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

CONTENTS
Who we are
PROFILE . . . . . . . . . . . . . . . . . . . . . . . . . .
TEN-YEAR CONSOLIDATEDFINANCIAL HIGHLIGHTS . . . . . . . . . . .
TO OUR STAKEHOLDERS . . . . . . . . . . .

What our businesses are

1
2
4

What our strategy is
BUSINESS ENVIRONMENT
AND COMPETITIVENESS . . . . . . . . . . . 10
OUR BUSINESS MODEL . . . . . . . . . . . . 16
BUSINESS MODEL TRANSITION . . . . 20
SPECIAL FEATURE:
LEASING BUSINESS STRATEGY . . . 22
CONSTRUCTION BUSINESS STRATEGY . . 24
OVERSEAS BUSINESS STRATEGY . . . . . 26
ELDERLY CARE BUSINESS STRATEGY . . 28
SOLAR POWER BUSINESS STRATEGY. . 29

BUSINESS OVERVIEWAT A GLANCE . . . . . . . . . . . . . . . . . . . 40
SEGMENT OVERVIEWLEASING BUSINESS . . . . . . . . . . . . . 42
CONSTRUCTION BUSINESS . . . . . . 44
ELDERLY CARE BUSINESS . . . . . . . . 46
HOTELS & RESORT BUSINESS . . . . 47
OTHER BUSINESSES . . . . . . . . . . . . 48
TOPICS:INFORMATION DISCLOSUREFOR STAKEHOLDERS . . . . . . . . . . . . . 49

How CSR supports
our management
Leopalace21 AND CSR
CSR ISSUES TO BE TACKLED AND
OUR VALUE CHAIN . . . . . . . . . . . . . . 50

DIALOGUE ON LEOPALACE21’S
CORPORATE GOVERNANCE . . . . . . . . . 30

Leopalace21’s MANAGEMENT PLAN
AND CSR ACTIVITIES. . . . . . . . . . . . . . 52

CORPORATE GOVERNANCE . . . . . . . . . 34
BUSINESS AND OTHER RISKS . . . . . . 38

BASIC CSR ACTION POLICYENGAGING IN SOUND, CONSTRUCTIVE
COMMUNICATION WITH STAKEHOLDERS . . . 54
PROVIDING HIGH-QUALITY SERVICESAND SUPPORTING AFFLUENT LIVING . . . . . 55
CONTRIBUTING TO LOCAL COMMUNITIES . . 58
CREATING PLEASANT WORKENVIRONMENTS AND DEVELOPING
DIVERSE HUMAN RESOURCES . . . . . . . . . 60
CREATING AN ENVIRONMENTALLYFRIENDLY SOCIETY . . . . . . . . . . . . . . . . . . 62

Leopalace21 Corporation / Annual Report 2015

Financial Section &Corporate Data
FINANCIAL SECTION . . . . . . . . . . . . . 64
Leopalace21 DATA COMPILATION . . 114
CORPORATE HISTORY . . . . . . . . . . . . 120
CORPORATE PROFILE . . . . . . . . . . . . 122

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

PROFILE
Leopalace21 has established a uniquebusiness model fusing two core businesses,
the Construction Business, which involves
constructing apartments aimed mainly at

LEASING
BUSINESS

single-person households, and the Leasing

CONSTRUCTION
BUSINESSBusiness, which involves renting units ofapartments we manage after they are built.
Through efforts to strengthen the

RE
R
REAL
EA
ALL ESTATE
ES
STA
ST
TAT
ATE

profitability of the Leasing Business,“ONE-STOP S“ONE-STOPSERVICE
EERV
RV
VIC
IC
CEE P
PROVIDER”
ROVIDER”

Leopalace21 is moving forward with theestablishment of a “stock-type business

ELDERLYCARE
BUSINESS

model,” which generates stable profits from
renting apartments it manages. At the same

HOTELS &RESORT
BUSINESSOTHER
BUSINESSES

time, with a portfolio also extending to the
Elderly Care Business, the Hotels and Resort
Business, and Other Businesses,
Leopalace21 is a one-stop provider of a wide
range of real estate services.

EDITORIAL POLICY
Since fiscal 2013, we have published an integrated report

corporate governance code. Moreover, to ensure readersthat combines a traditional annual report with CSR

understand trends to date affecting our business, thereporting. We seek to present our management strategy,report includes the “Data compilation” section. We takepriority measures, an overview of business conditions,care to explain what we present in ways that are readilyetc. as well as inform readers about our CSR activities.

understandable so that the report serves as an effective

This report covers the fiscal year from April 1, 2014

communication tool that reaches our many stakeholders.

through March 31, 2015 (fiscal year 2014). The scope is

Based on our corporate philosophy of “creating new

Leopalace21 Corporation and its consolidated

value,” Leopalace21 is forging ahead with measuressubsidiaries in Japan and overseas. Our aim is to publish

reflecting the basic approach of “focusing on coreto the extent possible the latest information available asbusinesses and challenging itself with new businessof the publication date. We also explain initiatives

fields.” It is our hope this report will help our stakeholders

adopted in response to new policies in areas likeobtain a greater understanding of the Company.

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

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

Leopalace21 Corporation / Annual Report 2015

1

2

TEN-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS
For the years ended March 31
Net sales
Leasing Business
Construction Business
Elderly Care Business
Hotels & Resort Business
Other Businesses
Cost of sales
Selling, general and administrative expenses
Operating income (loss)
Leasing Business
Construction Business
Elderly Care Business
Hotels & Resort Business
Other Businesses
EBITDA (Operating income + depreciation)
Net income (loss)’06/3 FY2005’07/3 FY2006’08/3 FY2007’09/3 FY2008¥

465,386
249,695
195,202
2,433
8,339
9,715
353,928
70,683
40,7758,079
39,452257(2,667)(4,346)45,340(16,582)¥

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

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

412,803
133,62264,513¥454,819
185,784
53,159¥493,956
170,155
49,710¥467,300
146,442
44,188¥56,971(11,266)(47,946)¥

63,308(15,930)(17,018)¥

11,745
148(26,779)¥

62,843(10,048)(33,885)¥

839.44(104.17)
15.00¥

1,054.99
234.6850.00¥

1,036.43
2.15
80.00

¥

967.4063.54
30.00

At year-end:
Total assets
Net assets
Interest-bearing debt
Cash flow:
Cash flow from operating
Cash flow from investing
Cash flow from financing
Amounts per share: (Yen)Net assets
Net income (loss)
Cash dividend
Ratio:
Units under management
Occupancy rate (%)
Orders received (Millions of yen)
Equity ratio (%)
Return on equity (ROE)(%)
Return on assets (ROA) (%)
Payout ratio (%)
Debt/equity ratio (%)
Number of employees

344,045

388,500

442,025

92.41

92.84

92.36

506,74288.51

322,253

362,493

463,044

337,883

32.4(11.7)
(3.8)
—
0.5
6,868

37.0
24.8
8.6
21.3
0.3
7,409

33.4
0.2
0.1
3,720.9
0.3
8,678

31.3
6.4
2.1
47.2
0.3
9,926

(Notes) 1. U.S. dollar amounts are translated from yen at the rate of ¥120.17 = U.S. $1, the approximate rate prevailing at March 31, 2015.
2.The amounts of net assets for the fiscal year ended March 31, 2006 represent the value of total shareholders’ equity of year-end, and do not include minority interests.
3. Return on equity (ROE) = Net income/average net assets during the fiscal year x 100
4. Return on assets (ROA) = Net income/average total assets during the fiscal year x 100
5. Debt/equity ratio = Interest-bearing debt/ (net assets - minority interests)

Net Sales

Operating Income (Loss)/ Operating Margin

Total Assets/ ROA(Millions of yen)

(Millions of yen)(%)

(Millions of yen)(%)

80,00016

500,000

10

60,00012

400,000

8

300,000

6

40,0008
200,000

4

20,0004
100,00020

0

800,000

600,000

400,000

200,00000

0−40,000−20−8’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Operating Income (Loss) (left axis)
Leopalace21 Corporation / Annual Report 2015

Operating Margin (right axis)

Total Assets (left axis)

ROA (right axis)

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

(Thousands of
U.S. dollars)(Millions of yen)

’10/3 FY2009’11/3 FY2010’12/3 FY2011’13/3 FY2012’14/3 FY2013’15/3 FY2014’15/3 FY2014¥

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

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

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

454,222
383,574
53,369
9,482
6,657
1,137
396,508
50,299
7,413
8,687
2,747
(742)
(1,005)35
13,097
13,335¥

471,089
388,768
63,135
10,1717,571
1,442
401,51055,906
13,673
15,5672,954(610)(1,118)137
19,666
15,229¥483,188399,316
61,312
10,608
8,951
2,999
407,433
60,992
14,763
20,532210(606)(1,289)31
22,49914,507$ 4,020,875
3,322,932
510,216
88,27774,487
24,962
3,390,472
507,549
122,853
170,864
1,751(5,043)(10,726)260
187,231
120,728¥

396,51170,97961,318¥298,274
33,04043,858¥

264,783
33,831
51,654¥

261,649
58,151
49,026¥

287,459
104,860
37,227¥308,274
126,473
44,487$ 2,565,318
1,052,452
370,205¥(12,990)(8,889)15,281¥(28,337)
13,143(15,890)¥(3,174)(3,537)
7,245

¥

6,069
(6)
9,148

¥

15,584(6,929)8,848¥

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

130,777(146,045)
14,545¥466.76(521.91)—¥

195.91(261.03)—¥199.739.40—¥

274.8074.50—¥

398.7867.17—¥

481.05
55.19
—

$

4.00
0.46
—

551,773

571,656556,207546,204

548,912554,948

82.25

80.09

81.16

82.94

84.58

86.57

250,247

80,33850,01973,006

81,13987,39517.9(72.8)(18.3)
—
0.9
8,582

11.1
(78.7)(11.8)
—
1.3
7,114

12.8
4.8
0.6
—
1.5
6,165

22.2
29.0
5.1
—
0.8
6,277

36.5
18.7
5.5
—
0.4
6,758

41.0
12.5
4.9
—
0.4
7,339

EBITDA

Interest-bearing Debt

(Millions of yen)(%)

(Millions of yen)

(Millions of yen)

200,000

40

100,000

80,000150,000

30

75,000100,000

20

50,00050,00010

25,000

0

0

0

−80

−25,000

Net Assets/ ROE——$

727,263
—
—
—
—
—
—

60,00040,00020,0000’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Net Assets (left axis)

ROE (right axis)
Leopalace21 Corporation / Annual Report 2015

3

4

TO OUR STAKEHOLDERS
With each employee encouraged totap their imagination, unrestrainedby preconceptions, to drive
innovation in his or her sphere of
responsibility, Leopalace21 seeks toattain its Medium-term Management
Plan targets and achieve growth
beyond that.

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

5

Advancing Initiatives Aimed at New Growth Based on a Business Foundation
Bolstered by Restructuring without Sanctuary
Leopalace21’s two core businesses are the Construction
Business, which builds single-person studio apartments,
and the Leasing Business, which accepts consignmentsfrom landowners to build and manage apartments. Ourparticular strength to date has been corporate-use
housing such as dormitories for singles, but in the wakeof the sharp falloff in corporate demand after the
Lehman collapse, we booked two successive years ofoperating losses. With the subsequent progress ofrestructuring without sanctuary, we have reoriented theCompany towards the Leasing Business and away fromthe Construction Business so as to avoid growth without
profits. As a result, operating income recovered to over¥10.0 billion in fiscal 2013 (fiscal year ended March2014). In view of the upturn in market conditions, wehave moved forward with an array of growth measuresin the year since the April 2014 launch of the“EXPANDING VALUE” Medium-term Management Plan.

Earnings Trend
Net sales (Billions of yen)

Operating income (Billions of yen)

800

80

600

60

400

40

200

20

0

0
-20
‘07/3 FY2006‘08/3 FY2007‘09/3 FY2008 ‘10/3 FY2009 ‘11/3 FY2010 ‘12/3 FY2011 ‘13/3 FY2012 ‘14/3 FY2013 ‘15/3 FY2014 ‘16/3 FY2015
Plan■ Leasing ■ Construction ■ Others ● Operating income

First Fiscal Year of Medium-term Management Plan
Initiatives for Core Businesses Delivered Solid Results
The first year of the Medium-term Management Plan,
which kicked off in April 2014, has been completed. In
the core Leasing Business, the average occupancy rate in
the full fiscal year, which is a key earnings indicator, wasmore or less in line with our plan thanks to our skillful
uptake of corporate demand growth that accompanied
the recovery in corporate earnings. With the number ofgeneral leases increasing to a record high of over
230,000, earnings at the Leasing Business were steady.
At the Construction Business, our other core
operation, orders grew on an improving external
environment reflecting inheritance tax revisions andother factors but fell short of the plan. Buffeted by higher
labor costs and longer project stages, margins tightened
and earnings fell short of the plan.
At the Elderly Care Business, the opening of new
facilities went smoothly and the occupancy rate ofexisting facilities also improved, and at the Hotels &Resort Business, the occupancy rate exceeded the plan.
We are pleased the strengthening of the businessfoundation that has been implemented thus far
translated into steady earnings in the first fiscal year of
the Medium-term Management Plan.

Key Achievements● Improved occupancy rates on uptake of corporate

demand etc.
● Conversion of custom-made wood-home builder

Morizou Co., Ltd. into a subsidiary● Stepped-up entry into Southeast Asian markets

Sales by Segment(Billions of yen)
600

400

200

0

‘12/3 FY2011 ‘13/3 FY2012 ‘14/3 FY2013 ‘15/3 FY2014 ‘16/3 FY2015
Plan■ Leasing ■ Construction ■ Elderly Care
■ Hotels & Resort ■ Others

Leopalace21 Corporation / Annual Report 2015

6

Year Two Key to Overall Plan Success; Core Businesses Becoming
Linchpins; Progress towards Target Attainment
The “EXPANDING VALUE” Medium-term Management
Plan is off to a strong start, with a favorable first year,
but I feel it would be unwise to place too much stock inthis. Even with a strong first year, a slackening in year
two would make it harder to reach the plan targets inyear three, and this would affect the targets for the next
new management plan.
With this in mind, I would like to explain what we will
focus on in fiscal 2015. The Company will do all it can tosteadily advance initiatives aimed at raising occupancy
rates in the Leasing Business. This means we will
broaden our menu of sought-after rooms and services,such as our popular “Room Customize,” aimed at thegeneral leasing market designed with a client’s
perspective in mind, while again striving to capture
corporate demand.
At the Construction Business, I think we will work hard
to win orders and not let opportunities, created by thefavorable tailwind of firm corporate tenant demand on
rebounding corporate earnings, slip away. One concern
for this business is labor supply. In response to the sharp
increase in labor costs, we support training apprentices

from overseas countries such as Vietnam, and aremaking progress in opening a new way for them to workat building contractors. Moreover, by the stepped-up
adoption of industrial methods for building materials andparts through apartment design revisions, etc., we aremaking progress in finding new ways of reducing costsby lightening the on-site workload.
In fiscal 2015, we expect tenant demand to stay highamid the improving trend for employment and rising
wages as corporate earnings continue to recover. In theevent a return to domestic production at manufacturingindustries, which are said to be buoyed by the weak yen,were realized, this would improve occupancy rates inprovincial regions and would be a swing to a morefavorable market environment for the Company. We seeplan target attainment as riding on our initiatives and are
eager for the opportunity to show we can deliver. With
each employee encouraged to tap their imagination,
unrestrained by preconceptions, to drive innovation in his
or her sphere of responsibility, the Company seeks toattain its Medium-term Management Plan targets andachieve growth beyond that.

Pursuing Added Value as an Elderly Care and Hotels& Resort Business Proprietor

Outside of our core businesses, we are pressing aheadin fiscal 2015 with an expansion strategy for the Elderly
Care Business, which we see as a growth business. The
reduction to nursing care compensation stemming fromthe April 2015 nursing care insurance systemamendment was a negative for our business, but in view

Leopalace21 Corporation / Annual Report 2015of the facility shortage at present, we think it is best toproceed assertively in opening new facilities. We are
striving to reach the Medium-term Plan target of opening
29 facilities in three years. The Elderly Care Businesssupports trends at the Construction Business, and webelieve it is important to work to secure orders for carefacilities at the Construction Business.
In contrast, at the Hotels & Resort Business, we are
not looking to expand beyond current levels but instead
we will encourage property owners, tenants, andcorporate clients—valued customers of our core Leasing
Business and Construction Business—to make use of
our hotels and Guam resorts for travel, business trips,
and employee benefit programs.
In these ways, the aforementioned two businesses,
especially the Elderly Care Business, enable us toharness synergies with our core businesses in leasing
apartments and constructing, and pursue further growth.

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Conversion of Highest-quality Custom-built-home Contractor Morizou intoa Subsidiary Opens Way for Growth and Synergies with Other Businesses
As I mentioned earlier, the two core operations, theLeasing Business and Construction Business, havesteadily bolstered their capabilities through a series ofmeasures that have been implemented to reinforce ourbusiness foundation, and so trends at these businesses
are comparatively favorable.
On the other hand, when I consider the future, I
recognize the necessity of boldly addressing risks andopportunities in assessing new businesses from here
onwards. On this score, I see two targets—custom-built
home construction contracting and overseas businesses.
With regards to the custom-built home contracting, weconverted Morizou Co., Ltd., an alliance partner sinceApril 2014 that has for years built ultra-luxurious Kisohinoki wood homes using traditional Japaneseconstruction methods, into a subsidiary in March 2015.
In bringing Morizou under our corporate umbrella, wehave further bolstered our collaboration relationship.
The perception many potential clients for our customordered homes have of us so far is as an apartmentbuilding contractor, but I think the Morizou addition

enables Leopalace21 to sharply improve perceptions
about the quality of the homes we build. At the sametime, we are striving to bolster contact points withproperty owners and broaden our order variation.

Plans to Launch Service Apartment Operations in Cambodia
I would next like to discuss our overseas businesses,
which we expect to drive growth. We plan to develop
and operate service apartments with amenities andservices catering to employees of Japanese companies,
etc. that have been sent overseas.
The first overseas location for our service apartments
will be Cambodia. With construction scheduled to befinished in January 2017, the service apartments are to

The cityscape in rapidly developing Phnom Penh, Cambodia

commence operations in April 2017. We are studying thesituation in other countries in assessing where to build
next, but from what I hear, Japanese companies
venturing out from Japan and posting employees
overseas are often not satisfied with the housing options
available, so there is scope for new entrants. Given this,in addition to Cambodia, Vietnam and Myanmar, among
others, are markets where we see similar opportunities,
and we look to expand our service apartment business inregions such as these.
On a related note involving M&A in our overseas
portfolio, we converted WING MATE CO., LTD. which
excels in making arrangements for overseas businesstrips for corporate clients, into a subsidiary in October
2014. We expect this move to add another arrow to thequiver of our marketing efforts to corporations as well as
feed through to bolstering sales routes we can harness tomarket the offerings of our Hotels & Resort Business.
In this way, we continue to take sound steps in ouroverseas business in fields where we see growthprospects.

Leopalace21 Corporation / Annual Report 20157

8

CSR as Part of Our Core Businesses: Initiatives to Contribute Socially
Using Our Strengths and Businesses
I have so far explained initiatives in our Medium-termManagement Plan centering on our growth strategy, but
I think CSR activities that support these initiatives fromthe base upwards are also important.
In the past few years within the discussion on moving
toward a sustainable society, there has been debate
about how companies should proceed in their role as forprofit enterprises with CSR activities, especially thoseextending from their core businesses. I would like toshare some examples of CSR activities at Leopalace21
that extend from our core businesses.

We have in the past few years stepped up the
expansion of leasing overseas. The impetus for thisexpansion originated in requests from a corporate client,whereas the focus of our business activities until thenhad been the domestic market. Our expansion into realestate brokerage overseas via the application of theknow-how we amassed in Japan in response to thisdemand has enabled us to build “win-win” relationships
not only with this client but also with local communities
to which our know-how has been transferred. At thesame time, we will work to build our business while
fostering exchanges that meet local needs.
One example is our human resources development
efforts. Apprentices that have finished our training
program in Vietnam are being brought to Japan for workat domestic building contractors. This addresses a
shortage of construction-site labor that persists ahead of
the 2020 Tokyo Olympics. Meanwhile, we are also
optimistic that apprentices who gain onsite work
experience in Japan will be valuable human resourcesthat can underpin contractor projects in their homecountry Vietnam in the future. We are making similar
efforts in our Elderly Care Business, where workers thatwere trained in the Philippines have been hired to workat our Azumi En care facilities.

Stepping up Measures Addressing the Governance Code: Adding a Second
Outside Director to Our Board
We are keenly aware of the growing public interest in
corporate governance systems, including the Corporate
Governance Code, a Japanese governance standard
devised for listed companies in an initiative supported by
the Tokyo Stock Exchange and the Financial Services
Agency, and others.
We have adopted a spate of measures aimed atgovernance reform, starting with the establishment of
the Compliance Committee in 2006. Among otheractions, we have since then introduced an executive
board system in 2007, set up the CSR Committee andRisk Management Committee in 2008, and establishedthe Auditing Council and nominated an outside director
to our board in 2010. The Corporate Business Promotion
Headquarters, established in April 2014, is preparing theway for a business promotion system throughLeopalace21 Corporation / Annual Report 2015

collaboration across divisions and functions. As a result,
we have put into place a comprehensive governancestructure aimed at enhancing the functions of the Boardof Directors, improving management quality, andstrengthening collaboration across divisions and functions.
From this basis, in response to the Corporate
Governance Code, we are studying the five generalprinciples established in the code and how initiatives
should be translated into the final objective of creating
greater corporate value and how we should implement
such initiatives.
As a plank in this effort, the agenda for the June 2015
annual general meeting for shareholders will containnominations for two Outside Directors. The newnominee is Yoshiko Sasao, an experienced female
executive who can draw on her experience andWho we are

What our strategy is

What our businesses areknowledge in offering her views. We welcome a female
executive’s insights to our boardroom debate as we
strive to reflect diversity in our decision-making.
Currently serving Outside Director Tetsuji Taya has
again been nominated and is expected to reprise the rolehe has played so far inside and outside the boardroom ofactively offering ideas for boosting corporate value.
Apart from the two Outside Directors, the Company
will continue to take steps to ensure the board’s

How CSR supports
our management

Financial Section &Corporate Dataeffectiveness, such as providing training for directors andproceeding with self-evaluation by the Board of
Directors. Moreover, with regards to applicablestandards outside of the Corporate Governance Code,
we intend to proceed with responsive measure asnecessary after developing a firm understanding of the
background and aims of each set of applicable rules,
codes, regulations, etc.

Aiming to Restore Dividends Soon as Retained Earnings Move into
Surplus
I would like to end with a discussion of our strategy toboost shareholder value. In view of the enormous
impact of the post-Lehman slump on our performance,
we have refrained from paying dividends for six years.
We have pressed ahead with serious efforts to reformthe company’s internal systems and structure but weare also keenly aware this policy tests the patience of
our shareholders.
The reforms we have pursued wholeheartedly are
beginning to yield results, with consolidated retained
earnings, a section within shareholders’ equity on thebalance sheet, swinging into positive territory in fiscal
2014 from a negative ¥46.5 billion in fiscal 2010.
Moreover, our performance has recovered to a level
where ROE has stayed above 10% for three successive
fiscal years, counting the 12.5% recorded in the fiscal
year under review. We have earned sufficient capital toerase the deficit in the retained earnings section ofshareholders’ equity, as the circular on matters fordiscussion at the annual general meeting (i.e., on thedecrease in capital reserves and disposal of surplus
retained earnings) indicates, and so our preparations forrestoring dividends are in place. Discussions at thecompany on the timing and size of resumption in
dividends are proceeding, along with matters such as
our future dividend policy, and we would like todisclosure specifics on these in the not-so-distant future.
That said, our long-term strategy for creating greater
shareholder value does not stop at dividends. In
particular, the growth strategy we are implementing
includes initiatives with a promising return outlook, andwe think there are cases where realizing those returns
will translate into boosting shareholder value. As a result,
we will devise our dividend policy after taking into
account the funding required for initiatives aimed atincreasing shareholder value.
Leopalace21 has traveled a long way in reforming its
systems and structure, and the entire company is united
in forging ahead with measures to boost growth. With
respect to our stakeholders, I would like in closing tohumbly request your continued support andencouragement.

June 2015
Eisei Miyama
President and CEO

Leopalace21 Corporation / Annual Report 2015

9

10

BUSINESS ENVIRONMENT AND COMPETITIVENESS
Business Environment

1

A Small Dip in Rental Housing Starts
New housing starts dropped sharply from fiscal 2008 to
fiscal 2009 due to the economic slump following theLehman Brothers collapse. Since then, they had been
gradually recovering as a result of policy support and thelike for housing investment but in fiscal 2014, againstrush demand in the run-up to the April 2014 consumption
tax hike, housing starts fell back 10.8% year on year.
Rental housing starts also declined for the first time inthree years, but the 3.1% year-on-year fall to 358,340
units was smaller than the overall drop in housing starts.

Number of New Housing Starts (Number of Housing Units by Use)
1,000 (1,000 units)
750
500
250
0
’11/3
FY2010’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014■ Rental units ■ Residential houses for allotment sales■ Condominium units for allotment sales ■ Owner-occupied houses ■ Others* Source: New Housing Starts Statistics for the fiscal year ended March 2015,
the Ministry of Land, Infrastructure, Transport, and Tourism

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Number of Apartment Units
under Management
Competitive Advantage

1

One of Japan’s largest lease managementcompanies
In the lease management business, many believe “thecompany that controls the battle for tenants, rules theindustry” and so competition is intense. Our rental
housing business centers on one-room type units forpeople living alone that come with furniture and electricalappliances as standard features. Our ability to respond to
the needs of clients, such as students and company
employees living alone, has enabled us to keep growing.
We also address short-term stay needs such as businesstrips, and about half of our leases are for company
housing and dormitories for single employees. With over
550,000 rooms under management, Leopalace21 is one
of Japan’s largest lease management companies.

554,948 units(as of the end of March 2015)

Trend in Units under Management
600 (1,000 units)

400

200

0
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Leopalace21 Corporation / Annual Report 2015

11

12

Business Environment

2

Uptrend in Single-person Households toContinue

Trend in Number of Households

The number of Japanese households is expected to
decline gradually but the number of single-personhouseholds is projected to keep growing for the foreseeable
future. Single-person households are likely to continue
growing beyond 2025, when the total number ofhouseholds is expected to start declining, and remain in
an uptrend through 2030. As a result, forecasts call for
18.45 million households in 2035, up 1.67 million from16.78 million in 2010, and for the number of singleperson households as a percentage of all households tobe 37.2% in 2035, up 4.8 points from the 32.4% of 2010.

Market Positioning(Leopalace21 market research)

60,000 (1,000 households)

40,00020,000

0
’05

’10

’15

’20

’25

’30

’35

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

Room typeStudio apartments

D2

Short-termLong-term

Length of stay

Leopalace21

S

Company

Company

D1

Company

Family-type units

Leopalace21 Corporation / Annual Report 2015

JULY

2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Ratio of Corporate Lease
Competitive Advantage
Leveraging Our Strength inSingle-person Households

2

Since soon after the Company was founded, we havefocused on urban-type apartments, especially housing forpeople living alone—a different category fromconventional segments. Given this, our core pillars ofapartment construction and leasing management haveover the past thirty years built up know-how in design,specifications, and management sought by single-personhouseholds and put this know-how to full use. Our
expertise is a good match for the high-quality housing
companies seek for dormitories for single employees andcompany housing for people living alone. As a result, theratio of corporate leases to our total portfolio has risen to
53.0% as of March 31, 2015.

53.0

%

(as of the end of March 2015)

Corporate Leases as a Ratio of Our Total Portfolio
55 (%)
50
45
40
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q’12/3 FY2011’13/3 FY2012’14/3 FY2013’15/3 FY2014

Amenities and Fixtures Provided in Leopalace21 Apartments

Leopalace21 Corporation / Annual Report 2015

13

14

Business Environment

3Higher Tenancy Rates in Large Cities
Conducted in 2013, the latest survey on total housing
units and homeownership shows the homeownershiprate was 61.7% and the tenancy rate was 35.5%.
Homeownership rates have remained at around 60%
since the survey started in 1973. This trend varies byregion with low homeownership rates and high tenancy
rates in major metropolitan areas. Of the prefectureswith the lowest homeownership rates, Tokyo is first,
Fukuoka Prefecture is third, Osaka is fourth, Aichi
Prefecture is seventh, and Kanagawa Prefecture iseighth. Given this, it is safe to say that tenant demand
for rental housing is largely concentrated in
metropolitan areas.

TOKYO

Leopalace21 Corporation / Annual Report 2015

Homeownership and Tenancy Rates of Households
60 (%)

40

20

0
Tokyo

Okinawa Fukuoka

Osaka

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

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Nationwide Portfolio Breakdown by Region

Total for Three Major Metro Areas
Competitive Advantage

703

Focus on Major Urban Centerswhere Client Demand Is Strong

%

About

(as of the end of March 2015)

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

NAGOYA

Kinki area Chubu area

14% 16%
Metropolitan
area

36%

OSAKA

Leopalace21 Corporation / Annual Report 2015

15

16

OUR BUSINESS MODEL
A Distinctive Business Model Based on
Our 30-year Master Lease System
Leopalace21 has time and again bolstered its presence as an industry leader inleasing management for apartments since the 1985 full-scale launch of Leopalace21
urban apartments. Our greatest strength is our superior business model, which
has been honed via knowledge we have amassed across the Group over the years.
Keeping apartment occupancy rates high and stable is the biggest determinant of ourbusiness success. With myriad initiatives to keep occupancy rates high, we seek tofurther reinforce our strengths.

Leasing
Business

Master Lease
System1

Existing apartments undermaster lease system

Leasing-related
businesses

Construction ofbuildings otherthan apartments

Rebuilding, property valueenhancement measures, renovation

Corporate housing
management
Rent payment guarantee

4

Overseas office &housing brokerage

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

Apartments
3

Tenants(corporations,individuals)

Apartment
owners6
Hotels & Resort
Businesss 5SE BY OWNERS
and tenantss 5SE BY CORPORATE CLIENTS
for trips and employee
BENEFIT PROGRAMS

2Other Businesses(Small-amount,
Short-term Insurance,
Solar Power Generation)

5
Elderly Care
Businesss /PERATES FACILITIES BUILT BY
the Construction Business

Leopalace21 Corporation / Annual Report 2015

Construction
Businesss )NSURANCE SALES TO TENANTS
s 3OLAR POWER GENERATION
on leased rooftops

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

1 Leopalace21 Developed Industry-First “Master Lease System”
Budgeting Maintenanceand Repair Costs
for a 30-year Period
Secures funds for property
maintenance and future repairs

Management ofRental Revenues
for a 30-year Period
Rent collection operations etc.

Tenants
Apartments

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

Rents fromMaster Leases

Recruitment andManagement of Tenants
for a 30-year Period
Tenant recruitment and everyday
tenant management operations etc.

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

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

Of the apartment owners in the Leopalace21 system,
many are individuals and regard apartment management
as a way to manage their assets. While major realestate developers aim for high-risk, high-return projects,
individuals dislike the risk of losing out on rent revenues
due to vacancies and view low-risk, middle-returninvestments as ideal.
With this in mind, the Company developed the 30-year
master lease system, an industry first. It reduces risk
for owners by offering them a total support package forapartments and condo properties from construction to
management for up to 30 years.
This system helps ensure stable income for owners
while reducing their burden. In addition to disbursing
fixed rent payments to owners over a prescribed period
whether or not there are vacancies, we also collect rent
from tenants and provide management, maintenance,and repair services. The master lease system can result in
losses for us if vacancies are sharply higher than we expect
but our system enables us to reduce such risks and avoid
losses with relentless creative thinking. Our efforts include
supplying properties that match the needs of customers
and communities, enhancing the appeal of buildings across
many dimensions such as interiors, exteriors, and fixtures,
as well as working to diversify contract forms.

