ended March 31, 2015 were as follows:
Type

SARs as stock option
Total

Class of sharesissued upon
exercise of
SARs

April 1, 2014

Increase

Decrease

March 31, 2015

Outstanding as ofMarch 31, 2015
Millions of yen

—
—

—
—

—
—

—
—

—
—

18
18

Number of shares issued upon exercise of SARs

Initiatives for Supporting Corporate Value

April 1, 2014

Initiatives for Creating Value

Shares issued and treasury stocks for the year ended March 31, 2015 were as follows:Business Model and CompetitivenessMatters concerning dividends for the year ended March 31, 2016 were as follows:(1) Amount of dividends paid: None
(2) Dividends which basis dates are in the current consolidated year but have effective dates in the next year:

Leopalace21: Who We Are

Stock acquisition rights (SAR) and own share options for the year ended March 31, 2016 were as follows:

Matters concerning dividends for the year ended March 31, 2015 were as follows:(1) Amount of dividends paid: None
(2) Dividends which basis dates are in the current consolidated year but have effective dates in the next year: None

(1) Finance lease transactions
The Companies primarily lease furniture and electronic appliances, for apartments of their leasing business. Leases are
depreciated by the straight-line method over the lease-term of respective assets as their useful lives with no residual value.

Leopalace21 Corporation / Annual Report 2016

Data Compilation

19. Leases

113(2) Operating lease transactions
Future minimum lease payments related to non-cancelable operating leases subsequent to March 31, 2016 and 2015
were as follows:
Millions of yen

March 31, 2016

Future lease
payments

Prepaid lease
payments

Differences

Due within one year

242,226(242,209)

1,315(1,315)240,911(240,893)

Due after one year

240,091(240,070)

2,723(2,723)

237,367(237,346)

Total

482,317(482,279)

4,039(4,039)478,278(478,239)

March 31, 2015

Future lease
payments

Prepaid lease
payments

Differences

Due within one year

242,609(242,595)

2,183(2,183)

240,426(240,412)

Due after one year

343,062(343,032)

2,499(2,499)340,562(340,532)

Total

585,672(585,627)

4,682(4,682)580,989(580,944)

March 31, 2016

Future lease
payments

Prepaid lease
payments

Differences

Due within one year

2,149,685(2,149,529)

11,673(11,673)

2,138,011(2,137,856)

Due after one year

2,130,735(2,130,548)

24,173(24,173)

2,106,562(2,106,374)

Total

4,280,421(4,280,078)

35,847(35,847)

4,244,573(4,244,230)

Millions of yen

Thousands of U.S. dollars

Future operating lease payments fixed under master lease agreements in leasing business are shown in parentheses.

20. Contingent Liabilities
Contingent liabilities as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Contingent liabilities to financial institutions forcustomers who have a home mortgage

838

898

7,437

Contingent liabilities to financial institutions forcustomers who have a membership loan

3

15

32

841

914

7,469

Total

114

Leopalace21 Corporation / Annual Report 2016

business. The Construction Business constructs apartments and other buildings and installs solar power systems on a contract basis. The Elderly Care Business operates elderly care facilities. The Hotels & Resort Business
operates hotels and resort facilities.
(2) Calculation Method for Sales, Profits and Losses,
Assets, and other Items by Reportable Segment
The accounting methods for reportable segments arebasically the same as that presented in “Summary of
Significant Accounting Policies.” The reportable segment
profits (losses) represent operating income (loss). Intersegment sales and transfers are based on prevailing market prices.

Business Model and Competitiveness(1) Overview of Reportable Segments
The Companies’ reportable segments are the components for which separate financial information is available,
and whose operating results are reviewed regularly by theboard of directors in order to determine allocation of
resources and assess segment performance.
The Companies have four reportable segments, theLeasing Business, Construction Business, Elderly Care
Business and Hotels & Resort Business.
The Leasing Business operations comprise the leasing
and management of apartment buildings and other properties, repair work, broadband internet service, rent obligation guarantee, and the company residence agency

Leopalace21: Who We Are

21. Segment Information(3) Information Regarding Sales, Profits and Losses, Assets, and other Items by Reportable Segment for theyears ended March 31, 2016 and 2015 were as follows:
Millions of yen

Consolidated
Total

511,424—

511,424

149

7,349

(7,349)—514,139
24,047
173,988

4,635
337
23,076

518,774
24,385
197,065(7,349)(3,388)129,825

511,424
20,996
326,890

2,013

6,009

2,059

8,069

1,544

9,614

1,850

8,459

3,917

12,376

1,599

13,976

Elderly Care
Business

Hotels &ResortBusiness

Segment
Total

OthersTotal

March 31, 2016

Construction
Business

Sales
Sales to customers

410,552

74,16010,798

11,427506,9394,485Inter-segment sales
and transfers

944

2,614

—

3,640

7,199

411,497
22,76099,32976,774
3,339
16,755

10,798(1,354)
2,657

15,068(697)
55,246

3,740

205

49

6,245

91

271

Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property,
plant, and equipment,
and intangible assets(Notes) 1. The “Others” classification is the business segment not included in reportable segments, and comprises thesmall-claims and short-term insurance business, solar power business, and financing business.
2. Breakdown of adjustments was as follows:
Segment profit (loss)
Thousands of
U.S. dollars(320)(3,067)(3,388)(2,844)(27,227)(30,071)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are
not part of reportable segments.

