Corporation Information
Corporate Data（As of March 31, 2009）

Members of Board of Directors（As of June 29, 2009）

Company Name : Leopalace21 Corporation

President and CEO

Head Office : 2-54-11 Honcho, Nakano-ku, Tokyo

Yoshiteru Kitagawa   

Senior Managing

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

Director

President and CEO : Yoshiteru Kitagawa

Eisei Miyama

Executive Director

Established : August 17, 1973of Management

Tadahiro Miyama

Director

Hiroyuki Miyata

Director

Yoshikazu Miike

Director

Kou Kimura

Director

Yousuke Kitagawa

Number of Employees : 9,926 (Consolidated basis) 9,017 (Non-consolidated basis)

Director

Satoshi Abe

Building lots and buildings transaction business license :Minister of Land, Infrastructure and Transport Permit (9) No. 2846

Director

Hiroshi Takeda

Director

Naomichi Mochida

Construction business permit :Minister of Land, Infrastructure and Transport Permit (Special-20) No. 11502

Standing Auditor

Yoshinori Uehara

Standing Auditor

Shinya Watanabe

Registration of Class-1 architect office : Tokyo Governor Registration 36122
Loan business registration : Kanto Finance Bureau Chief Registration (8) No. 00581
Memberships: Japan Association of Home Suppliers
Japan Financial Services Association
Japan Prefabricated Construction and Manufacturers Association

AuditorMasami Matsushita

AuditorKoichi Fujiwara

Common Stock : ¥ 55,640.66 million
Number of Shares Outstanding : 159.54 million shares
Operations : Construction, leasing, and sales of apartments, condominiums,
and residential housing; development and operation of resort
facilities; hotel business; broadband business; Silver business, etc.

Corporate Structure（As of March 31, 2009）

Treasury Stocks
8,165 thousand shares ／5.12%

Apartment Construction Subcontracting Division(50% )

Business Corporations andother legal entities
8,310 thousand shares ／5.21%

Securities Companies
1,719 thousand shares ／1.08%

Financial Institutions
30,038 thousand shares ／18.83%

Leasing Division
Leopalace Leasing Corporation(Company housing agency and real estate agency)

For the year ended March 2009

Shareholder Composition（As of March 31, 2009）

Leopalace21 Corporation
Toyo Miyama Kogyo Co., Ltd.
(Manufacturing and Sales of Housing Materials)

Investors Guide(100% )

Foreign Corporations
62,832 thousand shares
39.38%

Individuals and Other
48,477 thousand shares ／30.38%

Hotel and Resort Division
LEOPALACE GUAM CORPORATION(Hotel/resort operations in Guam)(100% )

Leopalace Travel, Ltd.
(Travel Agency)(100% )

Other Business
Leopalace Finance Co., Ltd.
(Financial Business)(100% )

Leopalace Insurance Co., Ltd.

(100% )

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

Leopalace21 Corporation
2-54-11 Honcho, Nakano-ku, Tokyo 164-8622
TEL: +81-3-5350-0001 (Main Line) FAX: +81-3-5350-0058

Major Shareholders (Top 10)（As of March 31, 2009）
Name of shareholder% of
No. of shares outstanding
sharesYusuke Miyama

21,251,774

13.32%

Leopalace21 Corporation

8,165,714

5.12%

Japan Trustee Service Bank, Ltd. (for trust 4G)

7,228,400

4.53%

Japan Trustee Service Bank, Ltd. (for trust)

6,245,800

3.91%

State Street Bank and Trust Company 505223
Standing Proxy, Mizuho Corporate Bank, Ltd.

6,157,793

3.86%

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

6,105,200

3.83%

Toyo Kanetsu K.K.

2,745,900

1.72%

The Chase Manhattan Bank, N.A. London SL Omnibus AccountStanding Proxy, Mizuho Corporate Bank, Ltd.

2,437,395

1.53%

MDI Corporation

2,350,000

1.47%

Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension
Standing Proxy, Mizuho Corporate Bank, Ltd.

1,952,349

1.22%

Leopalace21 Corporation
Code No. 8848

http://www.leopalace21.co.jp

Message from President
The selection and concentration of ourbusiness operations have been clarified andour “New Medium-term Management Plan:
Change for NEXT” has been established to copewith the current global economic recession.

Medium-term Management Plan-1
Corporate Slogan

Corporate Vision
1. We strive to become a Total Support Enterprise,

Leopalace21 is currently transitioning into its next stage. In
order to respond to a year of drastic changes and turmoil, we
aim to establish a framework for a robust business structurethat does not rely on market conditions, while we concentrate
our efforts into the apartment construction subcontracting andleasing businesses, which are our starting points. We will unite
all our capabilities to respond to the needs of each and every
one of our customers and to raise our corporate value.

providing a diverse range of products and services inaccordance with solutions relating to "Effective Use ofLand" and "High Quality Housing," as well as market
needs.

2. We will make work operations and financial content

those of a market leader, form a "Corporate Quality"that responds to the social responsibility of theCompany as a "Corporate Citizen" and build a"Corporate Brand" deserving of trust and appreciation.

President and CEO

Yoshiteru Kitagawa

Course of Action for the Medium-term Management Plan

In December 2006, we at Leopalace21 announced our “Medium-termManagement Plan: United Spirit” with a prospective outlook for the following
five years. We were, however, greatly impacted by the trends arising fromthe global economic downturn that was triggered by the collapse of Lehman
Brothers in the United States during September of last year. In order to deal
with the changing situation, we needed to drastically review our “Mediumterm Management Plan: United Spirit” as we approach the March 2010 fiscal
year (our 37th term), and therefore we have formulated a new plan, the “NewPrevious Medium-term Management Plan

Corporate Philosophy(fiscal year ending March 2007 to March 2009/First Phase)

June 2006: The new slogan “United Spirit” formulated

We aim to create
new value throughhousing

End March 2009:
Number of apartment units undermanagement exceeded half amillion!

effort must be concentrated. We intend to focus our management resources
into the apartment business in order to accelerate its sustained growth.
Furthermore, our critical agenda will continue to be “to participate in society
as a Corporate Citizen”, as well as “to sustain the growth of our businessthrough support obtained from society”, as cited in our Corporate Vision,or, in other words, to be evaluated favorably as a business that fulfills social
responsibilities (CSR management).
Obviously, attaining the targets set by our newly establishedmanagement plan, the “New Medium-term Management Plan: Change
for NEXT”, is a matter of course, but more specifically we recognize ourcorporate philosophy of “Creation of New Values” as the social responsibility(CSR management) of our business, as we strive to fulfill our agendas in thiscurrent global economic crisis. Therefore, we believe that it is quite important
to shape up the foundation of our business and to work proactively towards
broadening the range of our business dealings. The newly formulated
corporate slogan, “Change for NEXT” was established as our expression ofthis objective.
As a representative officer of Leopalace21, it is my intention to overcome
the global economic crisis by following our corporate philosophy and our
new corporate slogan in the pursuit of our “Creation of New Values”, always
staying a step ahead of the times and promoting our CSR management tocreate a “Corporate Quality” and “Corporate Brand" that can respond to our“Corporate Social Responsibility” (CSR) as a “Corporate Citizen”, as indicatedby our corporate vision statement.
We would like to ask all our stakeholders for their continued support andpatronage.
01
Leopalace21 Investors Guide 2009

May 2009: The “New Medium-term Management
Plan: Change for NEXT” announced
The new slogan “Change for NEXT” formulated

2010/3
2009/3targeted by the previous medium-term management plan were converted
enterprise, was once again designated as the business operation for which(fiscal year ending March 2010 to March 2012)2011/3Medium-term Management Plan: Change for NEXT”. Quantitative agendas
into qualitative agendas. Furthermore, the apartment business, our core

New Medium-term Management Plan

2008/3

Basic Policies

2007/3

1. We view the apartment businessas a social undertaking, which
realizes the effective use of land andsupply of high-quality housing (CSR
management).

December 2006: The “Medium-term Management
Plan: United Spirit” announced
In our previous Medium-term Management Plan (First Phase) we
set as our primary target the establishment of our management
base, in order to seek the transformation of our business into a“Stock-Emphasized Business Model”. Quantitative increases andqualitative improvements were promoted for apartment units
under our management (our stocks).

2. We believe that successful leasing
operations are our top priority
in the apartment business.

3. We develop and introduce uniqueproducts based on a pioneering spirit.

4. We pursue client-first marketing
approaches as well as prompt andsystematic proactive operations.

Baseement hase
g
a
n
a
M
shing P
Establi

2012/3retructu ase
S
s
s
e
n
Busi mation Ph
orTransfOur New Medium-term Management Plan wasreformulated with new conditions for the second
phase, in order to take into account and cope witha business environment that drastically changed
following the September 2008 financial crisis.
Our management resources are concentrated into
our core businesses according to our new Mediumterm Management Plan, in order to accelerate thetransformation of our business structure into a fullscale “Stock-Emphasized Business Model”.

Medium-term Management Strategy
1. In terms of management, organizational reforms and further enhancement of governance are required, as is a drastic
2.
3.

review of cost structure, in order to promote our return to the starting point of a “Motazaru keiei”＊ financial structure.
In business terms, we aim to realize “Unified Management for Construction Subcontracting and Leasing Businesses”.
Management resources will be concentrated into our core businesses, while the priorities of related businesses areclarified according to the relevance to (synergy with) the core businesses, and their continuous monitoring will beenhanced.
For overall strategies for the core businesses, we intend to establish a new profit structure by inducing the flow of
new tenants away from studios into large studios and family units, through the implementation of new proposals thatserve as our “One-stop Strategy”.
■ Apartment construction subcontracting business: We intend to expand the areas in which properties are supplied.
■ Leasing business: We intend to expand the scope of our prospective tenants.

＊ The Company’s core businesses’ model is based on construction of apartments on behalf of property owners and entering master-lease agreements with these apartment

owners. We then lease apartments to individual tenants. This model enables us to continue growing our business and earnings without requiring the Company to own
the underlying assets or take on debt. We call this model “Motazaru keiei ” in Japanese.

02
Leopalace21 Investors Guide 2009

Medium-term Management Plan-2【Overall Image of Medium-term Management Plan】
As with our previous Medium-term Management Plan, the “New Medium-term Management
Plan: Change for NEXT” enables strategies with a superior sense of orientation over the medium
term through the incorporation of “Demographic Dynamics” and “Demographic Shifts” into thebackground of the plan’s formulation.

Transition of net sales and operating income rate for the “New Medium-term Management Plan: Change for NEXT” by business division (planned)
Consolidated operating income rate（％）
15.0

12.0

The market strategies for the “New Medium-term Management Plan: Change for NEXT” have been formulated with “Household Dynamics” and“Demographic Shifts” in the same way as the previous Medium-term Management Plan. The “Household Dynamics” and “Demographic Shifts”
are indices that do not cause significant variations in short-term forecasts or in medium-term forecasts. Use of such indicators to formulate
fundamental business strategies is a crucial concept for ensuring that deviations do not occur with regard to a sense of orientation and paths to
be taken for business tactics and strategies over the short to medium term.

10.6
10.0

6.8
Consolidated operating income rate

3.1

For many years the “Demographic Shift” in Japan has been concentrated
in urban areas, and this trend has been strengthening in recent years. As
shown in the table, the demographic shift in the year 2008 indicated thatis the “Number of Single-Person Households”. Our future estimates indicatethat the number of single-person households will continue to grow at thecurrent rate and the figure is expected to exceed 15 million households by

the top nine regions with increases are in the Kanto, Kinki, and Chubu
blocks, with the tenth region a location in the Kita-Kyushu block, which has
the fourth-largest population concentration in Japan.

the year 2010.