2 Restrict New Supplies to Specific Areas
Proportion of Managed Properties,
Nationwide and by Key Area
Total for 3 Metro Areas
Approx.
%

Kinki area

Chubu area

14% 16%70

Metropolitan
area

36%

Age composition of Leopalace21 Individual Apartment Owners（as of the end of March 2015）■ Under 50 .......... 1,553/ 5.9%
■ 50s ......................3,747/ 14.3%■ 60s ......................7,744/ 29.6%■ 70s ......................5,698/ 21.8%■ 80s ......................4,095/ 15.7%■ 90s ......................1,215/ 4.7%
■ Over 100..................50/ 0.2%
■ Age unknown ...2,027/ 7.8%

To succeed in business, it is essential to apply selectivity
and focus to resource allocation so as to maximize gains
from the resources that a company has. Since the fulllaunch of Leopalace21 urban apartments in 1985, we haverestricted our focus to areas in large urban centers, where
demand is greatest for apartments for people living alone,a key demographic for our business model. This strategy
of selectively concentrating new supply in these areas
enables us to maximum our potential.
Many of the apartment owners in our system are older,with 72% over age 60 and 42% over age 70. Many of them
are thus part of a demographic that will bequeath assets inthe not-so-distant future.

Sub-total for individual owners . . . . . . . . . . . . . . 26,129
Sub-total for corporate owners . . . . . . . . . . . . . . . 1,290
Grant total for all owners . . . . . . . . . . . . . . . . . . 27,419
Leopalace21 Corporation / Annual Report 2015

17

18

3 Channel Strategy Aimed at Attracting Tenants
Directly
managed
OfficesPartners

Main
Channels

Cooperative
Real Estate
BrokersWeb

The Leasing Business can also be seen as a matchingbusiness that brings together apartment owners who needtenants and prospective tenants who seek rental housing.
It is thus necessary for a company like Leopalace21 thatmanages many apartments to create venues that expand
the opportunities for quality interaction between renters
and the population of would-be tenants so there is smooth
progress in matching them up. With this in mind, we are
not only developing new channels, but are also coming up
with creative ways to use existing ones.
Specifically, we harness our network of directly run offices
and Leopalace Partners franchisees to convince potential
tenants to become actual ones while expanding our channels
online, which is becoming the go-to channel for most people
looking to live alone to search for rooms. Moreover, ourcomprehensive channel strategy has initiatives targeting
all untapped tenant segments, unearthing demand in theindividual market via seminars for those actively looking forrental housing etc., offering proposals to corporate clients fordormitories for singles etc., and developing student demandthrough seminars at universities and vocational schools. These
are aimed at ensuring potential tenants do not slip away.

4 Measures to Enhance Existing Property Values
Japanese housing policy is moving in a direction thatemphasizes greater supply of high-quality housing for longterm occupancy, and boosting housing values is also an
important issue for the rental housing market. Yet, withthe vacancy rate in rental housing at 20.0% (the Fiscal
2013 Housing and Land Survey, Statistics Bureau, Ministryof Internal Affairs and Communication), apartments
themselves increasingly need more than ever to be
attractive so that would-be tenants choose them and keep
their occupancy rates high, avoiding vacancies.
As a result, we are moving ahead with measures
to lift the value of existing properties and enhance
product development with a focus on features ofparticular importance to would-be tenants—comfortableliving environments, eco-consciousness and disaster
preparedness, and safety and security.
These include the operational tie-ups we have with major
security companies in security systems aimed at ensuring
tenant safety and security, the installation of solar powersystems that contribute to environmental conservation, andour “Room Customize” plans, which improve the appealof older properties. We thus use a variety of measures toensure the properties we manage are preferred by tenants.
Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

5 Synergies between our Elderly Care Business and Construction Business
SynergiesSy
es
Elderly
CareBusiness

Construction
BusinessSSynergies
Single-personhousehold apartment

Senior carefacility
Landowner

The projected rise in the portion of the Japanese population
over age 65 means the potential market for our Elderly
Care Business is growing, and we see it as a standalone
growth business. Beyond this, however, we recognize thepotential for this business to generate synergies with ourcore Construction Business.
The Elderly Care Business runs a network of nursing
care facilities under the “Azumi En” brand in the greater
Tokyo metropolitan area and its environs, a catchment areathat mirrors that of our core Construction Business, and it
recently entered the greater Nagoya area (i.e., the Chukyo
region). As a result, even in cases where we cannot market
a single-person household apartment to a landowner, we
may be able to propose a plan for a senior care facility. Thissynergy is thus indispensible as a plank in our effort to be a
one-stop provider of land-use solutions.
We anticipate potential demand for facilities for
employee welfare and benefit programs and expect tomake such proposals to clients that we have institutional
contracts with, and envision a host of ways to capturesynergies with our Construction Business.

6 Synergies between our Hotels & Resort Business and Core Pillars
Clients of our core
Leasing Business and Construction BusinessCorporate client

WING MATE

TenantTennantBusiness trips
and training events
Employeebenefit programs

Landowner

TravelTravelHotels & Reso
Resortort Business

Leopalace
Leopalacce Hotels

Guam resort

Our current Medium-term Management Plan does not target
an increase in visitor traffic at our Hotels & Resort Business.
We instead view this business as a way to indirectly
support expansion of synergies with our core pillars.
Simply put, we envision the Hotels & Resort Businessas supplying venues for providing service and hospitality
to clients of our core Leasing Business and Construction
Business.
We encourage corporate clients to whom we supply
rental housing to use our domestic Leopalace Hotels
for business trips and training events. In contrast, we
market use of the overseas Guam resort to tenants andlandowners as a tourist destination and to corporate clientsas a facility for their employee benefit programs. We
hope our clients will come away from their visits favorably
impressed with our services and hospitality and thesecontacts serve a promotional role in encouraging our clients
to form long-term relationships with us.
WING MATE, which was recently acquired for its skill inarranging business trips and the like for corporate clients, is
expected to be a new sales channel for the corporate sales
department at the Hotels & Resort Business.

Leopalace21 Corporation / Annual Report 2015

19

20

BUSINESS MODEL TRANSITION
Macro-Environment and Business Performance Trends(Billions of yen)

Economic Expansion

Period of Global Recession(Before the collapse of Lehman Brothers in 2008)(Post-Lehman Collapse)

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

Stagnation of Synergy Model

Leasing Business (left axis)

Net Sales and Operating Income

Construction Business (left axis)

800
600
400
200
0
-200

Master lease system: up to 30 years, rent fixed for initial “10-year” renewable every two years thereafter(%)

Average Occupancy Rate

95
90
85
80

FY2002

FY2003

FY2004

FY2005(Each fiscal year ends on March 31)

2003
Leopalace Resort Guam commences second
phase (hotels, sports facilities such as a
baseball field)
2004
Lists on 1st section of Tokyo Stock Exchange
2005
Number of managed properties increases to
300,000
Starts elderly care businesses

FY2007

2006
Starts rental housing-related businesses(corporate housing management,
marketing insurance for household
valuables to tenants)
2007
Number of managed properties increases
to 400,000

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

Leopalace21 Corporation / Annual Report 2015

FY
2006

FY
2008

FY2009FY20102009
Number of managed properties
increases to 500,000
Opens Shanghai unit to introduce
Japanese rental housing to exchange
students, etc.
2010
Number of managed properties
increases to 550,000
Launches Leopalace Partners franchisesystem2011
Scale up installation of security systems
for apartments
Scale up launch of solar power
generation system sales

As a result of the rise in the unemployment rate acrossJapan due to the global financial crisis triggered by the 2008
collapse of Lehman Brothers, apartment demand alsosagged. Many tenants vacated apartments we managednear factories in regional communities, and the decline inrental income eroded profits at the Leasing Business. In
addition, the financial crisis caused financial institutions totighten loan screening, which in turn reduced orders at theConstruction Business. We fell into an “Earnings
Deterioration Cycle,” where the Construction Businessshrank following earnings erosion at the Leasing Businesscaused by the decrease in tenants.

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

In the period of economic growth, our Construction Business drove our growth, sharply
expanding new apartment supply, but following the 2008 collapse of Lehman Brothers,
we recorded operating losses as orders at the Construction Business declined.
Our aim amid the current economic recovery and beyond is to thrive due to our shift
to a stable earnings model that achieves a balanced earnings mix from the Leasing
Business and Construction Business.

Targets for Final Year of“Expanding Value”
Medium-term Management Plan

Period of Economic Recovery(The Present and Onward)

Comprehensive Enhancement of Earnings from Stock
Others (left axis)(Period Ending March 2017)(Billions of yen)

Operating income (loss)(right axis)

80
60

Net sales

540.0

billion

40
20
0
-20

Master lease system: up to 30 years, rent fixed for initial “2-year” renewable every two years thereafter

Operating income

22.0
ROE

12.3
FY
2011

FY2012FY2013

FY2014billion%

FY
2015(Plan)

2012
Launches “Room Customize” service
2013
Launches nationwide business of installing solar power systems onleased rooftops
Establishes local units in Thailand and Vietnam to introduce local
properties to Japanese companies
Increases capital to ¥62.86 billion via exercise of share subscription rights
2014
Increases capital to ¥75.28 billion via public offering and third-party placement
Establishes local unit in Cambodia and sales office in Myanmar to
introduce local properties to Japanese companies
Converted WING MATE CO., LTD. (travel business) into subsidiary
2015
Converted Morizou Co., Ltd. (detached custom-built homes) into subsidiary
We implemented business structure reforms in the wake of the
global financial crisis amid a series of weak earnings. While sharply
restricting the supply of apartments to specific areas in theConstruction Business, we strove to cut costs and boost rental
income through improvement in occupancy rates, in an effort torebuild the profitability of the Leasing Business. We also commenced
sales of security systems and solar power systems as a way toenhance the property value of the existing buildings we managed.
In fiscal 2011, we returned to profit after two fiscal years oflosses in the wake of the global financial crisis, and since then we
have established a stable earnings model based on the Leasing
Business. Together with aforementioned business structurereforms, our success in reorienting the earnings model reflects
an upturn in business sentiment and stronger corporate demandfor employee housing and dorms, benefiting from the pickup in
stock prices and yen weakening following the December 2012
start of the Abe administration.

The rental housing market is now in a temporary slump relating
to the consumption tax hike but factors such as the return of
manufacturing industries to Japan etc. are creating new
sources of demand, and a firm bottom underpins demand forhigher quality housing in major urban hubs in particular.
At the Leasing Business, we are working to improveearnings steadily via a focus on boosting occupancy rates byoffering products and services that are a step ahead of thetimes and by limiting our provision of apartments to areas
where tenant demand is strong.
In contrast, at the Construction Business, we are striving tobroaden our order mix beyond our customary mainstay inapartments to encompass facilities for seniors, commercial
buildings, custom-built homes, etc. Moreover, we are also
rolling out new businesses such as solar power systems,
rental housing brokerage in Asia, and the provision of service
apartments.
Leopalace21 Corporation / Annual Report 2015

21

22

SPECIAL FEATURE: LEASING BUSINESS STRATEGY
In the Leasing Business, improving occupancy
rates is crucial to securing stable profits. For
this reason, we are working to foster demand
among corporate clients for properties withlong-term tenancy prospects like company
housing, dormitories for singles, etc. In theindividual market, we are moving ahead withefforts to broaden our service menus to create
spaces where people want to live.

Unititss unUnunder Maana
unde
nage
geme
ge
m nt
me
n , Av
Averagaagge An
Annu
nnu
nuaal
al Occccuupaupancyy Rat
up
ae
Thou
hhou
o sandandndss of uni
nd
u ts
un
ts))
600
00 (TTh(%) 95
95

500

90

400

8855

300

80
80

’08/3 ’09
09/3
/3 ’1011000//3/3 ’11/3 ’112/33 ’1’113/3 ’14
’13
’14/3
/3 ’1515/3
15
5/3 ’16’16/3/3
FY 0077 FY2008
FY2
008 FFY2
Y2009 FY2010 FY
Y220111 FYY
FY2Y20122 FY2FY2013013
1 FY2
13FY2014014 FY2
Y 015
1(P an)(Plan
Manaanagedaged units at end--FY
Y (le(leftt axi
axiss) ● Ave
A raagage annu
annu
nual
al occaloccupaccupa
pancy
ncy raratte
te (rir gh
gh axxiss)
ght
■ Man

Ratio of Listed Companies Using Our Services

Further Bolster Corporate Sales
Expert Marketing Teams for Each Industry
At the Leasing Business, about half of the leased units areused by corporate clients. We cater to many industries
including manufacturing, personnel dispatch and businessoutsourcing, services, retail, etc. About 80% of listedcompanies across Japan use properties we manage.
Given this, we have set up marketing teams for eachkey industry and fine-tune our marketing to industry
clients in ways that take into account their attributes.
We can propose leasing plans to corporate clients thatbest meet their needs in terms of contract form, length,
and number of units. After signing corporate clients to acontract, we appeal to them on the basis of our ability toidentify properties nationwide. These strengths further
reinforce our marketing to corporations.

* Companies listed on Japan’s TSE1, TSE2,
regional stock exchanges, or startup
stock markets

79.3%
Corporate-Leased Housing Units by Industry
300,000 (Units)

200,000

202,584

219,239

228,708

246,272

262,577

+6.6%
+4.5%
+11.6%+11.2%+4.3%

100,000+6.6%+10.0%
+2.7%

0

’11/3
FY2010’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014Year-on-Year■ Manufacturing ■ Personnel Dispatch/Business Outsourcing ■ Services■ Retail ■ Food & Beverage ■ Construction ■ Other

Customer VoiceKOURAKUENCORPORATIONFounded in 1954,
KOURAKUEN is a
restaurant chain serving
ramen, soba, etc.
It currently has 518 outlets
in Japan and 5 overseas.

We turned to Leopalace21 when we sought to revise our employee
dormitory room system to address dissatisfaction with our previous
arrangement that employees noted in their self-review reports. The generalaffairs department had been managing about 300 units, including 3LDKapartments, with three employees living in each one. After we grasped how
much employees wanted their own living spaces, we asked Leopalace21
for help in their specialty of single-person households. After the changeover,
80% of employees surveyed on their housing said they were either satisfied
or very satisfied, and management is also pleased. The “corporate limitedplan” Leopalace21 arranged also lightened the workload of our generalaffairs department. While these benefits are not readily identifiable inperformance data, the lighter workload enabled employees to focus more
on work and themselves. We think this is a major plus in advancing thecompany and our human resources development.
With an aim of 1,000 outlets in Japan, KOURAKUEN sees
Leopalace21’s extensive property portfolio and arrangement
capabilities as important resources.

Leopalace21 Corporation / Annual Report 2015

President of
KOURAKUEN

Tsutae Niida

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

23

Promoting Long-term Tenancy via More Extensive Tenant Services
Developing Products to Reflect Client
Viewpoints with over 20,000 “RoomCustomize” Contracts
To retain individual tenants over the long term, it isimportant to ensure rooms are ones where they will
want to continue to live. As an industry pioneer on thisfront, Leopalace21 has consistently worked to offer
products and services that appeal to clients in this way.
One example that is popular among tenants is our“Room Customize”, which allows them to change forfree the wallpaper on one wall to suit their tastes.
Such customization plans are not available for mostrental housing. The aim is to encourage long-term
occupancy by enabling tenants to personalize and form
attachments to their apartments. The “Room Customize”
have proven very popular, with the number of leases
with such plans exceeding 20,000. The Company isworking to developing new products and services.

Cumulative “Room Customize” Contracts
25,000 (Number of contracts)
20,00015,00010,000
5,000
0
1Q

2Q

3Q

4Q

1Q

’13/3
FY2012

2Q

3Q

4Q

1Q

’14/3
FY2013

2Q

3Q

4Q

’15/3
FY2014

Installing Home Security Systems for“24-hour, 365-day” Safety
For prospective tenants, attractive housing goesbeyond design, room layout, amenities, and fixtures.
For apartments aimed at single-person households that
Leopalace21 mainly builds, a well-conceived security
arrangement that offers safety and peace of mind is amajor attraction. For this reason, we have operational tieups with major security companies, with security systeminstallations in units we manage on the increase.
Of our aggregate managed unit portfolio, the number
with a security system installed has risen to 40.9%,
equating to 226,801 units. We plan to stay on thiscourse, with the aim of attracting more female tenants,
who in particular tend to find comfort and security froma well-conceived security setup, and encourage them tobecome long-term tenants.

Installation of Home Security Systems
250,000 (Units)
200,000
150,000
100,000
50,0000
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014

Leopalace21 Corporation / Annual Report 2015

24

SPECIAL FEATURE: CONSTRUCTION BUSINESS STRATEGYCons
Con tructiiono Businese s Salelees anandd GrG osss Pr
Prof
ofi
of
fit
it Mara gin
giin
In concert with the drop-off in demand after
the 2008 collapse of Lehman Brothers, we kept
orders at the Construction Business in check.
With the market now picking up, however,
we are aiming for annual sales of ¥100 billion
by enhancing our product mix and offering abroader portfolio of construction products.

120 (Billions of yenn)(%)) 40
4

90

30

60

200

300

10

0

0

’111/3
FY22010

’12/3
’12/3
F 011
FY2

’13/3
/3
F 012
FY2

’14
14/3
/3
FY2013
FY2
FY
013

’15
15/3
/3
FY
Y20144

’16
16/3
/3
FFY2
Y2015
(Pl
Plan)
an)

■ Net
Ne salessales (leeft
ft axxis) ● Gro
Gross
ss prop fit
f maargi
rginn (ri(rigr ht axis)

Market Environment Facing the Construction Business
Net Migration into Urban Centers, Especially
the Greater Tokyo Area
Our strategy for the Construction Business is to focus onregions where we expect tenant demand to be robust. One
indicator we use to determine tenant demand is a reportwhich tracks migrant inflows and outflows by prefecture[Report on Internal Migration in Japan Derived from the
Basic Resident Registration, Ministry of Internal Affairs andCommunications((MIC)].
There has been a net migrant inflow into urban centers
for the past three years running. In view of this trend, we
expect the strongest tenant demand to be in six prefectures,
especially the greater Tokyo metropolitan area (Tokyo,
Kanagawa, Saitama, etc.). The next four prefectures where
we see potential, led by Osaka, had net migrant inflows

in either the past three years combined or in 2014. Mainly
located in the prefectures referenced above, our networkof 60 offices and bases (as of March 31, 2015) for theConstruction Business leads our marketing efforts.
The ratio of rental housing over 35 years old in thefour major urban centers where most of our efforts areconcentrated has risen to 14.5% of the total rental housing
stock, or 1.265 million units, according to statistics of rental
housing that include apartments.

Privately Owned Rental Units over 35 Years Old (units, % of total)
Tokyo’s 23 wards
Major government-designated cities

Built before 1980 (over 35 years old)
283,500
15.5%
429,900

14.9%

551,600

13.8%

Total of four major metropolitan areas

1,265,000

14.5%Grand total in Japan

2,193,400

15.0%

Other municipalities

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

Population Inflows/Outflows by Prefecture in Japan in 2012-2014(Thousands of people)

45

8

8

30

4

4

15
0

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

18Tokyo: 202

Numberumbber off LP21
LP21 offices
offi
ffices ■ PPrefecturesreffectures withi h LP21
LP21 offices
offi
ffifices
●N

1

1 1

2

5

2
3

1

1 1

-15

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

Consulting Sales Based on Understanding Landowner Needs
Apartment Construction Proposals
Reflect Our Tax System Knowledge
Of the landowners that we build apartments for, manyown property as individuals. Of these, quite a few regard
apartment management as a way to reduce taxes arisingfrom bequeathing assets to the next generation. In theJapanese tax system, the inheritance tax payable on land
inherited with a structure such as an apartment building
on it differs from that on a vacant lot (unused land).
Leopalace21 is knowledgeable about the tax system
Leopalace21 Corporation / Annual Report 2015

with regards to land use and inheritance considerations,and we strive to uncover latent needs via a consultingbased marketing approach where we propose plans thatbest fit the circumstances of each individual landowner.

Consulting-based Proposals with Benefits for Landowners
Consultations

Sales tolandowners
Land
owned

Land owned

Land owned Investigate,
arrange

Land
usage

Landowners
Sales toothersProceeds fromasset sales

Apartment management
Use asset sale proceeds for construction costs

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Bolstering Product Competitiveness
Creating Comfortable Spaces Responsive to Future Rental Housing Needs
The standards potential tenants seek for rental housing are increasingly
high. Given the importance many people put on privacy these days,sound insulation is becoming a standard feature. While many years ago
Leopalace21 apartments were thought to have thin walls, we have foundmany ways to reduce unwanted noise in apartments we built such as
sound-insulated flooring, walls, and pipes. Other ways we are bolstering
our product competitiveness is by broadening our construction productmix and factoring a female perspective into our product planning.

Adding more product planning functions thatreflect a female perspective
Our product lineup to date has often lacked a female perspective,
from the ways we have innovated to the fixtures and amenities
selected. We have for this reason launched a team comprised entirelyof women to be responsible for a slice of our product planning.
As a result, we have started to roll out products with fixtures andspecifications that women appreciate such as a powder space in theliving room and wall storage.

Installing industry-leading sound-insulation
fixtures we developed
In wooden apartments sold since April 2013, we have installedsound-insulated flooring (i.e., “non-sound floors”) as a standard
feature to go with sound-dampening drainage pipes and soundinsulating walls. Compared with normal flooring, our “non-soundfloors” are at least two ranks more effective in providing soundinsulation in a wooden structure. Moreover, as of July 2013, “nonsound flooring” has been installed as a standard feature in our steelframed rental housing products. We have thus lessened problems
around unwanted noise—important for residence quality—in waysthat have translated into greater product competitiveness.

High sound-insulated flooring, non-sound floor V-model (optional)
Sound-insulated sheets
Plaster board

Sound-insulating flooring
ALC board
Ply board
Floor-reinforcing materials
Floor beams
Wooden ceiling joists
Reinforced plaster board
Plaster board

Woodenceiling joists
Glass wool
Wooden ceiling beams
Original shearing-typevibration-proof ceiling hangers
Special vibration-proof dampers

Broadening our construction product mix
The Construction Business is predicated on apartment orders, which
are in turn premised on keeping occupancy rates high at the Leasing
Business. To expand orders at the Construction Business, we arebroadening our construction product mix to custom-built homes, inaddition to fields that have not been priorities thus far such as carefacilities for the elderly, retail stores, and commercial facilities. These
steps are helping to strengthen our ability to market proposals tolandowners.

Leopalace21 Corporation / Annual Report 2015

25

26

SPECIAL FEATURE: OVERSEAS BUSINESS STRATEGYWith a business structure dependent on adomestic market that is bound to shrink, we
realize our business could contract. We arethus expanding to not-yet-mature leasing
markets overseas, harnessing the know-how
on leasing management and contracting that
we have amassed over the years.

DalianBeijing

South Korea
Seoul
Busan

Shanghai

Our approach to date

China

Introducing properties
in Japan to foreigners
Guangzhou+

TaipeiTaiwanMyanmar
Hanoi
YangonLaos

Our future approach

Thailand
BangkokCambodia
Phnom Penh

VietnamBrokering properties in Asia
to Japanese individuals
and companies

Ho Chi Minh

Sales office expansion plan: 20 sites(as of the year ending March 31, 2017)● Offices introducing/arranging rental housing in Japan● Offices brokering local rental housing in Asia
● Offices introducing/arranging in Japan and brokering in Asia

Training Workers in Vietnam for Construction Work in Japan
There is a shortage of building-site workers available forconstruction work in Japan as a result of redevelopment
in major cities and projects for the 2020 Tokyo Olympics.
In these circumstances, it is critical for a company like
Leopalace21 with a construction contracting business tosecure enough skilled labor for onsite construction work.
For this reason, apprentices that finished our first training
program in Vietnam are being brought to Japan for workat domestic building contractors.
We think the shortage of construction-site labor supply islikely to persist, and there are plans to bring apprentices thatcomplete our second training program to Japan for work.

Leopalace21 Corporation / Annual Report 2015

Training workers in Vietnam

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

Progress at South Korean Joint Venture Woori & Leo PMC Progresses
Woori & Leo PMC Co., Ltd. has commenced aresidential lease business for companies withrent collection management in South Korea. The
joint venture with Woori Housing Operation andManagement Co., a major Korean residential building
manager, was established in November 2012.
Most rental housing in South Korea has been
managed and traded with an eye on capital gains
but an income approach has gained acceptance andis emerging as the mainstream method, with thepreferred form of lease for rental housing changing
over from the upfront deposit Chonse contract to themonthly rent Wolse contract. The venture’s founding
is a response to these trends and the concomitant
demand for know-how in housing rent collection
management for corporate clients. Woori & Leo
PMC’s units under management stood at 452 units
as of the end of March 2015.
The venture aims to reap synergies between Woori& Leo PMC’s leasing management business andour Korean consulting business, which brokers local
rental housing, and is keeping an eye on expansion
via construction contracting in the future.

◆

Woori & Leo PMC Co., Ltd. ◆A joint venture with Woori Housing Operation andManagement Co., a major South Korean residentialbuilding manager with 360,000 units under management
An unmatched system of rent collection services
provided by a company
A full rollout of marketing activities based on local
regulations in February 2014; managed 452 units as ofthe end of March 2015

Launched Service Apartment Business in Cambodia
We started construction on a service apartment
property in Cambodia. We selected Cambodia for
our first service apartment overseas because wethink there is ample opportunity for us to harness our
know-how there.
With a growing population, Cambodia is situatedin the heart of Southeast Asia, and 142* Japanesecompanies have set up operations there. About
1,800* Japanese nationals now reside in Cambodia
and more are coming every year, mainly due to thegrowing presence of Japanese manufacturers, but
the residential environment is not yet suitable forJapanese employees on long-term stays.
With these trends as a backdrop, Leopalace21
launched operations in Cambodia, but we think
there are still many nations in Asia where there aresuch needs, and our policy is to expand our target
countries sequentially.
* Statistics on Japanese nationals overseas, as of October 2013,
Ministry of Foreign Affairs

Official Members of the Japanese Business Association of Cambodia
160
120
80
40
0

’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/5
Source: Japanese Business Association of Cambodia

Leopalace21 Corporation / Annual Report 2015

27

28

SPECIAL FEATURE: ELDERLY CARE BUSINESS STRATEGY
Staying true to a “local community roots”
concept, Leopalace21 is working to expand
its elderly care businesses, centering ongroup homes, day-service centers, and feebased homes with nursing care and fee-based
residential homes.

Group Homes• Provide personalized nursing careto elderly dementia patients• Feature completely private rooms
that preserve privacy

Day-service, Short-stayNursing Care Centers

Fee-based Residential
Homes with Nursing Care

• Provide same-day and overnight
nursing care services• Private long-term residences withonsite staff providing nursing care

• Combine fee-based homes withnursing care and increasing visitingcare day services“Azumi En” Facility Map“Azumi En” Facility Network
Tochigi

Sekigawa

Nogi

KanumaOta Tatebayashi

Hanyu

Higashimatsuyama

Saitama
SayamaOume Irumagawa
Hirasawa
Tatemachi

Shinkoga

Gyoda

Honjo

Chichibu

Facilities

Utsunomiya

Horigome

Gunma

Yaita

Yuki
Koga
Koga-chuo

Ina

Kitamoto
Ageo

ShimodateHanasaki-no-oka

Iwai

Showa
IbarakiMinami-sakurai
Tsuchiura
Gamou Yoshikawa
KokinuMizuho Goseki
YashioSoka
YanagiKomakidai sawa ▲ Shimizu-koen
Abiko
Takamihara
SakasaiNakanoKomuroMihashiTokyo
Takatsukashinden

Tokiwadaira
MisakiWakabaNamikicho

Ino

Katsuragi
Takaoka Nakazawa
Oyumi
Ichihara

Kanagawa
Tsurumaki
Tsukuihama
Yamakita

Leopalace21 Corporation / Annual Report 2015

Chiba
Ichihara▲ Kisarazu

Group homes
Day-service, short-stay centers
Sites including fee-based nursing homes
Total

2
40
21
63

*As of the end of March 2015
★ Fee-based home with nursing care,day/short-stay services◆ Fee-based home with nursing care,short-stay service■ Fee-based home with nursing care,
day service● Fee-based home with nursing care
★ Fee-based residential homes
with day/short-stay services◆ Fee-based residential homes
with short-stay service● Fee-based residential homes○ Group homes▲ Day/short-stay services● Day services

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

29

SPECIAL FEATURE: SOLAR POWER BUSINESS STRATEGY
Global warming is a problem facing people
everywhere. Leopalace21 has set up solar
power generation businesses via an array of
approaches such as installing solar panelson the rooftops of apartments we manage.
Through the use of natural energy sources,
we are moving forward with measures tocounter global warming.

Solar Power Systems

12,356

buildings(172.4MW)(Installation rate: Approx. 55%)

Installations of Solar Power Systems (cumulative)
12,500 (Buildings)
10,000
7,500
5,000
2,500
0
1Q

2Q

3Q

4Q

1Q

’12/3 FY2011

3Q

4Q

1Q

2Q

3Q

4Q

’14/3 FY2013

1Q

2Q

3Q

4Q

’15/3 FY2014

Solar Power Systems: Installations by Region (As of the end of March 2015)
5,000 (Buildings)

Total installations nationwide: 12,356 buildings

4,000
3,000
2,000
1,000

■ Owner funded ■ Leased rooftop

TohokuKita Kanto

Tokyo metropolitan
area

HokurikuKoshinetsu

Chubu

Kinki

Chugoku

Shikoku

0
Kyushu/Okinawa

We are focusing on solar power systems as a promising
new business endeavor that also contributes to mitigating
global warming. We are proceeding with three kindsof solar power businesses. The first is installing solar
panels acquired using investment funds from apartment
owners (the construction business). The second isleasing the rooftops of apartments we manage so as togenerate solar power and sell this electricity to power
utilities (other businesses). The third is designing andconstructing mega solar installations on vacant idle sites(the construction business).
Our main focus is solar power generation from panels
the Group has installed on leased rooftops. Since
launching this business in December 2013, we haveinstalled panels on 3,969 buildings. Our aim is to proceedwith installations on about 500 rooftops in the first half offiscal 2015, adding about 64MW in generation capacity.

2Q’13/3 FY2012

Our Business Models for Solar Power Penetration (As of the end of March 2015)
Business models

Starting month

As of the end of March 2014

As of the end of March 2015

1

Solar panel installations via owner investment

Mar. 2011

6,629(79.7MW)

7,129(89.1MW)

2

Solar panel installations on leased rooftops

Sep. 2012

2,372(46.1MW)

5,227(83.3MW)a SPC-based tie-ups

Feb. 2013

1,258(24.6MW)

1,258(24.6MW)b Leopalace21 Group’s generation businessDec. 2013

1,114(21.4MW)

3,969(58.7MW)

Sep. 2013

Tomisato City,
Chiba Pref.

(1.7MW)

Tomisato City,
Chiba Pref.

(1.7MW)

TOTAL

9,001

(125.8MW)

12,356(172.4MW)

3

Mega solar projects using idle sites*2b: Earnings on installations for Leopalace21 Group’s generation business are
subject to consolidated eliminations*For details, see “Creating an Environmentally Friendly Society” on pages 62-63.
Leopalace21 Corporation / Annual Report 2015

30

DIALOGUE ON LEOPALACE21’S CORPORATE GOVERNANCE
President Eisei Miyama and Outside Director Tetsuji Taya discuss governance-related themes
such as what form of corporate governance the Company seeks, its response to the corporate
governance code, and the code’s requirement that at least two outside directors be appointed toa listed company’s board of directors.