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Inter-segment eliminations
Corporate expenses*
Total

Millions of yen

Initiatives for Supporting Corporate Value

Adjustments

Leasing
Business

Initiatives for Creating Value

Reportable segment

115

Adjustments in segment assets (129,825 million yen, $1,152,158 thousand) consist mainly of surplus operating
funds, long-term investment capital, and assets which do not belong to reportable segments.
Adjustments in the increase of property, plant, and equipment, and intangible assets (1,599 million yen,
$14,199 thousand) consist of capital investments which do not belong to reportable segments.
3. Segment profit (loss) is adjusted to operating profit on the consolidated statements of operations.
Millions of yen

Reportable segment

March 31, 2015
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 assets

Adjustments

Consolidated
Total

483,188—483,188

127

15,810(15,810)—495,871
18,848
171,960

3,127
31
21,481

498,999
18,879193,441(15,810)(4,116)
114,832

483,188
14,763308,274

1,872

5,060

1,330

6,390

1,345

7,736

1,017

6,663

12,18018,844

5,514

24,358

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels &ResortBusiness

Segment
Total

OthersTotal

399,316

61,312

10,608

8,951

480,188

2,999

790

12,065—

2,827

15,682400,107
20,532
96,21873,378210
16,81010,608(606)
2,428

11,778(1,289)56,502

2,992

170

24

5,551

73

21

(Notes) 1. The “Others” classification is the business segment not included in reportable segments, and comprises thesmall-claims and short-term insurance business, solar power business, and financing business.
2.Breakdown of adjustments was as follows:
Segment profit (loss)
Millions of yen

Inter-segment eliminations
Corporate expenses*
Total(1,346)(2,769)(4,116)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are
not part of reportable segments.
Adjustments in segment assets (114,832 million yen) consist mainly of surplus operating funds, long-term
investment capital, and assets which do not belong to reportable segments.
Adjustments in the increase of property, plant, and equipment, and intangible assets (5,514 million yen) consist of capital investments which do not belong to reportable segments.
3. Segment profit (loss) is adjusted to operating profit on the consolidated statements of operations.

116

Leopalace21 Corporation / Annual Report 2016

March 31, 2016

Leasing
Business

Segment

Business

Hotels &ResortBusiness

658,147

95,835

101,417

23,202—32,311

681,349
29,632
148,698

95,835(12,017)
23,588

1,826

814

Total

4,498,928

39,8084,538,736

63,8971,330

65,228

133,728 4,562,825(6,192) 213,418
490,292 1,544,097

41,1382,993
204,798438

17,86953,334

18,28071,615

13,70985,325

2,412

16,41875,07334,767

109,840

14,199124,040

Elderly Care

Total
3,651,911
Segment profit (loss)
201,995
Segment assets
881,517
Other items
Depreciation
33,199
Increase in property,
plant, and equipment,
55,427and intangible assets

Total— 4,538,736(65,228)—

4,603,964(65,228) 4,538,736
216,412(30,071) 186,340
1,748,895 1,152,158 2,901,054

Business Model and Competitiveness

Sales
Sales to customers 3,643,527
Inter-segment sales
and transfers
8,383

Consolidated
Total

Adjustments

OthersConstruction
Business

Leopalace21: Who We Are

Thousands of U.S. dollars

Reportable segment

Related information

2. Geographic area
(1) Sales
Information concerning sales by geographic area has been omitted, since more than 90% of sales reported in the consolidated statement of operations are generated in Japan.

Millions of yen
Japan

Trust territory of
U.S.A. Guam

People’sRepublic of
China

128,355

41,785

1

Kingdom ofThailandSocialist
Republic ofVietnamKingdom of
Cambodia

Republic of thePhilippines

Republic ofIndonesia

Total

1,283

6

468

120

15

172,036

March 31, 2015
Millions of yen

Japan

Trust territory of
U.S.A. Guam

People’s Republic of
China

Kingdom of Thailand

Kingdom of Cambodia

Total

126,835

42,3963

7

187

169,430

Initiatives for Supporting Corporate Value(2) Plant, property, and equipment
March 31, 2016

Initiatives for Creating Value

1. Products and services
Information concerning products and services has been omitted, since similar information is reported in “21. Segment
Information.”

March 31, 2016

Japan

People’sRepublic of
China

Kingdom ofThailandSocialist
Republic ofVietnamKingdom of
Cambodia

Republic of thePhilippines

Republic ofIndonesia

Total

1,139,118

370,831

15

11,387

53

4,156

1,071

140

1,526,773

Data Compilation

Thousands of U.S. dollars
Trust territory of
U.S.A. Guam

3. Major customers
Information concerning sales to major customers has been omitted, since sales to any particular customer does notexceed 10% of sales reported in the consolidated statement of operations.
Leopalace21 Corporation / Annual Report 2016

117

Information concerning impairment loss on fixed assets by reportable segments
March 31, 2016
Millions of yen

Impairment loss

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

605

—

—

—

—

11

616

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

161

—

—

62

—

—

224

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

5,369

—

—

—

—

104

5,473

March 31, 2015
Millions of yen

Impairment loss

March 31, 2016
Thousands of U.S. dollars

Impairment loss

Information concerning goodwill amortization and unamortized balance by reportable segments
March 31, 2016
Millions of yen

Goodwill amortization
Balance

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

—
—

154
1,530

—
—

—
—

—
—

—
—

154
1,530

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

—
—

—
1,684

—
—

4
—

—
—

—
—

4
1,684

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

—
—

1,370
13,582

—
—

—
—

—
—

—
—

1,370
13,582

March 31, 2015
Millions of yen

Goodwill amortization
Balance

March 31, 2016
Thousands of U.S. dollars

Goodwill amortization
Balance

Information concerning gain on negative goodwill by reportable segments
For the years ended March 31, 2016 and 2015
Not applicable.