(Thousands of households)

Under 35 years

20,00015,707

16,00014,457
12,911

8,000

4,000

3,032
(23.5%)

4,577

5,302
(41.1%)

Our share
0

8,000

[Pr

2.7%
2000/103,865(26.7%)

5,444

4,655

6,351

16,563

5,621

6,757

17,334

6,311

7,134

17,922

6,729

7,531

5,148
(35.6%)
4,701

6.5%
2005/102010

65 years and over
18,2377,173(39.3%)

7,662

4,185

3,890

3,662

3,402
(18.7%)

2015

2020

2025

2030

(Projected) (Projected) (Projected) (Projected) (Projected)

Note: Excerpted from the National Census from Ministry of Public Management, Home Affairs, Posts andTelecommunications for fiscal 2005 and the Number of Households and Future Estimates of fiscal 2008
from the Institute of Population Problems.

RegionTotal numberof migrants

City name

Total numberof migrants％

1

Tokyo Block

1,218,807

66.4

2

Tokyo Metropolis

Special wards of
768,322 Tokyo Metropolis

644,146

83.8

3

Osaka Block696,367 Osaka City & Sakai City

237,160

34.1

4Kanagawa Prefecture

437,586 Yokohama City & Kawasaki City

398,815

91.1

5

Nagoya Block

370,689 Nagoya City

163,058

44.0

6Osaka Prefecture

326,746 Osaka City

186,74257.2

7

Saitama Prefecture

320,376 Saitama City

98,66430.8

8Chiba Prefecture309,270 Chiba City

77,18225.0

9Aichi Prefecture

242,355 Nagoya City

163,058

67.3

10 Fukuoka Prefecture

211,242 Fukuoka City

141,68367.1

1,835,554 Urban areas of Tokyo Block

The demand for “Housing” is more concentrated in regions where an influxof a large number of residents occurs, causing a population concentration

we will see the emergence of new demand from single men and womenin the region. The basic characteristic of such regions is that more people

aged 35 or older. Furthermore, the number of single-person households

reside on the outskirts of cities and towns, rather than in the cities andcomprising persons aged 65 or older is on the rise due to the “Aging

towns themselves. We are promoting the following activities intended toPopulation”.

expand our areas of business:

Our new Medium-term Management Plan takes this rapidly changing● The flow of tenants is induced away from studio units to large studios
and family units based on the “One-stop Strategy” and the acquisitionof new demand from the 35 and older group is promoted in the corebusiness segment, where management resources are concentrated.
● Provisions for expanding the Silver Business and Real Estate Businessare frozen for the time being in consideration of the businessenvironment. Our focus is concentrated on improving the profit
structures of related businesses for which monitoring will beenhanced, even though demand for these businesses is expected torecover and expand over the medium term.

7,007

7,231
248

7,511
176

3,461
2,864

3,136

3,611

3,982

4,333

4,000

3,000

2,000

3,161

3,275

3,591
3,002

3,001

3,002

2010/3

2011/3

2012/31,000

age of 35 is expected to decrease due to “Declining Birth Rates”, thoughstrategies that incorporate the intake of new groups such as the following:

Plan]

re
Structu ase
s
s
e
n
i
Bus
on Ph
ormati
f
s
n
a
r
T
edium

[New M

394

318

ement

anag
-term M

291

5,000

Source: "Report on Migratory Movements Based on Basic Resident Register" of the Ministry of Public
Management, Home Affairs, Posts and Telecommunications (issued January 30, 2009).

The number of single-person households comprising persons under thebusiness environment into account and promotes the implementation of

6,000

ase
ent B asemehag
Man lishing P
7,332
b
Esta
280
6,729

6,316

● Top ten regions with highest demographic shift in 2008

35 years to 64 years

an]
nt Pl

e

agem

an
rm M

m-te

ediu

sM
eviou

7,000

● Estimates for single person households in the future

12,000Consolidated net sales(¥100 million)

0Core businesses

Apartment construction subcontracting business

Strategies based on “Demographic Shifts”

The “Demographic Dynamics” mentioned indicate significant trends for“Declining Birth Rates” and the “Aging Population”. In the midst of such
movements the index data relating to “housing”, in which we must focus,

5.0

Related businesses (all non-core businesses)
Leasing business

Strategies based on “Demographic Dynamics”

6.2

4.7

● Large studios and family units are to be aggressively supplied in thecore business to expand serviced areas from existing urban areas tosuburbs (such as commuter neighborhoods and regional cities andtowns).
● Discovery of new demand in urban areas is also promoted throughproposals for residences with attached rental units.
● Business operations by Leopalace Leasing Corporation and Leopalace
Insurance Co., Ltd., which are strongly relevant to core businesses, arelinked up with core business operations to expand synergic effects.

03
Leopalace21 Investors Guide 20090

2007/3(record)

2008/3(record)2009/3(record)(plan)(plan)(plan)The new Medium-term Management Plan was formulated under new conditions that incorporate a businessenvironment that changed rapidly following the occurrence of the financial crisis in September 2008.
Basis of figures calculated for plans in apartment
construction subcontracting business

Basis of figures calculated for leasing business● Sales coverage areas are expanded through the enhancement of product lines,
while the framework for expanding sales is enhanced to cope with the current
severe business environment and to sustain the level of orders received at ¥300
billion.

● Increases in sales are calculated according to the volume of newly
supplied properties (planned) in the apartment construction
subcontracting business.
● Allowances for vacancy losses arising from a more conservative● Sales capabilities are enhanced according to regional strategies, and thelocations of sales offices are reviewed while sales administrative expenses are
reduced.

review are incorporated into accounting, and a drastic reductionin the administrative expenses of sales is implemented (to becompleted in March 2010).

04
Leopalace21 Investors Guide 2009

Medium-term Management Strategy-1【Overall Strategy】
Create a robust business foundation using our core businesses as the backbone and with a meticulous
selection of business domains, with management resources concentrated in these segments.
At Leopalace21 we are aiming to complete our new business model according to the “New Medium-term Management Plan: Change for NEXT”
through a meticulous “selection” of business domains and a “concentration” in management resources. We intend to implement reforms in ourcore businesses to transform the framework of our business into one that can sustain continued growth and provide stable earnings. At the sametime, the relevance with core businesses is emphasized for all other businesses not considered to be core businesses, their priorities are clarified
to re-establish our “Business Portfolio”, and strategies will be implemented to synergize business divisions, including the core businesses. All
business divisions of all business units will be striving to enhance the synergic effects of their regional strategies, product strategies, and leasing
service strategies, with synergic effects between the core businesses and individual related businesses as the pivotal force.

Build a cornerstone for the foundation of our business model within three years, fortifying ourorganization for management operations

ACTION
PLAN

First Year

（Ending March 2010）

Transform business structure to make it capable of responding to rapidchanges in business environment● Objective (effect) ●1 Organizational reform● Start “Unified Management for Construction Subcontracting and Leasing Businesses”● Enhance management organizations for related businesses; installation of review
committees for individual management issues

Core Businesses
Our core businesses are redefined as “businesses for generating earnings
with our apartment stock as the foundation”, where the “apartment
construction subcontracting business” and the “leasing business” areconsidered to be our two core businesses.
Our broadband business draws from a primary market of apartment
units under our management, which fall under the category of our leasing
business. We incorporated the broadband business into our leasing
business, as we determined that management, operation, and extension, asa single business, would lead to a more efficient business expansion.

【Core Businesses】
Apartment
Construction
Subcontracting
Business

Subcontracting &leasing under unified
management

3 Related businesses: Enhancement of monitoring● Ascertain businesses for prioritized implementation of endeavors to consider
redistribution of invested management resources【Related Businesses】● Reduce “operating expenses” and “fixed expenses”

businesses (non-core businesses; includes businesses that involve
subsidiaries).
For the purpose of information disclosure, we therefore decided
to change our business segments to be in line with the concept of
our New Medium-term Management Plan so that we can disclose
information in a more accurate manner, starting from the fiscal year
ending March 2010.

Domestic
HotelBusiness

ResortBusiness

Leopalace
Leasing
Corporation● Drastically review cost structure

Real EstateBusiness
Leopalace
Insurance
Co., Ltd.

the implementation of responsive strategies for the business environment that has been experiencing cataclysmic changes since the latterpart of last year (2008) and the implementation of strategies to match the status of our business model as it goes through its evolution. We
SilverBusiness

Leopalace
FinanceCo., Ltd.

Implementation of strategies based on priorities
that emphasize the relevance to core businesses

Segment namewill proactively implement new action, with the former theme involving a concentration of management resources in the core businesses;
implementation of emergency strategies, such as special discounts (see page 8); and the promotion of management rationalization. The lattertheme entails the pursuit of a new business model that is built around a full line of products in the core businesses.

ACTION Second Year
P L A N （Ending March 2011）

Fiscal year ending March 2009

Leasing businesssegment
Hotel and resort
business segment

Other businesses
segment

create a new business hotel and resort business segment.
05
Leopalace21 Investors Guide 2009

Leasing Division

Leasing Division

Domestic Hotel Division

Broadband Division
Leopalace Guam Division

Leopalace Guam Division

Hotel Sales Department(organizational name change)

Residential Business Division

Real Estate Division(organizational name change)

Silver Business Division

Silver Business Division

Broadband Business Division

Leopalace Leasing Corporation

Leopalace Leasing Corporation

Leopalace Insurance Co., Ltd.

Leopalace Insurance Co., Ltd.

Leopalace Finance Co., Ltd.

Leopalace Finance Co., Ltd.

● Objective (effect) ●● Supply wide range of products by making full line of offerings available and secure
new tenants● Improve profitability for leasing
business

2 Related businesses● Implement strategies for utilizing external resources through business collaborations ● Narrow down related businesses
and subcontract to external entities

From fiscal year ending March 2010

Construction Subcontracting
Division

Improve profitability in implementing various individual businessstrategies

1 Core businesses

Corresponding businesses

Construction
Construction Subcontracting
subcontracting business
Divisionsegment

Changes pertaining to the core businesses include theincorporation of the broadband business into the leasing business,since the broadband business is an extension of the leasing business.
The domestic hotel business, on the other hand, which used to be apart of the leasing business segment until the fiscal year ending March
2009, was removed from the leasing business segment and combinedwith the resort business, which shares a similar management mode, to● Concentrate implementation ofmanagement resources into corebusinesses

During the first year of the New Medium-term Management Plan, we aim to build a new business structure by pursuing two major themes:【Change of Business Segments (beginning in the fiscal year ending March 2010)】
The “New Medium-term Management Plan: Change for NEXT”
concentrates management resources in the two core businesses (theapartment construction subcontracting business and the leasing
business), while the relevance with the core businesses are emphasizedin clarifying the priorities of businesses categorized as related● Secure adequate amount of orders forconstruction subcontracting projects● Improve balance of revenue andexpenditure for leasing business

4 Promotion of management rationalization

In order to further clarify the management policy for the selection of corebusinesses and concentration of management resources, all non-core

integrated our domestic hotel business with our overseas resort business as
our hotel and resort business to improve management efficiency.