Eisei Miyama
Leopalace21 President and CEO

X
Tetsuji Taya
Leopalace21 Outside Director
Growth Platform, Inc.
( Industrial
Partner & Managing Director )What Form of Corporate Governance Leopalace21 Seeks
Miyama: While our core businesses are still in Japan, we are looking to overseas
markets as a source of growth and foreign investors now comprise over 50%
of our shareholder structure. We are thus implementing various initiatives toadapt our management approach to respond to such global shifts. One

Management sincerely feels a
corporate governance structurethat passes muster at the
global level is a necessity.

example of this is our sincere conviction that a corporate governancestructure that passes muster at the global level is now a necessity.
Among other efforts, the Company is forging ahead by enhancing thefunctions of the Board of Directors, adopting management quality
improvements, and bolstering corporate systems via efforts to strengthen
collaboration among business divisions. While proceeding with efforts to
upgrade our unique corporate governance, we are always asking ourselves
what new idea or initiative should we consider next.
Taya:

I think there has been rapid progress in strengthening Leopalace21’s
corporate governance systems in the past few years. Of particular note are
the committees under the Board of Directors that act as consultative bodies

There are sufficient corporate
governance systems alreadyin place.

to the board. With the effective functioning of these committees, I believe
Leopalace21 has already put into place sufficient governance systems.
In view of the steady progress of its efforts to address new needs andchanges in the times as the years go by, my sense is governance fromhere onward is unlikely to be a problem.

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Some Measures in Place Address Corporate Governance Code Content
Miyama: A new tide is sweeping across the world of Japanese business with theconfirmation of the final version of the Corporate Governance Code on
March 5, 2015. We have been following with interest the expert council’s
process in reaching a final version, and are studying what we should do inspecific terms now it has been decided.
That said, we have already commenced several initiatives that address
issues raised in the code. On ensuring diversity, including the active
participation of women, for example, we have already started
implementation of an action plan to promote work-life balance.

On diversity concerns,
including the active
participation of women, we are
implementing an action plan topromote work-life balance.

In sum, there are items in the code we are already addressing and items
we will address in the future. Our policy is to be mindful of sequence indisclosing what new initiatives we will need to implement and how weshould explain these initiatives so as to satisfy all the requirements of the
Corporate Governance Code.
Taya:

I think companies should welcome the formulation of the Corporate
Governance Code and the clarification of standards for listed companies.
While there is an explicit statement on the addition of outside directors as
a formal requirement, Leopalace21 has developed greater awareness ofshareholder concerns in the course of its public share offerings and thediversification of its shareholder base to date, and there are hardly any
issues in the code it will need to address immediately.
There are issues such as improving management transparency andadvancing dialogue with shareholders on which the Company will need toraise its game, but I think what matters most is not to overreact to theissuance of a code of this sort and rush to put into place superficial
compliance. Instead, I believe it is vital to satisfy the code based on actual
practice by explaining those items where our response needs to be
explained while striving to fully understand the real intent of code’s

I believe it is vital to satisfy
the code based on actual
practice by explaining items
where necessary.

principles and aims.

Ensuring Boardroom Debate Translates into Greater Corporate Value Creation
Miyama: As contained in the Corporate Governance Code, boards of directors are
expected to create conditions that enable top management to takeappropriate risks. We rely on Mr. Taya, our Outside Director, for necessary
debate and advice so the Company can foster greater corporate value
without losing our aptitude for speed.

Leopalace21 Corporation / Annual Report 2015

31

32

Taya:

What is most important in promoting necessary debate and providing
appropriate advice is information. As a condition for accepting an appointment
to the board, I asked the Company to disclose all the information necessary formaking decisions. Given I set terms of this sort for accepting this position, I
have a duty to avoid irresponsible statements. I thus participate not only inmeetings of the Board of Directors but also in the process of formulating
agenda items for meetings, and I make an effort to grasp what is happening
even in intermediate stages.
If directors were to simply vote up or down on fully developed proposals, thiswould reduce the board to a mere formality. Moreover, to contribute my own
experiences and knowledge to decision-making, I have found there are many
instances where improving proposals with appropriate revisions yields favorable
results. In addition, there are many cases where agenda items involve
stakeholders outside the Company, so it is necessary to minimize the risk andcosts of their opposition.
For such reasons, I feel outside directors that can only attend a once-a-month
meeting at a specific time are not well suited to fostering a fast-moving

The size of an outside director’scommitment is a key factor to
improving the quality ofboardroom debates.

management approach. The key elements for outside directors to improve thequality of boardroom debate go beyond just offering an independent perspective
to encompass the size and extent of his or her commitment to the company.

The Conduct and Attributes Leopalace21 Seeks from Outside Directors
Miyama: When we originally decided to appoint an outside director and looked into
what sort of person we thought would be a good fit, we naturally soughtsomeone that could offer us objective viewpoints based on a wealth ofknowledge and experience but in addition to that, an important condition for
us was to find someone who could act as a brake on management decisions.
Leopalace21 is a company where decision-makers inherently come from

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

sales divisions and their viewpoints tend to be skewed toward speed inmanagement decision-making. As a result, we have been very pleased tohear opinions based on an outside perspective on how we can correctcourse. We think Mr. Taya has done well in discharging such responsibilities.
Taya:

We have been very pleased tohear opinions based on an
outside perspective on how
we can correct course.

While Mr. Miyama suggests he sought someone who could act as a brakeon decision-making, in my capacity as Outside Director, I am not alone inperforming this role at Leopalace21. The Company has built a proper
governance structure that harnesses third-party contributions from its
outside corporate auditors, its accounting auditor, lawyers, and others. The
Corporate Business Promotion Headquarters, set up in 2014, has worked toenable the Company to benefit more from bottom-up input, collecting
opinions from employees, and preparing the way for a horizontal organization
across divisions that is less vertically segregated. In these ways and others,
efforts across multiple dimensions have coalesced into a structure that has
appropriate brakes in place but has not lost its ability to move fast.

Our Policy on Returning Profits to Shareholders
Miyama: What to do about shareholder returns is an important item for the Board of
Directors. We have refrained from paying dividends but a pathway to a bolstering
our earnings structure and accumulating retained earnings that can funddividends has come into view. I think debate will focus on this matter from here.
Taya:

In fiscal year 2014, profits returned to shareholders in some form by listedcompanies in Japanese came to a record high of about ¥13 trillion. There
are also calls for Leopalace21 to restore dividend payments soon. In
deciding on a policy for returning profits to shareholders within the context
of the Company’s tilt toward growth, I feel it is necessary to determine
based on a dialogue with shareholders what kind of policy they really want.

It is necessary to determine
based on a dialogue withshareholders what kind ofpolicy they really want.

Leopalace21 Corporation / Annual Report 2015

33

34

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

Our Corporate Governance Philosophy
We see the construction and reinforcement of corporate
governance as one of our most critical managementtasks, and it is our basic philosophy of corporate activities
to pursue efficient, fair, and highly transparent operations
to attain greater corporate value for the sake of all our
stakeholders.
Based on this philosophy, we seek to improve
management organizations and management systems
through such measures as reinforcing check-and-balance
functions in our decision-making processes and building
good relations with shareholders, business partners, etc.
Specifically, we set up the Board of Directors toenhance business performance through appropriate andrapid decision-making, responding dynamically tochanges in the business and management environment.
At the same time, we strive for stronger management
oversight through the Board of Auditors, a body set up tomonitor the performance of duties by directors. Moreover,through committees set up as consultative bodies to theBoard of Directors, we have established a compliancesystem and risk management system.

In fiscal 2014, our headquarters division, called the
Corporate Business Promotion Headquarters, wasestablished to enhance collaboration among businessdivisions. Creating a four-headquarters system, it
augments the three-prong structure that had been inplace—the Marketing and Sales Headquarters, theManagement Planning Headquarters, and the Management
Headquarters. With this structure in place to clarify
responsibilities and authorities, we aim to continuously
enhance our systems and corporate governance.
We are assertively moving forward with information
disclosure activities through the PR and IR Group in theManagement Planning Division. While working to provide
a fuller array of information disclosure on our website,
we conduct information disclosure activities via
participation in business presentations aimed at individual
investors and IR fairs organized by third parties. We holdregularly scheduled meetings attended by Japan-based
analysts and institutional investors, and top executive
officers etc. visit investors in North America, Asia, andEurope when necessary.

Corporate Governance System
General Shareholders’ Meeting
Appointment/Removal

Corporate Management Council
All directors/standing auditors

Various Committees
・Risk Management Committee・CSR Committee
・Compliance Committee
・Personnel Committee
・IT Committee

Appointment/
RemovalAppointment/
RemovalImportant
Matters for
Discussion
InquireAccounting Auditors
Accounting
Audit

9 Directors(including
2 outside directors)

ReportAppointment/
RemovalAppointment/
RemovalBoard of Auditors
Audit

MutualInformation
Sharing

Corporate Business
Promotion Headquarters

Leopalace21 Corporation / Annual Report 2015

Cooperation

ReportAuditing Department(internal audit, internal controls)

Executive Board
All Directors

2 Standing Auditors /2 Outside Auditors

Auditing Council

President and CEO

Marketing and Sales
Headquarters

Cooperation

Board of Directors

ReportOutside director/standing auditors

Appointment/
RemovalReportWork-Life Balance
Promotion Office

Management
Planning Headquarters

Management
Headquarters

Executive
Actions

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Governance System and Initiatives
Board of Directors

Internal Audit

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

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

Board of Auditors
The Board of Auditors (BOA), composed of four
members (two standing auditors and two non-standing
auditors), is a body set up to monitor the performance of
duties by directors. BOA members attend important
meetings of the Board etc. in accordance with the audit
plan to monitor the decision-making process for key
decisions and the progress of operational strategies set
by the directors. At the same time, BOA strives toensure the system in place enhances audit
effectiveness by conducting operational statusinvestigations and periodically exchanging views andopinions with the president.

Outside Directors/Outside Auditors
By nominating outside directors as well as outside
auditors, Leopalace21 strives to strengthen the oversightfunction to ensure that decision-making and businessexecution by the Board comply with relevant laws andregulations in order to achieve managementtransparency and fairness. At the same time, it hopesthat the outside directors and auditors provide advice
from an objective standpoint based on the experienceand knowledge they have obtained through theirbusiness careers as well as their insight as executives.
The Company has notified the Tokyo Stock Exchange ofthe independence of its two outside directors and twooutside auditors (four in total).

Attendance at Board Meetings by Outside Director
Tetsuji Taya

Attended 16 of 16 Board Meetings

Accounting Audit
Leopalace21 has hired Grant Thornton Taiyo ASG to audit
its financial statements. The auditing contract we signed
is for audits to be performed in accordance withJapanese legislation, the Companies Act, and the
Financial Instruments and Exchange Act. The status ofaudits by our accounting auditor is reported at regularintervals to the Board of Auditors.

Compensation for Members of Board of
Directors
Compensation etc. for members of the Board
comprises three categories: basic compensation, stock
options, and bonuses. Compensation is determinedbased on the policies described below. The
compensation etc. of auditors is decided by the auditors
after mutual consultation within a framework
determined at the shareholder meeting that sets aceiling on the aggregate amount.
(Basic Compensation)
This is determined for each member of the Board basedon a comprehensive assessment of the attributes of theoperations they oversee, the scope of these operations,
their business performance, etc.
(Stock option)
Leopalace21 has adopted a stock-based compensation
stock option plan with the objectives of ensuring board
members and stockholders share gains and losses fromshare price movements and of enhancing earnings
performance. The size of the grant takes into accountearnings and share price performance, and is calculated
based on our corporate bylaws, including whether or nota grant is awarded. The outside director is not allocatedany stock options.

Attendance at Board and BOA Meetings by Outside Auditors
Koichi Fujiwara
Masahiko Nakamura

Attended 16 of 16 Board Meetings
Attended 9 of 9 BOA Meetings
Attended 16 of 16 Board Meetings
Attended 9 of 9 BOA Meetings

Leopalace21 Corporation / Annual Report 2015

35

36

(Bonuses)
The size of the bonus awarded, including whether or not
one is awarded, reflects quantitative factors such ascompany earnings etc. and qualitative factors such as
bolstering the management foundation etc. and factors in
a comprehensive assessment of the magnitude ofcontribution by each director etc. The outside director is
not awarded a bonus.

Amount of Compensation Awarded to Directors and Auditors (Millions of yen)
Total compensation etc. across categories
Total
Basic
compensation compensation

Stock
options

Bonuses

7 board members (excludes OD)

277

277

—

—

2 auditors (excludes OA)

32

32

—

—

3 outside directors/auditors

20

20

—

—

* The table includes one director who resigned as of March 31, 2015 and one auditor who is toretire as of June 27, 2015; OD = outside director and OA = outside auditor

Compliance and Risk Management Systems
The basic policy of the internal control system is to baseour corporate activities on compliance with laws andregulations as well as with social ethics. We are working
to identify and correct problems from time to time, andto further improve and reinforce internal control systems.
With regards to the compliance system, theCompliance Committee has been set up as an advisory
body to the Board of Directors, in addition to theestablishment of the Corporate Code of Ethics and aninternal reporting system, aiming to strengthen
compliance. With the president serving as chair, theCompliance Committee includes lawyers and otherexternal experts. As one plank in our efforts to bolster
governance, the committee develops various measuresrelating to compliance such as enhancing educational
training and reinforcing the information management
system. We are also working to bolster monitoring
systems and to identify and improve problems, and have
put into place a system to assertively implement
compliance-related measures onsite where operations
are conducted, assigning a person responsible forcompliance at each division and department.

Specific Initiatives Concerning Compliance (Fiscal year ended March 31, 2015)
Content

Theme

Compliance training

Compliance basics, information management, contract management, etc.

E-learning

Harassment, information management, etc.

Distribution of compliance publications

Information management, etc.

With regards to the risk management system, the Risk
Management Committee has been created as anadvisory body to the Board of Directors to ascertain andmanage the risks facing the entire Company in acomprehensive manner, with a view to strengthening
risk management. With the president serving as chair,
the Risk Management Committee includes lawyers andother external experts. It not only verifies risk
management conditions but also plans and implements

Leopalace21 Corporation / Annual Report 2015

training and other measures in its efforts to reduce risk
and increase preparedness and prevention. Each division
extracts and analyzes risks concerning their operations,establishes and supervises risk countermeasures, andreports these efforts to the Risk Management Committee.
The committee ensures the proper management of risks
in each division through consultation and guidance.

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Directors (As of June 26, 2015)

Back row, left to rightOutside Director Tetsuji Taya, Director Yoshikazu Miike, Director Hiroyuki Harada, Outside Director Yoshiko Sasao
Bottom row, left to right
Director Hiroshi Takeda, Director Tadahiro Miyama, President and CEO Eisei Miyama, Director Yuzuru Sekiya, Director Kazuto Tajiri

Executive Officers (As of June 26, 2015)

Back row, left to rightExecutive Officer Yasushi Mizuno, Executive Officer Motoyoshi Ohishi, Executive Officer Bunya Miyao,
Executive Officer Kenichiro Samejima, Executive Officer Shigeru Ashida, Executive Officer Shu Ikeda
Bottom row, left to rightExecutive Officer Hideki Matsunaga, Managing Executive Officer Naomichi Mochida, Managing Executive Officer Satoshi Abe,Managing Executive Officer Fujio Sato, Executive Officer Seiji Shinozaki
Leopalace21 Corporation / Annual Report 2015

37

38

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

3. Risks Associated with Property, Plant and Equipment
and Real Estate Held for Resale

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

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

property for sale, fixed assets, or other assets could

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

management as of the end of the consolidated fiscal

as well as its financial position. Moreover, with regard toterm under review.

the Company’s hotel and resort related businesses,
there will be a continuing need for regular investments in

1. Revenue-related Risk

facility replacement and renewal. As a result, changes in

Leopalace21 apartments are primarily utilized by single

depreciation expenses could have an effect on the

persons, and corporate contracts typically involve short-Company’s business performance.

term leases of apartments for use as company
dormitories by workers travelling on company business.

4. Loan Losses, and Reserve for Bad Debt

As a result, changes in the performance of the overall

The Company conducts financing activities, and carries

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

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

housing loans and membership fee loans offered to its

In addition, we have included in our forecasts all

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

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

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

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

willingness of financial institutions to provide credit,

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

increase, or if we should be obliged to honor claims

as collateral, and fluctuations in interest rates could

pertaining to these loan guarantees.

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

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

2. Cost of Sales

in apartment vacancies, Leopalace21 has established a

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

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

constructed apartment for a period of time and at a rent

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

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

rental income received from tenants during the contract

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

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

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

6. Leasehold Deposits and Guarantee Deposits

8. Information Leaks

Leopalace21 has long-term deposits from property

The Leopalace21 Group holds a great deal of information,

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

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

renovation expenses, following the dissolution of

the Company has drawn up the required information

Leopalace21 Owners Mutual Insurance Association.

security guidelines, and set up a Compliance Committee

Leopalace21 makes a concerted effort as a leasing

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

apartment maintenance structure, through which

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

possibility that the Group’s reputation could be damaged,

or renovation could have an impact on Leopalace21’s

and that business performance might be affected.

financial position.
Leopalace21 also has deposits for Leopalace Resort

9. Other Risks

memberships related to the Guam resort business, most

The Group is aware that it incurs a variety of risks in theof which date to the opening of the resort complex incourse of promoting its businesses, and it attempts toJuly 1993. The Leopalace21 Group works to increase

prevent, distribute or avoid risk whenever possible.

member usage by improving facilities and member

Nevertheless, the Group’s business performance andservices, but should there be an unexpected number offinancial position may be affected by changes inrequests for reimbursement of these deposits, this could

economic conditions, the real estate market, the financial

have an impact on Leopalace21’s financial position.

and stock markets, legal regulations, natural disasters,
and a variety of other factors.

7. Financial Covenants
Financial covenants have been set on the numerous loan
agreements that Leopalace21 has concluded withfinancial institutions. Accordingly, should consolidated or
non-consolidated net assets, consolidated or nonconsolidated interest-bearing debt, non-consolidated
operating income violate the conditions of a financial
covenant, there is a possibility that the Company, at thebehest of the financial institution, could forfeit thebenefit of the term for corporate bonds or otherborrowings, which could have an impact on the
Company’s operating performance.

Leopalace21 Corporation / Annual Report 2015

39

40
BUSINESS OVERVIEWAT A GLANCE42PLEASING BUSINESS

44P

CONSTRUCTION BUSINESS

Segment overview
This business is involved in renting units of managed
properties based on our master lease system. One rental
agreement we developed allows usage fees to be paid on amonthly basis, easing the burden of initial costs. Anothercontract, the “monthly agreement,” requires upfront paymentof usage fees for furniture and home appliances but does not
require payment of water bills and utility costs. We seek tosecure tenants using our outlets, franchise sales offices,
cooperative real estate agents etc. and raise occupancy rates
by offering a richer array of services that improve tenantsatisfaction.
key subsidiaries and affiliates

This business engages in construction, mainly apartments. We
are working to bolster our product competitiveness, offering
products designed from a female perspective and those foryoung people living on their own for the first time. Outside ofapartments, we are expanding construction of commercial
properties and elderly care facilities. We also plan to expand
contracting for custom-built homes.
To boost custom-built home contracting, we converted
Morizou Co., Ltd., a builder of high-end custom-built homes,
into a subsidiary, broadening our construction product mix withthe rollout of products jointly developed with Morizou.
key subsidiaries and affiliates• Leopalace Leasing Corporation(corporate housing agency/real estate brokerage business)• Plaza Guarantee Co., Ltd. (lease guarantee business)• Leopalace21 Business Consulting (Shanghai) Co., Ltd.
(consulting business))• Leopalace21 (Shanghai) Property Management Co., Ltd.
(real estate agency)
Net Sales• LEOPALACE21 VIETNAM CO., LTD.
Breakdown(real estate agency)• Leopalace21 (Thailand) CO., LTD.
(real estate agency)
FY ended• Leopalace21 (Cambodia) Co., Ltd.
March 31, 2015
(real estate agency))• Woori & Leo PMC Co., Ltd.
(leasing management services)• Morizou Co., Ltd. (custom-built homes)

Net Sales
Breakdown

82.6%

12.7%
FY ended
March 31, 2015

Changes in Net Sales
400 (Billions of yen)

100 (Billions of yen)

300

75

200

50

100

25

0

0

’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014’16/3
FY2015(Plan)’12/3
FY2011’13/3
FY2012’14/3
FY2013’15/3
FY2014’16/3
FY2015(Plan)Key Data

Occupancy Rates

Master Lease Apartment Completions（as of end-March 2015）

90（％）（Number of buildings, % of total）

88

Tohoku region

Other

86

45, 6.9%36, 5.5%

Chugoku region

84

54, 8.2%

82

Kyushu/Okinawa
80

656

Tokyo
metropolitan area

306, 46.6%

59, 9.0%
Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
’12/3 FY2011’13/3 FY2012’14/3 FY2013

Leopalace21 Corporation / Annual Report 2015’15/3 FY2014

Chubu region

66, 10.1%

Kinki region90, 13.7%

Who we are

What our strategy is

ELDERLY CARE BUSINESS

46P

Under the brand name “Azumi En”, ourcommunity-based nursing care business
manages fee-based nursing homes,
centers offering day services and shortstays, and group homes at 63 locationsin the Kanto region as well as providing
home visits by nursing care staff,
in-home nursing care support, etc.
key subsidiaries and affiliates

How CSR supports
our management

What our businesses are

47P

HOTELS & RESORT BUSINESS

Through our overseas subsidiary
Leopalace Guam Corp., this business
manages sports facilities such as golfcourses and baseball fields as well as
resort facilities such as hotels andcondominiums on the island of Guam. It
also operates hotels at seven locations
across Japan.
key subsidiaries and affiliates• Azu Life Care Co., Ltd. (elderly care business)

48P

OTHER BUSINESSES

This segment centers on small-amount,
short-term insurance and solar power
generation. The latter installs solar
power systems acquired with internalfunds on leased rooftops, earning profits
from reselling the electricity generated(solar panel installations on leased
rooftops).
key subsidiaries and affiliates• Leopalace Guam Corporation(hotels and resort business/Guam)• WING MATE CO., LTD. (travel business)

Net Sales
Breakdown

Financial Section &Corporate Data

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

Net Sales
Breakdown

Net Sales
Breakdown

2.2%

1.9%

0.6%

FY ended
March 31, 2015

FY ended
March 31, 2015

FY ended
March 31, 2015

12 (Billions of yen)

15 (Billions of yen)

4.5 (Billions of yen)

8

10

3.0

4

5

1.5

0

0

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

0

’16/3
FY2015(Plan)

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

Elderly Care Facility Occupancy Rates

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

100（％）

100（％）

75

75

50

50

25

25

0

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

0’12/3
FY2011’13/3
FY2012’14/3
FY2013

Short-stays
Day services
Private residential nursing homes, etc.

’15/3
FY2014’12/3
FY2011’13/3
FY2012

Leopalace Resort Guam
Domestic hotels’14/3
FY2013’15/3
FY2014

Westin Resort Guam

Leopalace21 Corporation / Annual Report 2015

41

42
SEGMENT OVERVIEWLEASING BUSINESS

Performance
In fiscal 2014, the Leasing Business posted net sales of¥399,316 million (a 2.7% increase from the previous fiscal
year) and operating income of ¥20,532 million (a 31.9%
increase from the previous fiscal year). We strove to maintainstable profit by securing tenants via our network, including
directly run offices; promoting long-term occupancy via a more
extensive menu of tenant services such as “Room Customize”
plans and home security system installations; further bolstering
marketing to corporations; sewing up demand from exchange
students; and revamping routine tasks. As a result, thenumber of units managed at the fiscal year-end was 554,948
units (up 6,036 units from the previous fiscal year-end), theoccupancy rate at the fiscal year-end was 89.29% (up 1.82
percentage points from the previous fiscal year-end), andthe average annual occupancy rate was 86.57% (up 1.99
percentage points from the previous fiscal year-end).

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

10

92

0

88

-30

84

80

-50
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015(Plan)

Operating income (left axis)

Average annual occupancy rate (right axis)

Business Environment and Related Issues
The domestic rental housing market is already saturated dueto the declining population and an increase in vacant houses.
Given these conditions, it is difficult to expect a nationwide
recovery in demand in the near future. As a result, in our Leasing
Business, we are going as far as we can to differentiate ourservices by making full use of our distinctive strengths like studioapartments and rental agreements that include furniture andhome appliances, and by taking steps that enable us to attract
tenants even in this fiercely competitive environment. In addition,
to secure stable occupancy rates it is necessary to limit tenant
outflow while moving ahead with cost reduction by reviewing
master lease rents based on market rent levels and periodicallyreviewing routine property management tasks.
Leopalace21 Corporation / Annual Report 2015

Number of Vacant Rental Housing and the Proportion of Vacant Houses (Japan)
5,000 (Thousands of units)(%) 25

4,000

20

3,000

15

2,000

10

1,000

5

0

0
1983

1988

1993

1998

Number of vacant houses for rent or sale (left axis)

2003

2008

2013

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

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Strategies
Promoting long-term occupancy and limiting tenant outflow:
In order to secure stable occupancy rates, it is important
not only to increase tenants but also to limit tenant
outflow. Thus, we contact tenants who plan to leaveand present them with a proposal to relocate to another
Leopalace21-managed apartment. In addition, we are
drawing on fresh ideas such as the “Room Customize”
and the MY PAGE website exclusively for tenants to
spruce up our service mix.
Corporate sales:
By building a sales system that is not overly reliant on one
particular industry, we have made our portfolio resilientto economic swings. In addition, our development andoperation of LAM System, a website aimed exclusively
at corporate partners, enables us to cultivate strong
relationships with our existing clients and strive to add newclients and thus bolsters our marketing to corporations.
Measures aimed at female tenants:
Females comprise only 30% of Leopalace21’s tenants.
We aim to attract more female tenants by offering

places where women find it comfortable to live, suchas apartments with security systems, and thereby raiseoccupancy rates. Specifically, we intend to enhance ourservices targeting women living on their own. For example,
we plan to do more to offer housing with plenty of storage
or a kitchen where cooking is enjoyable.
Measures aimed at international students:
Our overseas branch network includes four sales offices in
China, two in South Korea, one in Taiwan, two in Vietnam,
and one each in Thailand, Cambodia, and Myanmar. We also
operate call centers as well as an online site, “LAM School,”
aimed exclusively at partner schools. We are stepping up
efforts to sew up demand among international students.
Expanding business overseas:
We have to date provided overseas customers withrental housing in Japan through outlets overseas, but weare expanding our leasing management and brokerage
services in overseas markets and working to facilitate
greater collaboration between our overseas units andJapanese corporate sales function.

Key Products/Services“Room Customize”:
This innovative service enables tenants to customize their living space
to suit their own tastes—even for rental properties. The number ofcontracts for the “Room Customize” service, which allows tenants
to change the wallpaper on one wall for free, has already exceeded
21,000. With this service, we aim to promote long-term occupancy byenabling tenants to personalize and form attachments to their rooms.
MY PAGE website for tenants:
Through this website exclusively for tenants we developed in collaboration
with corporate partners, tenants can use myriad services such asbroadband Internet access service LEONET, online shopping, cleaning
services, home delivery of dry-cleaned items, etc. We also provide tenantswith various services and campaign information via this website.
Monthly agreements:
Monthly agreements for as few as 30 days are available for short-term use.
These are furnished units, with utilities charges included in the rental fee,making them suitable for long-term business trips or periods of training.
Security systems:
With “24-hour, 365-day safety and security” as our motto, we havepartnered with two major nationwide security companies to install
security systems in properties we manage. The number of security
system installations has already exceeded 220,000 units. We are also
focusing on security camera installations, with the number of buildings
with cameras in place now above 5,500.
Leopalace21 Corporation / Annual Report 2015

43

44
SEGMENT OVERVIEWCONSTRUCTION BUSINESS

Performance
In fiscal 2014, total orders at the Construction Business cameto ¥87,395 million (a 7.7% increase from the previous fiscal
year), net sales to ¥61,312 million (a 2.9% decline fromthe previous fiscal year) and operating income of ¥210
million (a 92.9% fall from the previous fiscal year).
We took many steps to improve margins at theConstruction Business such as focusing our apartment
supply in areas where we expect high tenancy rates;
adopting “non-sound system” fittings and fixturesthat improve sound insulation; sprucing up productdevelopment via amenities appealing to women andyoung prospective tenants; broadening our construction
mix with products responsive to diverse land use needs;
and restructuring our project construction systems. Evenso, earnings were squeeze by a labor shortage and a
sharp rise in building materials prices.

Operating Income
80 (Billions of yen)
40
30
20
10
0
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015(Plan)

Business Environment and Related Issues
Due to recovery in the domestic economy and ourearnings, the environment facing our Construction
Business is improving. Yet, as shown by the continued
decline in new rental housing starts from a peak of
537,943 units in fiscal 2006, the rental housing market issaturated when assessed at the national level. In such adifficult environment, we aim to identify areas where highoccupancy rates are likely and expand orders based ona more detailed supply plan, notably in the three largest
metropolitan areas. We also look to enhance productquality by introducing tenant perspectives, especiallywomen’s, into our product development and doing more
to improve sound insulation and security.
Leopalace21 Corporation / Annual Report 2015

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

400

200

0
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014* Source: Statistics on New Housing Starts of the Ministry of Land, Infrastructure, Transport, and Tourism

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Strategies
Actively supplying apartments to specific areas:
Since the occupancy rate is high for relatively newbuildings and, in particular, extremely high demand
continues to be expected in Japan’s three largest
metropolitan areas, we aim to expand the number ofapartments we supply, focusing on those areas. To
establish a sales system based on tenant demand forapartments, we increased the number of branches by six
at end-March 2015 from the previous year-end.
Enhancing product competitiveness:
We are actively working to reduce unwanted noise bycombining sound-insulating flooring (“non-sound floor”),
walls, and drainage pipes in a “non-sound system” withan industry-leading level of sound insulation that comes
as a standard feature in apartments we build. We aim
to erase the perception that Leopalace21 buildings havethin walls and build high-quality apartments that enable
tenants to live comfortably.

Market expansion via new products:
With the introduction of products created from a female
perspective, more women are becoming tenants atapartments we manage. We have also launched sales of
products targeting young people living on their own for
the first time.
Sales of solar power systems:
Starting from fiscal 2012, we shifted our focus to solar
panel installations on leased rooftops, and this remains
an initiative aimed at enhancing property values.
Broadening our construction product mix:
We are expanding our business-use building contracting
beyond apartments to encompass elderly care facilities,
for which demand is expected to grow, and buildings
with retail and commercial space. We have launchedcustom-built “Taiga” homes, which we jointly developedwith Morizou Co., Ltd., a subsidiary that builds custombuilt homes made using high-quality Kiso-hinoki wood.
Our product lineup thus responds to a wide range ofland-use needs.

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

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

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

Leopalace21 Corporation / Annual Report 2015

45

46
SEGMENT OVERVIEW

ELDERLY CARE BUSINESS

Performance
Thanks to expansion of the Group’s “Azumi En” facilities,
net sales at our Elderly Care Business in fiscal 2014
came to ¥10,608 million (a 4.3% increase from theprevious fiscal year). This business posted an operating
loss of ¥606 million, an improvement of ¥4 million
versus the previous fiscal year.