118

Leopalace21 Corporation / Annual Report 2016

(1) The following tables set forth the net assets and net income per share of common stock for the years ended
March 31, 2016 and 2015.
Yen

U.S. dollars

2016

2015

2016

556.06481.05

4.93

73.92
—

55.19
—

0.66
—

(2) Basis of computation of basic and diluted net income per share for the years ended March 31, 2016 and 2015
was as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2016

19,432—
19,432

14,507—
14,507

172,453—
172,453

Weighted-average shares during the year
(Thousands of shares)

262,874

262,874

Dilutive securities that didn’t have dilutive effects
and therefore were not included in the calculation ofdiluted net income per share.

New stock acquisition rights (650)

Initiatives for Creating Value

2016

Basic net income per share
Net income attributable to shareholders of the parent
Amount not attributable to common stock
Net income attributable to common stockBusiness Model and CompetitivenessNet assets
Net income attributable to shareholders of the parent
Basic
DilutedLeopalace21: Who We Are

22. Amounts per Share

23. Related Party Transactions
The following tables set forth related party transactions for the years ended March 31, 2016 and 2015.

(b) Directors and major individual shareholders
Capital stock
Name

Address

Directors andclose relatives

ToshikoMiyoshi—

Attribute

Name

Transaction

Directors andclose relatives

ToshikoMiyoshi

Leasing ofapartments

Millions of yen

Thousands of
U.S. dollars——

Business or
position

Percentage ofshare ownership——Transaction amountMillions of yen

Thousands of
U.S. dollars

26

231

Relation

Leasing of landand building

Balance

Account

Millions of yen

Thousands of
U.S. dollars——

Prepaid
expenses(Notes) 1. Consumption taxes were not included in amounts.
2. Conditions of leasing of apartments are the same as transactions with third parties.
3. Toshiko Miyoshi is a close relative of Tadahiro Miyama, Director of the Company.

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Attribute

Initiatives for Supporting Corporate ValueFor the year ended March 31, 2016(a) Unconsolidated subsidiaries and affiliates
None

119

For the year ended March 31, 2015(a) Unconsolidated subsidiaries and affiliates
None(b) Directors and major individual shareholders
Capital stock
Attribute

Directors andclose relatives

NameToshiko Miyoshi

Millions of yen

Business or
position

Percentage ofshare ownership

—

—

—

Address—

Leasing of landand building
Balance

Transaction amountAttribute

Name

Transaction

Account
Millions of yen

Directors andclose relatives

Toshiko Miyoshi

Relation

Leasing ofapartments

Millions of yen

26

Prepaid expenses—(Notes) 1. Consumption taxes were not included in amounts.
2. Conditions of leasing of apartments are the same as transactions with third parties.
3. Toshiko Miyoshi is a close relative of Tadahiro Miyama, Director of the Company.

24. Other
The following tables set forth quarterly information for the year ended March 31, 2016.
(Cumulative period)

Net sales (Millions of yen)
Income before income taxes (Millions of yen)
Net income attributable to shareholdersof the parent (Millions of yen)
Net income per share (yen)(Accounting period)

Net income per share (yen)(Cumulative period)

Net sales (Thousands of U.S. dollars)
Income before income taxes (Thousands of U.S. dollars)
Net income attributable to shareholdersof the parent (Thousands of U.S. dollars)
Net income per share (U.S. dollars)(Accounting period)

Net income per share (dollars)

25. Subsequent Events
Not applicable120

Leopalace21 Corporation / Annual Report 2016

First quarter

Second quarter

Third quarter

Full-year

124,524
3,791

252,316
9,511

376,541
14,467

511,424
19,061

3,303

8,211

12,462

19,432

12.57

31.24

47.41

73.92

First quarter

Second quarter

Third quarter

Full-year

12.57

18.67

16.17

26.51

First quarter

Second quarter

Third quarter

Full-year

1,105,113
33,6502,239,229
84,407

3,341,692
128,397

4,538,736
169,164

29,32072,871

110,604

172,453

0.11

0.28

0.42

0.66

First quarter

Second quarter

Third quarter

Full-year

0.11

0.17

0.14

0.24

Leopalace21: Who We Are

Business Model and CompetitivenessInitiatives for Creating Value

Initiatives for Supporting Corporate Value

Data Compilation

121

Leopalace21 Corporation / Annual Report 2016

DATA COMPILATIONEXTERNAL ENVIRONMENT■ Number of New Housing Starts(1,000 units)

The number of new housing starts rose for the first time in
two years in fiscal 2015, with rental housing starts also climbing for the first time in two years on a 7.1% year-on-yearincrease to 383,678 units. Starts of rental units less than 30
square meters aimed mainly at single-person households remained robust, surging 26.4% year on year to 60,882 units.

FY2013

FY2014FY2015

Rental units

370

358

384

Of which, rental units under 30m2
Other

36
617

48
522

61
537

Total

987

880

921

Source: New residential housing construction work commencement statistics,
the Ministry of Land, Infrastructure, Transport, and Tourism■ Number of Households
The number of households in Japan is
expected to decline from 2020 due toJapan’s twin demographic trends of a
growing elderly cohort and a low fertility
rate. On the other hand, the number ofsingle-person households, including thosein our target demographic cohort of ages
15-64 (productive population), are expected to trend sideways from here.