● Review “Organizational Structure” and “Earnings Structure” in leasing business

Concentrate management resources oncore businesses and intensify sales activities

Related Businesses

clarified with an emphasis on their relevance to the core businesses at thesame time.
We have also integrated our residential business and strategic realestate development business into our real estate business, as well as● Substantiate stock variations through sale of studio, large studio and family units

Broadband
Business

Creation of new business modelwith our core businesses
as the backbone

businesses are initially lumped together as “Related Businesses”, for which
continuous monitoring is enhanced and reforms based on profitability are
to be implemented.
We aim to promote strategies that have the priority of these businesses

2 Core businesses: Implementation of aggressive sales

Leasing Business● Enhance governanceDuring the second year, we will promote improvement strategies that focus on the “profitability” of each individual business. We will enhance
activities intended to break early from habitual deficit conditions, particularly in the leasing business. Our earnings performance will also be
increased in the related businesses by focusing on businesses in which we want to concentrate our efforts.

ACTION
PLAN

Third Year

（Ending March 2012）

Next growth stage through completion of building business structure● Objective (effect) ●1 Core businesses● Sustain and accelerate "Unified Management for Construction Subcontracting andleasing Businesses"● Restore profitable leasing business

During the third year we intend to raise the level of completion for our business structure, with increased profitability for each individual
business and with attention already on our next growth stage. We will accelerate even further “Unified Management for Construction
Subcontracting and Leasing Businesses” in our efforts to enhance our business structure built around our core businesses.
06
Leopalace21 Investors Guide 2009

Medium-term Management Strategy-2【Strategies for Core Businesses】
Build new business structure for core businesses based on our endeavors in “Unified Management
for Construction Subcontracting and Leasing Businesses”
Apartment Construction Subcontracting Business

1

Product strategies and regional strategies

Leasing Business

From specializing in studios to offering full product line
NEW

NEW

NEW

Our conventional studio units
Leopalace21 series

Residences with attached rental units
LEO NEXT series

Large studio units
LEO NEXT series

Family type units
LEO NEXT series（19.87 to 23.18 square meters）（21.65 to 56.04 square meters）（26.08 to 37.26 square meters）（67.49 to 77.77 square meters）「Con Grazia」「Lavo cerna」「LEPIDO」

1

Sales strategies (tenancy securing measures)

Assortment of managed properties, as well as
strategies for maximizing rental revenue fromleasing properties and securing tenants

Average rent for studiounits: Approx.
¥50,000

Existing properties (primarily studio units)「Lavo vita」

Studio units〔Urban areas〕

Maximize rental revenue fromleasing by optimizing leasing prices.

Sequential review of leasing prices
in areas with high demand

Increase corporate
customers

Average rent for familytype units: Approx.
¥70,000

Supply of new properties from March 2010 onwards〔Regional towns〕

Enhance utilization ofreal estate agents

Average rent for larger
studio units: Approx.
¥60,000

Tenancies can be secured
with relative ease

Large studio units〔Ordinancedesignated cities〕

Family-type units〔Nationwide〕
Improvements to revenue due torise in leasing price range

Supply of studio units to beterminated in all areas other thanordinance designated cities

Potential demand of corporate
customers/Relocation ofexisting studio unit tenants

In the leasing business, we will secure more tenants by proactively responding to the demand to relocate for our existing studio unit tenants, and to the potential
demand of corporate customers, by supplying larger studio units, family-type units, and residences with attached rental units as new lease properties in addition
to our existing studio units, through the “One-stop Strategy”. Furthermore, improvements will be made in terms of profits through the rise in the price range ofleasing and renting rates.
（Living area: 7.5 mats*）*1mat =3.3 square meters（Living area total: 20 mats）（Living area: 12.2 mats）

Central region(urban areas, commercial districts)（Living area total: 31.5 mats）

Suburbs(commuter neighborhoods, regional cities and towns)

Leasing Business

2

Strategies for improving sales and earnings generating capacity
Enhancement of linkups withreal estate agents

Further increases to corporate
customers

In the past we implemented products by targeting primarily younger people, living on their own, in studio units in urban areas. In the future, however, it will be

The creation of the “Leasing ALM System”,
promoted by the previous Medium-termManagement Plan as a means to optimize

We have been striving to expand our own
sales offices (Leopalace Centers) as our primarylocations for recruiting tenants. In the future,

The acquisition of corporate demand, which we
passed up in the past, will become possible byoffering a full line of properties, including family-

possible for us to offer a one-stop acquisition of new customer groups, such as adults in general, DINKs (double income, no kids), and families, through our efforts
in the acquisition of demand arising from the change in lifestyle that results from tenants moving out of studio units, and implementing larger studio units andfamily-type units as well as residences with attached rental units (responding to the need to rebuild in urban areas). Through this “One-stop Strategy”, we areaiming to secure orders and expand serviced areas (urban and suburban areas) in the apartment construction subcontracting business, by promoting the unified

operations of expanding property assets

however, we will enhance our linkups with

type units. For this purpose, we will increase(apartment unit stocks), is scheduled to begin
operating from fiscal 2010. The operationof this system will provide a mechanism forreal estate agents, which number in excess of
300,000, to increase the number of tenancy
contracts signed through this channel andour direct contracts with corporations in the
future. Sales organizations that were establishedat individual sales offices in the past will be

maximizing the profits of property owners andour company.

reduce the burden on our own sales offices,
thereby allowing

transformed, and a unified corporate salesorganization will

us to significantly
integrate,
discontinue, andbe establishedat our head
office, thereby

merge to reduce
administrative
expenses.

enhancing its
sales capabilities.

Enhancement of supply to areas with high demandUpgraded studio units

Family use

Expansion of targeted tenants by incorporating new stocks

management of the apartment construction subcontracting business and leasing business.

Apartment Construction Subcontracting Business2

Leasing ALM system

Orders and sales strategies

Property
ownersLiabilities

Leopalace21●Total maximization of proﬁts
between unit contracts andleasing●Best balance between rental
revenue and leasing rental
costs

AssetsTenants●Lease price setting for
maximizing lease prices x
number of tenants●Reduce life cycle costs forproperties

Enhancement of new ordertakingEnhancement of linkups withapartment unit owners

Stabilization of loanacquisitions

It will become possible to acquire newowner groups from customers in the suburbs

We aim to acquire repeat customers among
the existing apartment unit owners, as well

We will implement strategies withconsiderations that include even fundthrough the enhancement of our order-taking
capabilities for large studio units and familytype units, while taking in new owners in urban

as new customers through introductions,and to enhance our linkups with apartment
unit owners. We will implement a variety ofacquisition concerns for apartment unit
owners in order to secure stable sales. We will
aggressively utilize such means as using public

As an emergency strategy to deal with the rapid drop in demand,

areas by enhancing our proposals for residenceswith attached rental units. We will also be
holding various seminars in a proactive manner
to accelerate the acquisition of these newapartment owner groups.

meticulous strategies to build a relationshipwith customers based on trust through such
efforts as substantiating offerings of the “Class-L”
membership services for apartment unit owners
and sponsor peer gatherings, while continuing

financing services such as the “Japan Housing
Finance Agency” or “Affiliated Loans”, forexample, or limiting the amount of investmentsby reducing the scale of the properties (thereby
stabilizing the loan executions) to stabilize loan

January 2009, with evidence of tenancy promotion effects. It iswith our follow-up services.

acquisitions.

07
Leopalace21 Investors Guide 2009

Implementation of special discounts

Web site dedicated to real estate agents

Web site dedicated to corporate customers● Image of ordinary rental revenue

we will implement discounts to the rent of leased properties for

Rent
Vacancy arises

periodic leasing contracts. This has already been employed since● Image of rental revenue with special discounts

Balance of rental
income improves as
economy recovers

Rent

Balance of rental
Promotion of income improves as
Vacancy tenancy through contracts reachfull termarisesdiscounts

therefore our policy to implement special discounts in a flexible
manner during the fiscal year ending March 2010 as well. This is ofcourse a strategy that can be employed for sub-leased properties.
Furthermore, special discounts are terminated at the end of tenancy
terms in order to sequentially improve rental revenue.

08
Leopalace21 Investors Guide 2009

Term

Term

Medium-term Management Strategy-3【Strategies for Related Businesses】
Concentration of management resources in core businesses is prioritized, while monitoring isenhanced for related businesses
Strengthening our corporate value for the future, by building a robust business structure capable of securing profits even in a rapidly
deteriorating business environment, is the chief objective of the New Medium-term Management Plan. We have therefore made the decision
to prioritize the creation of a robust business structure foundation by once again concentrating our management resources into our corebusinesses. With regard to related businesses, we will enhance continuous monitoring and establish business domains for concentrating efforts
based on the priorities assigned according to their relevance to core businesses.
Business name

Status analysis

Real Estate BusinessWe will concentrate on the disposal of sales inventory for the time being
and place the utmost priority on improving profit structure
Our core target for the sale of residential buildings, in terms of
demographic dynamics, is the “Baby-boomer Junior” generation(born between 1971 and 1975), as over 60% of this population isconcentrated in the three major metropolitan areas. The target
areas for the real estate business for the time being, therefore,

Future strategies

Leopalace Leasing
Corporation

Primary properties comprise studio units and there isno differentiation from other companies with regard toproperties presented to family groups.

Efforts will be made to start offering properties intended forfamilies and a foundation for acquiring corporate customers
will be established.

will remain these three major metropolitan areas.

Leopalace InsuranceCo., Ltd.

It will be possible to expand the business base linked withthe leasing business and to secure a stable cash flow.

The current condition is sustained with regard to salesorganization, with the aim of increasing profitability at theearliest possible time.

2007, and with deterioration driving the market in 2008 and withthe financial crisis occurring in September 2008, the situation is
becoming increasingly worse.

Silver Business

The operating rate of facilities is low, with the profitability ofthe operating business unit in decline.

Orders for the construction of new facilities have been
terminated to increase the operating rates of existing
facilities.
Our sales capabilities are enhanced through the utilization ofcomprehensive resort facilities and implementation of cost
reductions.

Resort Business

The number of people visiting Guam has dropped since
October 2008 due to the economic downturn.

Domestic HotelBusiness

The business environment for the overall hotel industry has
deteriorated, due to the economic downturn and decreased
corporate demand.

Efforts are being made to improve operating rates and to
reduce costs.

Real Estate BusinessLand prices are in a correction phase but demand is expected
to remain sluggish for the foreseeable future, althoughgovernment economic stimulus strategies can be expected.

Sales inventories are to be disposed of and the acquisition of
new land will be discontinued.

Leopalace FinanceCo., Ltd.

Bad debts are on the rise due to deterioration in the market
environment for secured loans provided to real estateagents.

Credit management has been thoroughly implemented witha rigorous evaluation of collateral and the implementation of“Bridging Loans” for the construction of apartment buildings.

Expansion of business is promoted based on new positioning as core businessWe have been promoting the installation of STB units (LEO-NET terminals)
for our unique broadband service (Leopalace BB), which we have been providing
to tenants who reside primarily in apartment units under our management. We
will further expand the scale of this business as the number of units under ourmanagement increases and installation rates of STB units improve. Furthermore,
we intend to introduce the service to our silver business facilities and to offer thesystem to external facilities such as hotels and hospitals.