Business Environment and Related Issues

Operating Income (Loss)
2 (Billions of yen)
1
0
-1
-2
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015(Plan)The business environment surrounding the Elderly Care
Business is difficult. While the population requiring careis growing and the market is expanding, the numberof facilities for seniors is also increasing. As a result,competition with other companies in the same businessis growing fiercer. Under such circumstances, we aim torealize a near-term return to profitability through creative
efforts and expansion of services at existing facilities,
but we are also looking at the development of new
facilities to attract demand with certainty.

Strategies
We have placed the Elderly Care Business under the
management of the Marketing and Sales Headquarters,
just as we have done for our two core pillars (theLeasing Business and Construction Business), anddesignated it a strategic growth business. With
occupancy rates at existing facilities stable, the Elderly
Care Business is moving forward with establishing new
facilities in cooperation with the Construction Businesswith the aim of improving earnings.

Key Products/Services
Azumi En:
Currently, we manage 63 “Azumi En” facilities in the Kanto region.
Services at each facility include fee-based homes for seniors that offer
support for their daily lives in a family-like atmosphere, group homes
with daily-living support through fine-tuned nursing care, day and shortstay services in which elderly people living in their own homes canaccess services for a day or come for temporary stays and so forth.

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

SEGMENT OVERVIEW

HOTELS & RESORT BUSINESS

Performance
In fiscal 2014, net sales at our Hotels & Resort Business(Guam resort facilities and hotels in Japan) grew to¥8,951 million (an 18.2% increase from the previous
fiscal year) thanks to the success of our campaign
promoting use by corporate clients of our Leasing
Business. Yet, due to heavy depreciation costs, theoperating loss at this business came to ¥1,289 million,
widening ¥170 million from the previous fiscal year.

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

Key Products/Services

Operating Income (Loss)
0 (Billions of yen)

-1

-2

-3
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015(Plan)

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

Leopalace Hotels:
Our hotels are situated across Japan in seven locations*: Sapporo, Asahikawa,
Sendai, Niigata, Nagoya, Okayama, and Hakata. Aimed at both long-term andshort-term stays, these hotels run restaurants under the direct management of
Leopalace21 and provide free laundry facilities.
*We plan to sell off Hotel Leopalace Niigata in July 2015.

Leopalace Resort Guam:
Leopalace Guam resort is fully equipped with sports facilities that meetinternational standards. Its swimming facilities have been authorized as a “JOC
authorized swimming competition center” and its golf courses have beenrecognized as a “Japan Golf Association-designated golf course.” It is used not
only as a resort but also as a training site for athletes.
Leopalace21 Corporation / Annual Report 2015

47

48
SEGMENT OVERVIEWOTHER BUSINESSES

Performance
In fiscal 2014, net sales at Other Businesses, which
includes small-amount, short-term insurance and solar
power businesses, came to ¥2,999 million (a 108.0%
increase from the previous fiscal year) and operating
income came to ¥31 million (a 77.3% decrease from theprevious fiscal year).

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

Operating Income (Loss)
1 (Billions of yen)
0
-5
-10
-15
-20
’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015(Plan)

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

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

Leopalace21 Corporation / Annual Report 2015

Metal Gripper

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

TOPICS: INFORMATION DISCLOSURE FOR STAKEHOLDERS
We believe proactively disclosing information in an appropriate manner is importantto building relationships based on trust and deepening mutual understanding withstakeholders such as shareholders and other investors. As a step in this direction,
we disclose information via investor relations (IR) sites and explanatory seminars
aimed at individual investors.

IR Events and Seminars for Individual Investors
With the aim of promoting a deeper
understanding of our businesses,
strategy, and earnings amongindividual investors, we host IR
events at major cities across Japan.
Moreover, we are bolstering ourcommunication with individual
investors through active
participation in seminars for themarranged by sponsors such as
Tokyo Stock Exchange, Nomura
Investor Relations Co., Ltd., etc. In
fiscal 2014, we hosted or
participated in 13 events orseminars for individual investors,
and we intend to remain aparticipant in the years to come.

IR Events Held in Fiscal 2014

IR Events Scheduled for Fiscal 2015

June 12, 2014

Event, Fukuoka

June 6, 2015

Seminar, Hiroshima

July 3, 2014

Seminar, Tokyo

June 12, 2015

Event, Nagoya

July 23, 2014

Seminar, Kashiwa

July 16, 2015

Seminar, Tokyo

August 8, 2014

Seminar, Osaka

July 22, 2015

Seminar, Okayama

August 24, 2014

Exhibit at IR Forum 2014
for Individual Investors

August 4, 2015

Seminar, Osaka

August 29, 2014

Seminar, Sapporo

September 11, 2014

Seminar, Osaka

September 12, 2014

Seminar, Kyoto

November 28, 2014

Event, Sendai

December 16-17, 2014

Exhibit at Nomura IR
Individual Investor Fair 2014

January 16, 2015

Event, Nagoya

February 27, 2015

Seminar, Kita Kyushu

March 13-14, 2015

Exhibit at TSE IR Festa 2015

September 12, 2015

Seminar, Kanazawa

December 11-12, 2015

Asset Management Fair 2015,
Tokyo

Guide to Our IR Website
Targeting a broad cross-section of theinvestment community, Leopalace21 discloses
the latest information on relevant management
issues at our IR website. In addition to pages
on management policies such as President
Eisei Miyama’s “Message from the
President” and an outline of our Mediumterm Management Plan, the website contains
financial and business information, stockrelated data as well as a section for individual
investors where there are easy-to-understandexplanations of our businesses. Investors
can also access a library of materials wehave disclosed in the past such as business
reports, medium-term management plans,presentation materials, etc.

Home Page

Information for Investors

Management Policy
Read explanations ofmanagement policies

Individual Investors
Read introductions toearnings and benefitsof investing

Financial andBusiness Information
Peruse importantfinancial data

Financial Reporting Stock Information
Read IR materials

View stock-related
information

http://eg.leopalace21.com/ir/

Recognized and Awarded for IR Website Content Richness
We believe our IR website is an important source of
information for our individual investors, domestic
institutional investors, and overseas investors, and we
strive to satisfy the needs of all our investors withextensive disclosure. Our efforts were recognized with theInternet IR Excellence Award in 2013 and 2014 by Daiwa
Investor Relations, and our website received the “Bronze”
score for three successive years in the Gomez Investor
Relations site ranking, an annual assessment sponsored by
Morningstar Japan K.K.
Leopalace21 Corporation / Annual Report 201549

50
Leopalace21 and CSR

CSR ISSUES TO BE TACKLED AND OUR VALUE CHAIN
From a big-picture vantage point, we look at trends affecting apartments, our main
product line, across the value chain and sum up the major stakeholders and relevant CSR
issues for each step in the process.

Construction,
Design andExecution

Rental Sales
at Counters,
CorporateSales

CSR Issues: Construction, Design and Execution

CSR Issues: Rental Sales at Counters, Corporate Sales

One of two core pillars at Leopalace21, theConstruction Business designs and executes theconstruction of apartments, elderly care facilities,
stores etc. to enable landowners to make themost effective use of their valuable land. With
ensuring building quality at the top of the list, we
see the following CSR issues as noteworthy.

The management of buildings after they havebeen constructed is the other core pillar at
Leopalace21. The Leasing Business provides
guidance to individuals who visit one of ouroffices across Japan to look for a room andintroduces corporate clients to rental properties.
In marketing rental housing to individuals andcorporations, we believe the following CSR
issues warrant consideration.

• Building quality guarantees• Ensuring safety at construction sites• Environmental consideration• CSR procurement guidelines• Human resource development• Compliance framework adherence• Protecting client privacy• Improving the quality of our response to clients• Human resource development<Key Stakeholders><Key Stakeholders>• Landowners• Business partners• Global environment• Employees• Tenants• Employees

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Move-in
Supportfor TenantsLeasing
Management

CSR Issues: “Move-in and Settle-in” Support for Tenants

CSR Issues: Leasing Management

In response to diversifying lifestyles, we havefocused on developing apartments that addressneeds such as sound insulation and earthquake
resistance. We have also worked to broaden ourmenu of tenant services, installing security
systems and introducing “Room Customize.” At
this stage of the value chain, we see thefollowing CSR issues as noteworthy.

In managing apartments and other facilities
across Japan, we strive to protect the valuableassets of landowners and provide ongoingsupport to ensure a comfortable living
environment for tenants. Beyond those, we alsoseek to build positive relationships with all our
stakeholders so as to continue to develop ourbusiness and services in a sustainable manner.
At this stage of the value chain, we see thefollowing CSR issues as noteworthy.

• High-quality service provision• Product development that responds to various needs• Compliance framework adherence• Protecting privacy• Improving the quality of our response to clients• Human resource development• Environmental consideration• Ensuring quality in order to support comfortable living• Building positive relationships with local communities<Key Stakeholders><Key Stakeholders>• Tenants• Employees• Tenants/Landowners• Global environment/Local communities

Leopalace21 Corporation / Annual Report 2015

51

52

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

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

Creating anenvironmentallyfriendly society

Creating pleasant work
environments and developing
diverse human resources

Contributing tolocal communities

Providing high-quality
services and supporting
affluent living

In 2013, we devised a new Basic CSR Action Policy
in response to the changing needs of our
stakeholders, social and environmental problems,
and the requirements of ISO 26000 and otherstandards and guidelines. We will steadily press
ahead with the established five themes of the newpolicy in order to expand CSR activities even further
through our businesses.
Based on compliance and corporate
governance that supports ourbusinesses, we intend to implement
Clientcompanies
CSR activities in accordance with theApartment tenants,
landowners
new policy, with the aim of “creating
Local
new value” together with all of ourcommunities
stakeholders.

Compliance

ance
Corporate Govern

Corporate
Code of Ethics

ophy
Corporate Philos

Employees
Globalenvironment
Investors andshareholders

Links between Our Value Chain and CSR Activities
Rental Sales
Construction to Individuals,
Companies

Move-in
SupportLeasing
Management

Basic CSR Action Policy

Restatement as ISO26000
Core Subjects

1

○

○

○

○

Engaging in sound, constructive
communication with stakeholders

Stakeholder engagement

2

○

○

○

○

Providing high-quality services
and supporting affluent living

Consumer issues

3

○

○

Contributing to local communities

Community involvement

4

○

○

Creating pleasant work environments
and developing diverse human resources

Human rights, Labor practices

5

○

○

Creating an environmentallyfriendly society

Natural environment○

Leopalace21 Corporation / Annual Report 2015○

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

CSR Management
In our CSR management, membersof the CSR Committee serve as
coordinators to bring together
separate Group companies, divisions,and departments to engage in various
CSR initiatives. The General Managerof the Management Planning
Headquarters chairs the committee.
The CSR Committee meets fourtimes a year to check the progress of
initiatives that meet the Basic CSR
Action Policy and discuss the future
direction of the initiatives. In suchways, the committee promotes CSR.

Stakeholder’s Voice
Leopalace21 has since 2009 conducted CSR activities
by providing residential spaces, the core concept of ourbusinesses. Our interest in CSR and corporate
governance has increased since then, and in 2013 we
devised a new Basic CSR Action Policy based oncompliance and corporate governance.
Through our businesses, we think identifying
solutions to social problems involving living spaces canhelp contribute to the creation of a sustainable society.
We will continue to promote and implement activities
that are in keeping with our Basic CSR Action Policy.

Director, Senior
Executive Officer,
CSR Committee
ChairmanYuzuru Sekiya

Links between Medium-term Management Plan and CSR Activities
Leopalace21 CSR activities play an important role insupporting three goals in “EXPANDING VALUE,” theMedium-term Management Plan devised in May 2014.
The setting of targets for key performance indicators(KPIs) for CSR (non-financial activities) and steadyprogress toward these have contributed to advancing themanagement measures in our Medium-termManagement Plan.

Plan Goal 1:

Plan Goal 2 :Plan Goal 3 :Achieve sustainable,balanced growth at core pillars
and maximize group profits

Foster new domains
and businesses that create
new social value

Retain low-cost structureand strategic “selectivity
and focus” approach to costs

Links between Management Plan and CSR Activities
Main CSR Activities• Communication with diverse stakeholders• High-quality services enabling safety andpeace of mind
• Improve client services further

Key Performance Indicators(KPIs)

Plan Goal 1 :Plan Goal 2 :Plan Goal 3 :Achieve sustainable,balanced growth at core pillars
and maximize group profits

Foster new domains
and businesses that create
new social value

Retain low-cost structureand strategic “selectivity
and focus” approach to costs○○• No. of meetings for landowners○• No. of rooms with security
systems installed• No. of buildings with security
cameras installed○○• Involve stakeholders in cleanup activities○• No. of cleanup events• No. of cleanup participants• Promote work-life balance• Foster diversity (boost ratio of female managers,
employees with foreign citizenship)○• No. of employees in training programs• Overtime hours worked• Solar power generation business• Factor environmental impact into ourbusiness activities○○• No. of buildings with solar powersystems installed• CO2 emissions reduction
Leopalace21 Corporation / Annual Report 2015

53

54
BASIC CSR ACTION POLICYENGAGING IN SOUND, CONSTRUCTIVE
COMMUNICATION WITH STAKEHOLDERS
Through our business activities, we actively disclose information to and engage
in dialogue with our stakeholders to build healthy, positive partnerships.

Social Backdrop: Importance of Dialogue and Disclosure
Companies face growing social expectations to engage
in active dialogue with a wide range of stakeholders,
including shareholders, as well as to be transparent intheir information disclosure. With finalization of the draft
version of the Corporate Governance Code in March
2015, the Financial Services Agency has called oncompanies to strive for proper collaboration withstakeholders based on recognition of their contribution toresults and provision of resources as shareholders, local
communities, employees, suppliers and business
partners, customers, creditors, etc. toward the creationof longer-term corporate value and sustainable growth.

Goals and Achievements
Main Activities

Fiscal 2014 goals

Fiscal 2014 achievements

No. of meetings forlandowners

330 times

193 times

No. of meetings for individual
investors

15 times

17 times

Fiscal 2015 goals
250 times

Achieved

16 times

Leopalace21’s Main Stakeholders
Apartment Tenants

Landowners• MY PAGE (website
exclusively for tenants)• Cooking classes
for women• Tenant surveys• Tenant monitors• Set up a system where
employees in charge
follows up with owners• Host apartment ownermeetings• Arrange events andseminars
Apartment
Tenants

Partners• Cleanup campaign events(see page 58)
Partners

Local
Communities

Local Communities• Host workplace
experience days forstudents• Marche project events(see page 59)

Leopalace21 Corporation / Annual Report 2015

Landowners

Employees• Provide employee training(see page 60-61)

Employees

Investors/
Shareholders

Investors/Shareholders• Hold earnings results
briefings• Arrange small meetings
for institutional investors• Participate in IR events

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

55

BASIC CSR ACTION POLICYPROVIDING HIGH-QUALITY SERVICES ANDSUPPORTING AFFLUENT LIVING
Amid the growing diversity of rental housing needs in an increasingly diverse society, we offer
tenants living spaces that are comfortable and pleasant via new lifestyle proposals.

Social Backdrop: Lifestyle Diversification
Attendant with shifting family compositionreflecting the twin demographic trends of a
growing elderly cohort and a low fertility rateand changing times, the number of singleperson households continues to grow. At
the same time, the foreign population in
Japan continues to grow, with a three-foldincrease in the number of international
exchange students enrolled in schools inJapan compared with the 1990 level. In
concert with such population trends, rental
housing needs are becoming more diverse.

Single-person Households by Age Group:
Estimates and Projections

Enrollment Trend for International Exchange
Students in Japan

20,000 (Thousands of households)

200,000 (Persons)

15,000150,000

10,000100,000

5,000

50,000
0

0

2005

2010

2015
plan

2020
plan

2025
plan

2030
plan

2035
plan

■ Age 35 or less ■ Age 35-64 ■ Age 65 or over
Source: 2010 Population Census, Ministry of Internal Affairs andCommunications; Household Projection for Japan (January 2013),
National Institute of Population and Social Security Research

1990

1995

2000

2005

2010

2014

* Results of the 2014 annual survey of international students in Japan,
Japan Student Services Organization (JASSO) (released in February 2015)** In 2014, data on international students in Japan, including those at
Japanese language institutes, was recorded.

Goals and Achievements
Main Activities

Fiscal 2014 goals

Fiscal 2014 achievements

220,000 rooms
Cumulative security system
226,801 rooms Achieved
installations
High-quality services enabling 4,500 buildings
safety and peace of mind
Cumulative security camera
5,505 buildings Achieved
Improve client services further installations
Add 24 tenant services to “MY
10 tenant services
PAGE,” a dedicated tenant site

Fiscal 2015 goals
240,000 rooms

7,000 buildings
20 tenant services

Providing Safe, Secure Living Spaces
Offering Peace of Mind with Stronger Anti-Crime Security Systems
Apart from affordable rent, security is one of the most important features totenants living on their own. We began mass deployment of security camerasin new and existing apartments in 2011 to monitor and record intruders andunwanted lurkers. The number of buildings we manage nationwide withsecurity cameras exceeds 5,505. Through our alliances with two security
services firms, SECOM Co., Ltd. and Sohgo Security Services Co., Ltd.
(ALSOK), we have moved forward with installing security systems at existing
properties we manage and installing security systems as a standard feature in
newly built apartments. The number of rooms with security systems installed
reached 226,801 as of March 31, 2015, or a 40.9% installation ratio.

Features Singles Value Most Apart from Affordable Rent
0
Bathtub, toilet in separate rooms
1
2 Distance from station, commute time
Age of building
3

4

Security features

5

Floor plan

10

20

Security isimportantto tenants

30

40 (%)

Stakeholder’s Voice

Sohgo Security Services
Co., Ltd. (ALSOK))HOME ALSOK Sales
Department

Yuuki Tanaka
We think security cameras are great not
only for their anti-crime deterrence, butalso as a solution to the many troubles
around garbage disposal at multi-dwelling
residential buildings. United with
Leopalace21 in delivering on the motto“safety and peace of mind around theclock 365 days a year,” we will continue toprovide tenants with a comfortable living
environment.

Source: October 2010 COBS ONLINE survey, 432 respondents

Leopalace21 Corporation / Annual Report 2015

56

Ideas for Expressing Individuality in Living Spaces■ “Room Customize” Popular among Women
Plans Enable Tenants Living Alone to Express Preferences
In response to the desire of tenants to express their preferences evenin a rented space, we launched “Room Customize” in May 2012 toenable tenants to customize their room to suit their preferences.
The plans enable tenants to select from over a hundred kinds ofwallpaper to decorate one wall in the apartment, with options to use
thumbtacks, attach shelves, and paint, scribble and draw freely on thewall. The ratio of males to females in Leopalace21 apartments is 7:3
but among tenants opting for “Room Customize,” the ratio is 5:5,
indicating the plans are especially popular among women.
The Company has sponsored a series of tenant
service-themed contests. Among these was a
Cumulative Number of “Room Customize” Contracts
collaborative project where Nagoya Mode Gakuen and25,000 (Number of contracts)
Osaka Mode Gakuen students used materials
21,573
supplied by Sangetsu Co., Ltd., a designer and retailer
20,000of interior decoration products, to create rooms that
15,000best expressed “Nagoya-ness” and “Osaka-ness” in
14,061
Leopalace21 apartments.
10,000Amid the uptrend in women living alone, especially
5,714
in metro areas, Leopalace21 will continue to broaden
5,000
the menu of services that enable tenants to express0
their tastes and preferences.
FY2012■ Community Space “L+” (L plus)
Hosting Events for Female Tenants
We have set up open-plan community spaces we call “L+” as places
all our clients can use based on the concept of “a plus for lifestyle.”
At present, there are “L+” spaces in Sendai, Osaka, and Shinjuku.
One representative event co-hosted with Nestle Japan Ltd. at
Sendai “L+” in August 2014 was a cooking class exclusively for
tenants. A Nestle Japan advisory chef showed attendees how tomake several tasty, easy-to-prepare dishes that can be made in
Leopalace21 apartment kitchens.
In January 2015 at the recently opened Shinjuku “L+”, two outside
experts led a “Sleeping Beauty” seminar on sleeping and theimplications for beauty and on how to choose sleep products
necessary for a good night’s sleep. The seminar was well received.
The Shinjuku “L+” also hosts get-togethers for international
exchange students, helping to improve the lives of tenants living
alone and providing a space for tenants to interact with neighbors.

Leopalace21 Corporation / Annual Report 2015

FY2013

FY2014

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Improving Customer Satisfaction with High-quality Service■ Services for International Tenants

Stakeholder’s VoiceSupporting Smooth Move-ins, Comfortable Living
Of our individual and student leases, 6.2% are for foreign tenants, andas a general rule, we seek to respond to international tenants in theirnative language. Our rental housing website is available in English,
Chinese, Korean, and Portuguese, and our call center accepts calls inthese four languages, in addition to Vietnamese.
We published a service guide in fiscal 2014—available in the five
aforementioned languages—with highlights on lease terms, manners
for those moving in and moving out, and general instructions. Some
482 people came to the 38 get-togethers we hosted at sites acrossJapan for international exchange students.
With offices in China, Korea, Taiwan, Vietnam, Thailand, Cambodia,
and Myanmar, our overseas network enables customers who areplanning to stay in Japan to search for apartments and sign contracts
before they arrive in Japan. We are assigning more employees withforeign citizenship (175 employees as of March 31, 2015), to theseoffices, and we will continue to help people coming to Japan bysupporting convenient apartment searches and comfortable living.

Lease Management
Supervisory Division
Leasing Management
Department“Meister” Secretariat
Deputy Division Chief

Naohito Yanagitsuru
We host get-togethers for international
tenants to introduce them to Japaneseculture and customs with the aim ofproviding them with a safe, comfortableliving environment. The instructions on
separating different kinds of waste andmanners neighbors need to observe areespecially appreciated, and we willcontinue to host get-togethers to dispel
concerns international tenants may haveabout living in Japan.

Number of Foreign-tenant Leases: Major Nationalities
15,000 (Number of leases)
12,000
9,000
6,000
3,000
0

FY2012FY2013

FY2014■ Chinese ■ Korean ■ Taiwanese ■ Thai ■ Vietnamese ■ Other SE Asian ■ Other

Service Centers Offer Full Post-Move-in Support
Leopalace21 has systems in place to respond swiftly to various problems
and emergencies that can arise after moving in to an apartment. At ourservice centers, our specialist communicators listen carefully to whatcustomers want and do their best to respond. By analyzing inquiry
content and continuously adding and updating the list of frequently asked
questions (FAQs) on our website, we ease customer doubts andanxieties and improve satisfaction levels, and thus enable them to live
safe, comfortable lives in the apartments we manage.
Our menu of tenant services is reshaping what people expect fromrental housing, such as concierge services that responds to tenantrequests via MY PAGE, a site exclusively for tenants launched in
April 2013.

Trend in Incoming Calls to Our Service Centers
1,000,000 (Number of calls)
750,000
500,000
250,000
0
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014■ Inquiries ■ Maintenance ■ Complaints and claims

Leopalace21 Corporation / Annual Report 201557

58
BASIC CSR ACTION POLICYCONTRIBUTING TO LOCAL COMMUNITIESTogether with local communities, we are continuing our activities in our immediatesurroundings as a company providing living space with the aim of creating places
where people can live in safety.

Social Backdrop: Weakening Local Community Connections
With more people living in dense cities and the ruralcountryside becoming depopulated, connections withincommunities are becoming more tenuous, and thesetrends have given rise to many problems such as elderly
people dying alone and more crime targeting children.
The importance of local community connections is
recognized in emergencies in particular, but there has
been little progress recently in moving forward with
policies to address the aforementioned trends. In serving
to promote interaction and collaboration amongneighbors, the structure of residential neighborhoods andhow people live play important roles.

Interaction among Neighbors
0

20

40

60

80

100 (%)

1975
1986
1997
2004
2015
■ Friendly interaction ■ Some interaction■ Little interaction ■ No interaction ■ Don’t know
Source: Data is drawn from past publications of the Cabinet Office Public Opinion Poll on the Social Awareness;
the questions have been revised since the 1997 poll (multiple-choice structure), and the above reflects the new questions.

Goals and Achievements
Main Activities

Involve stakeholders incleanup activities

Fiscal 2014 goals

Fiscal 2014 achievements

Fiscal 2015 goals•Entire company in unison
Four events(1,000 buildings per event)• Entire company in unison
Three events (2,458 buildings)• Entire company in unison
Four events• Immediate vicinity of
construction sites 2,000 sites,
10,000 participants• Immediate vicinity of construction
sites 2,437 sites, 12,294
participants Achieved• Immediate vicinity of
construction sites 3,200
buildings, 16,000 participants

Cleanup Campaign
Creating Better Places to Live via Our Cleanup Campaign
We are continuing with our neighborhood cleanup
campaign to encourage our employees to form
attachments to the towns and regions where we operatebusinesses and to promote deeper interaction among
stakeholders. Those participating in the campaign are,naturally, Leopalace21 employees as well as landowners
and their families and local contractors who work for us atapartment construction sites. It seeks to foster
communication between them and local residents.

Cleanup campaign

Fiscal 2014 achievements

Entire company in unison(three events)

3,203 participants at 2,458
buildings

Immediate vicinity of
construction sites

12,294 participants at 2,437 sites

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Initiatives via Diverse Channels Harnessing Core Businesses
Leopalace21 continues to cooperate with “Kodomo #110,”a program where private-sector businesses register toprovide emergency refuge to children who feelthreatened or troubled. It is seen as effective inpreventing an array of harms from coming to children. Of
our 180 directly run sales offices, 134 offices areregistered for the program, and 53 offices run by
Leopalace Partners franchisees are also registered. Of
the Azumi En facilities, 61 have been registered.
In addition, Hotel Leopalace Asahikawa began an
initiative to provide a temporary shelter for those afflictedby domestic violence in response to a request from the
Hokkaido police. We also continue to support snow

removal efforts. As a member of communities where we
do business, we will continue to support efforts thatenable their residents to live in safety.

Registered for “Kodomo #110” as of March 31, 2015
Sales offices(includes Leopalace Partner franchisees)

187

HotelsAll seven

Azumi En facilities

61

Total

225 facilities andoffices registered

Marche Project
French for marketplace, a neighborhood “marche” inFrance is a place where people go to shop for fresh
ingredients and to swap friendly chitchat and gossip.
With the aim of providing a venue that fosters
communication among landowners, tenants, international
tenants, and nearby residents, we launched the Marche
Project, where vegetables and other perishables grownby landowners are sold in the parking lots of Azumi En
facilities and apartments we manage. Thanks to thecooperation of all those who interact with us regularly,
the three Marche Project events held in fiscal 2014 were
well received. We will continue to host Marche Project
events in the future with the aim of stimulating greaterinteraction with community residents.

Stakeholder’s Voice

Hotels and Resort Supervisory Division
Resort Marketing Department
Planning Section
Deputy Section Chief

Rika Burako
It started with an idea proposed at a session of therecently launched cross-divisional training program thatreached the planning stage. Everyone involved—sellers,
buyers, and corporate sponsors—in the Marche Project
benefits. I feel we were able to host a very lively,
enjoyable event that offered fresh vegetables and fun.

Elderly Care Business Division
Operations Department
Manager

Tomoyoshi Isa
It commenced as the first Marche Project event, drawing
107 elderly residents receiving care at Azumi En facilities.
Prudent consideration for safety management was
important, and the event attracted more regularcustomers than we expected with the vegetables sellingout quickly. I think the project was a positive inempowering facility employees responsible for various
operations.

Leopalace21 Corporation / Annual Report 201559

60
BASIC CSR ACTION POLICYCREATING PLEASANT WORK ENVIRONMENTS AND
DEVELOPING DIVERSE HUMAN RESOURCES
We believe human resources are important as upholders of our corporate philosophy of“creating new value.” Our aim is to build pleasant workplaces where people enjoy working,enabling all employees to express their diverse individuality and harness their capabilities.

Social Backdrop: Diversifying Work Styles and Human Resources
Work styles in Japan are becoming increasingly diverse
for many reasons, from the shrinking of the working-age
population attendant with a growing elderly cohort andlow fertility rate to the advance of women in society. The
2014 working-age population was one million smaller
than 2007’s. Yet the female working-age population grew
200,000 year on year in 2014 even as the male workingage population shrank 100,000 in the same period.
At the same time, we expect human resources,
including women, with diverse values and perspectives
that reflect their varied backgrounds to be responsive todiversifying social needs and contribute to sustainablegrowth at the Company through innovation.

Trend in Working-Age Population
70 (Millions of people)
60
50
40
30
20

2007

2008

2009

2010

2011

2012

2013

2014

● Women ● Men ● Total
Source: Labor force status trends and labor force status by population group (2014), Statistics Bureau,
Ministry of Internal Affairs and Communications

Goals and Achievements
Main Activities

Promote work-life balance
Foster diversity

Fiscal 2014 goals

Fiscal 2014 achievements

Fiscal 2015 goals

Implement planned employee
training 3,200 employees

2,739 employees in training
programs

3,420 employees in training
programs

Implement measures toreduce overtime work hours
7% year-on-year reduction

2% year-on-year reduction in
overtime work hours

70% usage rate of paidvacation days

Developing Diverse Human Resources
Overseas Training Program for Female Employees
Leopalace21 has started a month-long overseas training
program called “Expanding Women’s Careers” with the aimof preparing female employees and managers to play activeroles at overseas operations, which are expected to grow.
The February 2015 public invitation for applicants the
Corporate Business Promotion Headquarters issued did
not restrict eligibility on the basis of age, current position
or function, and many ambitious women applied. Fromamong those, seven were ultimately selected and sent
for training in Thailand, Vietnam, and Cambodia in May
2015 with an eye to preparing them for future overseas
assignments. Participants benefited from the program,striving to make the most of exposure to different
languages, cultures, and sales training.

Leopalace21 Corporation / Annual Report 2015

Stakeholder’s Voice
Overseas Department
Overseas Sales Section

Yachiyo Kaneko(Center Partner, Leasing Business Division
Applicant from Takadanobaba office’s Sales
Supervisory Division from a public invitation)

In my fourth year after joining Leopalace21, I was given
an opportunity to participate in training in Vietnam. By
visiting Japanese companies and introducing them tolocal rental properties, I was able to experience a culture
and ways of doing business that differs from Japan’s. I
came away with the impression that new business
opportunities await there.
The training program was a very valuable experiencein helping me develop a sense for business that extends
across borders.

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Cross-divisional Training
As part of an initiative to improve our vertical organizational structure, theCompany launched a cross-divisional training program in fiscal 2014 aimed atbolstering the organization in a holistic sense. The program focused on renewing
mutual understanding of tasks across divisions and departments, intra-company
interaction, work-life balance, and labor-management problems etc.
A total of 430 employees—core representatives from each division anddepartment—came together over three sessions to share information,exchange views, and propose new initiatives that extend beyond theboundaries of our organizational chart. The third session was the grand finale,
where teams from 26 different areas made presentations on implementing
new initiatives. With preparations, announcements, and networking among
teams, the program was a valuable learning opportunity.

Employee Training System
The regular training system is essentially split along two lines: training
according to employee rank and training according to division. The former isdesigned to enable all employees to obtain the knowledge and capabilities theyneed in a series of stages. The latter is aimed at enabling employees to polishtheir expertise and thus improve customer satisfaction.
Employee Training System
No. of training programs
No. of participants
Per-head training costs
Total training days

Fiscal 2013 results

Fiscal 2014 results

Fiscal 2015 plan

3

7

10

460

2,739

3,420

¥76,326¥77,087

Approx. ¥90,000

70

163

408

Stakeholder’s Voice
Corporate Business
Promotion Headquarters
Corporate Business
Promotion Division
Division Manager

Mayumi Hayashima
The Corporate Business Promotion
Headquarters was set up in April 2014 to
improve our capabilities as anorganization by encouraging more robust
collaboration across our divisions anddepartments. We have commenced
cross-divisional training to build up arobust organization that is responsive tothe needs of an era of diversification.
Several measures proposed at training
sessions have been adopted, such as the
Marche Plan (see page 59) andrenovation of properties we own.
Some employees knew little outside theirown departments and so had constrained
views on what could be achieved but
through exchanges with other departments
and exposure to fresh perspectives, thesessions opened up their thinking on how
the Company as a whole can improvecustomer satisfaction. In pursuit of“creating new value,” we will continue
with further cross-divisional training.