(1,000 households)

Single-person households
Of which, under 25
Of which, age 25-34
Of which, age 35-64
Of which, age 65 or older
Married couples
Married couples with children
Single-parent with children
Others
Total

2015
2020
2025
2030
2035
(forecast) (forecast) (forecast) (forecast) (forecast)

2005

2010

14,458
2,178
2,971
5,444
3,865
9,637
14,6464,112
6,212
49,063

16,784
2,060
2,999
6,745
4,980
10,26914,474
4,535
5,779
51,842

17,637
1,952
2,721
6,956
6,008
10,861
14,274
4,982
5,150
52,904

18,270
1,885
2,531
7,175
6,679
11,037
13,8145,338
4,594
53,05318,648
1,760
2,441
7,440
7,007
10,973
13,132
5,558
4,127
52,43918,718
1,645
2,311
7,464
7,298
10,782
12,3405,648
3,743
51,231

18,456
1,515
2,147
7,172
7,622
10,50011,532
5,645
3,421
49,555

Source: January 2013 estimates on the number of households and forecasts, the National Institute of Population and Social Security Research■ Number of Vacant Homes in Japan
Amid the concentration of populations
in cities, the number of vacant homes
is growing, especially in rural areas. The
number of vacant properties in Japan available for rent or sale stands at 4,601,000
units, or one in five homes, according the
fiscal 2013 Housing and Land Survey, themost recently published one.

Number of vacanthouses for rent or sale
(1,000 units)
Ratio of vacant
dwellings (%)

1983

1988

1993

1998

2003

2008

2013

1,834

2,336

2,619

3,520

3,978

4,476

4,601

12.4

14.3

14.3

17.4

18.8

20.1

20.0

Source: Housing and Land Survey, the Ministry of Internal Affairs and Communications

LEASING DATA
■ Apartment Rooms under Management
The number of apartment rooms we haveunder management is the earnings foundation of the Leasing Business. For a third
successive year, the number of rooms under management grew, rising to 561,961
as of the end of March 31, 2016. The proportion of our total portfolio located in our
focus regions of Kanto, Chubu, and Kinki,
where growth was conspicuous, stands
at about 70%.

122

Leopalace21 Corporation / Annual Report 2016

(Rooms)

FY2013

Hokkaido
Tohoku14,22933,704FY2014

14,19934,300FY2015

14,132
34,843Kita-Kanto

39,874

40,12640,381

Tokyo metro area

155,568

158,322

161,756

Hokuriku-Koshinetsu

40,64940,63040,643

Chubu

86,64287,22587,711

Kinki

78,15378,906

79,790Chugoku

37,292

37,83838,439

Shikoku

14,483

14,497

14,535

Kyushu-Okinawa

48,31848,90549,731

Total

548,912554,948

561,961

FY2014Units%

FY2015
Units%

Corporations

246,272

51.3

262,577

53.0

277,261

54.5

Individuals

179,03637.3

182,14236.8

183,008

36.0

Students

54,802

11.4

50,76810.2

48,451

9.5

Total

480,110 100.0

495,487 100.0

508,720 100.0

FY2013

FY2014FY2015■ Average Annual Occupancy Rate
Like fiscal yearend occupancy rates (seebelow), the average annual occupancy raterecovered during the fiscal year under review. The average annual occupancy rate was
88.0% in fiscal 2015, the fifth successive yearof increase. This in large part reflected a risein long-term lease contracts and further progress toward longer occupancy periods.

(%)

Average annual
occupancy rate

84.6

88.0

86.6

With the economy now beyond the slump that
followed the collapse of Lehman Brothers,
the occupancy rate improved 1.2 percentage
points to 90.5% as of March 31, 2016. The
occupancy rate of properties located in the Tokyo metro area and the regions of Tohoku andChugoku stood at well over 90%, with almost
no vacancies.

The Leasing Business is forging ahead withbuilding a network balanced between directly
run leasing sales offices and franchisee-run offices. Meanwhile, we continue to bolster oursales force, which grew 5.0% year on year to1,603 people as of March 31, 2016.

Security systems installed (cumulative, rooms)

End-FY2015

Hokkaido

77.5

79.4

81.8

Tohoku

93.9

94.3

94.4

Kita-Kanto

82.9

85.0

85.5

Tokyo metro area

91.0

92.5

92.8

Hokuriku-Koshinetsu

80.0

84.4

88.3

Chubu

83.5

86.4

89.1

Kinki

87.6

89.6

90.6

Chugoku

90.0

91.4

92.5

Shikoku

83.4

83.7

87.0

Kyushu-Okinawa
Total

90.7
87.5

90.6
89.3

90.7
90.5

FY2013

FY2014FY2015

348

329

319

Of which, Leopalace Centers

184

188

189

Of which, Leopalace Partners (franchisees)

164

141

130

No. of leasing sales personnel

1,512

1,526

1,603

Of which, Leopalace Centers

1,132

1,108

1,181

Of which, corporate sales

380

418

422

No. of lease sales offices

FY2013

FY2014FY2015

187,756

226,801

256,900

3,142

5,505

7,848

Services centers, no. of incoming calls

609,877

608,294

576,764

Of which, inquiries

428,293433,589

412,947

Of which, maintenance related

144,059

137,740

129,614

Of which, complaints or claims
Tenant response rates from Internet (new contracts only)

37,52553,01936,96554,45534,20357,556

Leopalace21 Corporation / Annual Report 2016

Data Compilation

Security cameras installed (cumulative, buildings)

End-FY2014

Initiatives for Supporting Corporate Value■ Number of Leasing Sales Offices andSales Personnel(%)

End-FY2013

Initiatives for Creating Value■ Fiscal Yearend Occupancy Rates by Region

Business Model and CompetitivenessWe are strengthening our marketing efforts
aimed at corporations, a category where wesee prospects for long-term stable earnings.
The number of corporate contracts for apartments grew 5.6% year on year to 277,261
rooms as of March 31, 2016 for a corporate
contract ratio of 54.5%, keeping corporate
contracts above half of our lease portfolio fora third consecutive year.