● Transition in number of units with which terminal service isavailable and number of subscribers (planned)
Number of units with which terminal service is available
Number of subscribers（thousands of units & thousands of subscribers）

700
600

480

500
400
300

412
345

362

404

523
454

567
504

611

2007/3 2008/3 2009/3 2010/3 2011/3 2012/3（record）（record）（record） （plan） （plan） （plan）
Previous Medium-termManagement Plan

09
Leopalace21 Investors Guide 2009

Flat Kumamoto

Leopalace Residential Center

Owners Salon

stock as priority is placed on improving the environment for the
restoration of profit structure for the real estate business unit.
Furthermore, with the existing “Strategic Real Estate
Development Business”, our ongoing real estate investments,
with an outlook of improving and expanding business
infrastructures, are also suspended for the time being in order toconcentrate management resources into the core businesses.

Silver Business

The increasing trend in the number of people in the “Silver
Generation” (age 65 or older) is continuing as the aging ofJapanese society progresses. Just under 60% of this populationis concentrated in the three major metropolitan areas, andthe target areas for the Silver Business for the time being will
therefore remain in these areas.
Since no significant solutions have been found for thequalitative and quantitative issues of nursing care personnel,
which is on the agenda for our entire industry, the environmentis still too severe to secure profitability in the business.
La Terrace Ichihara

Orders for the construction of new facilities have beensuspended amidst this economic downturn, which was triggered,among other factors, by the financial crisis, and it is our policy
to concentrate our efforts on improving the operating rates ofexisting facilities to prioritize the improvement of profitability in

302

100

Set Top Box（STB）Living space (B-type)and demand is expected to remain sluggish for the foreseeable
future. The stocking of new properties, therefore, is suspended
and efforts are concentrated on disposing of existing sales

545

200

0

The current real estate market has deteriorated significantly

Efforts are concentrated on improving operating rate of existing facilities and priority
placed on improving profitability in operating business unit

Broadband Business

The broadband business has been redefined as a core business because of
its utilization of apartment stocks, which are created through the apartment
construction subcontracting and leasing businesses, and because it is a “businessthat creates revenue with the apartment stock as a base”.

In terms of the market situation, however, the real estatemarket started to show some sluggishness in the second half of

New Medium-termManagement Plan

the operating business unit.
We believe that by dedicating effort to the operating
business unit, we will be able to raise the level of know-how
for the operation of facilities, including strategies for securing
tenants, which will lead to the creation of a robust business baseto transition to the next stage of growth.

10
Leopalace21 Investors Guide 2009

Azumi En TokiwadairaMedium-term Management Strategy-4【Strategies for Related Businesses】【CSR Strategies】
Promote CSR management to contribute as corporate citizen, creating sustainable society

Domestic Hotel Business
Improve operating rate, while striving to reduce costs

Leopalace21 considers contributions towards the creation of a sustainable society a critical management mission, in response to the expectationsof all of our stakeholders through action taken based on our corporate philosophy of “New Value Creation” and by being aware of our status as acorporate citizen.
In order for us to pursue this mission, we are promoting aggressive CSR management according to the following four policies:

Asahikawa(Opened August 2003)

Domestic hotel business services, with “Hotel Leopalace”, are

Sapporoprovided at eight locations nationwide. These are primarily in(Opened November 2002)

major cities, from Asahikawa (Hokkaido) in the north to Hakata
Niigata(Kyushu) in the south. These provide not only ordinary hotel(Opened September 2002)

stays but our core business sales offices are also located atthese hotels, playing a role in the sales locations for these areas.

Okayama(Opened September 2003)

Individual private customers as well as corporate customers

apparent.

SendaiHakatadeclined in number with the drastic economic downturn,and the business environment for the entire hotel industry isdeteriorating. Hotels under our management are no exception,with reductions in the operating rate starting to become more

(Opened April 2003)(OpenedApril 2007)

Hotel Leopalace Hakata● Various plans that suit lifestyles● Around-the-clock reception for apartment unit
management
offered in terms of products and effort made for the development● Charitable contributions and relief fund-raising activities● Creation of vigorous work environments● Clean Campaign ● Promotion of sports● Kids Emergency Number (Kids Dial 110)
● Collaborative action for blood donations

A product line that meets a diverse range of tenants’ needs is beingof products that cater to the needs of a wide range of land owners

We are proactively involved in contributing to local societies through such activities as

Nagoyafrom the perspective of CSR management through actual businesscharitable contributions and relief fund-raising activities for disaster-stricken areas both(Opened May 2002)

activities. We are also operating around-the-clock phone support toinside and outside Japan, clean-up activities sponsored in collaboration with apartment

provide a comfortable lifestyle for our tenants. In December 2008, ourunit owners at local communities, and the registration of Leopalace Centers nationwide

head office and all branch offices were simultaneously certified in thein the “Kids Emergency Number” program, offering our cooperation in providing safety

ISO 9001 quality standard (latest version issued in 2008).

and peace of mind to local communities. We are also endeavoring to create favorable

Yokkaichi(Opened February 2003)

work environments through the implementation of support for child birth and childMarketing and sales activities suitable for the characteristics ofrearing, as well as proactive employment for physically disabled persons and seniors.

each area, where our eight hotels are located nationwide, arecarried out with the utmost priority placed on improving theoperating rate through multifaceted action to stir up shortterm, long-term, and corporate demand. Concentrated efforts
are also being made to reduce costs at each location to pushdown the break-even point and to strive for improvements in
profitability.

Services ofsuperior quality andbountiful living

Hotel Leopalace Nagoya

Resort Business
Aggressively implement sales activities that take full advantage of our strength in providing
comprehensive resort services

Sound and highly transparent
business activities

Comprehensive resort facilities equipped with sports andother facilities are being offered under two brands, “Leopalace

Four Basic
Policies

Contributions to local society
Favorable work environments

Realization of society
considerate ofglobal environment

Resort” and “Westin Resort”, through LEOPALACE GUAMCORPORATION, our wholly owned subsidiary.
A series of infrastructure improvements were completed
and various customer drawing facilities were implemented inrecent years as the business started to get back on track. Dueto the impact of the simultaneous global downturn, however,the number of people visiting the island of Guam has been
declining since October 2008.

● Participation in the “Team Minus 6% ” program● Participation in the Eco Cap program● Implementation of tests on solar power generation panels
on our model buildings and condominium buildings

Leopalace Resort● Aggressive investor relations activities● Establishment of compliance structure

Although we find ourselves in a severe environment, our resort
business has the major strength of providing a “comprehensive
resort facility” and we intend to restore its operating rate by
implementing sales activities that maximize the benefits of thisstrength. In addition, we will strive to reduce costs and attain

Track and soccer field

We take part in the “Team Minus 6% ” program, a national project intended to

We are thoroughly and strictly observing laws and regulations, as well
as social ethics, though the establishment of the “Charter of Corporate
Ethics” in our business implementation processes. We established ourCompliance Hotline and distributed our Compliance Manual to all

improvements to profitability.

personnel throughout the company, and we continuously implement
training seminars to thoroughly instill compliance. Furthermore, in order
to secure transparency of the company and to disclose information in atimely manner, we issue various investor-relations tools, convene various
Westin Resort

11
Leopalace21 Investors Guide 2009

Competition-sized pool

IR events, and maintain an IR web site on our aggressive IR activities.

reduce greenhouse gases, and we carry out six activities including regulation oftemperature and putting into effect proper methods for the consumption of watersupplied by the water service. Among these efforts is the installation of a device
that automatically shuts off power to air conditioners, installed in apartment units
under our management, after three hours of operation, as well as calling on ourcustomers to save energy.
Other than these, we are spreading the range of our activities through such
efforts as our participation in the Eco Cap program, and with the installation of solar
power generation panels on our model buildings and condominium buildings on a
trial basis.

12
Leopalace21 Investors Guide 2009

Outline-1: Company History● Formulation of the “New Medium-term Management Plan: Change for NEXT”.
● Opening of Leopalace Center Taipei and Leopalace Center Pusan● Formulation of the “Medium-term Management Plan: United Spirit”.

（● All events illustrated in the timeline occurred in respective calendar years, while all operational data in charts
represent respective ﬁscal year ﬁgures.）● Number of managed properties increased to 300,000● Start of Residential and Silver Businesses● Launch of Monthly Leopalace Flat service● Opening of Leopalace Center Seoul● Beginning broadband business● Launch of Leopalace REIT II and III, a series of real estate securitization products● Capital increases to ¥37.24 billion following public offering of new shares (¥37.56 billion in 2003)● Listed on 1st Section of Tokyo Stock Exchange● Capital increase by public offering, capital increase to ¥55.64 billion● Opening of Leopalace Center Shanghai● Launch of Leopalace REIT, a real estate securitization product● Capital increases to ¥30.52 billion following third-party allotment of new shares● Change company name to “Leopalace 21 Corporation”

Other Divisions

6.0％● Launch of Monthly Leopalace service

Leasing Division● Leopalace 21 Villa Colonna Series wins the 1998 Good Design Award

11.3％● Launch of Leopalace Fraternity● Sales breakdown by division for FY
ended March 1991 (consolidated)

Construction
Division

2.1％

Apartment
development/sales

80.6％● Listed on over-the-counter market(JASDAQ)

87

86

89

88

91

90
le
Bubb

92

d

Perio

Grow

odel
m
s
s
ne
Busiransitiont

Post le
b
b
Bu od
Peri

to
turn

Re

wth

earn

Net worth turns positive on a consolidated basis

Construction
Subcontracting

Establishment of
New Business Model

Net Sales by Division (consolidated)

Return to profitability at net level(¥100million)

7,332

7,000

6,316

Apartment construction
subcontracting business

Related businesses

49.0％

3.8％

Leasing business

47.2％(in the ﬁscal year ended March 1996)

Synergies from Construction and Leasing start to be felt in earnest
full-operation
Number of Apartment Units under Management

8,000● Sales breakdown by division for FY
ended March 2009 (consolidated)(in ﬁscal year ended March 2001)

Return to profitability at operating level

Apartment development/
sales businessedwidWorl ssion
rece

gro
ings

(in the ﬁscal year ended March 1997)

Developer

07

96

95

94

93

d

rio
th Pe

97

99

98

01

00

05

04

03

02

06

09

08

Transition in Number of Owners(or Number of People Who are Members of Leopalace Fraternity)
30,000600,000

6,730

6,000
5,000

4,222

4,000
2,976

2,000

0
Real Estate
Construction
Leasing
Other

500,000

25,11425,000

3,604

3,000

1,000

506,742

4,763 4,654

572

1,168

1,445

1,918

2,205
1,073

744

635

736

1,055

1,371

1,670

22,568 22,627

442,025

1,915 2,062 1,873

20,258400,000

87/3

88/3

89/3

90/3

91/3

92/3

93/3

94/3

95/3

96/3

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

08/3

09/3

497
54
19
3

1,049
54
47
17

1,265
34
109
37

1,632
45
180
61

1,777
46
250
132

537
78
349
110

183
85
390
85

26
137
364
108

18
224
377
116

5
531
431
88

1
760
519
91

12
915
618
125

27
1,040
728
120

44
1,073
841
104

37
17
637 1,544
1,082 1,268
118
147

0
1,902
1,628
74

0
2,250
1,889
83

0
2,480
2,166
116

0
1,952
2,497
205

0
0
3,161 3,275
2,772 3,027
383
427

0
3,592
3,346
395

388,500

20,00017,107344,045
304,111300,000

15,00014,218259,221
11,594* The sales figures of the Real Estate Division from March 2003 onwards are included in the “Other” category.
216,463

Recurring Profit (consolidated)

200,000(¥100million)

800

760

600
445

400
200

158

171

211
65

0
-100

87/3

88/3

89/3

90/3

91/3

37

-10

-22

-6

92/3

93/3

94/3

95/3

96/3

102

144

97/3

98/3

154

169

9,128

152,351
136,755

502

408

346

340
78

517

714

547

10,000181,484

100,000

167

7,115

117,273
100,035

5,517

5,000

83,176

4,397
2,991
1,897

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3 08/3

09/3

0

97/3 98/3 99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3

0

98/4 98/12 99/12 00/12 01/12 02/12 03/12 04/12 05/12 06/12 07/12 08/3 09/3

*Figures from March 2008 onwards represent the number of owners (figures obtained from the end of fiscal
year calculations), whereas those up to and including December 2007 represent the number of people whoare members of the Leopalace Fraternity (figures obtained from the end of year calculations). (The Leopalace
Fraternity has been transferred into Class-L as of the end of December 2007.)