Creating Worker-friendly Workplaces
Progress in Initiatives Advanced by Work-life Balance Promotion Office

Comparison of Total Working Hours (Monthly Average)
230 (Hours)

We believe promoting work-life balance is an important issue, and we aremoving ahead with various initiatives such as promoting diverse styles of210
working and shortening work hours.
190
Established in January 2014, the Work-life Balance Promotion Office,which reports directly to the President, works to raise awareness of labor170
management issues and to create work environments where eachManagerial
Non-managerial
employee can achieve his or her full potential.
■ FY2012 ■FY2013 ■FY2014
In fiscal 2014, total hours worked (average) fell
4.7 hours for managerial employees versus theyear-ago level and fell 3.5 hours for non-managerial
employees. As has been the case since 2012,
The Kurumin mark
Leopalace21 was again
Female employee ratio
28.4%
recognized by the Ministry of■ Action Plan Goals (March 2015-March 2017)
Goal 1: Implement measures to ensure employees
Health, Labor, and Welfare forFemale manager ratio
4.1%
have enough time for parenting
its many measures to support
No. of employees using paid
Goal 2: Implement measures to encourage employees to79parenting by employees, andholidays for parenting
use annual paid vacation days
as a result, obtained theNo. of employees using
Goal 3: Offer some paid holidays for employees to care87
shorter work-hour system“Kurumin mark.”
for sick children, spouses, or relatives*Non-consolidated

Leopalace21 Corporation / Annual Report 201561

62
BASIC CSR ACTION POLICYCREATING AN ENVIRONMENTALLY FRIENDLY SOCIETY
Recognizing the large impact our business activities have on the global environment, we
remain steadfast in our pursuit of low-environmental-impact living space, and we areworking to reduce the environmental burden that arises from all of our business activities.

Social Backdrop: Growing Demand for Clean Energy
Regenerating naturally at a faster pace than it is used,renewable energy refers to energy from solar light, solar
heat, water flows, wind flows, and geothermal sources.
These clean energy sources do not release greenhousegases (GHG) when generating power, so wider adoptionof them is seen as a way to mitigate global warming. In
fiscal 2013, Japan’s total GHG emissions came to 1,480
million metric tons, up 10.8% versus the 1990 level, thebase year in the Kyoto Protocol. Given this, interest inclean energy sources is growing, especially photovoltaic(PV) panels, the growth leader thus far. Most PV panel
installations on the rooftops of buildings and factories
and at vacant sites are for industrial power generation.

Trend in annual electricity generation (gWh) fromrenewable energy sources in Japan(%) 5.0

50,000 (gWh)

40,0004.0

30,0003.0

20,0002.0

10,000

1.0

0

0

1990

1995

2000

2005

2012

■ Solar ■ Wind ■ Geothermal ■ Small hydro ■ Biomass● Renewable energy ratio
Source: Renewables Japan Status Report 2014, Institute for Sustainable Energy Policies,
an independent non-profit research organization

Goals and Achievements
Main Activities

Solar power generation
business
Factor environmental impact
into our business activities

Fiscal 2014 goals

Fiscal 2014 achievements

Fiscal 2015 goals

Install solar power systems in
3,000 buildings (38,371,000
kWh, CO 2 emission reductionof 12,068t)

3,405 buildings (44,669,000 kWh, 535 buildings (8,093,000 kWh,
CO 2 emission reduction of
CO 2 emission reduction of
14,048t) Achieved
2,545t)Reduce electricity
consumption/CO 2 emissions
via switch to new multifunction printers

Lowered CO 2 emissions 423t
via switch to new multifunction printers (446 units))

Replace remaining 40 older
models with new multifunction printers/copiers

Reduce gas consumption via
introducing mini-cars to fleet

Lowered per-vehicle CO 2
emissions 0.3t versus fiscal
2012 level

Replace remaining 80 standard
cars with mini-carssequentially

Reducing Environmental Impact of Our Business Activities
We are working to reduce the environmental burden of
our business activities. In fiscal 2014, like in fiscal 2013,
we implemented a “Cool Biz” dress code for summer aswell as an Eco-green cards program, along with moving
forward with the adoption of mini-cars and theinstallation of LED lighting at facilities we operate.
Recognizing the size of the impact our businessactivities have on the environment, we monitor electricity
usage at the head office as well as for the entire
company. We plan to continue to actively implement
initiatives to reduce our impact.
Leopalace21 Corporation / Annual Report 2015

Annual Electricity Consumption at Head Office4,000,000 (kWh)3,000,000

2,000,000

1,000,000

0FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Adoption of Mini-cars

Conversion to LED Lighting at Facilities We Operate

Leopalace21 pressed ahead with mini-car adoption in
fiscal 2014, with mini-cars making up 97.4% of ourvehicle purchases, up 58% compared to fiscal 2012.
Compared with the fiscal 2012 level, our annual per-car
gas consumption has fallen 143L and our annual pervehicle emissions have declined 0.3t on a CO 2
equivalence basis.

While providing a comfortable living environment totenants, we implement measures to reduce energy use.
In new apartments, LED lighting is now a standard
feature for all lighting needs. In existing apartments, weare switching to LED lighting for common-use spaces
when renovating.

Promotion of Solar Power Generation Business
Since 2011 we have focused on three models to actively
advance our solar power generation business: (1) solar
panel installations via owner investments; (2) wholesaling
electricity generated from solar panels installed on
rooftops leased from owners; and (3) the design andexecution of a mega-solar project on a vacant site.
As of March 31, 2015, the total installed generation
capacity stands at 172.4 MW, with installations on therooftops of 12,356 buildings. We plan to move forwardwith solar power generation initiatives as a way tosupport safe, sustainable energy generation.

Independent Third-party Assurance on Environmental Reporting

Leopalace21 Corporation / Annual Report 2015

63

64

FINANCIAL SECTION

MANAGEMENT’S DISCUSSION AND ANALYSIS ..................................................... 65
CONSOLIDATED BALANCE SHEETS .......................................................................... 68
CONSOLIDATED STATEMENTS OF OPERATIONS .................................................... 70
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ............................. 71
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS .............................. 72
CONSOLIDATED STATEMENTS OF CASH FLOWS ................................................... 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................................... 75
INDEPENDENT AUDITOR’S REPORT ....................................................................... 113

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

FINANCIAL SECTION

MANAGEMENT’S DISCUSSION AND ANALYSIS
1. Operating Environment

Operating Income by Segment

During the fiscal year although weakness can be seen in
individual consumption due to the increase in
consumption tax, a continuing recovery in the Japanese
economy was evidenced primarily by the improvement
in corporate earnings, employment, and income.
In the rental housing industry, new housing starts ofleased units declined for the first time in three years(3.1% down year-on-year), due to negative effects of therush demand from consumption tax increase. To achieve
stable occupancy rates against the increasing number ofvacant houses in the market, housing supply in limitedareas and high-quality housing and services are required.
Under these conditions, the Leopalace21 Group (theCompanies) aims to build solid management strength
focusing on the core businesses, made up of leasing andconstruction, based on the Medium-term Management
Plan “EXPANDING VALUE” announced in May 2014. In
addition, the Companies aims to establish new
businesses that will contribute to future growth.

(Millions of Yen)

2. Analysis of Business Results(1) Net Sales
Net sales during the fiscal year were ¥483,188 million(up 2.6% year-on-year). In the Leasing Business, net
sales was ¥399,316 million (up 2.7% year-on-year), andnet sales in the Construction Business was ¥61,312
million (down 2.9% year-on-year).
Net Sales by Segment(Millions of Yen)

Leasing
Construction
Elderly Care
Hotels & Resort
Others
Total

2014

2015

Change388,768
63,135
10,1717,571
1,442
471,089

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

10,548(1,823)
436
1,379
1,557
12,099(2) Earnings
Gross profit was ¥75,755 million (up 8.9% year-on-year),
operating profit was ¥14,763 million (up 8.0% year-onyear), recurring profit was ¥13,424 million (up 16.0%
year-on-year), and net income was ¥14,507 million (down
4.7% year-on-year).

Leasing
Construction
Elderly Care
Hotels & Resort
OthersAdjustments
Total

2014

2015

Change15,5672,954(610)(1,118)137(3,256)
13,673

20,532210(606)(1,289)31(4,116)
14,763

4,965(2,743)
4
(170)
(106)
(859)
1,090

Change in Operating Income(Billions of yen)

20

Leasing+4.9

Elderly
Care
+0.0

15
Construction
-2.7

10
5

2014
13.6

Others-0.1
Hotels &Resort-0.1

Adjustments
-0.8

2015
14.7

0

(3) Segment Information
Leasing Business
The occupancy rate at the end of the consolidated fiscal
year was 89.29% (up 1.82 points from the end of last
fiscal year) and the average occupancy rate for the fiscal
year was 86.57% (up 1.99 points from last fiscal year).
In the Leasing Business, to establish stable profits led
by occupancy improvement, the Company implemented
measures such as tenant recruitment utilizing direct
leasing offices, franchises, and local real estate brokers,
as well as expanding tenant services including “RoomCustomize” and security system installations. In addition,
the Company further strengthened sales against
corporate and foreign clients as well as reduced costs byreviewing routine property management tasks.
The number of units under management at the end of
the consolidated fiscal year was 554 thousand (increasing
6 thousand from the end of last fiscal year), and thenumber of direct offices was 188 (increasing 4). The
number of franchise offices was 141 (decreasing 23).
As a result of the above, net sales amounted to¥399,316 million (up 2.7% year-on-year), and operating
income was ¥20,532 million (up 31.9% year-on-year).
Construction Business
Orders received during the consolidated fiscal year were¥87,395 million (up 7.7% from last fiscal year) and the

Leopalace21 Corporation / Annual Report 2015

65

66

orders received outstanding at the end of theconsolidated fiscal year stood at ¥58,136 million (up30.7% from last fiscal year).
In the Construction Business, the Company aimed to
improve profitability by focusing apartment supply in thethree metropolitan areas where solid leasing demand isanticipated, as well as installing “non-sound floors”
which improve sound insulation and developing products
targeting females and young tenants. The Company also
expanded construction variations to meet various land
usage needs and has begun restructuring construction
methods. However, the influence of worker shortage andcost increase in construction materials cannot be
avoided. As a result, net sales came to ¥61,312 million(down 2.9% year-on-year), and operating income was¥210 million (down 92.9% year-on-year).

reserve for apartment vacancy loss, despite an increaseof ¥1,920 million in accounts payable for completed
projects, ¥2,465 million in unpaid expenses and ¥7,260
million in interest-bearing debt.
Net assets were up ¥21,612 million from the end of theprevious fiscal year, to ¥126,473 million, chiefly due to anincrease of ¥16,216 million in retained earnings from net
income and application of accounting policies related toretirement benefits, as well as an increase of ¥5,662
million in foreign currency translation adjustments. The
ratio of shareholders’ equity to assets rose 4.5 points
from the end of the previous fiscal year, to 41.0%.

Equity Ratio
(%)

41.0

40

37.0
33.0 32.4

Elderly Care BusinessNet sales were ¥10,608 million (up 4.3% year-on-year),and operating loss was ¥606 million (improving ¥4 million).

30
20
10

Hotels & Resort BusinessNet sales in resort facilities in Guam and hotels in Japan were
¥8,951 million (up 18.2% year-on-year), and the operating
loss was ¥1,289 million (increasing ¥170 million in loss).
Other Businesses
In Other Businesses such as the small-claims and shortterm insurance business, the solar power generation
business, and the finance business, net sales were ¥2,999
million (up 108.0% year-on-year), and the operating
income was ¥31 million (down 77.3% year-on-year).

3. Analysis of Financial Position(1) Position of Assets, Liabilities, and Net assets
Total assets at the end of the fiscal year increased¥20,815 million from the end of the previous fiscal year, to¥308,274 million. This was mainly attributable to anincrease of ¥16,927 million in property, plant andequipment, such as machinery, equipment, and vehicles
related to solar power generation business, ¥2,801 million
in deferred tax assets, ¥1,684 million in goodwill, and¥1,429 million in other accounts receivables, despite adecrease of ¥3,023 million in prepaid expenses.
Total liabilities decreased ¥797 million from the end of
the previous fiscal year, to ¥181,801 million. This
primarily reflected a decrease of ¥9,699 million in longand short term advances received and ¥4,072 million in

Leopalace21 Corporation / Annual Report 2015

19.3
16.6

33.4

36.5
31.3
22.2
17.9
11.112.8

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

(2) Cash Flow Position
Cash flow from operating activities was a net inflow of¥15,715 million (an increase of ¥131 million in net inflow
from the previous fiscal year). This was mainly due to¥12,896 million of income before taxes and minority
interests, ¥7,736 million of depreciation, an increase of¥4,924 million in accounts payable and a decrease of¥3,774 million in long-term prepaid expenses, despite adecrease of ¥9,572 million in advances received and¥4,072 million in reserve for apartment vacancy loss.
Cash flow from investing activities was a net outflow
of ¥17,550 million (an increase of ¥10,620 million in net
outflow from the previous fiscal year). This was primarily
due to payments for the purchase of property, plant andequipment of ¥16,531 million, as well as payments forthe purchase of shares in subsidiaries of ¥812 million.
Cash flow from financing activities was a net inflow of¥1,747 million (a decline of ¥7,100 million in net inflow
from the previous fiscal year). This was chiefly due toproceeds from the loans and bond of ¥3,354 million(after deduction of repayment of borrowings and bonds
redemption), despite a repayment of finance leaseWho we are

What our strategy is

What our businesses are

obligations of ¥1,606 million.
As a result, cash and cash equivalents at the end of
the consolidated fiscal year stood at ¥74,504 million, an
increase of ¥354 million from the end of the previous
fiscal year.

How CSR supports
our management

Financial Section &Corporate Data

The Companies acknowledges that the distribution of
profit to shareholders is an important management
issue. The Company is aiming to restore dividends soonby accumulating profit.

power generation business and overseas business.
As for the consolidated business results of the fiscal
year ending March 2016, we expect sales of ¥525,000
million (up 8.7% year-on-year), operating profit of¥19,500 million (up 32.1% year-on-year), recurring profitof ¥18,000 million (up 34.1% year-on-year), and net
income of ¥16,000 million (up 10.3% year-on-year).
The Company has set its financial targets for the fiscal
year ending March 31, 2017, the final year of its MediumTerm Management Plan, at ¥540.0 billion for net sales,¥22.0 billion for operating profit, ¥19.0 billion for net
income, 12.3% for ROE, and 6.0% for ROA.

5. Outlook

6. Issues to be Addressed by the Company

The Company aims to build solid management strength
based on its fundamental policy of “focusing on corebusinesses and challenging itself with new business fields”
as established in its Medium-Term Management Plan.
The Company aims to develop the Leasing Businessfurther as a highly profitable business by taking various
steps such as improving strong corporate sales,
addressing tenant needs through “Room Customize”
and the installation of security systems, strengthening
efforts for foreign students who demonstrate solid
demand, expanding its sales network through new store
openings, and reducing costs by reviewing routine
property management tasks.
In the Construction Business, the Company will seek a
new profit foundation through measures such as
supplying apartments in urban areas where a highoccupancy rate is expected, offering advanced new
products, building high-quality apartments by paying
attention to earthquake protection and sound insulation,etc., and expanding the number of orders received forbusiness buildings such as elderly care and commercial
facilities and built-to-order houses. In the Medium-Term
Management Plan, the Company positions the Elderly
Care Business as a growth strategy area and will
endeavor to promote the opening of care facilities
through collaboration with the Construction Business. As
a company-wide measure, the Company will also maintaina low cost structure while strategically investing in thecosts (personnel, advertising, and sales promotion
expenses) necessary to expand future sales and earnings.
In the next fiscal year, the Company will strengthen ourcompetitiveness by taking in our core business as thebase, expanding Elderly Care Business by cooperatingwith Construction Business and full-scale initiation of solar(1) Acquisition of individual clients and thepromotion of long-term occupancy
With respect to the tenants in the Company’s properties
under management, corporate clients constitute a rising
trend while individual clients constitute a declining trend.
The Company’s policy is to continue to enhance strong
corporate sales, however, taking into consideration thefact that corporate clients are easily impacted byeconomic cycles, from the perspective of assuring stablesales and earnings, the Company will also strengthen its
efforts to take in individual clients and promote long-term
occupancy through measures such as implementing
advertising and sales campaigns for individual clients,
expanding its sales network through new store openings,
and providing a variety of services for tenants.

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

Leopalace21 Corporation / Annual Report 2015

67

68
FINANCIAL SECTIONCONSOLIDATED BALANCE SHEETS
Leopalace21 Corporation and consolidated subsidiaries
March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS
Current assets:
Cash and cash equivalents (Notes 2-(2), 4, 5-(2))
Trade receivables (Note 5-(2))
Accounts receivable for completed projects (Note 5-(2))
Operating loans (Note 5-(2))
Securities (Notes 2-(4), 5-(2), 6)
Real estate for sale
Payment for construction in progress (Note 2-(15))
Raw materials and supplies
Prepaid expenses
Deferred tax assets (Notes 2-(18), 10)
Other accounts receivable
OthersAllowance for doubtful accounts (Notes 2-(10), 5-(2))
Total current assets
Non-current assets:
Property, plant and equipment: (Notes 2-(6), 2-(22))
Buildings and structures (Notes 8, 11-(3), 17)
Accumulated depreciation
Net
Machinery, equipment, and vehicles
Accumulated depreciation
Net
Land (Notes 8, 11-(3), 17)
Leased assets (Note 2-(19))
Accumulated depreciation
Net
Construction in progress
Other (Note 20-(1)-(a))
Accumulated depreciationNet
Total property, plant and equipment
Intangible fixed assets:
Goodwill
Others (Note 2-(8))
Total intangible fixed assets
Investments and other assets:
Investment securities (Notes 2-(4), 5-(2), 6, 11-(3))
Long-term loans (Note 5-(2))
Bad debts (Notes 5-(2), 9)
Long-term prepaid expenses (Note 2-(9))
Deferred tax assets (Notes 2-(18), 10)
Others (Note 11-(3))
Allowance for doubtful accounts (Notes 2-(10), 5-(2))
Total investments and other assets
Total non-current assets
Deferred assets:
Bond issuance cost
Total deferred assets
Total assets (Note 23)
The accompanying notes are an integral part of these statements.
Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

75,221
6,254
1,714
1,135
831
21
647
609
3,656
4,447
3,013
4,907
(199)
102,263

74,767
5,490
1,651
1,429
350
—
501
464
6,679
4,147
1,584
5,479
(221)
102,324

625,960
52,05014,270
9,448
6,918
181
5,391
5,073
30,42537,00525,07940,841(1,658)
850,988

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

121,075(64,001)
57,073
7,326(3,376)3,950
81,80011,470(6,302)
5,167
3,712
10,844(10,046)797
152,503

1,082,634(584,179)
498,454
168,586(42,803)125,783
693,093
123,233(57,654)
65,5798,257
100,403(81,648)
18,755
1,409,924

1,684
7,210
8,894

—
6,601
6,601

14,02059,99874,019

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

7,257
562
1,420
3,719
12,152
3,037(2,153)25,996
185,100

56,857
4,494
10,79328,432
121,949
24,179(17,351)
229,355
1,713,299

123
123
308,27434
34
287,459

1,031
1,031
2,565,318

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable (Note 5-(2))
Accounts payable for completed projects (Note 5-(2))
Short-term borrowings (Notes 5-(2), 5-(3), 11, 12)Current portion of long-term debt (Notes 5-(2), 5-(3), 11)Bonds due within one year (Notes 5-(2), 5-(3))
Lease obligations (Notes 5-(2), 5-(3), 11-(1))
Accounts payable—otherAccrued expenses
Accrued income taxes
Advances received (Note 2-(16))
Customer advances for projects in progress
Reserve for warranty obligations on completed projects (Note 2-(13))
Reserve for fulfillment of guarantees (Note 2-(14))
Asset retirement obligations (Note 18)
OthersTotal current liabilities
Non-current liabilities:
Bonds (Notes 5-(2), 5-(3))
Long-term debt (Notes 5-(2), 5-(3), 11)Lease obligations (Notes 5-(2), 5-(3), 11-(1))
Long-term advances received (Note 2-(16))
Lease/guarantee deposits received
Deferred tax liabilities
Reserve for apartment vacancy loss (Note 2-(12))
Liability for retirement benefit
Asset retirement obligations (Note 18)
OthersTotal non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock: (Note 19)
Authorized: 500,000,000 shares in 2015 and 2014
Issued: 267,443,915 shares in 2015 and 2014
Capital surplus
Retained earnings
Treasury stock: 4,569,430 shares in 2015 and 4,569,210 shares in 2014 (Note 19)
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on “other securities” (Note 2-(4))
Foreign currency translation adjustments (Note 2-(21))
Remeasurements of defined benefit plans (Notes 3, 13)
Total accumulated other comprehensive income
Share subscription rights
Minority interests
Total net assets
Total liabilities and net assets

2015

2014

2015

2,803
14,04960
23,0051,460
2,355
18,466
13
944
40,781
6,930
404
700
41
4,504
116,5212,685
12,128
—
2,940
560
1,575
16,001
2
998
45,051
5,242
231
582
42
4,517
92,56023,325
116,910499
191,443
12,14919,598
153,673
109
7,863
339,367
57,672
3,362
5,831
348
37,482
969,636

3,960
7,196
6,450
22,198
8,019
253
5,280
9,351
76
2,492
65,279
181,801920
27,077
4,154
27,628
8,492
135
9,352
10,05043
2,182
90,037
182,598

32,95359,88553,676
184,723
66,7372,112
43,94077,818639
20,743543,229
1,512,866

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

75,28251,501(15,788)(3,660)107,334

626,465
428,571
3,555(30,461)
1,028,131

379
3,545
(1,021)2,904
18
0
126,473308,274427(2,116)(815)(2,504)18
13
104,860
287,459

3,159
29,507(8,496)24,170149
01,052,452
2,565,318

Leopalace21 Corporation / Annual Report 2015

69

70
FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF OPERATIONS
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net sales (Note 22)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (Note 22)
Other income (expenses):
Interest and dividend income
Equity in gains of affiliated companies
Equity in losses of affiliated companies
Foreign exchange gains (losses), net (Note 2-(20))
Interest expenses
Commission fee
Gain on sale of property, plant and equipment (Note 14)
Gain from cancellation of contracted work
Gain on adjustment of accounts payable
Refund of fixed asset tax
Loss on sale of property, plant and equipment (Note 15)
Loss on retirement of property, plant and equipment (Note 16)
Impairment loss (Notes 2-(7), 8)
Others—net
Income before income taxes
Income taxes (Note 2-(18))
Current
RefundDeferredIncome before minority interests
Minority interests
Net income (Note 23)
The accompanying notes are an integral part of these statements.

Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

483,188
407,433
75,75560,992
14,763471,089
401,510
69,57955,906
13,6734,020,875
3,390,472
630,403507,549
122,853

124
—
(8)
52
(1,143)
(461)
6
14
50
88
(0)
(309)
(224)
(56)
12,896110
2—
10(1,574)
(550)
0
18
5
—
(1)
(13)
(778)
(120)
10,781

1,036
—
(68)
438
(9,518)(3,836)
55
120
422
735
(2)
(2,575)(1,868)(471)
107,3191,016(0)(2,613)(1,597)
14,494(13)
14,507768(31)(5,181)(4,444)
15,226(3)
15,2298,454(0)(21,749)(13,295)
120,615(113)
120,728

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen

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

2015

2014

2015

14,494

15,226

120,615

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

(220)
6,943
—
1
6,723
21,95021,953(3)(396)
47,105(1,709)18
45,017
165,632
165,745(113)

The accompanying notes are an integral part of these statements.

(Note)Net unrealized gains on “other securities”
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Net unrealized gains on “other securities”
Foreign currency translation adjustments (Note 2-(19))
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Remeasurements of defined benefit plans
Share of other comprehensive income of associates accounted forusing equity method
Amount accrued in the fiscal year
Total

Thousands of
U.S. dollars (Note 1)

Millions of yen

2015

2014

2015

(102)
—
(102)
55
(47)

(342)
—
(342)
122
(220)

(856)
—
(856)
459
(396)

5,660
—
5,660
—
5,660

6,943
—
6,943
—
6,943

47,105—
47,105—
47,105

(348)
142
(205)
—
(205)

—
—
—
—
—

(2,898)
1,188(1,709)—(1,709)

2
5,409

1
6,723

18
45,017

Leopalace21 Corporation / Annual Report 2015

71

72
FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2015 and 2014

Millions of yen
Shareholders’ equity

Balance as of April 1, 2013

Acquisition of treasury stock
Sales of treasury stock
Net change of items otherthan shareholders’ equity
Total change during period
Balance as of March 31, 2014

Net unrealized
gains on “othersecurities”

Foreigncurrencytranslation
adjustments

648(9,061)—(8,413)(0)
1,066

66,546
15,22924,830
(0)
728

1,066
(3,660)—40,787
107,334

(220)
(220)
427

6,944
6,944
(2,116)

(815)
(815)
(815)

5,908
5,908
(2,504)

CapitalsurplusRetainedearnings

Treasurystock

62,86739,424(31,018)
15,229(4,726)

12,415

12,415(338)

12,41575,282

12,07651,501

15,229(15,788)

Share
Total accumulated
Remeasurements
subscription
otherof definedrightscomprehensive
benefit plansincomeTotal
shareholders’equityCommonstock

Net income
Issuance of new shares

Accumulated other comprehensive income
Minority
interests

Total net
assets18—

58,151
15,22924,830
(0)
728

—
—
18

13
13
13

5,921
46,709104,860

Cumulative effects of changes
in accounting policies
Restated balance after changes
in accounting policies
Net income
Issuance of new shares
Acquisition of treasury stock
Sales of treasury stock
Net change of items otherthan shareholders’ equity
Total change during period
Balance as of March 31, 2015

1,708

1,708
75,282—75,28251,501—51,501(14,080)
14,507

14,507427(3,660)109,042
14,507

(0)

(0)

(0)
(3,660)14,507
123,550

1,708
427(2,116)(815)(2,504)18

13

106,568
14,507
(0)

(47)
(47)
379

5,662
5,662
3,545

(205)
(205)
(1,021)

5,409
5,409
2,904

—
—
18

(13)
(13)
0

5,396
19,904
126,473

Minority
interests

Total net
assets108872,602

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

Balance as of March 31, 2014

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityNet unrealized
gains on “othersecurities”

Foreigncurrencytranslation
adjustments

626,465

428,571(131,387)(30,460)

893,1883,556(17,614)

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

Accumulated other comprehensive income

14,215428,571

907,404
120,728

(1)

(1)

—
(1)
—
120,728
428,571(30,461)
626,465
3,555
The accompanying notes are an integral part of these statements.

120,727
1,028,131

than shareholders’ equity
Total change during period
Balance as of March 31, 2015

Leopalace21 Corporation / Annual Report 2015

(117,172)
120,728(6,787)(20,844)

149

14,215(30,460)

626,465

Net income
Issuance of new shares
Acquisition of treasury stock
Sales of treasury stock
Net change of items other

Share
Total accumulated
Remeasurements
subscription
otherof definedrightscomprehensive
benefit plansincome14,215
3,556(17,614)(6,787)(20,844)149

108

886,818
120,728
(1)

(396)
(396)
3,159

47,122
47,12229,507(1,709)(1,709)(8,496)45,01545,01524,170

—
—
149

(108)
(108)
0

44,907
165,634
1,052,452

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF CASH FLOWS
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen

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

2015

2014

2015

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

10,781
5,993(269)(4,597)
(110)
1,574
(10)
(2)
0
13
778
(193)
(161)
10,067(2,513)
1,346(8,718)
(533)
(519)
4,628
17,55798(1,584)(486)
15,584

107,319
64,377
86(33,890)(1,036)
9,518
(438)
68
(52)
2,575
1,868
(6,112)(670)
31,41340,9809,273(79,659)(4,410)8,177(1,036)
148,352905(9,478)(9,002)
130,777

The accompanying notes are an integral part of these statements.

Leopalace21 Corporation / Annual Report 2015

73

74

Thousands of
U.S. dollars (Note 1)

Millions of yen

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

Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

(15,532)
230
(998)
(101)
86
(812)
(10)
38
(600)
500
(349)
(17,550)(5,480)
3
(963)
(216)
20
—
(15)
36
(700)
400
(13)
(6,929)(129,258)
1,916(8,307)(844)
717(6,762)(86)
319(4,992)4,160(2,906)(146,045)

3,900(3,900)7,261(7,846)(1,606)
4,500
(560)
—
—
(0)
1,747
441
354
74,15074,504—(11,874)—(2,942)(1,210)—(560)
24,708
728
(0)
8,848
265
17,76856,381
74,15032,454(32,454)
60,424(65,297)(13,367)
37,446(4,660)——(1)
14,5453,672
2,949
617,043
619,993Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

FINANCIAL SECTIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2015 and 2014

1. Basis of Presenting Consolidated Financial
Statements
The accompanying consolidated financial statements of
Leopalace21 Corporation (the “Company”) have been
prepared in accordance with the provisions set forth in
the Financial Instruments and Exchange Act of Japanand its related accounting regulations and in conformity
with accounting principles generally accepted in Japan,
which are different in certain respects as to applicationand disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements
have been reformatted and translated into English (withcertain expanded disclosure) from the consolidated
financial statements of the Company prepared inaccordance with accounting principles generally
accepted in Japan and filed with the Financial Services
Agency as required by the Financial Instruments andExchange Act of Japan. Some supplementary
information included in the statutory consolidated
financial statements, but not required for fairpresentation, is not presented in the accompanying
consolidated financial statements.
The translation of the Japanese yen amounts into U.S.
dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at
March 31, 2015, which was ¥120.17 to US$1.00. Suchtranslation should not be construed as a representationthat the Japanese yen amounts have been, could havebeen, or could in the future be, converted into U.S.
dollars at this or any other rate of exchange. Certain
amounts in the previous year’s financial statements
have been reclassified to conform to the current fiscal
year’s presentation.
Figures less than ¥1,000,000 had been rounded to thenearest ¥1,000,000 until the previous fiscal year.
However, the Company changed the method ofpresentation to the statement of figures rounded down to
the nearest ¥1,000,000 from the consolidated fiscal year.