FY2013
Units%

Leopalace21: Who We Are■ Leases by Contract Type123

CONSTRUCTION DATA
■ Orders
Orders edged down for the first time in four
years in fiscal 2015, but were nearly flat at
86,439 million yen. While orders were downin our mainstay of apartments as well as innursing care facilities and solar power systems, overall orders were propped up by
those for stores and commercial space andfor detached housing at subsidiary Morizou.

(Millions of yen)

FY2013

Building categories
Apartments
Elderly care facilities
Stores & commercial space
Custom-built homes*
Solar power systems
Total

67,446
61,354
5,516
575—
13,693
81,139FY2014

84,67979,798
4,343
536
—
2,715
87,395(Buildings)

FY2013

Two stories
Three stories
Four stories or more
Total

FY2014

453
77
23
553

FY2015

537
92
27
656

■ Apartment Completions by Region
Of the three major metro areas, order activity
was focused on the Tokyo metro area owing
to the firmness of demand. The number ofapartment completions in the Tokyo metroarea rose sharply. In addition, the number ofapartment completions in Kyushu-Okinawa
also increased, including notable growth inapartment demand in Okinawa.

■ Sales Offices Accepting Construction
Orders, Sales Personnel
The domestic economy has tracked a mild recovery path in the past few years and demand
for apartment construction is also rebounding,so we are increasing the number of sales
offices tasked with seeking construction contracts. We are also continuing to add moresales personnel at these sales offices.

124

Leopalace21 Corporation / Annual Report 2016

513
125
47
685

(Buildings)

FY2013

TohokuKita Kanto
Tokyo metro area
Hokuriku-Koshinetsu
Chubu
Kinki
Chugoku
Shikoku
Kyushu-Okinawa
Total■ Solar Power Systems Installed,
Total kW Capacity Installed
Solar power system installations continue tobe a source of earnings growth at the Construction Business. As of March 31, 2016, thecumulative number of buildings where solar
power systems have been installed came to12,964, lifting total power generation capacity
to 182,070 kW.

86,42177,004
2,872
2,040
4,502
18
86,439*Subsidiary Morizou■ Apartments Completions
The number of apartments completed rose
4.4% year on year to 685 buildings in fiscal 2015.
Of those, completions of our mainstay two-story
models declined but completions of models withthree stories and models with four stories ormore increased, and their weighting in aggregate
completions climbed to about one-fourth.

FY2015FY2014

50
15
274
6
42
77
46
1
42
553

FY2015

45
28
306
5
66
90
54
3
59
656

46
20
342
5
57
98
39
7
71
685
(Cumulative)

FY2013

No. of buildings with solar
power systems installed
Of which, no. ofbuildings with systems
installed by LP21 GroupPower generation
capacity installed (kW)Of which, power
capacity installed by
LP21 Group (kW)FY2014

9,001

12,356

12,964

1,114

3,969

4,493

125,836

172,399

182,070

21,49458,69467,060FY2013

Sales offices responsible forconstruction orders (offices)
Sales personnel responsible for construction orders(personnel)

FY2015FY2014FY2015

54

60

60

363

418

427

■ Number of Facilities(Facilities)

FY2013

FY2014FY2015Fee-based homes

21

21

21

Day services, Short stays

38

40

44

Group homes

2

2

2

Total

61

63

67

■ Utilization Rate

(Utilization rate, %)FY2013The utilization rate at fee-based homes forseniors and group homes stayed high at over
90%. In contrast, attendant with the openingof new facilities, the utilization rate for facilities
with day services and short stays declined.

FY2014FY2015Day services

72.7

67.2

66.3

Short stays

99.2

98.1

92.3

Fee-based homes &group homes

93.8

93.5

92.4

Initiatives for Creating Value

HOTELS & RESORT DATA

Business Model and CompetitivenessWith a network of over 60 facilities, the Elderly Care Business is based in the Tokyo metroarea but it is also expanding in the Chubu region as a designated growth business, opening in particular facilities offering day services
and short stays. Our aim is to increase thenumber of facilities in our network to 104 asof March 31, 2018.

Leopalace21: Who We Are

ELDERLY CARE DATA

■ Leopalace Resort GuamAt Leopalace Resort Guam, a resort facility the Company runs in
Guam, profitability continues to improve thanks to efforts to promoteusage by stakeholders such as corporate clients.
(Utilization rate, %)

2014

2015

No. of visitors to Guam*(millions)

1.335

1.343

1.409

No. of visitors to Leopalace
Resort Country Club (users)

51,00054,00052,000No. of stakeholder visitors(people who stayed, recreational
facility users)

28,00030,0002013**

2014

2015

Leopalace Resort Guam

66.7

71.0

60.2

Westin Resort Guam

81.2

86.0

82.6

44,000(33.8%of the total)*We sold Westin Resort Guam in April 2016.

* Data on the number of visitors to Guam, Guam Visitors Bureau (a government agency)** Leopalace Resort Guam’s fiscal year corresponds with the calendar year.

■ Leopalace Hotels
Leopalace21 operates hotels across Japan, where there
has been progress in promoting usage by stakeholders
such as usage by corporate clients on business trips.

(Utilization rate, %)FY2013

FY2014FY2015

78.7

82.1

79.1

Sapporo

84.8

88.1

87.9

Sendai

79.6

81.4

78.0

Niigata**

66.1

68.1

62.9

Nagoya

70.9

76.6

80.5

Yokkaichi*

83.1

81.1

—

Okayama

75.7

75.7

73.3

Hakata

88.3

91.9

94.2

13,581

11,648

No. of stakeholder stays(persons)

17,044(5.7% of the total)

Data Compilation

Asahikawa

Initiatives for Supporting Corporate Value

2013*** Hotel Leopalace Yokkaichi was sold in August 2014.
** Hotel Leopalace Niigata was sold in July 2015.