13
Leopalace21 Investors Guide 200914
Leopalace21 Investors Guide 2009

Outline-2: Core Business【Core Business Model】【Construction/Leasing Synergies】

Further evolution of our basic strength, "Model of Synergies between Construction and Leasing".
The “Model of Synergies between Construction and Leasing” development, which was intended for the organic consolidation of real property
utilities, has after a twenty-year history been converted into “High Revenue Generating Asset Management” and transformed our businessmodel into one that can maximize the benefits from the scale of our stock business.

Our Company

Proposing and contracting
construction of leased
apartments

Property ownersegment(Landowners)

Apartment
Construction
Subcontracting
Business

Bulk leasing contract(promising stable
management)

Simple and convenient
leasing format(Available for use startingfrom 30 days )Leasing
Business

Rental agreement

Total Support System(TSS)(maintenance andmanagement of buildings)

Provision of various services
that support daily life

Monthly agreement[Construction subcontracting revenue][Management services revenue]

Tenant segment(those moving in)● Individuals(general)● Corporations(dormitories
and company
housing)

Studios (less than 30m2): Construction
Division's main productIn the apartment business, accurately assessing
the changing needs of specific customer groups

Rental agreement for long-term
occupancy and Monthly agreement for
short-term stays: the Leasing Division's
two main products

over the next 20-30 years is essential. In thisMonthly Leopalace Flat has multiple
functions
In recent years, Monthly Leopalace Flat has been
employed by a diverse group of tenants. Simply

The Leasing Division offers products designed

context, we have developed products primarily
targeting single individuals, who account forthe majority of apartment tenants. Thus, wefor long-term occupancy and short-term stays.

offer studio units (single room with kitchen, lesspayments and without agent fees, whereas

than 30 square meters) as our main product.
In addition, we are offering a new lineup thatthe latter is suitable for a temporary tenancy as
it offers a “Monthly Agreement” that includes

includes larger studio units and family-typefurniture, consumer electronics, and utility

units, as well as residences with attachedrental units to target new tenants to improve

expenses, and requires an advanced payment in asingle lump sum.

put, long-term occupancy tenants account forsome 60% of Monthly Leopalace Flat tenants andshort-term tenants make up the remaining 40% .

The former responds to a long-term occupancy

Long-term occupancy functions include ordinary
residential use, company and school dormitories,

through a “Rental Agreement” with monthly

and housing for job transferees away fromfamilies. Meanwhile, reasons for short-term stays
include business trips (mainstay), job training,
entrance examinations and lectures, temporary
housing during moves and home renovation, andoccupancy rates and to create new demand.
Indeed, proposals we submit to owners are forsightseeing. As mentioned earlier, the success of
the Monthly Leopalace Flat service owes to ourthe construction of apartment buildings locatedin areas where we expect large lease demand
based on detailed analysis of the market.

accurate response to diverse customer needs.

[Usage fee revenue]

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

The increasing number of property owners who selectour services leads to an increased number of leased
properties (managed properties), thereby promoting
the expansion of the Leasing business.
Unit bath comes equipped withconvenient bathroom dryer features

Building a unique business model withthe fusion of construction business andleasing business based on the conceptthat "apartment management exists
only because of leasing"

Exhibiting an extremely strong
competitiveness in the industry byfacilitating compatibility between
benefits for property owners andbenefits for tenants

We are building our business based on the basic
policy that states "Apartment Management

Our customers are from both the property ownerbase, owners of the real property, as well as

Exists Only Because of Leasing" and with our

tenants, who wish to move into leased properties.

belief that apartment building construction and

The strength of the "Model of Synergies between

leased property management are inseparable
businesses. From the perspective of property
owners, the biggest concern regarding theirConstruction and Leasing" is born out of various
mechanisms that maximize the benefits for bothparties.

decision to build an apartment building is"whether it would be possible to continue
securing an adequate number of tenants
throughout the years". Consequently, we

We established a "Total System for Apartment
Operations" that not only offers the membersof the property owner base recruitment andmanagement of tenants, through a bulk property

provide a "Bulk Leasing System" to the property
owners by conducting the Leasing business on
our own and by building an organization thatcan sustain a high rate of tenancy. We resolve
the concerns regarding apartment building

leasing system and cooperative system, but also
includes maintenance and management of thebuildings through the provision of comprehensive
support.
Furthermore, to the members of the tenant

management for property owners and provide
them with a mechanism that makes it possible

base, we provide not only the development
and provision of leased properties that feature

to commission us with the construction of anapartment building by realizing a "Model of
Synergies between Construction and Leasing".

superior designs and functionality, but also units
furnished with consumer electronics by providing
leasing formats (such as Rental agreement andBy owning such a unique synergy between
Construction and Leasing, we are able torealize extremely high stability in our business
operations.

Monthly agreement) to respond to the diverse life
styles of modern times.
Our business model that offers significant
benefits to both parties exhibits an extremely
strong competitiveness.
15
Leopalace21 Investors Guide 2009

Expansion of student’s rental market
through business collaboration;
improved occupancy rates throughimproved corporate sales
By actively developing expansion for new
demand, we have been successful in further"Leopalace21 Series" exterior view

"Leopalace21 Series" Interior view

Facility with Pet Accommodating
Specifications (some available)

Microwave oven

Kitchen with an electricalcooking facility

improving our occupancy rates in this particularsector.
With the original intention of retaining
existing student tenants from 2005 we concluded
an agreement with companies that have a large
number of students in their correspondence study
businesses. We also established a new payment
option that allows for monthly payments for

Leash hook

Western door with pet access

Refrigerator

Security Installations

the use of Monthly agreement, providing thepossibility of making payments necessary to moveinto the leased properties as if they were being
paid as rent on a monthly basis through a businessalliance with credit card companies. This has
expanded demand and developed a structure thateases the burden on students starting a new life.
We also intend to expand corporate tradingeven further, by utilizing as leverage our extended
product lineup that incorporates larger studiounits and family-type units. What used to beregional corporate sales business units locatedat individual sales offices were integrated intoa single corporate sales organization based at
our head office in April 2009. This office will bedirecting sales to the head office functions ofother corporate groups.

Bed

Automatically locking gate

Intercom equipped with monitor
Television also offers broadband
services

Card key

Security windows (first floor only)*Includes currently unfurnished/uninstalled properties

16
Leopalace21 Investors Guide 2009

Table and chair (table is collapsible)

Air-conditioner

Outline-3: Characteristics and Competitiveness of Core BusinessCharacteristics and Competitiveness-1 Master sublease system and Total Support System ensuresmooth maintenance and administration

With our unique supply plan, we promise 30 years of stable management

Three unique points that support the master-lease system

Based on our belief that successful leasing operations are the key tothe apartment business, we introduced a master sublease system
which guarantees 30 years of stable apartment operations, aheadof industry rivals. Under the system, we first draft apartment supply
plans based on our research on market potential and tenant needs
in each of the about 1,130 segmented areas across the country.

Payment ofmaster sublease
rent to owners

OwnersBased on these plans, we make proposals to prospective apartment
owners, offering comprehensive support for the apartment
business from construction to maintenance and administration.

Leopalace21
Corporation

The master sublease system, which ensures stable rent income
over the maximum 30-year period, and Total Support System(TSS), which guarantees apartment building maintenance andadministration, represents our key support systems for apartment
owners.

Building

Unique tenant
recruitment
systemTenants
Payment ofsublease rent

Comprehensive
maintenance andadministration

Multiple tenant recruitment channels

Innovative leasing systems

Without successful tenant recruitment, theapartment business would not run smoothly. Our

Our products cover short-termstays as well as conventional long-

Reliable proxy maintenance andadministration

thorough research in local markets' potential

term housing needs, aided by ouroperations from building maintenance tobacked by our nationwide marketing activities

unique systems. Moreover, we havetenant administration. Furthermore, the asset

enables tenant recruitment independently as well as

introduced innovative businessvalue of buildings are maintained at a highthrough approximately 316,000 real estate agentsnationwide. We employ various recruitment media,

practices that do not require anyutility expenses; however, furniturelevel and the current Total Support System(TSS) has been implemented since April

including our nationwide office network, web sites,

and consumer electronics are

2007 to protect the life savings of owners

apartment rental publications, and TV commercials

included. Thus, we have successfully

against unforeseen incidents, replacing

to ensure efficient tenant recruitment. Meanwhile,prospective tenants are able to search for housing
units, anytime, anywhere from all over Japan.

recruited a broad range of tenantgroups unrivaled by competitors,
meeting multiple needs of boththe apartment maintenance, which was
systematically conducted by the “Leopalace
Owners' Mutual Insurance System” in the past.

On behalf of apartment owners, we carry out

individuals and corporations.

Characteristics and Competitiveness-2 Nationwide studio apartment network, supported by online＊ Total Support System (TSS) : a planned maintenanceprogram for apartment buildings.

search capabilities

Apartment buildings under master sublease contracts with Leopalace21 are available nationwide

Domestic network of 286 Leopalace Centers

Studios for which we have subcontracted construction and have

Visitors to Leopalace Centers at 286 locations nationwide cansearch real-time for studios using our online network. For
example, a person who lives in Tokyo can look for the most up-to-carried out maintenance and administration are located all overJapan, totaling some 506 thousand units. These studios werebuilt in areas where we estimated reasonable potential demand
based on thorough market research, in order to meet needs ofprospective tenants. We are the only industry player with this● Number of apartments managed by area
(at end-March 2009)

Hokkaido area:
13,528 units

Total number of units in Japan

506,742date information about studios for lease available in other areas

Koshinetsu area:
22,122 units

many studios nationwide.

such as Hokkaido and Kyushu, apply for the apartment, and sign
the contract on the spot. The nationwide sales center network

Hokuriku area:
15,580 units

Tohoku area:
31,663 units

Kinki area:
70,088 units
Chugoku area:
34,695 units

Kanto area:
179,335 units

Kyushu/Okinawa area:
42,693 units
Lavo cerna

Tokai area:
83,795 units
Shikoku area:
13,243 units

Lavo familia● Number of Leopalace Centers by area
(at end-March 2009)286*In addition to a further five overseas outlets.

Koshinetsu area:
14 Outlets
Hokuriku area:
9 Outlets

combined with our online network guarantees our ability to meeta variety of needs among prospective corporate and individual
tenants.
Enhancement of linkups with real estate agents has beenpromoted from the second half of 2008. In coordination with thissubstantiation of a collaborative linkup framework, we have started
to integrate our own domestic sales offices. As a result, the numberof locations nationwide was reduced from 306 as of March 2008
to 286 by the end of March 2009. This number is scheduled to befurther reduced to 187 by the end of March 2010. As a result, we
also expect to see a reduction in our administrative expenses (fixed

Chugoku area:
22 Outlets

Kanto area:
88 Outlets

Kyushu/Okinawa area:
34 Outlets

Tokai area:
30 Outlets
Shikoku area:
8 Outlets

costs) that are expected to exceed ¥6 billion in comparison withthe previous fiscal year, thereby enhancing our business frameworkfor profitability.