2. Summary of Significant Accounting Policies(1) Consolidation
The accompanying consolidated financial statements asof March 31, 2015 include the accounts of the Company
and its 18 (13 as of March 31, 2014) significant
subsidiaries (together, the “Companies”). Of these 18
subsidiaries, Leopalace21 (Shanghai) Property
Management Co., Ltd., Leopalace21 (Cambodia) Co.,

Ltd., LEOPALACE21 REAL ESTATE (CAMBODIA) Co.,
Ltd., and Leopalace Energy Corporation have been
included in the scope of consolidation because they were
established in the consolidated fiscal year. Morizou Co.,
Ltd. and WING MATE CO., LTD., whose shares wereacquired in the consolidated fiscal year, have also been
included in the scope of consolidation. On the other
hand, Leopalace Travel Co., Ltd. has been excluded fromthe scope of consolidation as a result of an absorptiontype merger that took place in the consolidated fiscal
year, through which WING MATE CO., LTD. became thesurviving company and Leopalace Travel Co., Ltd.
became the dissolved company. Affiliated companies
over which the Company exercises significant influencein terms of their operating and financial policies havebeen included in the consolidated financial statements onan equity basis. Investments in 1 affiliate (2 as of March
31, 2014) have been included for the year ended March
31, 2015. All significant intercompany balances andtransactions have been eliminated.
Investments in subsidiaries and affiliates that are notconsolidated or accounted for by the equity method are
carried at cost or less. Where there has been apermanent decline in the value of such investments, theCompany has written down the investments.
Since the balance sheet date of Leopalace21 Business
Consulting (Shanghai) Co., Ltd., Leopalace21 (Shanghai)
Property Management Co., Ltd., LEOPALACE21
VIETNAM CO., LTD., Leopalace21 (Thailand) CO., LTD.,
Leopalace21 (Cambodia) Co., Ltd., LEOPALACE21 REALESTATE (CAMBODIA) Co., Ltd., Leopalace Guam
Corporation, Leopalace Guam Distributing Corporation,
Leopalace Guam Service Corporation, and WING MATE
CO., LTD is December 31, their financial statements asof that date are used in the preparation of the Company’s
consolidated financial statement. When significant
transactions occur at those subsidiaries between theirfiscal year end and the Company’s fiscal year end, thesetransactions are included in consolidation as necessary.
The balance sheet date of Morizou Co., Ltd. is
September 30. In preparing the consolidated financial
statements, its financial statements based on a provisional
settlement as of the consolidated settlement date inaccordance with the actual settlement have been used.
(2) Cash and cash equivalents
For the purpose of the statements of cash flows, theCompany considers all highly liquid investments with

Leopalace21 Corporation / Annual Report 2015

75

76

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

2. Derivative transactions are accounted for using
hedge accounting.
(a) Hedge accounting method
The Company uses the deferred hedge
accounting method.
The interest rate swaps that meet specificmatching criteria are recognized and included ininterest expense or income.
(b) Hedging instrument and hedge items
Hedging instrument
Hedge items
Interest rate swaps
Long-term debt

Leopalace21 Corporation / Annual Report 2015(c) Hedge policy
Interest rate swaps are utilized as a hedge against
possible future interest rate increases, in amounts
that fall within the range of the particular liability
being hedged.
(d) Method used to evaluate the effectiveness of thehedge
Cumulative interest rate fluctuations and changes
in cash flows are compared to evaluate theeffectiveness of hedged item and hedging
instrument. However, evaluation as of the date ofsettlement of the effectiveness of interest rate
swaps that meet specific matching criteria isomitted.
(6) Property, plant and equipment(except for leased assets)
Buildings for rent of the Company and domestic
consolidated subsidiaries are stated at cost. Depreciationis computed generally on the straight-line basis. The
range of useful lives is principally from 22 to 47 years forbuildings for rent.
Property, plant and equipment other than buildings forrent of the Company and domestic consolidated
subsidiaries are stated at cost. Depreciation is computed
generally by the declining-balance method. However,buildings (excluding accompanying facilities) obtained on
or after April 1, 1998 are depreciated by the straight-line
method. The range of useful lives is principally from 15
to 50 years for buildings and structures, 17 years formachinery, equipment and vehicles, and 5 to 10 years fortools, furniture and fixtures.
Property, plant and equipment of the consolidated
overseas subsidiaries are depreciated by the straightline method based on the local GAAP. The range ofuseful lives is principally from 30 to 40 years forbuildings and structures and from 3 to 5 years for tools,
furniture and fixtures.
(7) Long-lived assets
The Companies review long-lived assets for impairment
whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not berecoverable. An impairment loss would be recognized if
the carrying amount of an asset or asset group exceeded
the sum of the undiscounted future cash flows expected
to be generated by the continued use and eventualWho we are

What our strategy is

What our businesses aredisposition of the asset or asset group. The impairment
loss would be measured as the amount by which thecarrying amount of the assets exceeds their recoverable
amount, which is the higher of the discounted cash flows
from the continued use and eventual disposition of theassets, or the net selling price at disposition.
(8) Intangible assets
Software for internal use is amortized on a straight-line
basis over the estimated useful life of 5 years.
(9) Long-term prepaid expenses
Long-term prepaid expenses are amortized evenly over a
period mainly from 3 to 5 years.
(10) Allowance for doubtful accounts
The Companies maintain an allowance for doubtful
accounts to reserve for potentially uncollectible
receivables. A general provision for doubtful receivables
is provided by applying a certain reserve percentage ofthe receivables based on experience from pasttransactions. A specific reserve is provided for theestimated amounts to be uncollectible based on thecustomers’ financial condition or other pertinent factors.
(11) Liability for retirement benefit
In conjunction with the calculation of retirement benefit
obligations, the method for attributing projected
retirement benefits for the period up to the end of thecurrent fiscal is based on straight-line basis.
Past service cost is amortized by the straight-line
method over a specified period (5 years) within the
average remaining service years of employees at thetime of accrual. Actuarial gains/losses, which areprorated according to the straight-line method over a
specified period (5 years) within the average remaining
service years of employees at the time of accrual, areamortized starting from the next fiscal year of therespective accruals.
Unrecognized actuarial gains/losses and unrecognized
past service cost are posted, factoring in tax effects, as
the cumulative amount of adjustments related tocumulated other comprehensive income in the net assets.
(12) Reserve for apartment vacancy loss
Reserve for vacancy losses on apartment units managed
under master lease agreements is calculated according
to the projected loss that could occur during a logically

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Financial Section &Corporate Data

predictable period to prepare for the risk of increased
vacancies. It is based on estimated losses resulting fromcurrent rental income and expected future occupancy
rates for each rental property managed by the leasing
division of the Company.
(13) Reserve for warranty obligations on completed
projects
Reserve for warranty obligations on completed projects
is provided to reserve for execution of warranty
obligations under defect liabilities in the future. It is
calculated using the percentage of the past execution of
warranty obligations on the completed projects.
(14) Reserve for fulfillment of guarantees
In order to provide for losses attributable to its leaseguarantee business, the Company’s consolidated
subsidiary, Plaza Guarantee Co., Ltd., records theamount of loss expected based on the rate of pastguarantee fulfillments.
(15) Revenues and costs of construction contracts
In recognizing construction revenues and costs ofconstructions in process, the percentage-of-completion
method is applied to such contracts in which theoutcome of the construction activity is deemed certainby the end of the fiscal year ended March 31, 2015,
while the completed contract method is applied to otherconstructions. Progress of construction is estimatedbased on the method of the ratio of actual cost incurred
to total cost.
(16) Advances received
With respect to advances received, such as rent, theCompany reports the portion corresponding to morethan a year in “long-term advances received” under“non-current liabilities,” and the portion corresponding toa year or less in “advances received” under “current
liabilities.” This allows the Company to more clearlypresent the characteristics and actual transactions of theCompany’s leasing business which receives rents, etc.
over a long period of time, such as monthly usage fees,
as advances received.
(17) Amortization method and period of goodwill
The Company has adopted a policy whereby goodwill isamortized on a straight-line basis over the period inwhich the economic benefits are expected to be realized.

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However, if the amount is negligible, it is amortized atonce when it takes place.
(18) Income taxes
Income taxes comprise corporate, inhabitant andenterprise taxes.
The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income
tax purposes.
(19) Leases
Finance leases that are deemed to transfer ownership ofleased property to the lessee (excluding leases thatexisted on or before March 31, 2008) are accounted for ina manner similar to sales transactions and depreciated by
the straight-line method over the lease-term of respective
assets as their useful lives with no residual value.
Any finance lease transactions executed before March
31, 2008, where ownership of the leased assets is nottransferred to the lessee, are accounted for as operatinglease transactions.
(20) Foreign currency transactions
All monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at thecurrent exchange rates as of each balance sheet date. The
foreign exchange gains and losses from translation arerecognized in the consolidated statements of operations.
(21) Foreign currency financial statements
The assets and liabilities of consolidated overseas
subsidiaries are translated into Japanese yen at thecurrent exchange rates as of each balance sheet date,and income and expenses are translated at the averageexchange rates of the fiscal year. Foreign currencytranslation adjustments resulting from the translation ofassets, liabilities and net assets are included in translation
adjustments as a separate component of net assets.
(22) Interest capitalization
Leopalace Guam Corporation, a consolidated subsidiary,
capitalized interest paid on borrowing for real estatedevelopment business for the development period intoacquisition cost of property, plant and equipment.

Leopalace21 Corporation / Annual Report 2015

Capitalized interests included in carrying value of
property, plant and equipment were ¥2,260 million($18,809 thousand) and ¥2,034 million as of March 31,
2015 and 2014, respectively.
(23) Consumption taxes
National and local consumption taxes are basically
excluded from transaction amounts. However, Asuka
SSI, a consolidated subsidiary, includes national and local
consumption taxes in operating expenses and generaland administrative expenses. The nondeductible portionof consumption taxes on the purchase of assets isrecorded as long-term prepaid expenses and amortizedevenly over 5 years.
(24) Earnings per share
Basic earnings per share of common stock is computedby net income available to common shareholders divided
by the weighted-average number of common shares
outstanding for the period.
Diluted earnings per share of common stock reflects
the potential dilution that could occur if securities orother contracts to issue common stock were converted
or exercised into common stock or resulted in theissuance of common stock.

3. Additional Information(Changes in Accounting Policies)(Application of accounting policies related toretirement benefits)
The Company has applied paragraph 35 of the
Accounting Standard for Retirement Benefits (ASBJ
Statement No. 26, May 17, 2012) and paragraph 67 of
the Guidance on Accounting Standard for Retirement
Benefits (ASBJ Guidance No. 25, March 26, 2015) since
the beginning of fiscal year. The calculation methods ofthe retirement benefit obligations and service costs havebeen revised and the method of attributing expected
benefit to period has been changed from the straight-line
basis to the benefit formula basis. In addition, themethod of determining the discount rates has beenchanged from a method utilizing the discount rate basedon the period approximate to the expected averageremaining working lives of employees to the use ofdifferent discount rates according to the estimatedtiming of benefit payment.
In accordance with the transitional measures stated inWho we are

What our strategy is

What our businesses are

section 37 of the Accounting Standard for Retirement
Benefits, the affected amounts due to changes in thecalculation method of retirement benefit obligations andservice costs are included in retained earnings as of the
beginning of fiscal year.
As a result, liability for retirement benefit has
decreased by ¥1,708 million ($14,215 thousand) andretained earnings have increased by the same amount asof the beginning of fiscal year. The effect on operating
income, recurring income and income before taxes andminority interests is insignificant.
Also, net assets per share have increased ¥6.50($0.05) and the effect on net income is insignificant.
(New Accounting Standard and Guidance Not Yet
Applied)• Accounting Standard for Business Combinations (ASBJ
Statement No. 21, September 13, 2013)• Accounting Standard for Consolidated Financial
Statements (ASBJ Statement No. 22, September 13,
2013)• Accounting Standard for Business Divestitures (ASBJ
Statement No. 7, September 13, 2013)• Accounting Standards for Earnings Per Share (ASBJ
Statement No. 2, September 13, 2013)• Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No. 10, September 13,
2013)• Guidance on Accounting Standard for Earnings Per
Share (ASBJ Guidance No. 4, September 13, 2013)(1) Overview
The ASBJ issued amendments with respect to handlingchanges in parent companies’ ownership interests while
retaining their controlling interests in their subsidiaries
when the additional acquisition of stock from thesubsidiaries is undertaken, handling expenses related tothe acquisitions, handling the presentation of net
income, changes from minority interests to noncontrolling interests, and the settlement of provisional
accounting treatment.

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Financial Section &Corporate Data

With respect to handling the settlement of tentative
accounting treatment, it will be adopted for any businesscombination that may be implemented at or after the
beginning of the fiscal year ending March 31, 2016.
(3) Effects Arising from Applying New Standard
and Guidance
Any impact of the revision of the Accounting Standard
for Business Combinations, etc. on the Company’s
consolidated financial statements is under review at
this point.
(Changes in presentation)(Consolidated Statements of Operations)“Gain on adjustment of account payable,” which was
included in “Others” in “Non-operating income” in theprevious fiscal year, is posted as a separate item in thefiscal year as its amount exceeds 10/100th of nonoperating income. Consolidated financial statements forthe previous fiscal year have been restated in order toreflect this change in description.
As a result, ¥160 million ($1,332 thousand) posted as“Others” in “Non-operating income” in the consolidated
financial statement of the previous fiscal year has been
restated as ¥5 million ($49 thousand) for “Gain on
adjustment of account payable,” and ¥154 million($1,282 thousand) for “Others.”(Retirement Benefits)
In accordance with the revisions of the Guidance on
Accounting Standard for Retirement Benefits (ASBJ
Guidance No. 25, March 26, 2015), the Company
changed the presentation method for notes onretirement benefits based on a multi-employer plan.
Accordingly, the consolidated financial statements forthe previous fiscal year have been restated in order toreflect this change in presentation.
The contents of the restated consolidated financial
statements and the figures for the major items for theprevious fiscal year are noted in the corresponding section.

(2) Effective Dates
The Company will adopt these new accounting
standards and amendments from the beginning of the
fiscal year ending March 31, 2016.

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4. Cash and Cash Equivalents(1) A reconciliation between cash and cash equivalents in the consolidated balance sheets and consolidated
statements of cash flows are as follows:
Thousands of
U.S. dollars

Millions of yen

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

2015

2014

2015

75,221(717)
74,50474,767(617)
74,150625,960(5,966)
619,993(2) Principal assets and liabilities of the company that became a consolidated subsidiary during theconsolidated fiscal year:
The breakdown of assets and liabilities at the time of the commencement of consolidation in connection with the newconsolidation of Morizou Co., Ltd. with the acquisition of stock and the relationship between the acquisition cost forshares of Morizou Co., Ltd. and expenditure for the acquisition (net) are as follows.
March 31, 2015
Current assets
Fixed assets
Goodwill
Current liabilities
Non-current liabilities
Minority interests
Acquisition price of shares
Cash and cash equivalents
Balance: expenditure for acquisition

5. Financial Instruments(1) The financial instruments and related disclosures(a) Policy for financial instruments
The Companies are mainly involved in raisingfunds (mostly bank borrowing and corporate bondissuance) needed for capital investment to carry
out Leasing Business and Construction Business.
Temporary excess funds are invested in highly
secure financial assets, and short-term working
capital is raised by borrowing from the bank. The
Companies conduct derivative transactions
primarily for the purpose of avoiding interest rateand exchange rate risks, and has a policy not to
conduct speculative trading.
(b) Nature and extent of risks arising fromfinancial instruments
Operating receivables such as trade receivables
and accounts receivable for completed projects are
exposed to credit risk.

Leopalace21 Corporation / Annual Report 2015

Millions of yen

Thousands of
U.S. dollars

1,363
202
1,684
(1,333)
(232)
(0)
1,685
(961)
723

11,3501,681
14,020(11,092)(1,937)(0)
14,022(7,998)6,023

Foreign currency denominated debts and credits
originated in conjunction with overseas businessdevelopment are exposed to exchange risk.
Securities are mainly held-to-maturity securities
and shares of the companies with which theCompany has a business relationship, and thosesecurities are exposed to market risk.
Almost all accounts payable and accounts
payable for completed projects which areoperating liabilities are scheduled to be paid within
one year.
Loans payable, corporate bonds, and leaseobligations related to finance lease transactions aremainly for the purpose of raising funds necessary
for investment in facilities, and the longest
repayment date is 16 years subsequent to fiscal
year end.
The derivative contracts represent interest-rate
swap transactions designed to hedge against therisk of future fluctuations in interest rates onWho we are

What our strategy is

What our businesses areborrowings, etc. Interest rate swap transactions
used by the Company are exposed to risks offluctuations in the market interest rate. For details
on hedge accounting with respect to hedging
instruments, hedging items, hedging policy and themethod for evaluating hedging effectiveness,please refer to the aforementioned “2. (5) Derivative
financial instruments and hedge accounting”.
(c) Risk management for financial instruments
Credit risk management for operating receivables
and loans outstanding follows the “Receivables
management rules”. While each business division
manages the extension of credit to its customers,
it is also organized for early detection and loss
reduction of accounts where collection is doubtful
due to worsening credit or similar problems.
Regarding securities and investment securities,
the Company periodically investigates andunderstands the share price and the financial
condition of the share issuing organization. In
addition, for items other than held-to-maturity
securities, the Company considers the relationshipwith the trading partner companies and constantly
re-evaluates its holdings.
The basic policy of derivatives trading isdetermined by the board of directors, and the

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Financial Section &Corporate Data

execution and administration of derivatives
transactions are conducted in accordance with theCompany’s “Derivatives Trading Management
Rules”. The derivatives trading management
situation is periodically reported to the board of
directors for comprehensive risk management. The
Company’s counterparties for derivative contracts
are highly creditworthy financial institutions inJapan, and therefore it does not assume the risk ofcounterparty default on these contracts.
Trade payables and debts are exposed toliquidity risk, but this risk is monitored by various
means such as the preparation of a monthly
financial plan by each company in the Companies.
(d) Supplementary explanations on fair value offinancial instruments
Fair value of financial instruments are measured basedon the quoted market price, or reasonably assessedvalue if a quoted market price is not available.
Fair value of financial instruments which quoted
market price is not available is calculated based on afluctuating factor, and the value might differ if different
assumptions are used. Contract sums, etc. in notes toderivative contracts do not themselves represent thevolume of market risk on derivative contracts.

Leopalace21 Corporation / Annual Report 2015

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82

(2) Fair value of financial instruments
The carrying amount on the consolidated balance sheet and fair value of financial instruments as of March 31, 2015 and2014 as well as the differences between these values are described below. Financial instruments whose fair values
appear to be extremely difficult to determine are not included in the table. (See Note (b))
Millions of yen

March 31, 2015
(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts (*1)Net(5) Long-term loans
Allowance for doubtful accounts (*1)Net(6) Bad debts
Allowance for doubtful accounts (*1)
Net
Total assets(1) Accounts payable and accounts payable for completed projects(2) Short-term borrowings(3) Bonds (*2)(4) Long-term debt (*2)(5) Lease obligations
Total liabilities
Derivative transactions

Carrying value

Fair value

Difference

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

—
—
17

1,242

212

445

—

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

—
229
—
—
3
37
(32)
8
—

Millions of yen

March 31, 2014
(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts (*1)Net(5) Long-term loans
Allowance for doubtful accounts (*1)Net(6) Bad debts
Allowance for doubtful accounts (*1)
Net
Total assets(1) Accounts payable and accounts payable for completed projects(2) Bonds (*2)(3) Long-term debt
(4) Lease obligations
Total liabilities

Leopalace21 Corporation / Annual Report 2015

Carrying value

Fair value

Difference

74,767
7,141
4,462
1,429
(106)
1,323
562
(96)
465
1,420
(1,387)32
88,192
14,8141,480
30,017
5,729
52,041

74,767
7,141
4,472

—
—
10

1,570

247

465

—

32
88,45014,814
1,487
30,017
5,788
52,107

—
258
—
7
—
58
65

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Thousands of U.S. dollars

March 31, 2015
(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts (*1)Net(5) Long-term loans
Allowance for doubtful accounts (*1)Net(6) Bad debts
Allowance for doubtful accounts (*1)
Net
Total assets(1) Accounts payable and accounts payable for completed projects(2) Short-term borrowings(3) Bonds (*2)(4) Long-term debt (*2)(5) Lease obligations
Total liabilities
Derivative transactions

Carrying value

Fair value

Difference

625,960
66,32037,327
9,448
(875)
8,572
4,494
(787)
3,707
10,793(10,793)—
741,888
140,236499
45,102
251,328
73,274510,441—

625,960
66,32037,474——146

10,337

1,765

3,707

—

—
743,800
140,236499
45,135
251,637
73,000510,508
—

—
1,912
—
—
32
308
(274)
67
—

(*1) Operating loans, long-term loans and bad debts have deductions of their respective allowance for doubtful
accounts, which are recorded separately.
(*2) As of March 31, 2015 and 2014, bonds due within one year of ¥1,460 million ($12,149 thousand for 2015) and ¥560
million, and current portion of long-term debt of ¥23,005 million ($191,443 thousand for 2015) and ¥2,940 million
are included in bonds and long-term debt, respectively.
Notes:(a) Matters concerning the calculation method forthe fair value of financial instruments, securities, andderivative transactions

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

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

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

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

Long-term loans
Bad debts
The fiscal year-end outstanding balances arecalculated mainly using expected future cash flowsof the potentially recoverable principal and interest.

Leopalace21 Corporation / Annual Report 2015

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84

Liabilities
Accounts payable and accounts payable forcompleted projects
These liabilities are stated at carrying amount asthey are settled in the short-term and their fairvalues approximate their carrying amount.

interest rate for new borrowings or leasetransaction).
Bonds
Bonds issued by the Company are privately offered,and their fair value is stated at the net present value,
which is calculated by discounting the principal withinterest by the discount rate (i.e. the current market
interest rate in consideration of residual value andcredit risk).

Short-term borrowings, Long-term debt, Current
portion of long-term debt
Lease obligations
These liabilities are stated at the net present value,
which is calculated by discounting the principal withinterest by the discount rate (i.e. the estimatedDerivative transactions
Please refer to “7. Derivative Transactions”.

(b) Financial instruments whose fair value appear to be extremely difficult to determine
Thousands of
U.S. dollars

Millions of yen

Item

2015

2014

2015

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

1,253
824
891
209
3,178

1,145
824
895
280
3,145

10,430
6,859
7,415
1,744
26,449As they have no market value, and as it is understood that it is extremely difficult to estimate their future cash flow, theabove financial instruments are not included in “Assets: Securities and investment securities”.
(c) The scheduled redemption amount of monetary claims and investment securities with maturity subsequent
to fiscal year end
Millions of yen

March 31, 2015

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

Leopalace21 Corporation / Annual Report 2015

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

75,221

—

—

—

7,969

—

—

—

—
—

900
—

500
—

—
—

759

1,309

—

—

—
72
211
16
—
84,250

—
—
728
32
—
2,970

—
—
161
19
—
681

824
891
33
471
1,297
3,517

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Millions of yen

March 31, 2014
Cash and cash equivalents
Trade receivables and accounts receivable forcompleted projects
Securities and investment securities
Held-to-maturity debt securities(1)Government and municipal bonds(2)Corporate bonds
Other securities with maturities(1)Government and municipal bonds(2)Bonds(Corporate bonds)(3)Others
Operating loans
Long-term loans
Bad debts
Total

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

74,767

—

—

—

7,141

—

—

—

200
—

500
—

600
—

—
—

150

1,310

544

—

—
—
248
18
—
82,526

—
94
799
39
—
2,744

—
—
336
22
—
1,502

824
895
44
482
1,420
3,666

Due within 1 year

Due after 1 year
through 5 years

Thousands of U.S. dollars

March 31, 2015
Cash and cash equivalents
Trade receivables and accounts receivable forcompleted projects
Securities and investment securities
Held-to-maturity debt securities(1)Government and municipal bonds(2)Corporate bonds
Other securities with maturities(1)Government and municipal bonds(2)Bonds(Corporate bonds)(3)Others
Operating loans
Long-term loans
Bad debts
Total

Due after 5 years
through 10 years

Due after
10 years

625,960———

66,320

—

—

—

—
—

7,489
—

4,160
—

—
—

6,316

10,892

—

—

—
603
1,758
133
—
701,092

—
—
6,062
271
—
24,715

—
—
1,346
163
—
5,671

6,859
7,415
281
3,925
10,79329,275

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

March 31, 2015
Short-term borrowings
Bonds
Long-term debt
Lease obligations
Total

Due within
1 year60
1,460
23,0052,355
26,880Due after 1
through 2 years

—
1,260
746
2,141
4,148

Due after 2
through 3 years

Due after 3
through 4 years

—
900
659
2,060
3,619

—
900
610
1,676
3,186

Due after 4
through 5 years

—
900
510
567
1,978

Due after
5 years

—
—
4,668
4
4,672

Millions of yen

March 31, 2014

Due within
1 yearBonds
Long-term debt
Lease obligations
Total

560
2,940
1,575
5,075

Due after 1
through 2 years

560
27,077
1,388
29,026

Due after 2
through 3 years

360
—
1,142
1,502

Due after 3
through 4 years

—
—
1,023
1,023

Due after 4
through 5 years

—
—
599
599

Due after
5 years————

Thousands of U.S. dollars

March 31, 2015

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Short-term borrowings
Bonds
Long-term debt
Lease obligations
Total

499
12,149191,443
19,598
223,690—
10,485
6,213
17,821
34,520

—
7,489
5,490
17,14430,123

—
7,489
5,083
13,947
26,520

—
7,489
4,251
4,726
16,467——
38,84636
38,882

6. Securities(1) At March 31, 2015 and 2014, information with respect to held-to-maturity debt securities for which market
prices were available was summarized as follows:
Millions of yen

March 31, 2015
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Total

Leopalace21 Corporation / Annual Report 2015

Consolidatedbalance sheet
amountMarket value

Difference

1,442
—
—
1,442

1,460
—
—
1,460

17
—
—
17

—
—
—
—
1,442

—
—
—
—
1,460

—
—
—
—
17

Who we are

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our management

Financial Section &Corporate Data

Millions of yen

March 31, 2014
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Total

Consolidatedbalance sheet
amountMarket value

Difference

1,232
—
—
1,232

1,243
—
—
1,243

10
—
—
10

106
—
—
106
1,339

106
—
—
106
1,350

(0)
—
—
(0)
10

Thousands of U.S. dollars

March 31, 2015
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Government and municipal bonds
Corporate bonds
OthersSubtotal
Total

Consolidatedbalance sheet
amountMarket value

Difference

12,005——12,005

12,152——
12,152

146
—
—
146

—
—
—
—
12,005————
12,152

—
—
—
—
146

Leopalace21 Corporation / Annual Report 2015

87

88

(2) Investment securities classified as other securities as of March 31, 2015 and 2014 were as follows:
Millions of yen

March 31, 2015
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Total

Consolidatedbalance sheet
amountAcquisition cost

Difference

979

460

519

1,855
—
—
—
2,834

1,825
—
—
—
2,285

30
—
—
—
549

—

—

—

208
—
—
—
208
3,042

208
—
—
—
208
2,493

(0)
—
—
—
(0)
549

Millions of yen

March 31, 2014
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Total

Leopalace21 Corporation / Annual Report 2015

Consolidatedbalance sheet
amountAcquisition cost

Difference

1,128

460

668

1,916
—
—
—
3,045

1,882
—
—
—
2,342

34
—
—
—
702

—

—

—

77
—
—
—
77
3,122

77
—
—
—
77
2,420

(0)
—
—
—
(0)
702

Who we are

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Financial Section &Corporate Data

Thousands of U.S. dollars

March 31, 2015
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Securities whose consolidated balance sheet amount notexceeds their acquisition cost:
Stock
Bonds:
Government and municipal bonds
Corporate bonds
OthersOthersSubtotal
Total(Note)March 31, 2015
¥1,253 million ($10,430 thousand) of non-listed shares,¥824 million ($6,859 thousand) of non-listed company
bonds (subordinate corporate bonds), ¥891 million($7,415 thousand) of subordinate beneficiary rights toloans and money in trust, and ¥209 million ($1,744
thousand) of contributions to investment business limited
partnerships are not included in the other securities given
above because they have no market value and assigningthem fair market prices is recognized to be extremely
difficult. The Company acquired the non-listed company
bonds (subordinate corporate bonds) and the subordinate
beneficiary rights to loans and money in trust as a resultof the securitization of non-recourse apartment loans that
financial institutions had loaned to clients as funds forpaying charges for jobs contracted to the Company.

Consolidatedbalance sheet
amountAcquisition cost

Difference

8,150

3,828

4,322

15,440———23,59015,188———19,016

251
—
—
—
4,573

—

—

—

1,731
—
—
—
1,731
25,322

1,736
—
—
—
1,736
20,753

(4)
—
—
—
(4)
4,568

March 31, 2014
¥1,145 million of non-listed shares, ¥824 million of nonlisted company bonds (subordinate corporate bonds),¥895 million of subordinate beneficiary rights to loans
and money in trust, and ¥280 million of contributions toinvestment business limited partnerships are notincluded in the other securities given above because
they have no market value and assigning them fairmarket prices is recognized to be extremely difficult. The
Company acquired the non-listed company bonds(subordinate corporate bonds) and the subordinate
beneficiary rights to loans and money in trust as a resultof the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds
for paying charges for jobs contracted to the Company.

(3) Proceeds from sales of other securities and gain or loss on these sales for the years ended March 31, 2015
and 2014 were summarized as follows:
March 31, 2015
None
March 31, 2014
None
Leopalace21 Corporation / Annual Report 2015

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90

(4) In addition, investment in affiliates included in investment securities of the consolidated balance sheet was
as follows:
Thousands of
U.S. dollars

Millions of yen

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

2015

2014

2015

34
34

41
28

283
283

7. Derivative Transactions(1) Derivative transaction not subject to the application of hedge accounting
March 31, 2015
None
March 31, 2014
None(2) Derivative transaction subject to the application of hedge accounting
March 31, 2015
Hedge accounting method: Exceptional accounting treatment for interest rate swaps
Type of transaction: Interest rate swaps, floating received rate and fixed paid rate
Major hedged item: Long-term debt
Contract value, etc.: ¥233 million ($1,944 thousand)Contract value, etc. lasting longer than one year: ¥133 million ($1,113 thousand)Fair value: The fair value of interest rate swaps subject to exceptional accounting treatment is included in the fair value ofthe corresponding long-term debt because they are recognized together with hedged long-term debt.
March 31, 2014
None

8. Long-lived Assets(1) Breakdown of major plants, properties, and equipments were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2015

2014

2015

57,007
12,88524,714
27,10415,157
13,72957,83013,41024,19323,783
13,773
2,973

474,389
107,223
205,665
225,551
126,135
114,253(2) Due to acceptance of national subsidies, the following reduction entry amount was deducted from theacquisition cost of relevant assets:
Thousands of
U.S. dollars

Millions of yen

Machinery, equipment, and vehicles

Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

155

155

1,290

Who we are

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Financial Section &Corporate Data

(3) The Companies recognized impairment loss on the following asset groups for the years ended March 31,
2015 and 2014:
March 31, 2015
Impairment loss
PurposeRental assets(Apartment buildings
and others, 23 units)
Hotel

Category

Buildings andStructures
Land
Buildings andStructures
Land

Location

Kawaguchi-shi,
Saitama, etc.
Yokkaichi-shi,
Mie

Total

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

Millions of yen

Thousands of
U.S. dollars

1
160

10
1,336

58
3
224

490
31
1,868

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

March 31, 2014
Impairment loss
PurposeCategory

Location
Millions of yen

Rental assets(Apartment buildings
and others, 70 units)
Total

Buildings andStructuresLand

The Companies recognized each property in domestic
rental assets as a unit and grouped overseas assets bymanagerial accounting segmentation.
The Companies wrote down book value of the rental
assets whose profitability decreased seriously due to theslump in the rental income market and continuous
decline in land prices, to recoverable amounts andKobe-shi,Hyogo, etc.

98
680
778

recognized the reduced values as impairment losses.
Recoverable amounts of rental assets were measured
at the higher of their values in use or their net realizablevalues in sale. Value in use was computed bydiscounting its future cash flows at 3.8%, while net
realizable value in sale was determined based on publicly
appraised value.