Leopalace21 Corporation / Annual Report 2016125

SOCIAL KEY PERFORMANCE INDICATORS■ Governance
FY2013

FY2014FY2015

Outside directors

1

1

2

Female directors

0

0

1

Yakuin* remuneration (millions of yen)

284

329

347

Directors (excludes outside directors)

234

277

280

Audit & Supervisory Board members (excludes outside ASB members)

31

32

32

Outside directors and ASB members

19

20

34

*In this table, “yakuin” refers to directors, Audit & Supervisory Board members, and outside directors.

■ Employee Composition (Parent company)
FY2013

FY2014
Men

1,598

6,149

4,402

1,747

6,413

4,491

1,922

3,964

1,315

5,668

4,193

1,475

5,961

4,274

1,687

503

220

283

481

209

272

452

217

235

35 years,
11 months
Average cumulative
7 years,
years of service
4 months

36 years,
8 months
8 years,
4 months

36 years, 33 years,
8 months 8 months
8 years,
4 years,
6 months 11 months

35 years,
11 months
7 years,
9 months

36 years,
11 months
8 years,
11 months

33 years,
7 months
5 years,
0 months

No. of career-track
employees
No. of temporary
hires

Men

5,782

4,184

5,279

Average age

Women

FY2015Total

No. of employees

Total

34 years, 35 years,
0 months 10 months
4 years,
7 years,
9 months 6 months

Women

Total

Men

Women

■ Work-life Balance (Parent company)
FY2013

FY2014

Men

Women

Total

Men

Women

Total

Men

Women

No. of employees on short work-hours schedules

88

4

84

125

5

120

128

4

124

No. of employees on childcare leave

138

1

137

137

0

137

116

3

113

Ratio of paid vacation usage

31.7%

22.1%

58.9%

33.0%

23.9%

58.0%

70.1%

64.2%

85.1%

Rate of workforce turnover

11.8%

10.3%

8.7%

Ratio of new hires

19.2%

14.4%

10.9%

■ Diversity (Parent company + domestic consolidated
subsidiaries)
FY2013

FY2014■ Support for Employees Seeking to
Obtain Qualifications

FY2015FY2013

FY2014FY2015

No. using support for obtaining
qualifications

122

96

490

No. of disabled employees

112

120

125

Disabled employee ratio

2.07%

2.04%

2.04%

—

364

25

28

No. using support system forobtaining specified qualifications

—

20
185

215

277

No. in program for language skills
improvement

—

—

21

18

22

19

71

52

52

51.6%

55.1%

61.0%

No. using a discount program for
textbooks for the Takken real estatetransaction specialist exam

No. of female managers

44

60

75

No. awarded a bonus for obtaining
Takken qualification

51

44

53

Female manager ratio

3.2%

4.1%

4.9%

No. of mandatory retirees that havebeen rehired*
No. of employees with foreign
citizenshipNo. of foreign managers
Ratio of females of employee hiring*Employees who reach the mandatory retirement age can be rehired on a different contract.

126

FY2015

Total

Leopalace21 Corporation / Annual Report 2016

“Takuchi tatemono torihiki shi” or “Takken”: This qualification recognizes those who passed
a test on Japanese building lots and transactions law.

FY2013

No. of labor accidents
Accidents requiring
time off work
Accidents not requiring time off work

■ Stakeholder Communication Initiatives
FY2014FY2015FY2013

39

49

28

8

18

8

31

31

20

■ Community Contributions

FY2015

193

257

12

17

19

—

—

31

Career-support activity
programs■ Efforts to Reduce our Environmental Impact

FY2015

13,203

15,497

14,239

3,642

3,203

3,598

9,561

12,294

10,641

1,832

2,254

2,577

235

255

255

436

609

571

50

21

45

FY2013

Annual electricity usageat head office (thousandsof kWh)Solar power generation
capacity (kW)CO2 reduction via solar
power generation (t-CO2)

FY2014FY2015

1,878

1,799

1,763

125,836

172,399

182,070

37,96352,01054,927

Initiatives for Creating Value

No. of cleanup campaign
participants
Of which, in vicinity ofexisting properties
Of which, in vicinity of
construction sites
Total sum of donations(thousands of yen)
Leopalace21-affiliatedoffices etc. registeredfor “Kodomo #110*”
No. joining observation tours and OTJ
training at Leopalace
Smile**
No. joining domestic
hotel observation
tours

FY2014FY2014211

Business Model and Competitiveness

FY2013

No. of owner meetings
No. of IR events (meetings for individual
investors, etc.)

Leopalace21: Who We Are■ Labor Safety and Health* ”Kodomo #110” is a program where private-sector businesses register to provide emergency
refuge to children who feel threatened or troubled.
** Leopalace Smile Co., Ltd. is a special subsidiary set up to employ the disabled under Article 44 of
the Act for Employment Promotion etc. of Persons with Disabilities.