Powerful web research based on nationwide network
Searchthousand studios managed nationwide, we are the only industry
player that can provide prospective tenants with real-time searchcapabilities of studios available nationwide even using our mobile
Internet site.

Selection

Application

Leasing Agreement

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

17
Leopalace21 Investors Guide 2009

Tohoku area:
27 Outlets

Kinki area:
42 Outlets

Characteristics and Competitiveness-3 Real-time web search possible anywhere, anytime
Visitors to our web sites can search real-time for the most up-todate information on studios available across the country, and apply
for the apartment and sign a contract on the spot. With some 506

Hokkaido area:
12 Outlets

Total number of outlets in Japan18
Leopalace21 Investors Guide 2009

Market Trend-1

Demands (Residential Construction Market)

Supply (Residential Leasehold■ Number of new residential housing starts (sorted by user relationships)

Construction Market)

Stock and Rebuilding (Residential Leasehold Construction Market)■ Number of studio units, number and shares of our units■ Number of new residential leaseholds (units under 30m2)

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

Number of new residential leaseholds

Number of new residential leaseholds under 30m2

Number of new residential leaseholds under 30m2

Number of units we supply

Market share of new residential leaseholds under 30m2

Our share

Studio housing stock(Thousands of units)

（％）

600

1,800

60.0

（％）

(Thousands of units)

150

75.0

537.9

1,600

1,200

1,226 1,213

1,249
1,173

1,145

800

426

418
442

455

459

467

518

136

118
113

600

211

166

192

116

129

139

138

223

198

202

207

400

107

160

165

39.6

24.3

23.7

438

476

26.3

377

366

373

367

353

356

312

45.0

60

108.1

113.5

112.2

59.3

110.4

93/10

98/10

30.0

14,00015,4702,054

16,132

65.6
42.8

116.9

44.9

49.7

31

28

19

15

13

12

12

10

12

10

11

12

12

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

08/3

09/3

Note : Excerpted from Residential Housing Construction Work Commencement Statistics for fiscal
2008 of the Ministry of Land, Infrastructure and Transport.

Residential housing supply status (commencement of construction
for new residential housing) has reached the lowest level in over a
decadeAccording to the Residential Housing Construction Work Commencement Statistics ofthe Ministry of Land, Infrastructure and Transport, the overall status of the supply forresidential housing and the number of newly built residential housing units for the pastten years peaked in fiscal 1996 (ending March 1997) with 1,630 thousand units andthereafter the number continued to hover around 1,200 thousand units during the ninesubsequent years, which indicated some slow recovery.
The condition of the real estate market significantly deteriorated in fiscal 2007 (ending
March 2008) due to the impact of the Revised Building Standard Law, which came into
effect in June 2007, and then again in fiscal 2008 (ending March 2009), from the impactof the global financial crisis. The number of construction commencements of newresidential housing has declined to a level of about one million units.

Leased residential housing taking up greater proportion of housing
A look at the trends for commencing new residential housing in recent years in terms ofuser relationships indicates that leased housing and owned houses have had a relatively
slow rate of depression even as the market deteriorates, and comprise an increasing
proportion in the makeup of overall housing. Leased residential housing is our coremarket among these, which recorded 445 thousand construction commencements for
new residential housing and dominated the makeup of the total number of constructioncommencements of new residential buildings, attaining the highest share by reaching
19

Leopalace21 Investors Guide 2009

0

04/3

05/3

06/3

07/3

08/3

09/3

0

Note 1 : Excerpted from Residential Housing Construction Work
Commencement Statistics for fiscal 2008 of the Ministry of Land,
Infrastructure and Transport.
Note 2: All figures are based on fiscal year periods.

as high as 42.8% . Residential housing for allotment sales(individual houses and condominiums), on the other hand,
has been experiencing the impact of reluctance on the partof consumers to make purchases due to the drastic economic
downturn.

Construction of leased units less than 30㎡
increasing at steady pace
Leased units under 30㎡ constitute our core field andhave shown a rapid increase in recent years. The amountof construction work commencing in fiscal 1999 (ending
March 2000) for leased units under 30㎡ bottomed out at
73 thousand units but showed a recovery by reaching 100
thousand units by fiscal 2002 (ending March 2003). In fiscal
2006 (ending March 2007) this figure increased further to 127.6
thousand units. The figure, however, dropped to the level seenin fiscal 2004 (ending March 2005) in fiscal 2007 (ending March
2008) and fiscal 2008 (ending March 2009), due to the impactof the Revised Building Standard Law and the financial crisis.
Furthermore, the proportion of residential units less than
30㎡ among the overall total number of leased units being
constructed has been sustained at a high level since fiscal 2004
(ending March 2005), dominating with a share that amounts
to about a quarter of the market.

0

04/3

06/3

03/10

2,790

2,664

55.9

56.3

5,371

15.0

07/3

08/3

09/3

0

Note : The total number of units supplied by our company is taken as theactual number of units supplied.

Our share of supply for studio apartments is
56.1%
The reason behind this increase in leased units under 30㎡ is
the increase in the number of young and single households inurban areas seeking a new lifestyle, along with the birth of a
new demand, such as the outsourcing of corporate dormitories
and company housing.
Furthermore, the graph shown above represents thenumber of new units supplied by our studio apartment
operations (Apartment Construction Subcontracting Business)for the construction of leased units under 30㎡ . In fiscal
2006 (ending March 2007) we were able to maintain or
improve on our high market share of 43.8% of all suppliedunits in the market. It is clear that we are in possession of aformidable market share in this field. Moving onto fiscal 2007
(ending March 2008), the market was impacted by the Revised
Building Standard Law during the fiscal year, and in fiscal 2008
(ending March 2009), the market was affected by the financial
crisis, which led to the decline in the number of constructioncommencements for new leased residential housing, dropping
to undercut the level of fiscal 2006 (ending March 2007) by

0

93/10

0
2001〜2003
1996〜2000
1991〜1995
1981〜1990
1980 and before

Now（6.5％）
5 years ago（16.6％）
10 years ago（16.0％）

4,510

20 years ago（28.1％）

5,282

25 years ago（32.9％）

6,000

8,045

2.0

2,577
5,100

8,000

4,000

05/3

242.9

16,076
1,043

6,939

2,000
0

4.0

1,303

12,000

10.0

127.6

2.4

■ Trend in residential leaseholds by period

10,000

311

8.0
6.0

3.4

(Thousands of units)

20.0

122.8

7.0

18,000

23.7

100

438

10.0

500

40.4

30

451

1,000

16,000

200

121

636
200

56.1

43.8
39.6

30.0

23.6

231 242

60.0

445

138

218

116.9

0
90

26.0
119

50.2

40.0

300

126

112.2

108.1

538

431
200

113.5

444.7

1,035 1,039
444

147

430.8
400

516
1,000

14.0
12.0

2,451

1,500

120

467.3

1,285

1,173 1,193

122.8

50.0

458.7

1,179

3,447
3,215

127.6

500

1,341

16.0

2,000

517.9

616

（％）

3,000
2,500

1,630

Our share

4,000
3,500

(Thousands of units)

1,400

Our stock(Thousands of units)

98/10

03/10

Note (for both graphs above): Excerpted from Residential Housing and Land statistics survey forfiscal 2003 of the Ministry of Public Management, Home Affairs, Posts and Communications(results from the survey for fiscal 2008 are expected to be released in the summer of 2009).

Increasing studio stocks
On the other hand, the stocks of studios are in a steadily increasing trend. According
to the Residential Housing Construction and Land Statistics Survey, conducted
every five years by the Ministry of Public Management, Home Affairs, Posts andTelecommunications, the number of studio units as of October 2003 was 3,447 thousand
units. This is an increase of 996 thousand units above figures taken ten years ago, witha growth rate of 40.6% , showing an outstanding performance in comparison with thegrowth rate for the residential housing stock for the same period (17.6% ). Furthermore,
our market share of stocks has also increased by 7.0% .

Market for rebuilding residential leaseholds has gigantic potential
for residential leasehold construction
The graph shown above represents the data of trends for the overall residential leaseholds
sorted by construction period. Figures have remained stable for the past five years; whileduring those five years 2,460 thousand units of residential leaseholds constructed in 1995
and earlier (ten years ago) were lost, with approximately 2,400 thousand new units built
to replace them. This indicates that this is a market with a gigantic demand for rebuildingin the future.

about 10% . Amidst this situation, however, we were still
able to increase the number of units we supply, backed by
our ability to consistently capture orders. Our market sharereached 56.1% .
20
Leopalace21 Investors Guide 2009

Market Trend-2

Demands (Leasing Market)

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

60,00050,28750,60050,411

49,83765 years and over

35 years to 64 years

35 years to 64 years

Under 35 years

Under 35 years(Thousands of households)(Thousands of households)

48,80240,00012,911(27.6%)

49,06350,00050,28750,600 50,441

49,837

14,457(29.5%)

15,707(31.2%)

16,563

17,334

17,922

18,237(37.4%)

40,000

11,136

3,578

4,514

30,000

8,835

9,637

10,085

4,824

5,013

5,072

14,646

14,03013,256

10,000

0

6,539

6,212

2000/10

2005/10

5,951
2010

(Projected)

creative activities. Common space

Temporary use

16,56344.61％

Business trips

14,4574,655

3,032(23.5%)

10,045

9,762

12,394

11,524

9,391

10,703

5,621

6,311

6,729

2015

(Projected)

5,655
2020

(Projected)

5,557
2025

(Projected)

2030

Note : Excerpted from the National Census from the Ministry of Public Management, Home Affairs,
Posts and Telecommunications for fiscal 2005 and the Number of Households and Future
Estimates of fiscal 2008 from the Institute of Population Problems.

Large market needs exist for studios that will be sustained over along period
With declining birth rates and an aging society, the population problem in Japan is an
issue that needs to be considered. In terms of family categories, singles consisted of
14,457 thousand in 2005, which comprised 29.5% share of the market. It is anticipatedthat this will increase to 15,707 thousand by 2010 and comprise over 31.2% of the market
share. Furthermore, an estimate for 2030 shows the number of households will reachapproximately 18,237 thousand, with 37.4% of the market share, a rapid increase in thisperiod. This indicates that the household makeup in Japan will be moving toward theformation of a gigantic single person household base very rapidly.
The market needs for studios provided by us is large and will be sustained over a long
period in the future, as indicated by this data on future estimates.

General 34.29％

Company dormitories

15.86％

3,865(26.7%)

Student dormitories 2.88％
Job assignment away from home 0.72％
Daily use because of long commute 0.34％(Thousands of units)

8,000

26,138 26,371 26,535
20,00025,39924,825

5,444

6,351

6,757

7,134

7,531

7,662

9,146

2000/10 2005/10

8,072
2010

6,623

6,265

5,929

2015

2020

2025

2030

(Projected) (Projected) (Projected) (Projected) (Projected)

The graph shown above is made up of data at the upper rightand an estimation of the future number of general households
by family category, as viewed in terms of age group. The
market share of the population comprising individuals aged
35 and younger, currently our main target, will be the smallest
group with only 16.1% in 2010. This figure is expected to drop
further in the future. The group including those between
35 and 64, however, dominates the market with the largest
share. The so-called silver population, comprising people
aged 65 and over, will exceed a 30% share of the makeup in2010 and their share of the makeup will reach 39.0% by 2030.
This means that a gigantic silver business market, comprisingterm, however, we will be including the silver population in
our perspective.