Leopalace21 Corporation / Annual Report 2015

91

92

9. Bad Debts
Bad debts are claims as stipulated under Article 32, Paragraph 1, and Item 10 of the Regulation concerning Financial
Statements. Bad debts at March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Claims in the process of bankruptcy
Bad debts
Others
Total

2015

2014

2015

1,066
107
123
1,297

1,092
186
141
1,420

8,875
891
1,026
10,793

10. Income Taxes(1) Significant components of deferred tax assets and liabilities as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

43,82522,858
3,024
1,730
1,387
1,295
867
811
654
432
384
270
247
133
132
122
120
120
92
80
18
14
13
302
78,942(59,605)
19,337

46,99923,035
3,581
3,333
2,551
1,427
374
741
705
518
424
278
207
82
125
134
183
128
77
88
34
16
12
244
85,311(68,724)
16,586364,697
190,219
25,166
14,403
11,54910,778
7,215
6,753
5,448
3,598
3,203
2,249
2,062
1,112
1,103
1,016
1,000
999
769
669
157
121
108
2,518
656,925(496,008)
160,916

(301)
(181)
(6)
(489)
18,847

(178)
(236)
(7)
(422)
16,163(2,508)(1,510)(54)(4,073)
156,842Who we are

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Financial Section &Corporate Data

(2) Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax
rate for the years ended March 31, 2015 and 2014 were as follows:

Normal effective statutory tax rate
Adjustments:
Effect from decrease in valuation reserve
Impact of change in income tax rates
Entertainment and other expenses not deductible for income tax purposes
Per capital portion of inhabitants taxes
OthersActual effective tax rate(3) Change in amount of deferred tax assets andliabilities due to the change in income tax rates
The Act for Partial Revision of the Income Tax Act, etc.
(Act No. 9 of 2015) and The Act for Partial Revision of the
Local Tax Act, etc. (Act No. 2 of 2015) were promulgatedon March 31, 2015. Consequently, the corporate tax rate,
etc. is changed from fiscal years beginning on or after
April 1, 2015. Accordingly, the effective statutory tax rateused for the calculation of deferred tax assets andliabilities will change from 35.64% to 33.10% for
temporary differences expected to be returned or paid in
the consolidated fiscal year beginning April 1, 2015, andto 32.34% for temporary differences expected to be
returned or paid in the consolidated fiscal years
beginning on or after April 1, 2016.
As a result of these changes in tax rates, deferred tax

2015

2014

35.64%

38.01%(94.32)
37.26
8.10
1.66
(0.73)(12.39)(95.10)
4.98
9.23
1.94
(0.29)(41.23)

assets (net of deferred tax liabilities) have decreased¥1,721 million ($14,322 thousand), income taxesdeferred have increased ¥1,739 million ($14,476
thousand), and net unrealized gains on “other securities”
have increased ¥18 million ($154 thousand).
Further, the limit on net operating loss deduction
under the carry-forward system for tax losses incurredin consolidated fiscal years beginning on or after April 1,2015 is reduced to the amount equivalent to 65% oftaxable income for the respective year, and to 50% of
taxable income for tax losses incurred in consolidated
fiscal years beginning on or after April 1, 2017. As aresult, the amount of the Company’s deferred tax
assets decreased by ¥5,615 million ($46,725
thousand), and income taxes-deferred have increasedby the same amount.

11. Short-term Borrowings and Long-term Debt
(1) Short-term borrowings, long-term debt and lease obligations at March 31, 2015 and 2014 consisted of
the following:Thousands of
U.S. dollars

Millions of yen

Short-term borrowings, with average interest rate of 0.90%
Current portion of long-term debt,
with average interest rate of 2.69%
Current portion of lease obligations,with average interest rate of 5.38%
Long-term debt, due 2016 to 2031,
with average interest rate of 0.80%
Lease obligations, long-term, due 2016 to 2021,
with average interest rate of 4.82%
Total

2015

2014

60

—

2015

499

23,005

2,940

191,443

2,355

1,575

19,598

7,196

27,07759,8856,450
39,067

4,154
35,74753,676
325,102

Leopalace21 Corporation / Annual Report 2015

93

94

(Note)
To calculate “average interest rate,” weighted-average rates and fiscal year-end balances are used. Please note, however,that the current portion of lease obligations and lease obligations (net of the current portion) are recorded in the
consolidated balance sheet in the amount before deducting the interest portion from total lease expenses for certain
consolidated subsidiaries, and that such lease obligations are not included in the calculation of the average interest rate.
(2) The amounts of long-term debt and lease obligations (excluding their current portion) scheduled for
repayment in five years from the consolidated settlement of accounts were as follows:
Millions of yen

Long-term debt
Lease obligations

Thousands of U.S. dollars

Long-term debt
Lease obligations

Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

746
2,141

659
2,060

610
1,676

510
567

Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

6,213
17,821

5,490
17,144

4,251
4,726

5,083
13,947(3) Assets pledged as collateral for short-term borrowings and long-term debt at March 31, 2015 and 2014 wereas follows:
Thousands of
U.S. dollars

Millions of yen

Cash and cash equivalents
Securities
Buildings and structures
Land
Investment securities
Others in Investments and other assets (Membership right)
Total

2015

2014

2015

17
—
26,19971,77776
420
98,49017
9256,45081,385
1,128
420
139,493141—
218,016
597,299
637
3,495
819,590(4) Secured borrowings with pledge of collateral at March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Current portion of long-term debt
Long-term debt
Total

2015

2014

2015

22,270—22,2702,940
27,07730,017

185,323—
185,323(5) Securities and investment securities which have been deposited with the Legal Affairs Bureau at March 31,
2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Deposit for operation stipulated in Building Lots andBuildings Transaction Business Act
Deposit for housing construction warranty
Deposit for housing defect warranty
Advanced payment certificate in accordance with
Payment and Settlement Regulations
Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

54
891
115

49
820
107

456
7,414
960

920

919

7,661

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Financial Section &Corporate Data

Millions of yen

Thousands of
U.S. dollars(6) Bonds at March 31, 2015 and 2014 consisted of the following:

Company nameLeopalace21
Corporation
Leopalace21
Corporation

Name of bond12th unsecured
straight bond13th unsecured
straight bond

Total

Company nameLeopalace21
Corporation
Leopalace21
Corporation

September 30,
2009
October 31,
2014

2015

2014

920
(560)
4,500
(900)
5,420
(1,460)

2015

7,655
(4,660)37,446(7,489)45,102(12,149)

1,480
—

—

—

Name of bondInterest rate (%)

Collateral

Date of maturity

1.04

None

September 30, 2016

0.39

None

October 31, 2019

—

—

—

12th unsecured
straight bond13th unsecured
straight bond

Total

Issuance date

—

1,480

(Note) Figures in parentheses represent the current portion.
(7) The amounts of bonds maturity in five years from the consolidated settlement of accounts were as follows:
Millions of yen

Due within 1 year

Due after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

1,460

1,260

900

900

900

Thousands of U.S. dollars

Due within 1 year

Due after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

12,14910,485

7,489

7,489

7,489

12. Commitment LineFor efficient procurement of working capital, the Company maintains current account overdraft agreements and commitmentline contracts with financial institutions. As of the end of the current fiscal year, the unexercised portion of facilities based on thecontract was as follows:
Thousands of
U.S. dollars

Millions of yen

Current account overdraft agreements and commitment line
Less amount utilized
Balance available

2015

2014

2015

1,000
—
1,000

10,000—10,000

8,321
—
8,321

Leopalace21 Corporation / Annual Report 2015

95

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13. Retirement Benefit Plans(1) Multi-employer plans
The amount of requested contributions for the employees’ pension fund program under multi-employer plans, which
is processed with the same accounting method as that for the defined contribution program for the year ended March
31, 2015 and 2014, was ¥1,332 million ($11,089 thousand) and ¥1,214 million, respectively.
Recent funding status of the multi-employer plan as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Pension assets
Total of amount of benefit obligations under pension funding
programs and amount of minimum actuarial liabilities (Note)
Difference

2015

2014

2015

57,28250,486476,679

61,415(4,133)53,019(2,533)511,073(34,394)(Note) It is stated as “Projected benefit obligation” in the previous fiscal year.
The main components of the difference were
unrecognized past service costs of ¥3,612 million($30,061 thousand) and ¥3,621 million, and deficiency
carried forward of ¥520 million ($4,332 thousand) and¥— million for the years ended March 31, 2015 and2014, respectively. The Companies recognized thespecial annuity premium of ¥99 million ($831 thousand)and ¥93 million as an expense for the years ended March
31, 2015 and 2014, respectively.
The deficiency carried forward of ¥520 million ($4,332

thousand) and ¥— million will be treated by a method
such as increasing the ratio of special premiums asnecessary based on pension actuarial revaluation.
Further, the percentages below do not match the actual
percentage borne by the Companies.
Ratio of the Companies in the amount of contributions
for the multi-employer program was 35% from April 1,2014 to March 31, 2015 and 34% from April 1, 2013 toMarch 31, 2014.

(2) Defined benefit plan(a) List of adjustments between the balances of retirement benefit obligations at the beginning and end of year
were as follows:
Thousands of
U.S. dollars

Millions of yen

Beginning balance of retirement benefit obligations
Cumulative effect of accounting change
Balance at beginning of fiscal year reflecting accounting change
Service cost
Interest cost
Actuarial gains and losses accrued
Retirement benefits paid
Past service cost
Increase due to consolidation of additional subsidiary
Closing balance of retirement benefit obligations

Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

10,050(1,708)
8,342
1,014
36
348
(399)
—
9
9,351

8,634
—
8,634
878
74
890
(458)
30
—
10,05083,635(14,215)
69,420
8,446
302
2,898
(3,328)—80
77,818Who we are

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Financial Section &Corporate Data(b) List of adjustments between the closing balances of retirement benefit obligations and pension assets and theliabilities and assets related to the retirement benefit posted in the consolidated balance sheet were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

—
—
—

—
—
—

—
—
—

Unfunded retirement benefit obligations
Net amount of the liabilities and assets
posted in the consolidated balance sheet

9,351

10,05077,8189,351

10,05077,818

Liability for retirement benefit
Net amount of the liabilities and assets
posted in the consolidated balance sheet

9,351

10,05077,8189,351

10,05077,818Funded retirement benefit obligations
Pension assets(c) Retirement benefit expenses and breakdown amounts were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Amortization of actuarial gain or loss
Amortization of past service cost
Retirement benefit expenses related to the defined benefit program

2015

2014

2015

2,347
36
136
6
2,526

2,093
74
81
24
2,274

19,536302
1,137
50
21,026(Notes) 1. Contributions of ¥1,332 million ($11,089 thousand) and ¥1,214 million, including ¥525 million ($4,374
thousand) and ¥473 million attributable to employees for the “Japan Housing Construction Industry
Employees’ Pension Fund” integrated employees’ pension funds, are included in the service cost for the year
ended March 31, 2015 and 2014, respectively.
2. Retirement benefit expenses of domestic consolidated subsidiaries, which are calculated based on asimplified method, are posted as service cost.
(d) Items posted as the remeasurements of defined benefit plans (before deduction of tax effects) were as follows:
Thousands of
U.S. dollars

Millions of yen

Past service cost
Actuarial gains/losses
Total

2015

2014

(6)
211
205

—
—
—

2015

(50)
1,760
1,709

(e) Cumulative items posted as the remeasurements of defined benefit plans (before deduction of tax effects)
were as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized past service cost
Unrecognized actuarial gains/losses
Total

2015

2014

2015

—
1,021
1,021

6
809
815

—
8,496
8,496

Leopalace21 Corporation / Annual Report 2015

97

98

(f) Main calculation basis for actuarial assumptions at the end of the fiscal year:
Discount rate for the years ended March 31, 2015 and 2014 were 0.03% to 0.89% and 0.83%, respectively.

14. Gain on Sale of Property, Plant and Equipment
Gain on sale of property, plant and equipment for the years ended March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery, equipment, and vehicles
Land
Total

2015

2014

2015

3
3
0
6

—
0
—
0

25
28
1
55

15. Loss on Sale of Property, Plant and Equipment
Loss on sale of property, plant and equipment for the years ended March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Land
Others (Intangible assets)
Total

2015

2014

2015

—
0
0

1
—
1

—
2
2

16. Loss on Retirement of Property, Plant and Equipment
Loss on disposal of property, plant and equipment for the years ended March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2015

2014

2015

281
—
8
19
309

11
0
1
0
13

2,339
—
73
162
2,575

income arising from these rental properties were ¥4,266
million ($35,506 thousand) and ¥4,057 million, andimpairment losses were ¥161 million ($1,347 thousand)and ¥778 million, respectively.
Also, the changes in book value of rental properties
during the year ended March 31, 2015 and 2014, and thefair value as of March 31, 2015 and 2014 were as follows:

17. Rental Properties
The Company possesses rental apartments in major
cities and regions throughout Japan. Also, Leopalace
Guam Corporation as a subsidiary company possesses
rental housing within resorts, and Plaza Guarantee Co.,
Ltd. as a subsidiary company possesses buildings forrent. For the years ended March 31, 2015 and 2014,
March 31, 2015

Millions of yen

Consolidated balance sheet amount
Balance as of April 1, 2014

Increase/Decrease

Balance as of March 31, 2015

Fair value as ofMarch 31, 2015

64,030(210)

63,81965,435

Leopalace21 Corporation / Annual Report 2015

Who we are

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Financial Section &Corporate Data

March 31, 2014
Millions of yen

Consolidated balance sheet amount
Balance as of April 1, 2013

Increase/Decrease

Balance as of March 31, 2014

Fair value as ofMarch 31, 2014

65,851(1,821)64,03062,558March 31, 2015
Thousands of U.S. dollars

Consolidated balance sheet amount
Balance as of April 1, 2014

Increase/Decrease

Balance as of March 31, 2015

Fair value as ofMarch 31, 2015

532,829(1,753)531,076544,524(Notes) 1. Carrying value recorded on the consolidated balance sheets is the amount after deducting accumulated
depreciation and accumulated impairment loss from acquisition cost.
2. The main decrease was impairment loss of ¥161 million ($1,347 thousand) and ¥778 million for the year
ended March 31, 2015 and 2014, respectively.
3. Fair value as of the end of the current fiscal year is calculated by the Company mainly based on “Real-estateappraisal standards”.

18. Asset Retirement Obligations
Omitted due to immateriality

19. Supplemental Information on the Statement of Changes in Equity
Shares issued and treasury stocks for the year ended March 31, 2015 were as follows:
SharesType of shares

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

April 1, 2014

Increase

Decrease

March 31, 2015

267,443,915
267,443,915

—
—

—
—

267,443,915
267,443,915

4,569,210
4,569,210

220
220

—
—

4,569,430
4,569,430(Note) Increase in treasury stock of 220 shares is the purchase of shares less than one unit.
Stock acquisition rights (SAR) and own share options for the year ended March 31, 2015 were as follows:
Type

SARs as stock option
Total

Class of sharesissued upon
exercise of
SARs

—
—

Number of shares issued upon exercise of SARs

Outstanding as of March 31, 2015

April 1, 2014

Increase

Decrease

March 31, 2015

Millions of yen

Thousands of
U.S. dollars

—
—

—
—

—
—

—
—

18
18

149
149

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100

Shares issued and treasury stocks for the year ended March 31, 2014 were as follows:
SharesType of shares

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

April 1, 2013

Increase

Decrease

March 31, 2014

217,443,915
217,443,915

50,000,000
50,000,000——

267,443,915
267,443,915

5,900,320
5,900,320

90
90

1,331,200
1,331,200

4,569,210
4,569,210(Notes) 1. Breakdown of amounts of increase in shares issued was as follows:
Issuance of new shares
50,000,000 shares
2. Breakdown of amounts of increase in treasury stock was as follows:
Purchase of shares less than one unit
90 shares
3. Breakdown of amounts of decrease in treasury stock was as follows:
Sell off of shares from “Leopalace 21 Employee Stock Ownership Committee Trust Account”
to the Board for Employees’ Ownership
68,600 shares
Sell off of remaining shares from settlement of trust account1,262,600 shares
Stock acquisition rights (SAR) and own share options for the year ended March 31, 2014 were as follows:
Type

Class of sharesissued upon
exercise of
SARs

SARs as stock option
Total

—
—

Number of shares issued upon exercise of SARs
April 1, 2013

Increase

Decrease

—
—

—
—

—
—

20. Leases(1) Finance lease transactions
The Companies primarily lease furniture and electronic
appliances, for apartments of their leasing business.
(a) The following pro forma amounts represent theacquisition cost, accumulated depreciation and net

Outstanding as ofMarch 31, 2014
March 31, 2014
Millions of yen

—
—

18
18

book value of leased property as of March 31, 2015
and 2014, which would have been reflected in theaccompanying consolidated balance sheets if financeaccounting had been applied to the finance leases
that existed on or before March 31, 2008 and are
currently accounted for as operating leases:
Thousands of
U.S. dollars

Millions of yen

Acquisition cost
Equipment
Accumulated depreciation
Equipment
Net book value
Equipment

2015

2014

2015

—

651

—

—

604

—

—

47

—

(Note) There are no relevant items because lease agreements subject to the Company’s consolidated operating results
have been terminated.

Leopalace21 Corporation / Annual Report 2015

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Financial Section &Corporate Data(b) The amounts of outstanding future lease payments under finance lease subsequent to March 31, 2015 and 2014
including the interest portion thereon were summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2015

2014

2015

—
—
—

55
—
55

—
—
—

(Note) There are no relevant items for the Company’s consolidated fiscal year because lease agreements subject to theconsolidated operating results have been terminated.
(c) Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2015 and 2014 forfinance lease transactions accounted for as operating leases were summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payment
Estimated amount of depreciation by
the straight-line method over the lease period
Estimated interest cost by the interest method(d) Method of estimating amount of depreciation:
Amounts corresponding to pro forma depreciation
under finance leases were computed by the straightline method in which the lease period is used as theuseful lives and it is assumed that the residual valueof the relevant assets falls to nil at the end of thelease period.

2015

2014

2015

56

306

467

47
1

269
6

396
9

(e) Method of estimating interest cost:
Estimated interest cost is calculated as the difference
between the total amount of lease payments and theacquisition cost of leased properties, and allocatedbetween each period using the interest method.

(2) Operating lease transactions
Future minimum lease payments related to non-cancelable operating leases subsequent to March 31, 2015 and 2014
were as follows:
Millions of yen

March 31, 2015

Future lease
payments

Prepaid lease
payments

Differences

Due within one year

242,609(242,595)
343,062(343,032)
585,672(585,627)

2,183(2,183)
2,499(2,499)4,682(4,682)

240,426(240,412)
340,562(340,532)
580,989(580,944)

Due after one year
Total

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102

Millions of yen

March 31, 2014

Future lease
payments

Prepaid lease
payments

Differences

Due within one year

249,304(249,295)
495,733(495,713)
745,037(745,009)

5,165(5,165)
3,291(3,291)
8,457(8,457)244,138(244,129)
492,441(492,422)
736,579(736,551)

Due after one year
Total

Thousands of U.S. dollars

March 31, 2015

Future lease
payments

Prepaid lease
payments

Differences

Due within one year

2,018,886(2,018,767)
2,854,810(2,854,558)
4,873,697(4,873,326)

18,166(18,166)
20,803(20,803)38,969(38,969)2,000,720(2,000,601)
2,834,007(2,833,755)
4,834,727(4,834,356)

Due after one year
Total

Future operating lease payments fixed under master lease agreements in leasing business are shown in parentheses.

21. Contingent Liabilities
Contingent liabilities as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Contingent liabilities to financial institutions forcustomers who have a home mortgage
Contingent liabilities to financial institutions forcustomers who have a membership loan
Total

22. Segment Information(1) Overview of Reportable Segments
The Companies’ reportable segments are thecomponents for which separate financial information isavailable, and whose operating results are reviewed
regularly by the board of directors in order to determine
allocation of resources and assess segment performance.
The Companies have four reportable segments, theLeasing Business, Construction Business, Elderly Care
Business and Hotels & Resort Business.
The Leasing Business operations comprise theleasing and management of apartment buildings andother properties, repair work, broadband internet service,rent guarantee, and the company residence agency

Leopalace21 Corporation / Annual Report 2015

2015

2014

2015

898

1,126

7,479

15
914

15
1,141

129
7,609

business. The Construction Business constructs
apartments and other buildings and installs solar powersystems on a contract basis. The Elderly Care Business
operates elderly care facilities. The Hotels & Resort
Business operates hotels and resort facilities.
(2) Calculation Method for Sales, Profits and Losses,
Assets, and other Items by Reportable Segment
The accounting methods for reportable segments arebasically the same as that presented in “Summary of
Significant Accounting Policies”. The reportable segment
profits (losses) represent operating income (loss). Intersegment sales and transfers are based on prevailingmarket prices.

Who we are

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our management

Financial Section &Corporate Data

(3) Information Regarding Sales, Profits and Losses, Assets, and other Items by Reportable Segment for theyears ended March 31, 2015 and 2014 were as follows:
Millions of yen

Reportable segment

March 31, 2015
Sales
Sales to customers
Inter-segment sales
and transfers
Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property,
plant, and equipment,
and intangible assets

Adjustments

Consolidated
Total

—

483,188

Segment

Business

Hotels &ResortBusiness

61,312

10,608

8,951

480,188

2,999

483,188790
400,107
20,532
98,861

12,06573,378210
19,895—
10,608
(606)
2,428

2,827
15,682
11,778 495,871(1,289)18,84850,367 171,554

127
3,127
31
21,481

15,810498,999
18,879193,035

2,992

170

24

1,872

5,060

1,330

6,390

1,345

7,736

5,551

73

21

1,017

6,663

12,18018,844

5,514

24,358

Leasing
Business

Construction
Business

Elderly Care

399,316

Others

Total

Total

(15,810)—(15,810) 483,188(4,116)
14,763
115,239 308,274(Notes) 1. The “Others” classification is the business segment not included in reportable segments, and comprises thesmall-claims and short-term insurance business, solar power business, and financing business.
2. Breakdown of adjustments was as follows:
Segment profit (loss)

Inter-segment eliminations
Corporate expenses*
Total

Millions of yen

Thousands of
U.S. dollars(1,346)(2,769)(4,116)(11,207)(23,044)(34,251)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are
not part of reportable segments.
Adjustments in segment assets (¥115,239 million, $958,967 thousand) consist mainly of surplus operating
funds, long-term investment capital, and assets which do not belong to reportable segments.
Adjustments in the increase of property, plant, and equipment, and intangible assets (¥5,514 million, $45,888
thousand) consist of capital investments which do not belong to reportable segments.
3. Segment profit (loss) is adjusted to operating profit on the consolidated statements of operations.

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104

Millions of yen

Reportable segment

March 31, 2014
Sales
Sales to customers
Inter-segment sales
and transfers
Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property,
plant, and equipment,
and intangible assets

Leasing
Business

Construction Elderly Care
Business
Business

Hotels &ResortBusiness

Segment
Total

Others

Total

Adjustments

Consolidated
Total

388,768

63,135

10,171

7,571

469,6471,442

471,089—

471,089592
389,360
15,56798,315

6,684
69,8202,954
16,121—
10,171
(610)
2,371

2,505
10,077(1,118)50,710

9,782
479,430
16,792
167,519

106
1,548
137
10,6629,889
480,978
16,929178,181(9,889)(9,889)(3,256)109,277—
471,089
13,673
287,459

2,578

175

40

1,857

4,652

157

4,809

1,184

5,993

4,698

52

37

437

5,225

6,785

12,011

2,703

14,714(Notes) 1. The “Others” classification is the business segment not included in reportable segments, and comprises thesmall-claims and short-term insurance business, solar power business, and financing business.
2.Breakdown of adjustments was as follows:
Segment profit (loss)

Millions of yen

Inter-segment eliminations
Corporate expenses*
Total

(641)
(2,614)(3,256)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are
not part of reportable segments.
Adjustments in segment assets (¥109,277 million) consist mainly of surplus operating funds, long-term
investment capital, and assets which do not belong to reportable segments.
Adjustments in the increase of property, plant, and equipment, and intangible assets (¥2,703 million) consistof capital investments which do not belong to reportable segments.
3. Segment profit (loss) is adjusted to operating profit on the consolidated statements of operations.

Leopalace21 Corporation / Annual Report 2015

Who we are

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our management

Financial Section &Corporate Data

Thousands of U.S. dollars

Reportable segment

March 31, 2015

Leasing
Business

Construction Elderly Care
Business
Business

Sales
Sales to customers 3,322,932
Inter-segment sales
and transfers
6,576
Total
3,329,508
Segment profit (loss)
170,864
Segment assets
822,684
Other items
Depreciation
24,901
Increase in property,
plant, and equipment,
and intangible assets
46,199Hotels &ResortBusiness

OthersSegment
Total

510,216

88,277

100,402610,618
1,751
165,562—
23,525 130,504
88,27798,012 4,126,417(5,043) (10,726) 156,845
20,212 419,135 1,427,595

74,487 3,995,913

Total

24,962 4,020,875

Adjustments

Consolidated
Total— 4,020,875

1,064 131,568 (131,568)—
26,026 4,152,444 (131,568) 4,020,875
260 157,105(34,251) 122,853
178,755 1,606,351 958,967 2,565,318

1,420

206

15,58042,108

11,07153,179

11,19764,377

607

181

8,463

55,453

101,358

156,81145,888

202,699

Related information
1. Products and services
Information concerning products and services has been omitted, since similar information is reported in “22. Segment
Information”.
2. Geographic area
(1) Sales
Information concerning sales by geographic area has been omitted, since more than 90% of sales reported in the
consolidated statement of operations are generated in Japan.
(2) Plant, property, and equipment
March 31, 2015
Millions of yen

Japan

Trust territory of
U.S.A. Guam

People’s Republic of
China

Kingdom of Thailand

Kingdom of Cambodia

Total

126,835

42,3963

7

187

169,430

March 31, 2014
Millions of yen

Japan

Trust territory of
U.S.A. Guam

People’s Republic of
China

Kingdom of Thailand

Total

114,682

37,8182

0

152,503

March 31, 2015
Thousands of U.S. dollars

Japan

Trust territory of
U.S.A. Guam

People’s Republic of
China

Kingdom of Thailand

Kingdom of Cambodia

Total

1,055,468

352,806

30

59

1,559

1,409,924

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3. Major customers
Information concerning sales to major customers has been omitted, since sales to any particular customer does notexceed 10% of sales reported in the consolidated statement of operations.
Information concerning impairment loss on fixed assets by reportable segments
March 31, 2015
Millions of yen

Impairment loss

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

161

—

—

62

—

—

224

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

778

—

—

—

—

—

778

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

1,347

—

—

521

—

—

1,868

March 31, 2014
Millions of yen

Impairment loss

March 31, 2015
Thousands of U.S. dollars

Impairment loss

Information concerning goodwill amortization and unamortized balance by reportable segments
March 31, 2015
Millions of yen

Leasing
Business

Goodwill amortization
Balance——

Construction
Business—
1,684

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

—
—

4
—

—
—

—
—

4
1,684

For the year ended March 31, 2014
Not applicable.
March 31, 2015
Thousands of U.S. dollars

Goodwill amortization
Balance

Leasing
Business

Construction
Business

Elderly Care
Business

Hotels & Resort
Business

OthersAdjustments

Consolidated
total

—
—

—
14,020

—
—

37
—

—
—

—
—

37
14,020Information concerning gain on negative goodwill by reportable segments
For the years ended March 31, 2015 and 2014
Not applicable.

Leopalace21 Corporation / Annual Report 2015

Who we are

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Financial Section &Corporate Data

23. Amounts per Share(1) The following tables set forth the net assets and net income per share of common stock for the years ended
March 31, 2015 and 2014.
Yen

Net assets
Net income
Basic
DilutedU.S. dollars

2015

2014

2015

481.05398.78

4.00

55.19
—

67.17
—

0.46
—

(2) Basis of computation of basic and diluted net income per share for the years ended March 31, 2015 and 2014
was as follows:
Thousands of
U.S. dollars

Millions of yen

Basic net income per share
Net income
Amount not attributable to common stock
Net income attributable to common stock
Weighted-average shares during the year
(Thousands of shares)
Dilutive securities that didn’t have dilutive effects
and therefore were not included in the calculation ofdiluted net income per share.

2015

2014

2015

14,507—
14,507

15,229—15,229120,728—
120,728

262,874

226,724

New stock acquisition rights (650)

24. Related Party Transactions
The following tables set forth related party transactions for the years ended March 31, 2015 and 2014.
For the year ended March 31, 2015(a) Unconsolidated subsidiaries and affiliates
None(b) Directors and major individual shareholders
Capital stock
Attribute

Name

Address

Directors andclose relatives

ToshikoMiyoshi—

Attribute

Name

Transaction

Directors andclose relatives

ToshikoMiyoshi

Leasing ofapartments

Millions of yen—

Thousands of
U.S. dollars—

Business or
position

Percentage ofshare ownership—

Millions of yen

26

216

Leasing of landand building—

Balance

Transaction amountThousands of
U.S. dollars

Relation

Account

Millions of yen

Thousands of
U.S. dollars——

Prepaid
expenses(Notes) 1. Consumption taxes were not included in amounts.
2. Conditions of leasing of apartments are the same as transactions with third parties.
3. Toshiko Miyoshi is a close relative of Tadahiro Miyama, Director of the Company.
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For the year ended March 31, 2014(a) Unconsolidated subsidiaries and affiliates
None(b) Directors and major individual shareholders
Attribute

Name

Address

Capital stock(Millions of yen)

Business or
position

Percentage ofshare ownership

Relation

Directors andclose relatives

Toshiko Miyoshi

—

—

—

—

Leasing of land and building

Attribute

Name

Transaction

Transaction amount(Millions of yen)Account

Balance(Millions of yen)

Directors andclose relatives

Toshiko Miyoshi

Leasing of apartments

26Long-term prepaid expenses

2(Notes) 1. Consumption taxes were not included in amounts.
2. Conditions of leasing of apartments are the same as transactions with third parties.
3. Toshiko Miyoshi is a close relative of Tadahiro Miyama, Director of the Company.

25. Business Combination(Share Acquisition of WING MATE CO., LTD.)(1) Outline of the business combination(a) Name of the acquired company and its businessactivities
Name of the acquired company: WING MATE CO., LTD.
Business activities:
Travel business(b) Major reasons for the business combination
WING MATE CO., LTD. is a travel agency thatprovides services of overseas business trip
arrangements and business travel management forcorporations. It does business with more than 1,300
corporations, including government and municipal
offices. On the other hand, in the Leasing businesssection of the Company, more than 50% of thetenants are corporate tenants and services related torental housing is provided to approximately 45,000
corporations in Japan.
By adding WING MATE CO., LTD. as a groupcompany, the Company has started overseas
business trip arrangements and business travel
management as one of our new services. In addition,
Leopalace21 aims to obtain the opportunity ofproviding rental houses to the corporate customers of
WING MATE CO., LTD.

Leopalace21 Corporation / Annual Report 2015(c) Effective date of the business combination
October 31, 2014(d) Legal form of the business combination
Acquisition of shares(e) Name of the company subsequent to the businesscombination
No change(f) Percentage of voting rights acquired
100%(g) Primary basis for determining the acquiring
company
Due to the fact that the Company has acquired theshares of WING MATE CO., LTD. for cash
considerations.
(2) Period of business performances of the acquiredcompany to be included in the consolidated
financial statements
The balance sheet date of WING MATE CO., LTD is
December 31, and since the deemed acquisition dateis set as December 31, 2014, the businessperformances of the acquired company is notincluded in the consolidated financial statement.

Who we are

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Financial Section &Corporate Data

(3) Acquisition cost of the acquired company and its details

Consideration for theacquisition
Direct costs required for
acquisition
Acquisition cost

The market value of the common stock of WING
MATE CO., LTD. on the business combination date
Advisory costs, etc.