Initiatives for Supporting Corporate Value
Data Compilation

Leopalace21 Corporation / Annual Report 2016

127

CORPORATE HISTORY
Sales breakdown by business

Fiscal Year
Ended
March 1991

1973
usiness as Miyama Inc.
Inc
• Started business■ Leasing Business................ 11.3%■ Construction Business.................. 2.1%
■ Real Estate Business(condo sales).................. 80.6%■ Other Businesses.................. 6.0%

Before the “Master Lease System” was established,
our mainstay was built-for-sale apartments

1991• Obtained a patent for housing with lofts

1987• Increased capital to 760 million yen• Increased capital to 2,740 million yen

1993• Opened Leopalace Resort Guam

GrowthPeriodPost-Bubble
PeriodBubblePeriod1998• Increased number of managed
rooms to 100,000• Leopalace21 awarded
1998 Good Design Award
1999• Launched “Monthly Leopalace”
short-term rental apartments
furnished with furniture andhome appliances

1985• Ramped up launch of Leopalace21
urban apartments• Increased capital to 132 million yen
1986• Increased capital 452 million yen

1997• Launched Leopalace Fraternity

Mainstay is apartment
development and sales

1988• Launch a unique membership-basedtenant system• Launched online computer managementof building and tenants

Business modeltransition
New business model(Shift from built-for-sale toconstruction subcontracting)1995• Launched corporate
membership sales

1989• Increased capital to 4,417 million yen• Listed on over-the-counter market(JASDAQ)• Change company name to
MDI Corporation

Economic
growth period
Full launch of a synergy model combining
Construction
and Leasing Pillars
分譲→建築請負

2000• Increased capital to 30,524.35
million yen via third-party
allotment of new shares• Change company name to
Leopalace21 Corporation
2001• Launch Leopalace REIT,a real estate securitization
product

1990• Increased capital to 22,484.5 million yen
Business modelin transition period

Leopalace21 Developed and Commenced the Industry’s First “Master Lease System”
Budgeting maintenance andrepair costs for a 30-year period
Secures funds for property maintenanceand future repairs

Apartments
Management of rental revenues
for a 30-year period
Rent collection operations etc.

Tenants
Individuals (general)Companies (dorms,
company-leased housing)

Recruitment and managementof tenants for a 30-year period
Tenant recruitment and everyday
tenant management operations etc.

128

Leopalace21 Corporation / Annual Report 2016

Rents frommasterleasesProperty owners
Master-lease rents are paid
to owners regardless ofwhether there are vacancies

Sales breakdown by business

Sales breakdown by business

Fiscal Year
Ended
March 2007

■ Construction Business ........... 50.0%

Fiscal Year
Ended
March 2016

■ Elderly Care Business .............. 0.9%
■ Hotels & Resort Business ......... 1.1%

■ Construction Business ........... 14.5%■ Elderly Care Business .............. 2.1%
■ Hotels & Resort Business ......... 2.2%
■ Other Businesses................... 0.9%

■ Other Businesses.................... 4.1%

Swift apartment construction demand growth on uptake of
the “Master Lease system” turns the Construction Business into mainstay

Leasing Business emerges as the mainstay as a tighter focus on
quality over quantity in apartment markets translates into earnings• Opened Leopalace Center Seoul in Gangnam• Launched Monthly Leopalace Flat service• Increased number of managed rooms to 200,000

2010• Number of managed properties increases to 550,000• Launch Leopalace Partners franchise system• Capital increases to 56.56 billion yen following third-party
allotment of new shares• Open Shanghai Corporation Dalian Branch and Guangzhou Branch

Global Recession,
Lehman Collapse

2004• Listed on 1st section ofTokyo Stock Exchange• Increased capital via public offering
to 55,640.66 million yen

2006• Opened Leopalace Center Taipei
and Leopalace Center Busan
2007• Increased number of managed
rooms to 400,000• Opened Leopalace Center Seoul in Jongno• Ramped up rollout
l t off solarlpower system sales

2012• Launched “Room Customize” service• Established power generation subsidiary
Leopalace Power Corporation• Established Woori & Leo PMC Co., Ltd.
in South Korea• Increased capital to 58,314.41 million yen
on receipt of cash for exercise of No. 1
new share subscription rights「Creating Future」策定

2014• Increased capital to 75,282.36 million yen
via public offering and third-party allotment• Established Leopalace Energy Corporation,a power producer and supplier (PPS)• Established Leopalace21 (Shanghai)
Property Management Co., Ltd. andLeopalace21 (Cambodia) Co., Ltd.
• Opened Myanmar branch (Leopalace21)• Converted WING MATE CO., LTD.
into a subsidiary via a stock acquisition

2015• Opened Ha Noi branch of LEOPALACEVIETNAM• Converted Morizou Co., Ltd. into a
subsidiary via a stock acquisition• Established LEOPALACE21 PHILIPPINES INC.,
2013
started operating serviced offices• Increased capital to 60,415.91 million yen• Commenced operations of serviced
on receipt of cash for exercise of No. 2
apartments in Thailand
new share subscription rights•
Established Sriracha Branch in Thailand• Increased capital to 62,867.36 million yen(Leopalace21)
oon receipt of cash for exercise of No. 3• Established PT. Leopalace Duasatsu Realty
nnew share subscription rights
in Indonesia• In
Introduced “non-sound system”
fi
fittings as standard feature in
2016
LLeopalace21 apartment•
Agreed to be the title sponsor of “Leopalace21•E
Established Leopalace21 (Thailand)
Myanmar Open,” a golf tournament forCO., LTD. and LEOPALACE21
C
professional male golfers in Asia
VIETNAM CO., LTD.
V
• Commenced operations of serviced office• Established elderly care service
in Myanmar
subsidiary Azu Life Care Co., Ltd.
Leopalace21 Corporation / Annual Report 2016

Data Compilation

2011• Ramped up security systeminstallations
for apartmentss

Building a new growth中期経営計画
stage

Initiatives for Supporting Corporate Value

2005• Increased number of managed
rooms to 300,000• Started Residential Businessand Elderly Care BusinessEconomy recovery period
Initiatives for Creating Value