371.7

300

6.5%

4,701

4,185

3,890

3,402
3,662 (18.7%)

2000/10 2005/10

200

100

2.7%
0

277.8
239.8

2010

2015

2020

2025

113.8
113.8

2030

(Projected) (Projected) (Projected) (Projected) (Projected)

Note : Excerpted from the National Census from Ministry of Public
Management, Home Affairs, Posts and Telecommunications forfiscal 2005 and the Number of Households and Future Estimatesof fiscal 2008 from the Institute of Population Problems.

Our next target will be the over-35 group, but
over the long term our focus will be on thegigantic silver business market

413.5
326.9

Our share
7,173

Monthly agreement
Rental agreement

400

5,302
4,000 (41.1%) 5,148(35.6%)

10,0000

4,577

24,561 23,842

nearly two out of every five households, will emerge.
Strategically, our next target for the time being will be the
new group that consists of individuals aged 35 and older, forwhich we will cater to by providing for the need to relocate
out of studio units and also to corporate demand. In the long21
Leopalace21 Investors Guide 2009

54.09％■ Number of tenants by contract type

5,443

(Projected)(for friends and others). Social area
. Conference room
. Other

Residential use

39.08％

7,173(39.3%)

30,000

9,509
5,771

. Place for hobby,

18,237500

10,18620,00014,9195,027

17,922

15,707

12,911

Temporary use (for space) 1.29％. Ofﬁce spaceand otherTraining 3.11％

48,802

12,000

4,112

0.54％

17,33418,992 19,012 19,031

Temporary stay to visit hospitalized relation 0.21％
Temporary stay to visit relation on assignment 0.19％
Domestic tourism (individual) 0.14％
Tourism (foreigners) 0.02％
Domestic tourism (group) 0.01％

Study 0.24％

Temporary stay
between moves 1.07％

16,00013,546 15,680 18,028■ Breakdown of uses of month-to-month leases (March 2009)
Temporary stay duringhomerenovation/rebuilding

20,00046,782

46,782

Utilization (Residential leaseholds)■ Estimates for single person households in the future

65 years and over

60,00049,06350,000■ Estimates for total number of households in the future
by household age groups

and Leasing Markets)

0

129.4
3.5

146.4
32.5

125.9

113.9

167.6
57.8
109.8

194.4

106.8

108.0

117.3

109.7

103.4

89.7

74.7

119.7

442.3

150.1 174.4

217.2

254.4

305.5

335.6

1999/3 2000/3 2001/3 2002/3 2003/3 2004/3 2005/3 2006/3 2007/3 2008/3 2009/3

Note : Based on company data

In terms of single person households

categorized by age group, the silver populationbase emerges together with the under 35s as
the target populations for our core business
Furthermore, the graph, shown above, represents dataprepared by categorizing the extracted information regarding
single person households obtained from the estimation for
the future number of general households by family category,shown on page 21, by age group. Targets comprised of theunder 35 population base of corporate users and the silverbusiness market, comprised of persons 65 and over, for whomthere are increasing needs in terms of hobby and nursing care,are emerging.
Our share in the market of the single person households
for under 35s was 2.7% in 2000, although it reached a level of
6.5% in 2005.

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

Steady increase of a user base for monthly leasing responding tovarious needs
The trend for number of tenants by contract type indicates that since Monthly Leopalace
provides furniture, consumer electronics and utility expenses, launched in March 2000,
the number of transactions for monthly leasing increased rapidly, which indicates theservice matched the needs of the market. Furthermore, Monthly Leopalace Flats waslaunched in March 2002, offering tenancy periods for shorter segments, responding
appropriately to the changing needs of the market. The number of units for this service
has been sustained at a high level exceeding 100 thousand units since March 2005.

22
Leopalace21 Investors Guide 2009

Financial Highlights

Consolidated net sales

Consolidated operating income

Consolidated Segment Information

Consolidated recurring profit

Consolidated sales for apartment construction
subcontracting business（¥ million）

400,000（¥ million）（¥ million）

800,000（¥ million）

80,00080,000316,117

327,540

359,154300,000
600,000

60,00060,000400,000

40,00040,000200,000

20,00020,000

0

05/3

06/3

07/3

08/3

09/3

Consolidated net income

0

05/3

06/3

07/3

08/3

Consolidated total assets

06/3

07/3

08/3

09/3

0

218,440

100,000

05/3

06/3

07/3

08/3

12,744

12,749200,000

06/3

150,000

07/3

08/3

09/3

Consolidated sales for other businesses
30,00012,682

12,60923,346

11,225400,000

20,00005/3（¥ million）（¥ million）

500,000

30,0000

09/3

Consolidated sales for hotel and resort business
15,00040,000346,131200,000

100,000

05/3

313,624

255,233
195,202200,000

Consolidated net assets（¥ million）

286,427

300,000（¥ million）（¥ million）

400,000

248,0320

09/3

Consolidated sales for leasing business*（¥ million）

10,00020,0005,000

10,00020,017

20,160300,000

10,000100,000
200,0000-10,000

100,000-20,000

0

05/3

06/3

07/3

08/3

09/3

50,000

4,737
05/3

06/3

07/3

08/3

0

09/3

05/3

06/3

07/3

08/3

849

09/3

0

05/3

06/3

07/3

08/3

0

09/3

05/3

06/3

07/3

08/3

09/3

＊ The consolidated sales amounts for the “Leasing Business” shown in the graphs above represent figures that include the sales figures of the “Broadband Business”■ Consolidated Sales Breakdown

Consolidated
2005/3

2006/3

2007/3

2008/3

2009/3

Net sales

476,266

465,386

631,608

672,973

733,235

Operating income

54,682

40,77576,007

71,40250,156

Recurring profit

53,265

44,15173,002

60,847

46,785

Net income

33,262-16,582

37,358342

9,951

Total assets

453,434

412,803454,819

493,956

467,300

Net assets

149,798

133,622

185,784

170,155

146,442

Common stock

55,64055,64055,64055,64055,640Net assets per share ( ¥ )941.06

839.44

1,054.99

1,036.43

967.40Net income per share ( ¥ )220.79-104.17234.68

2.15

63.54

Non-Consolidated（¥ million）

2005/3

2006/3

2007/3

2008/3

2009/3

Apartment Construction Subcontracting Business

248,032

195,202316,117

327,540

359,154

Leasing Business

218,440

255,233

286,427

313,624

346,131

Hotel and Resort Business

11,225

12,744

12,74912,682

12,609849

4,737

20,017

23,346

20,160(Eliminations/Unallocated)（2,282）（2,532）（3,704）（4,222）（4,821）

Total

476,266

465,386

631,608

672,973

733,235

2005/3

2006/3

2007/3

2008/3

2009/3（¥ million）

Other Businesses■ Consolidated Operating Income Breakdown（¥ million）

Apartment Construction Subcontracting Business

57,05139,452

74,61473,267

70,112

Leasing Business

4,365

7,531

6,918

3,396

-977

Hotel and Resort Business-3,689-2,313-2,339

-793

-472

-1

-199

915

-38

-13,724

2005/3

2006/3

2007/3

2008/3

2009/3

Other Businesses

Shares outstanding (thousand shares)

159,543

159,543

159,543

159,543

159,543(Eliminations/Unallocated)（3,043）（3,695）（4,101）（4,430）（4,782）

Net assets per share ( ¥ )1,056.95

835.15

1,052.81

1,005.07

991.25

Total

54,682

40,77576,007

71,40250,156

Net income per share ( ¥ )190.47-209.23

248.45

19.85

58.21

Dividends per share ( ¥ )

15.00

15.00

50.00

80.00

30.00

Payout ratio (% )

7.88

-

20.12

403.0251.54

23
Leopalace21 Investors Guide 200924
Leopalace21 Investors Guide 2009

Consolidated Financial Indicators

Profitability

Productivity

Gross profit / Net sales

Operating income / Net sales

Net income / Net sales

（％）

（％）

（％）

20

10

10

10

5

0

30

0

15

05/3

06/3

07/3

08/3

09/3

20

0

05/3

06/3

07/3

08/3

09/3

Net sales per employee

Operating income per employee（¥ million）（¥ million）

120

-10

05/3

06/3

07/3

08/3

09/3

2005/3

2006/3

2007/3

2008/3

2009/3Gross profit / Net sales (% )

24.92

23.94

24.84

24.06

19.55

Operating income / Net sales (% )

11.48

8.76

12.03

10.60

6.84

Net income / Net sales (% )

6.98

-3.56

5.91

0.05

1.35

No. of employees at end-FY（persons）

12

12,000

90

9

9,000

60

6

6,000

30

3

3,000

0

05/3

06/3

07/3

08/3

0

09/3

05/3

06/3

07/3

08/3

09/3

0

05/3

06/3

07/3

08/3

09/3

2005/3

2006/3

2007/3

2008/3

2009/3

Net sales per employee ( ¥ million)

78.33

69.85

88.47

83.66

78.82

Operating income per employee ( ¥ million)

8.99

6.12

10.64

8.87

5.39

No. of employees at end-FY (persons)

6,457

6,868

7,409

8,678

9,926

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

Stability

Investment Indices
Equity ratio

Current ratio

Fixed assets/Equity ratio

（％）

（％）

（％）

30

60

200

15

30

100

45

0

90

05/3

06/3

07/3

08/3

09/3

300

0

05/3

06/3

07/3

08/3

09/3

0

ROE

ROA
（％）

（Times）

40

15

15

20

10

10

0

5

5

60

05/3

06/3

07/3

08/3

09/3

EV/EBITDA

（％）

-20

20

05/3

06/3

07/3

08/3

09/3

20

0

05/3

06/3

07/3

08/3

09/3

0

05/3

06/3

07/3

08/3

09/3

2009/3

2005/3

2006/3

2007/3

2008/3

2009/3Equity ratio (% )

33.03

32.36

36.96

33.44

31.33

ROE (% )28.77-11.70

24.75

0.20

6.38

Current ratio (% )

80.25

79.50

86.00

81.40

82.96

ROA (% )

12.18

10.19

16.82

12.82

9.73

Fixed assets/Equity ratio (% )197.84186.44159.50166.64187.97EV ( ¥ 100million)

3,440

7,250

6,002

2,457

548

EV/EVITDA (times)

5.68

15.99

7.45

3.21

0.98

2005/3

2006/3

2007/3

2008/3Note1: Total assets, and equity are expressed as an average of the relevant numbers at the beginning and end of each fiscal year, respectively.
Note2: EV = market capitalization + interest-bearing debt - cash and cash equivalents
Note3: EBITDA = operating income + depreciation expense

Efficiency

Cash Flows

Total assets turnover

Fixed assets turnover（Times）

Property, plant and equipment turnover（Times）

1.5（Times）

3.0

1.0

4.0

Depreciation expense

Capital investment（¥ million）（¥ million）

40,0004,000

20,00020,0002,000

10,00060,000

3.0

2.0

Free cash flows（¥ million）

6,000

30,000

2.0
0.5

0

1.0

05/3

06/3

07/3

08/3

09/3

0

1.0

05/3

06/3

07/3

08/3

09/3

0

05/3

06/3

07/3

08/3

09/3

2005/3

2006/3

2007/3

2008/3

2009/3

Total assets turnover (times)