Millions of yen

Thousands of
U.S. dollars

65

540

16
81

136
677

(4) Amount, reason, amortization method and amortization period of goodwill(a) Amount of goodwill¥4 million ($37 thousand)(b) Reason of goodwill
Due to the acquisition cost exceeding the market value of net assets on acquisition date.
(c) Amortization method and amortization period of goodwill
All the amount of goodwill as expense(5) Amounts of assets acquired and liabilities assumed as of the date of the business combination
March 31, 2015

Current assets
Fixed assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities

Millions of yen

Thousands of
U.S. dollars

112
35
147
70
—
70

932
292
1,224
584
—
584

(6) Estimated amount of impact on the consolidated financial statement of income for the consolidated fiscal
year on the assumption and the method of the calculation of the amountMarch 31, 2015

Millions of yen

Thousands of
U.S. dollars

Net sales
Operating income
Net income (loss)

1,887
1
(8)

15,710
8(68)(Method of calculation of estimated amount)
The difference between the net sales and profit and loss
information calculated as if the business combination
was completed as of the date of commencement of theconsolidated fiscal year and the net sales and profit andloss information in the consolidated profit and loss
statement of the acquiring company is defined as theestimated amount of the effect.
Please note that these notes have not received audit
certification.

(Share Acquisition of Morizou Co., Ltd.)(1) Outline of the business combination(a) Name of the acquired company and its businessactivities
Name of acquired company: Morizou Co., Ltd.
Business activities: Design, construction andmanagement of custom-built homes(b) Major reasons for the business combination
Morizou Co., Ltd. is engaged in the design,
construction and management of custom-built
detached houses in the Kanto and Chubu regions. On

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109

110

the other hand, in its construction business, theCompany subcontracts the construction of custombuilt detached houses, including the homes ofapproximately 26,000 landowners nationwide.
The Company established a business alliance with
Morizou Co., Ltd. in April 2014, and has been
providing jointly developed products since then. The
business combination is designed to aim to achieve
the further advancement of the two companies byfurther strengthening the collaboration with the
Leopalace Group.

(c) Effective date of the business combination
March 30, 2015(d) Legal form of the business combination
Acquisition of shares(e) Name of the company subsequent to the businesscombination
No change(f) Percentage of voting rights acquired
88.2%(g) Primary basis for determining the acquiring
company
Due to the fact that the Company has acquired theshares of Morizou Co., Ltd. for cash considerations.
(2) Period of business performances of the acquiredcompany to be included in the consolidated

financial statements
Since the deemed acquisition date is set as March
31, 2015, the business performance of the acquiredcompany is not included in the consolidated financial
statement.
(3) Acquisition cost of the acquired company and its
details
The market value of the common stock of Morizou
Co., Ltd. at the date of business combination is¥1,676 million ($13,950 thousand), and direct costs
required for acquisition, including advisory costs, etc.
is ¥8 million ($71 thousand). Total acquisition cost is¥1,685 million ($14,022 thousand).
(4) Amount, source, method and period of goodwill
amortization(a) Amount of goodwill¥1,684 million ($14,020 thousand)Since the allocation of the acquisition cost is notcomplete, a provisional accounting treatment has
been conducted based on available and rational
information.
(b) Source of goodwill
Due to a reasonable estimation of future excess
earning power, which is expected by the futurebusiness development.
(c) Method and period of goodwill amortization
Amortization on a straight-line method over ten years(5) Amounts of assets acquired and liabilities assumed as of the date of the business combination
March 31, 2015
Current assets
Fixed assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities

Leopalace21 Corporation / Annual Report 2015

Millions of yen

Thousands of
U.S. dollars

1,363
202
1,566
1,333
232
1,565

11,3501,681
13,031
11,092
1,937
13,030Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

(6) Estimated amount of impact on the consolidated financial statement of income for the consolidated fiscal
year on the assumption that the business combination was completed at the beginning of the consolidated
fiscal year, and the method of the calculation of the amountMarch 31, 2015
Net sales
Operating income (loss)
Net income (loss)(Method of calculation of estimated amount)
The difference between the net sales and profit and loss
information calculated as if the business combination
was completed on the date of commencement of theconsolidated fiscal year and the net sales and profit andloss information in the consolidated profit and loss
statement of the acquiring company is defined as theestimated amount of the effect.
Further, the amount of goodwill amortization is
calculated by supposing that goodwill recognized at thetime of the business combination occurred at the
beginning of the consolidated fiscal year.
Please note that these notes have not received audit
certification.

(Transaction under common control, etc.)(1) Outline of transaction(a) Names of the companies involved in the businesscombination and their business activities(i) Combined Company
Name of acquiring company: WING MATE CO., LTD
Business activity:
travel business(ii) Dissolved Company
Name of acquired company: Leopalace Travel Co., Ltd.
Business activity:
travel business(b) Date of business combination
January 1, 2015

Millions of yen

Thousands of
U.S. dollars

4,395
(89)
(174)

36,574(746)(1,454)(c) Legal form of business combination
Merger and acquisition with WING MATE CO., LTD.
as the surviving company and Leopalace Travel Co.,
Ltd. as the extinct company.
(d) Name of company after combination
WING MATE CO., LTD(e) Other matters concerning the outline of thetransaction
By consolidating the management resources of thetwo domestic consolidated subsidiaries engaged in
the Hotels & Resort Business, the Companies aims
to stimulate the growth of its travel business tocapture a wider customer base in addition to theexisting customers as well as strengthening the sales
channels for the Guam resort business and domestic
hotels, improving services to corporate customers
through business travel management operations, andpursuing synergies with its overseas business.
(2) Outline of the accounting treatment implemented
For accounting purposes, the Company treated thetransaction as a transaction under common control inaccordance with the Accounting Standard forBusiness Combinations (ASBJ Statement No. 21
issued on December 26, 2008) and the Guidance on
Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures (ASBJ
Guidance No. 10 issued on December 26, 2008).

26. Other
The following tables set forth quarterly information for the year ended March 31, 2015.
(Cumulative period)First quarter

Second quarter

Third quarter

Full-year

Net sales (Millions of yen)
Income before income taxes (Millions of yen)
Net income (Millions of yen)
Net income per share (yen)115,626
2,075
2,048
7.79

233,037
5,273
5,066
19.27

350,756
8,249
7,856
29.89

483,188
12,896
14,507
55.19

Leopalace21 Corporation / Annual Report 2015

111

112

First quarter

Second quarter

Third quarter

Full-year

7.79

11.48

10.62

25.30

(Cumulative period)First quarter

Second quarter

Third quarter

Full-year

Net sales (Thousands of U.S. dollars)
Income before income taxes (Thousands of U.S. dollars)
Net income (Thousands of U.S. dollars)
Net income per share (dollars)

962,188
17,26817,0470.06

1,939,230
43,88642,1570.16

2,918,833
68,64965,381
0.25

4,020,875
107,319
120,7280.46(Accounting period)First quarter

Second quarter

Third quarter

Full-year

0.06

0.10

0.09

0.21

(Accounting period)

Net income per share (yen)Net income per share (dollars)

27. Subsequent Events
The Company announces that, at the meeting of its
Board of Directors held on May 11, 2015, it was resolved
to present “Reduction of legal capital surplus andappropriation of surplus” to the 42nd ordinary meeting ofshareholders that is scheduled to be held on June 26,
2015. Details are as follows.
(1) Purpose of reduction of legal capital surplus andappropriation of surplus
The Company aims to cover the deficit in retained
earnings brought forward, adopt flexible andexpeditious capital policies in the future, and secure astructure in which dividend payments will beresumed as soon as possible.
(2) Outline of reduction of legal capital surplus
Based on the provisions set forth in paragraph 1 of
Article 448 of the Companies Act, the Company will
reduce a legal capital surplus and transferred it toother capital surplus.
(a) Account and amount of a legal capital surplus
decrease
Legal capital surplus: ¥5,071,334,538(b) Account and amount of other capital surplus
Other capital surplus: ¥5,071,334,538

Leopalace21 Corporation / Annual Report 2015(3) Outline of appropriation of surplus
Based on the provisions set forth in Article 452 of theCompanies Act, the Company will cover the deficit bytransferring other capital surplus to retained earnings
brought forward.
(a) Account and amount of surplus decrease
Other capital surplus: ¥6,266,172,256(b) Account and amount of surplus increase
Retained earnings brought forward: ¥6,266,172,256(4) Schedule for reduction of legal capital surplus andappropriation of surplus(a) Date of resolution at the meeting of the Board of
Directors: May 11, 2015(b) Date of resolution at the meeting of shareholders:June 26, 2015(c) Effective date: June 26, 2015
Because this accounting is applicable to therequirements set forth in the provision of Paragraph 1 of
Article 449 of the Companies Act, no procedures takeplace for creditors rising objections.

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

Leopalace21 Corporation / Annual Report 2015

113

114

Leopalace21 DATA COMPILATION
External
Environment

Number of New Housing Starts

1,000 (1,000 units)

The number of new housing starts for rental
units fell for the first time in three years infiscal 2014, down 3.1% year on year to358,340 units. Of these, units under 30
square meters aimed mainly at people living
alone increased 32.9% year on year to
48,150.

750

987
893

880

500
250
0

48

36

30
FY2012FY2013■ Rental units (Under 30m2) ■ Rental units (Over 30m2)

FY2014■ Other

Source: New residential housing construction work commencement statistics, the Ministry of Land, Infrastructure,
Transport, and Tourism

Number of Households

60,000 (1,000 households)

The number of households in Japan is
expected to decline from 2020 due to Japan’s
twin demographic trends of a growing elderly
cohort and a low fertility rate. On the other
hand, the number of single-personhouseholds, including those in our target
demographic cohort of ages 15-64 (theproductive population), are expected trend
sideways from here.

45,00049,063

51,842

52,90453,05352,43951,231

49,555

14,457

16,785

17,637

18,27018,64818,71818,457

2005

2010

2015
plan

2020
plan

2025
plan

2030
plan

2035
plan

30,00015,0000Single (■ under age 35 ■ age 35-64 ■ over age 65)■ Married couple ■ Married couple, children ■ Single parent, children ■ Others
Source: January 2013 estimates on the number of households and forecasts, the National Institute of Population andSocial Security Research

Number of Vacant Homes
in Japan

5,000 (1,000 units)

Amid the concentration of populations incities, the number of vacant homes is
growing, especially in rural countryside areas.
The number of vacant properties in Japanavailable for rent or sale stands at 4,601,000
units, or one in five homes, according the
fiscal 2013 Housing and Land Survey, themost recently published one.

3,000

Leopalace21 Corporation / Annual Report 2015(%) 25

4,000

17.4
12.4

2,000
1,000

14.3

14.3
3,520

2,336

18.8
3,978

20.1

20.0

4,476

4,601

20
15
10

2,619

1,834

5

0

0

1983

1988

1993

1998

2003

2008

■ Number of vacant houses for rent or sale (left) ● Ratio of vacant dwellings (right)
Source: Housing and Land Survey, the Ministry of Internal Affairs and Communications

2013

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

Leasing
Data

Apartment Rooms underManagement
The number of apartment rooms we haveunder management is the earnings
foundation of the Leasing Business. For asecond successive year, the number ofrooms under management grew, rising to554,948 as of the end of March 31, 2015.
The proportion of our total portfolio locatedin our focus regions of Kanto, Chubu, andKinki stands at about 70%.

Leases by Contract TypeWe are strengthening our marketing efforts
aimed at corporations, a group where wesee prospects for long-term stable earnings.
Thanks to these efforts, the number ofcorporate contracts for apartments grew
6.6% year on year 262,577 rooms as ofMarch 31, 2015, keeping corporate contracts
at 53.0%, ie, over half our lease portfolio fora second consecutive year.

Fiscal Yearend Occupancy
Rates by Region
With the economy now fully beyond theslump that followed the global financial
crisis, the occupancy rate of our portfolio
improved 1.8 percentage points to 89.3% asof March 31, 2015. The occupancy rate ofproperties located in the regions of Tohoku,
Tokyo Metropolitan, Chugoku, and KyushuOkinawa all stood at over 90%.

600,000 (Units)546,204

548,912554,948

FY2012FY2013

FY2014400,000

200,0000■ Hokkaido ■ Tohoku ■ Kita Kanto ■ Tokyo metropolitan ■ Hokuriku-Koshinetsu■ Chubu ■ Kinki ■ Chugoku ■ Shikoku ■ Kyushu-Okinawa

500,000 (Units)
400,000

12.6%

11.4%

10.2%

300,000

38.0%

37.3%

36.8%

49.4%

51.3%

53.0%

200,000
100,000
0

FY2012FY2013

FY2014■ Corporations ■ Individuals ■ Students

100 (%)

94.3

92.5
89.6

90

85.0
80

84.4

91.4

90.6

86.4
83.7

79.4

70
Hokkaido Tohoku■ FY2012■ FY2013

Kita
Kanto

Tokyo Hokuriku- Chubu
metro- Koshinetsu
politan

Kinki

Chugoku Shikoku KyushuOkinawa■ FY2014

Leopalace21 Corporation / Annual Report 2015

115

116

Leasing
Data

Average Annual Occupancy Rateand Fiscal Yearend Occupancy Rate

90 (%)

Like the fiscal yearend occupancy rate, theaverage annual occupancy rate recovered
during the fiscal year under review. The
average annual occupancy rate was 86.6% in
fiscal 2014, the fourth successive year ofincrease. This reflected a rise in long-termlease contracts and a trend toward longer
occupancy periods.

86

Growing Number of Leasing Sales
Offices and Sales Personnel

400 (Offices)

The Leasing Business is forging ahead withbuilding a network balanced between directly
run leasing sales offices and franchisee-run
offices. On the other hand, we continue tobolster our sales personnel workforce, whichgrew 5.0% year on year to 1,440 people as ofMarch 31, 2015.

200

800

100

400

89.3

88

87.5
86.6
84.8

84.6

84

82.9
82

FY2012FY2013

FY2014● Average annual occupancy rate ● Fiscal yearend occupancy rate

300

(Personnel) 1,600

374

348 1,371

1,244

329

1,440
1,200

0

0

FY2012FY2013

FY2014■ Lease sales offices (Leopalace Centers) ■ Lease sales offices (Leopalace Partners franchisees)■ Leasing sales personnel (Leopalace Centers) ■ Leasing sales personnel (corporate sales)

Fiscal 2012

Fiscal 2013

Fiscal 2014

Security systems installed (cumulative, rooms)

136,064

187,756

226,801

Security cameras installed (cumulative, buildings)

1,323

3,142

5,505

Service centers, no. of incoming calls

590,867

609,877

608,294

Of which, inquiries

394,075

428,293433,589

Of which, maintenance related

143,476

144,059

137,740

Of which, complaints or claims

53,31637,52536,965Internet tenant response rates (new contracts only)

60,84053,46356,692

Leopalace21 Corporation / Annual Report 2015

Who we are

What our strategy is

What our businesses are

How CSR supports
our management

Financial Section &Corporate Data

117

Construction
Data

Orders100,000 (Millions of yen)Orders rose for a third successive year infiscal 2014, climbing 7.7% year on year to¥87,395 million. With apartment orders up
25.5% year on year, a recovery is underway,
and we are making progress in developing
new fields such as elderly care facilities,
stores, and commercial buildings.

75,00073,006

81,13987,39550,00025,0000FY2012FY2013

FY2014■ Apartments ■ Elderly care facilities ■ Stores/Commercial buildings ■ Solar power systems

Apartments Completed

800 (Buildings)

The number of apartments completed rose
12.7% year on year to 656 buildings in fiscal
2014. Of those, the mainstay remained twostories or less, but the trend toward a morediverse mix continues, as buildings with atleast three stories accounted for about 20%of the total.

600

656
582
509

400
200
0

FY2012FY2013

FY2014■ Two stories or less ■ Three stories ■ Four stories or more

Solar Power Systems Installed,
Total kW Capacity Installed
Solar power system installations continue tobe one source of earnings growth at theConstruction Business. As of March 31, 2015,
the cumulative number of buildings where
solar power systems have been installed cameto 12,356, lifting total power generation
capacity to 172,400 kW.

Sales Offices Accepting Construction
Orders, Sales Personnel
With the frontend of the pivot toward the Leasing
Business as part of our business reforms now
done, we are adding offices and sales personnel
tasked with Construction Business responsibilities,
buoyed by the tailwind of a demand recovery
driven by Abenomics.

172,400

15,000 (Buildings)(kW) 180,000

12,356
10,000

5,000

9,001

125,836

120,000

6,065 67,753

60,0000

0FY2012FY2013

FY2014■ Number of buildings where solar power system installed (cumulative)■ Of those, number of buildings where the Leopalace21 Group installed systems (cumulative)■ Power generation capacity installed (cumulative)■ Of that, power generation capacity installed by the Leopalace21 Group (cumulative)

60

60 (Offices)

54

52

418

(Personnel) 450

313

40

300

256
20

150

0

0

FY2012FY2013

FY2014■ Construction Business offices ■ Sales personnel responsible for construction subcontracting

Leopalace21 Corporation / Annual Report 2015

118

Elderly Care
Data

Numbers of Facilities
With a network of about 60 facilities, theElderly Care Business is based in the Tokyo
metropolitan area. In fiscal 2014, it opened
two new facilities offering day services andshort stays that we expect to be profit
generators.

Occupancy Rate

80

58

61

63

FY2012FY2013

FY201460
40
20
0■ Fee-based homes for seniors ■ Day services/short stays ■ Group homes

100 (%)

98.1
93.5

90

The occupancy rate at short-stay facilities,
fee-based homes for seniors, and grouphomes remains high at above 90%. At dayservice facilities, however, the occupancy
rate declined in fiscal 2014 with the start ofa policy of opening for business on Sundays,
which had been a non-business day.

80
70

67.2
60

FY2012FY2013

FY2014● Day services ● Short stays ● Fee-based homes for seniors

Hotels &Resort Data

Leopalace Resort GuamAt Leopalace Resort Guam, a resort facility
the Company runs in Guam, the occupancy
rate improved on efforts to promote usage
by stakeholders such as corporate clients.

150 (Total no. of visitors to Guam*) (No. of users, no. of stays per 10,000 people) 6

134.2

100

5.4

4

80

2

60

0

40

0

FY201370.9

FY2014FY2012■ No. of visitors to Guam* ■ No. of Leopalace Resort Country Club visitors■ No. of stakeholder stays

Leopalace21 operates hotels across Japan,
where there has been progress in promoting
usage by stakeholders.
* Hotel Leopalace Yokkaichi was sold in August 2014.
Hotel Leopalace Niigata is to be sold in July 2015.

FY201380(No. of stays) 20,000

91.9

88.1

90

82.1

FY2014● Leopalace Resort ● Westin Resort

100 (Occupancy rate %)

81.4

70

15,00013,581

81.1
76.6

75.7

10,000(Share 5.5%)

5,000

68.1

0

60

Asahikawa Sapporo

Sendai

Niigata■ FY2012 ■ FY2013 ■ FY2014
Leopalace21 Corporation / Annual Report 2015

86.0

3.0
(Share 27.8%)50FY2012

Leopalace Hotels

100 (Occupancy rate %)*Data on the number of visitors to Guam, Guam Visitors Bureau (a government agency)

Nagoya Yokkaichi Okayama Hakata

No. ofstakeholder staysWho we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

Social KPIs

Employees with Foreign
Citizenship, Ratio of Foreign
Managers
As one part of our growth strategy, theCompany is expanding the Leasing Business
into the ASEAN region. As a result, we arehiring more employees with foreign
citizenship, and we are gradually adding
more managers with foreign citizenship.

Employee data (parent)

Fiscal 2012

Fiscal 2013

Fiscal 2014

No. of employees

5,390
36.2
26.0
3.0
2.07
144
1.2
70
44
1
43

5,781
35.9
27.6
3.3
2.07
162
1.3
77
68
15
39

6,149
35.8
28.4
4.1
2.04
175
1.5
79
87
3
50

Average age
Female employee ratio
Female manager ratio
Disabled employee ratio (consolidated)
No. of employees with foreign citizenship
Ratio of foreign managers
No. of employees who used child care leave
No. of employees on short work-hours schedule
No. of employees who used nursing care leave
No. of labor accident incidents

Ratio of Female Employees
We aim to hire diverse human resources,
including women and people with foreign
citizenship, as one of our initiatives tocontribute as a corporate citizen to thecreation of a sustainable society. The ratio of
female employees in our total workforce roseto 28.4% in fiscal 2014.

Employees by
age group (parent)

Under
age 29

Age
30-39

Age
40-49

Age
50-59

Over
age 60Total

Totals

1,803

2,682

1,067

489

108

6,149

Males

1,024

2,117

829

344

88

4,402

Females

779

565

238

145

20

1,747

CSR initiatives

Fiscal 2012

Fiscal 2013

Fiscal 2014

Cleanup campaign participants

15,534
3,642
11,892
193
135
58
0
0
138
1
1,434,459
1,793
50
123

13,203
3,642
9,561
235
133
65
30
7
211
5
328,661411
50
436

15,497
3,203
12,294
255
134
53
61
7
193
5
850,952
1,064
21
609

Of which, in the vicinity of existing properties
Of which, in the vicinity of newly built properties
Registered for “Kodomo #110”
Of which, Leopalace Center offices
Of which, Leopalace Partners franchisees
Of which, Azumi En facilities
Of which, Leopalace Hotels
No. of meetings for apartment owners
No. of building tour fairs for students
No. of PET bottle caps collected for Ecocap Movement*(No. of polio vaccines)
No. of students on domestic hotel observation tours
No. of tours, OTJ training accepted at Leopalace Smile*** The Ecocap Movement is an NPO that accepts used PET bottle caps collected by companies and other organizations and sells them to recycling vendors
and uses the proceeds to fund donations to an NPO that purchases polio vaccine for children.
** Leopalace Smile Co., Ltd. is a special subsidiary set up to employ the disabled under Article 44 of the Act for Employment Promotion etc. of Persons with Disabilities.
Leopalace21 Corporation / Annual Report 2015

119

120

CORPORATE HISTORY
Sales breakdown■ Leasing Businessby business

Fiscal Year
Ended
March 1991

1973
s Establishment
ment................ 11.3%■ Construction Business.................. 2.1%
■ Real Estate Business(condo sales).................. 80.6%■ Other Businesses.................. 6.0%

Before the “Master Lease System” was established,
our mainstay was built-for-sale apartments

1991s Acquire a patent for housing with lofts

1987
s Capital increases to ¥760 millions Capital increases to ¥2.74 billion

1993s Open Leopalace Resort Guam

GrowthPeriodPost-Bubble
PeriodBubblePeriod1998s Number of managed properties
increases to 100,000s Leopalace 21 wins 1998
Good Design Award1999
s Launch Monthly Leopalace
Flat service including furnitureand consumer electronics

1985
s Full-scale launch of Leopalace 21
urban apartmentss Capital increases to ¥132 million
1986s Capital increases to ¥452 million

1997s Launch Leopalace Fraternity

Business modeltransition

Apartment development/
sales business

Establish our business model

1988
s Launch a unique membership-basedtenant systems Launch an online management ofbuildings and tenants

1995
s Launch corporate
membership sales（Shift from built-for-sale toconstruction subcontracting）

1989s Capital increases to ¥4.42 billions List on over-the-counter market(JASDAQ)s Change company name to“MDI Corporation”
1990s Capital increases to ¥22.48 billion

Economic
growth period
Full launch of a synergy model combining
Construction
and Leasing Businesses
分譲→建築請負

2000
s Capital increases to ¥30.52 billion
following third-party allotment of
new sharess Change company name to“Leopalace21 Corporation”
2001s Launch Leopalace REIT,
a series of real estate
securitization products

Business modelin transition period

Leopalace21 Developed and Commenced the Industry’s First “Master Lease System”
Budgeting maintenance andrepair costs for a 30-year period
Secures funds for property maintenanceand future repairs

Apartments
Management of rental revenues
for a 30-year period
Tenants

Rent collection operations etc.

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

Recruitment and management of
tenants for a 30-year period
Tenant recruitment and everyday tenant
management operations etc.

Leopalace21 Corporation / Annual Report 2015

Rents frommaster leases Property owners
Payments of master-leaserents are made to owners
regardless of whether or notthere are vacancies

Who we are

What our strategy isSales breakdown by business

Fiscal Year
Ended
March
M rch 2007
Ma

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

Sales breakdown by business■ Leasing Business............. 43.9%■ Construction Business .... 50.0%■ Elderly Care Business ............ 0.9%
■ Hotels & Resort Business ... 1.1%
■ Other Businesses .................. 4.1%

Fiscal Year
Ended
March
M rch 2015
Ma

Swift apartment construction demand growth on uptake of the“Master Lease system” turns the Construction Business into mainstay

2002s Capital increases via public offering
to ¥37.24 billions Start broadband
business

Leasing Business emerges as mainstay, as shift away from volume toa focus on quality in apartment market translates into earnings

2008s Launch of membership-based ‘Class-L’ service
2009
s Number of managed properties increases to 500,000s Open Leopalace21 Business Consulting (Shanghai) Co., Ltd.
Open Beijing Branchs Open Leopalace Center Gangnam, Seouls Launch Monthly Leopalace Flatss Number of managed properties increases to 200,000

2010
s Number of managed properties increases to 550,000s Launch Leopalace Partners franchise systems Capital increases to ¥56.56 billion following third-party
allotment of new sharess Open Shanghai Corporation Dalian Branch and Guangzhou Branch

Global Recession
Lehman Collapse
Comprehensive enhancementof stock-based earnings

2004
s List on 1st Section ofTokyo Stock Exchanges Capital increases via public offering
to ¥55.64 billion

Great East Japan
Earthquake

Economic recovery period

Establish New GrowthStage
中期経営計画「Creating Future」策定

2011
s Full-scale installation of security
systems for apartments

2005s Number of managed properties
increases to 300,000s Start Residential
and Elderly Care Businesses
2006
s Open Leopalace Center Taipei
and Leopalace Center Busan
2007
s Number of managed properties
increases to 400,000s Open Leopalace Center Jongno, Seoul■ Leasing Business............. 82.6%■ Construction Business ....12.7%■ Elderly Care Business ............ 2.2%
■ Hotels & Resort Business ... 1.9%
■ Other Businesses .................. 0.6%

s Commences full sales launch ofsolar power systems
2012s Launch “Room
Room Customize
Customize” service

s Established power generation subsidiary“Leopalace Power Corporation”
s Establish “Woori & Leo PMC Co., Ltd.”in South Koreas First exercise of share subscription rights,
capital increases to ¥58.31 billion

2013s Second exercise of share subscription
rights, capital increases to ¥60.42 billions Third exercise of share subscription
rights, capital increases to ¥62.87 billions Install our “non-sound system”
with improved sound insulation inapartments as standard fixturess Established Leopalace21 (Thailand)Co., LTD. and LEOPALACE21
VIETNAM CO., LTD.
s Established elderly care service
subsidiary Azu Life Care Co., Ltd.
2014s Capital increases via public offering andthird-party allotment to ¥75.28 billions Established Leopalace Energy
Corporation, a power producer
and supplier (PPS)s Established Leopalace21 (Shanghai)
Property Management Co., Ltd. andLeopalace21 (Cambodia) Co., Ltd.
s Opened a branch in Myanmars Converted WING MATE CO., LTD.
into a subsidiary via a stock acquisition
2015s Opened Ha Noi Branch of
LEOPALACE21 VIETNAM CO., LTD.
s Converted Morizou Co., Ltd.
into a subsidiary via a stock acquisition
Leopalace21 Corporation / Annual Report 2015

121

122

CORPORATE PROFILE
Corporate Data

(As of March 31, 2015)

Members of Board of Directors and Auditors(As of June 26, 2015)

Company Name:
Leopalace21 Corporation

Paid-in Capital:¥75,282.36 million

Directors
President and CEO
Director
Director
Director
Director
Director
Director
Director (Outside)
Director (Outside)

Eisei Miyama
Tadahiro Miyama
Yuzuru Sekiya
Hiroshi Takeda
Kazuto Tajiri
Yoshikazu Miike
Hiroyuki Harada
Tetsuji Taya
Yoshiko Sasao

Operations:
Construction, leasing and sales of apartments,
condominiums, and residential housing; development
and operation of resort facilities; hotel business;broadband business; and elderly care business, etc.

Auditors
Standing Auditor
Standing Auditor
Auditor (Outside)
Auditor (Outside)

Masumi Iwakabe
Mutsuhiro Yamada
Masahiko Nakamura
Takao Yuhara

Head Office:2-54-11 Honcho, Nakano-ku, Tokyo
TEL: +81-3-5350-0001 (Main Line)
Established:
August 17, 1973

Number of Employees:
7,339 (consolidated basis)
6,149 (non-consolidated basis)

Major Shareholders (Top10)(As of March 31, 2015)

Thousands ofSharesPercentage of
Outstanding Shares

1 Japan Trustee Services Bank, Ltd. (Trust Account)

38,28114.31%

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

16,838

6.30%

3 STATE STREET BANK AND TRUST COMPANY 505225

7,270

2.72%

4 MSIP CLIENT SECURITIES

6,199

2.32%

5 Stockholding Association for Leopalace21’s Business Connection

5,721

2.14%

6 Trust & Custody Services Bank, Ltd.

5,669

2.12%

7 GOLDMAN SACHS INTERNATIONAL

5,653

2.11%

8 BNYM SA/NV FOR BNYM CLIENT ACCOUNT MPCS JAPAN

5,240

1.96%

9 BBH FOR FIDELITY LOW-PRICED STOCK FUND (PRINCIPAL ALL SECTOR SUBPORTFOLIO)

4,891

1.83%

10 Leopalace21 Corporation

4,569

1.71%

Shareholders

Note: Of the shares listed above, those held in trust accounts as part of trust bank operations are as follows:
Japan Trustee Services Bank, Ltd. (Trust Account)
37,896 thousand shares
The Master Trust Bank of Japan, Ltd. (Trust Account) 16,668 thousand shares
Trust & Custody Services Bank, Ltd.
5,669 thousand shares

Stock Information(As of March 31, 2015)

Number of Shares:
Authorized: 500,000,000
Outstanding: 267,443,915
Number of Shareholders:
39,197
Listing:First Section of the Tokyo Stock Exchange(Security code: 8848)
Transfer Agent:
Mitsubishi UFJ Trust and Banking Corporation

Leopalace21 Corporation / Annual Report 2015

Shareholder Composition(As of March 31, 2015)■ Financial Instruments■ Treasury Stocks

Business Operations(Securities Companies)
3.39%

1.71%

■ BusinessCorporations
and Other
Legal Entities
2.51%■ Financial

Institutions

25.01%■ Individuals

and Other
16.73%■ Foreign
Corporations
50.65%

Who we are

What our strategy is

How CSR supports
our management

What our businesses are

Financial Section &Corporate Data

Number of Apartment Units under Management and Domestic Leasing Sales Offices by Areas
Total Number ofUnits in Japan

Total Number of
Directly Managed Sales Offices

39

14,199425,126

180 offices(As of March 31, 2015)

Number of Partners Franchise Sales Offices
Number of Directly Managed Sales Offices

Number of
Leased Managed Properties

554,948 units

123

Hokkaido Area

Okinawa Area

Total Number ofPartners Franchise Sales Offices

141 offices

9
13

40,63016
25

78,906

Hokuriku/Koshinetsu
Area

34,300

Tohoku Area

13
11

37,838

7
15

Kinki Area

Chugoku Area

40,126

8
14

Kita-Kanto Area

6
5

14,497

Shikoku Area

87,22515
1543,779

21
23

39
48

158,322

Chubu Area

Kyushu Area

Metropolitan Area

Share Price and Trading Volume(As of March 31, 2015)

Trading Volume

Share Price(Yen)(Thousand shares)

900

60,000600

40,000300

20,000

0

Apr.
2014

May

Jun.

Jul.

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2015

0

Feb.

Mar.

Leopalace21 Corporation / Annual Report 2015