Comprehensive reinforcement of
earnings from rental housing

Great East Japan
Earthquake

Business Model and Competitiveness

2002
2008
• Increased capital via public offering to 37,204.34 million yen • Launch of membership-based ‘Class-L’ service• Start broadband
business2009• Number of managed properties increases to 500,000• Open Leopalace21 Business Consulting (Shanghai) Co., Ltd.
Open Beijing Branch

Leopalace21: Who We Are■ Leasing Business .................. 80.3%■ Leasing Business .................. 43.9%

129

CORPORATE PROFILE
Corporate Data

(As of March 31, 2016)

Company Name:
Leopalace21 Corporation
Head Office:2-54-11 Honcho, Nakano-ku, Tokyo
TEL: +81-3-5350-0001 (Main Line)
Established:
August 17, 1973
Paid-in Capital:¥75,282.36 million
Operations:
Construction, leasing and sales of apartments, condominiums, and residential housing; development andoperation of resort facilities; hotel business; broadband
business; and elderly care business, etc.
Number of Employees:
7,846 (consolidated basis)
6,413 (non-consolidated basis)

Members of Board of Directors and Auditors (As of June 29, 2016)
Directors
President and CEO
Director
Director
Director
Director
Director
Director
Director
Director (Outside)
Director (Outside)
Director (Outside)

Eisei Miyama
Tadahiro Miyama
Yuzuru Sekiya
Hiroshi Takeda
Kazuto Tajiri
Yoshikazu Miike
Hiroyuki Harada
Bunya Miyao
Tadashi Kodama
Tetsuji Taya
Yoshiko Sasao

Audit & Supervisory Board Members
Standing Audit & Supervisory Board Member
Mutsuhiro Yamada
Standing Audit & Supervisory Board Member
Atsunori Nasu
Audit & Supervisory Board Member (Outside)
Masahiko Nakamura
Audit & Supervisory Board Member (Outside)
Takao Yuhara

Major Shareholders (Top10)(As of March 31, 2016)

Thousands ofSharesPercentage of
Outstanding Shares

1 Japan Trustee Services Bank, Ltd. (Trust Account)

42,38916.12%

2 STATE STREET BANK AND TRUST COMPANY 505225

10,5834.02%

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

9,883

3.75%

4 MSIP CLIENT SECURITIES

5,931

2.25%

5 Stockholding Association for Leopalace21’s Business Connection

5,773

2.19%

6 MELLON BANK, N.A. AS AGENT FOR ITS CLIENT MELLON OMNIBUS US PENSION

5,524

2.10%

7 STATE STREET BANK AND TRUST COMPANY 505103

4,697

1.78%

8 BBH FOR FIDELITY LOW-PRICED STOCK FUND (PRINCIPAL ALL SECTOR SUBPORTFOLIO)

4,619

1.75%

9 JP MORGAN CHASE BANK 380634

3,976

1.51%

10 STATE STREET BANK AND TRUST COMPANY

3,892

1.48%

Shareholders

Note: Of the shares listed above, those held in trust accounts as part of trust bank operations are as follows:
Japan Trustee Services Bank, Ltd. (Trust Account)
41,781 thousand shares
The Master Trust Bank of Japan, Ltd. (Trust Account) 9,805 thousand shares

Stock Information(As of March 31, 2016)

Number of Shares:
Authorized: 500,000,000
Outstanding: 267,443,915
Number of Shareholders:
48,476
Listing:First Section of the Tokyo Stock Exchange(Security code: 8848)
Transfer Agent:
Mitsubishi UFJ Trust and Banking Corporation

130

Leopalace21 Corporation / Annual Report 2016

Shareholder Composition■ Financial Services

Providers(Securities Companies)
1.70%■ BusinessCorporations
and Other
Legal Entities
2.40%■ Financial

Institutions

23.07%(As of March 31, 2016)■ Treasury Stocks

1.71%■ Individuals

and Other
16.57%■ Foreign
Corporations
54.55%

Total Number ofManaged Rooms(As of March 31, 2016)

Number of Partners Franchise Sales Offices
Number of Directly Managed Sales Offices

Number of Managed Rooms

561,961 units
3
2

5,299

Total Number of
Directly Managed Sales Offices

29

14,132

Okinawa Area

Leopalace21: Who We Are

Number of Apartment Rooms under Management and Domestic Leasing Sales Offices by Area

Hokkaido Area

182 offices
Business Model and CompetitivenessTotal Number ofPartners Franchise Sales Offices

130 offices

9
13

40,64379,790

Tohoku Area

12
11

38,4397
1534,843

Hokuriku/Koshinetsu
Area

15
25

Kinki Area

Chugoku Area

540,381

14

Kita-Kanto Area

Shikoku Area

20
24

87,71116
15

44,432

Initiatives for Creating Value

5
5

14,53536
49

161,756

Chubu Area

Kyushu Area

Metropolitan Area

(As of March 31, 2016)

Trading Volume

Share Price(Yen)(Thousand shares)

900

60,000600

40,000300

20,000

Apr.
2015

May

Jun.

Jul.

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2016

0

Feb.

Mar.

Leopalace21 Corporation / Annual Report 2016

Data Compilation0

Initiatives for Supporting Corporate Value

Share Price and Trading Volume131

2-54-11
2-54-11
Honcho,Honcho,Nakano-ku,
Nakano-ku,
Tokyo
Tokyo
164-8622,
164-8622,
Japan
Japan
TEL:TEL:+81-3-5350-0001+81-3-5350-0001
(Main
(Main
Line)
Line)
http://eg.leopalace21.com/
http://eg.leopalace21.com/

Leopalace21 Corporation

Leopalace21
Leopalace21
Corporation
Corporation

Annual Report 2016

©Leopalace21©Leopalace21
Corporation
Corporation
20162016