1.08

1.07

1.45

1.41

1.52

Fixed assets turnover (times)

1.64

1.70

2.44

2.47

2.66

Property, plant and equipment turnover (times)

1.97

2.11

3.12

3.31

3.75

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

0

05/3

06/3

07/3

08/3

09/3

0

05/3

06/3

07/3

2005/3
Cash flows( ¥ million)

08/3

09/3

2006/3

05/3

06/3

07/3

2007/3

2008/3

08/3

09/3

2009/3

Cash flows from operating activities

40,34856,971

63,308

11,74562,843

Cash flows from investing activities-8,978-11,266-15,930148-10,048

Cash flows from financing activities-20,959-47,946-17,018-26,779-33,885

Depreciation expense ( ¥ million)

5,855

4,565

4,559

5,163

5,782

Capital investment ( ¥ million)

8,919

13,193

21,830

6,887

5,374

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

25
Leopalace21 Investors Guide 2009026
Leopalace21 Investors Guide 2009

Consolidated Balance Sheets（¥ million）

2007/3

2008/3

2009/3

186,555

218,684

192,015

Cash and cash equivalents

75,16660,96578,375Trade receivables and accounts receivable for completed projects

9,594

15,159

-

-

-

6,793

Assets（¥ million）

2007/3

2008/3

2009/3

216,914

268,621

231,432

77,392

89,523-

Accounts payable

-

-

3,586

Accounts payables for completed projects--

59,000Liabilities

Current assets

Trade accounts receivable
Accounts receivable for completed projects
Operating loans
Marketable securities
Real estate for sale
Property inventories

Current liabilities
Accounts payable including payables for completed projects

-

-

2,678

Short-term borrowings

16,518

16,221

17,4928,501

15,78910,043

Bonds due within one year

1,126

5,094

-

29

14

153

Lease liabilities

27,76537,8197,560

Unpaid expenses--

21,266

Accrued expenses

8,818

11,792

14,925

Accrued income taxes

Other inventories

722

750

-

Raw materials and supplies

-

-

597

Prepaid expenses

21,81924,628Deferred tax assets

5,076

12,085

Other accounts receivable

22,07528,058

Payment for construction in progress

792
11,18730

25

19

14,30813,258Advances received

46,744

98,496

97,945

Customer advances for projects in progress

23,52921,752

14,83527,671

Allowance for employees' bonuses

2,798

3,243

3,759

8,046

Allowance for completed construction indemnification

-

1,041

1,123

2,596

Other

8,465

9,278

8,429

52,12055,17989,425

Bonds

8,194

-

-

275,280

Long-term borrowings

27,32028,39522,897

191,343

Lease liabilities

-

-

3,006

8,273

13,068

12,778

Allowance for doubtful accounts-1,289-1,448-1,472

268,190

275,265

207,112

199,124

Property, plant and equipment

9,635

27,021

Other
Fixed assets

13,287Long-term liabilities

Buildings and structures

80,62676,556

66,529Retirement benefit reserves

4,111

5,064

6,193

Land

118,255

116,295

114,914Retirement benefit reserves for directors

2,986

1,592

1,281

Lease assets

-

-

3,498

Provision of reserve for rental income

533

399

-

Construction in progress

4,397

1,901

2,884

Reserve for loss on apartment vacancies

-

-

4,620

Other

3,832

4,370

3,516

Long-term lease/guarantee deposits received

8,974

19,72750,870

569

622

3,027

Other

-

-

555

60,50975,51980,909Total liabilities

269,035

323,800

320,857

Net assets
Shareholders' equity

175,348

165,858

156,616

Intangible fixed assets
Investments and other assets
Investment securities

7,934

9,082

6,103

Long-term loans receivable

2,281

2,399

995

Bad debt

2,125

4,015

4,563

Common stock

55,64055,64055,640Long-term prepaid expenses

42,72753,356

61,132

Capital surplus

34,104

34,104

34,104

Deferred tax assets

3,074

3,388

5,474

Retained earnings

85,70076,211

73,412

Other

4,942

5,442

8,123

Treasury stock

-96

-98

-6,541

Allowance for doubtful accounts-2,575-2,164-5,483-7,205-672-10,173

73

6

4

532

89

17

Deferred assets

Effect of evaluation and exchange rate difference
Net unrealized gains on other securities

Organization costs

-

6

4

Deferred gains or losses on hedges

Bond issuance costs

73

-

-

Translation adjustments

454,819

493,956

467,300

Total assets

27
Leopalace21 Investors Guide 2009

-

-

-7

-7,737-762-10,183

Minority interests

17,641

4,970-

Total net assets

185,784

170,155

146,442

Liabilities and net assets

454,819

493,956

467,300

28
Leopalace21 Investors Guide 2009

Consolidated Statements of Income

Consolidated Statements of Cash Flows（¥ million）

2007/3
Ordinary income and loss
Net sales
Sales from Contracting Division
Sales from Leasing Division
Sales from Other Division
Cost of sales
Cost of Contracting Division
Cost of Leasing Division
Cost of Other Division
Gross profit
Selling, general and administrative expenses
Advertising expense
Selling fees
Provisions for allowance for doubtful accounts
Director compensation
Salaries and bonuses
Provisions for allowance for employees' bonuses
Provisions for retirement benefit reserves
Provision of reserve for directors' retirement benefits
Rents paid
Depreciation expense
Taxes and public charges
Other
Operating income
Non-operating income and loss
Non-operating income
Interest income
Dividend income
Gain on sale of investment securities
Equity in earnings of affiliates
Income from cancellation of resort memberships
Income from cancellation of construction contracts
Unrealized gains on interest rate swaps
Foreign currency translation gain
Gain on consumption tax
Insurance revenues
Other
Non-operating expenses
Interest expense
All other financing costs
Equity in loss of affiliates
Commission paid
Foreign currency translation loss
Other
Recurring profit
Extraordinary income and losses
Extraordinary income
Gain on sales of fixed assets
Gain on sale of affiliates' stocks
Gain on sale of affiliates' bonds
Reversal of allowance for doubtful accounts
Reversal of lease fee reserve
Extraordinary losses
Loss on sales of fixed assets
Write-offs of fixed assets
Loss on valuation of property held for saleImpairment losses
Markdown on investment securities
Provision for allowance for doubtful accounts
Provision of reserve for directors' retirement benefits
Provision of reserve for rental income
Adjustment for advances received
Prior fiscal year's consumption tax, etc.
Transfer to allowance for completed construction indemnification
Reversal of reserve for loss on apartment vacancies
Payment of retirement benefits for directors
Net income before taxes and adjustments
Corporate, residential, and enterprise taxes
Refund of corporation and other taxes
Prior fiscal year's corporation and other taxes
Income tax adjustments
Minority interest
Net income
29
Leopalace21 Investors Guide 20092008/3（¥ million）

2009/3631,608
316,117
277,163
38,328474,713
209,395
228,119
37,197
156,895
80,887
8,564
3,429
1,035
547
30,218
1,983
999
196
4,580
1,246
3,455
24,62876,007

672,973
327,540
302,73142,701
511,053
217,263
253,583
40,206
161,919
90,516
8,153
2,998
835
581
34,920
2,219
1,214
164
5,477
2,018
3,915
28,016
71,402

733,235
359,154334,560
39,519589,833
249,563
290,423
49,847
143,401
93,244
8,115
3,306
3,518
555
35,242
2,292
1,382
140
5,398
1,939
3,651
27,70050,156

1,497
50
166
19
70
122
501
566
4,502
1,332
606
2,320
242
73,002

1,602
246
4
104
7
107
19
255
201
655
12,157
1,462
851
9,533
309
60,847

1,269
120
175
324
100
547
4,640
1,224
780
1,876
758
46,785

3,725
7
2,514
1,119
83
7,397
16
215
3,009
210
710
2,789
446
69,32926,437
4,662
871
37,358

5,170
4,465
560
144
53,593
120
142
701
906
794
47,754
594
1,378
1,200
12,424
17,4491,414-7,039
257
342

695
0
296
399
14,035
0
162
2,560
2,807
3,405
786
4,313
33,446
21,502
-0
-0
1,992
9,951

2007/3
Cash flows from operating activities
Net income before taxes and adjustments
Depreciation expense
Increase (Decrease) in allowance for doubtful accounts
Increase (Decrease) in retirement benefit reserves for directors
Increase (Decrease) in reserve for loss on apartment vacancies
Interest and dividends income
Interest expense
Foreign exchange loss (gain)
Equity in losses (earnings) of affiliated companies
Loss (Gain) on sale of property, plant and equipment
White-offs of property, plant and equipment
Loss on valuation of property held for saleImpairment losses
Gain on sale of affiliates' stocks
Gain on sale of affiliates' bonds
Loss (Gain) on sale of investment securities
Loss on valuation of investment securities
Decrease (Increase) in accounts receivable
Decrease (Increase) in real estate for sale
Decrease (Increase) in work in process
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 tax
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payment for purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Commissions paid on sale and disposal of property, plant and equipment
Payment for purchase of intangible fixed assets
Payment for purchase of affiliates' stocks
Income from sale of affiliated companies' stock due to changes in consolidation
Proceeds from sale of affiliates' bonds
Payment for purchase of investment securities
Proceeds from sale of investment securities
Payment for loans madeProceeds from collection of loans
Other
Net cash used in (provided by) investing activities

2009/3

2008/369,329
4,559
159
2,986
-136
1,332
-501
2,320
16
215
3,009
-2,514-1,119-166
210
914-18,554
26,430-12,366-2,571-18,531
9,093
-780
2,923
2,769
69,028129-1,290-4,55963,30812,424
5,163
590-1,394
-338
1,462
9,533
-104
-4,345
142
701
-560
-4
906
-21,745-11,237-2,973-12,456
12,225-1,77751,804
10,567-3,155-725
44,695367-1,476-31,840
11,74533,446
5,782
3,637
-310
4,620
-296
1,224
1,876
-324
0
162
2,560
2,807
3,405
35,868
4,941-3,133-10,854-26,860-6,916-505
31,1801,549
2,489
86,350603-1,225-22,884
62,843-21,830-6,887-5,3748-119-1,100
4,109
2,880
-792
1,000
-1,3783,646-2,355-15,930

12,144-179-3,393730-369
202-2,101148

227-2,443
-498
79
-536
301
-1,803-10,048

Cash flows from financing activities
Proceeds from short-term debt
Repayment of short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Funds used for repayment of finance lease obligations
Funds used for purchase and cancellation of bonds
Redemption of bonds
Dividends paid to minority shareholders
Funds used for redemption of investments to minority shareholders
Payment for purchase of treasury stock
Dividend paid for shareholders
Net cash used in financing activities

-873

-475

-

-2
-4,781-17,018-12,484-4,970Effect 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 of newly consolidated subsidiaries
Cash and cash equivalents at end of year

195
30,55444,61275,16630
Leopalace21 Investors Guide 2009

34,19078,61029,000-32,454-82,388-29,000

13,00022,00018,000-22,655-17,454-22,226-400---2,006-3,100--1,435-1,126-5,094-1-6,443-10,359-12,750-26,779-33,885-405-1,498-15,290

17,41060,96578,37575,166
1,089
60,965